City of Erie v. Guaranty National Insurance ( 1997 )

Opinions of the United
1997 Decisions States Court of Appeals
for the Third Circuit
3-21-1997
City of Erie v. Guaranty Natl Ins Co
Precedential or Non-Precedential:
Docket 96-3117,96-3163
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
________________
Nos. 96-3117 & 96-3163
________________
CITY OF ERIE, PENNSYLVANIA
v.
GUARANTY NATIONAL INSURANCE COMPANY;
IMPERIAL CASUALTY AND INDEMNITY COMPANY;
WESTERN WORLD INSURANCE COMPANY
City of Erie,
Appellant
_______________________________________________
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civil Action No. 95-cv-00090E)
___________________
Argued October 30, 1996
Before: SCIRICA and COWEN, Circuit Judges
and POLLAK, District Judge*
(Filed March 21, 1997)
GREGORY A. KARLE, ESQUIRE (ARGUED)
Office of the City Solicitor
Municipal Building
626 State Street, Room 505
Erie, Pennsylvania 16501
Attorney for Appellant
*The Honorable Louis H. Pollak, United States District Judge for
the Eastern District of Pennsylvania, sitting by designation.
1
GERALD J. STUBENHOFER, JR., ESQUIRE (ARGUED)
MARCIA H. HALLER, ESQUIRE
MacDonald, Illig, Jones & Britton
100 State Street, Suite 700
Erie, Pennsylvania 16507
Attorneys for Appellee,
Guaranty National Insurance Company
RICHARD P. JEFFRIES, ESQUIRE (ARGUED)
ROBERT M. SLOVEK, ESQUIRE
Kutak Rock
The Omaha Building
1650 Farnam Street
Omaha, Nebraska 68102-2186
Attorneys for Appellee,
Imperial Casualty and Indemnity Company
PAMELA G. COCHENOUR, ESQUIRE (ARGUED)
NORA BARRY FISCHER, ESQUIRE
Pietragallo, Bosick & Gordon
One Oxford Centre, 38th Floor
Pittsburgh, Pennsylvania 15219
Attorneys for Appellee,
Western World Insurance Company
__________________
OPINION OF THE COURT
__________________
SCIRICA, Circuit Judge.
The issue on appeal involves the interpretation of an
"occurrence" insurance policy under Pennsylvania law,
specifically whether the tort of malicious prosecution "occurs"
when the criminal charges are filed or when the prosecution is
resolved in the plaintiff's favor.
2
I.
Louis DiNicola was arrested and charged on March 25,
1980, for arson and three counts of second degree murder. He was
convicted on all counts. On December 6, 1983, the Pennsylvania
Supreme Court overturned his conviction and remanded for a new
trial. Commonwealth v. DiNicola, 468 A.2d 1078 (Pa. 1983). More
than ten years later, on May 23, 1994, a jury acquitted DiNicola
of all charges.
On December 15, 1994, DiNicola filed a complaint in
federal court charging the City of Erie with, inter alia,
malicious prosecution. He sought damages under federal and state
law.1 In order to assert a claim of malicious prosecution, a
plaintiff must allege "the defendants instituted proceedings
without probable cause, with malice, and that the proceedings
were terminated in favor of the plaintiff." Cosmas v.
Bloomingdales Bros., Inc., 660 A.2d 83, 85 (Pa. Super. 1995)
(quoting Amicone v. Shoaf, 620 A.2d 1222, 1224 (Pa. Super.
1993)). It is undisputed that a plaintiff has no cause of action
for malicious prosecution in Pennsylvania until dismissal or
acquittal of the underlying criminal charges. The statute of
limitations in Pennsylvania for malicious prosecution claims is
two years. 42 Pa. Cons. Stat. Ann. § 5524; Seto v. Willits, 638
A.2d 258 (Pa. Super. 1994). It begins to run on the date when
1. His complaint sets forth federal claims under 42 U.S.C. §§
1983 and 1988 as well as state law claims for "false arrest and
imprisonment, malicious prosecution, spoilation of evidence,
intentional infliction of emotional distress, defamation, abuse
of process, willful misconduct, prima facie tort, conspiracy
tort, negligence and gross negligence."
3
the underlying proceedings are terminated in the plaintiff's
favor. Cap v. K-Mart Discount Stores, Inc., 515 A.2d 52 (Pa.
Super. 1986).
The City of Erie requested a defense and
indemnification from its insurers, appellees Guaranty National
Insurance Company, Imperial & Indemnity Company and Western World
Insurance Company. Each insurance company declined coverage on
the ground that the alleged tort had not occurred during the
periods covered by their respective policies with the city.2 The
City of Erie then sought a declaratory judgment in the United
States District Court for the Western District of Pennsylvania
that the insurers were obligated to defend and indemnify it
against DiNicola's action.3
The parties agree the insurance policies provide
coverage for malicious prosecution suits and are "occurrence"
policies, not "claims made" policies.4 "An 'occurrence' policy
2. Each insurance company insured the City of Erie at various
times from July l, l980 to January l, l995. Guaranty insured the
city from July 1, 1980 to January 1, 1984. Imperial insured the
city from January 1, 1984 to November 1, 1988. Western World
insured the city from November 1, 1988 to January 1, 1995.
3. The City of Erie voluntarily dismissed its claims against
two other insurance companies, United National Insurance Company
and Diamond State Insurance Company, in order to establish
diversity jurisdiction.
4. Guaranty's policies provide that Guaranty "will pay on
behalf of the Insured all sums which the Insured shall become
legally obligated to pay . . . for damage because of . . .
Personal Injury Liability . . . to which this insurance applies
caused by an occurrence within the policy period. . . ." Western
World's policies provide: "We will pay those sums that the
insured becomes legally obligated to pay as damages because of
'bodily injury', 'property damage' or 'personal injury' to which
this insurance applies occurring during the policy period as a
result of a 'law enforcement incident' that takes place in the
4
protects the policy holder from liability for any act done while
the policy is in effect, whereas a 'claims made' policy protects
the holder only against claims made during the life of the
policy." St. Paul Fire & Marine Ins. Co. v. Barry, 438 U.S. 531,
535 n.3 (1978). Nor are the time periods covered by the policies
in dispute. But the parties disagree whether the tort of
malicious prosecution occurred, for insurance coverage purposes,
during the periods covered by these policies.
Guaranty National and Western World moved to dismiss
the case under Fed. R. Civ. P. 12(b)(6), asserting the tort did
not occur during the periods covered by their policies. They
argued the tort of malicious prosecution "occurs" for insurance
coverage purposes at the time the underlying criminal charges are
filed against the plaintiff. Because the murder and arson
charges against DiNicola were filed on March 25, 1980, when none
of their policies was in effect, they claimed there was no
coverage. In response, the City of Erie contended the tort of
malicious prosecution "occurs" when the claim arises -- in this
case, in 1994, when DiNicola was acquitted and when he was first
able to bring suit under Pennsylvania law. In the alternative,
the City argued for application of a "multiple trigger" analysis
similar to that employed by Pennsylvania courts in asbestosis
cases. Under a multiple trigger theory, all three insurers could
(..continued)
coverage territory." Imperial's policies provide: "This policy
applies only to acts committed or alleged to have been committed
during the policy period stated in the declarations."
5
be responsible to some degree to defend and indemnify the City of
Erie against DiNicola's suit.
The district court held the insurance contracts were
"occurrence policies" and that the tort of malicious prosecution
"occurs" when the underlying charges are filed. Erie v. Guaranty
Nat'l Ins. Co., 935 F. Supp. 610 (W.D. Pa. 1996). Because the
underlying charges were filed against DiNicola on March 25, 1980
and none of the insurance policies were in force on that date,
the court dismissed the claims against Western World and Guaranty
National. Subsequently, Imperial was granted summary judgment on
the same grounds. The City of Erie now appeals.
II.
The district court had diversity jurisdiction over this
declaratory judgment action under 28 U.S.C. § 1332. We have
jurisdiction under 28 U.S.C. § 1291.
Our review of the district court's dismissal of the
complaint under Fed. R. Civ. P. 12(b)(6) is plenary. We must
determine whether, under any reasonable reading of the pleadings,
the plaintiff may be entitled to relief. We must accept as true
the factual allegations in the complaint and all reasonable
inferences that can be drawn therefrom. Nami v. Fauver, 82 F.3d
63 (3d Cir. 1996). Our review of the district court's grant of
summary judgment is plenary. United States v. Capital Blue Cross,
992 F.2d 1270 (3d Cir. 1993). We apply the same test the
district court should have used originally. Summary judgment
should be sustained only if there is no genuine issue of material
6
fact and the moving party is entitled to judgment as a matter of
law.
III.
A.
Under Pennsylvania law, the general rule is that a tort
"occurs" for insurance coverage purposes when the injuries caused
by the tort first become apparent or manifest themselves. In the
case of malicious prosecution, it is undisputed that the injuries
caused by the tort first manifest themselves at the time the
underlying criminal charges are filed.
Had the City of Erie purchased an occurrence policy in
effect on March 25, 1980, when the charges against DiNicola were
filed, the City would be covered. Likewise, had the City of Erie
obtained a "claims made" insurance policy in effect on December
15, 1994, it would be covered. But as we have noted, all of the
insurance policies here were occurrence policies, and none were
in effect at the time DiNicola's injury first manifested itself.
B.
The Pennsylvania Supreme Court has not decided when,
for insurance coverage purposes, the tort of malicious
prosecution occurs. As a federal court sitting in diversity, we
must predict what the Pennsylvania Supreme Court would do. In
making this determination, we give proper regard to the opinions
of Pennsylvania's intermediate courts. The policies underlying
applicable legal doctrine, current trends in the law and
7
decisions of other courts also inform our decision. Wassall v.
DeCaro, 91 F.3d 443, 445 (3d Cir. 1996).
Even though the Pennsylvania courts have not addressed
this precise question, other courts have done so. Although there
is no agreement on when the tort of malicious prosecution occurs
for insurance coverage purposes, the clear majority of courts
have held the tort occurs when the underlying criminal charges
are filed. Royal Indem. Co. v. Werner, 979 F.2d 1299 (8th Cir.
1992) (applying Missouri law); Southern Maryland Agric. Ass'n,
Inc. v. Bituminous Cas. Corp., 539 F. Supp. 1295 (D. Md. 1982)
(applying Maryland law); Ethicon, Inc. v. Aetna Cas. and Sur.
Co., 688 F. Supp. 119 (S.D.N.Y. 1988) (applying New Jersey law);
S. Freedman & Sons, Inc. v. Hartford Fire Ins. Co., 396 A.2d 195
(D.C. 1978); American Family Mut. Ins. Co. v. McMullin, 869
S.W.2d 862 (Mo. Ct. App. 1994); Patterson Tallow Co., Inc. v.
Royal Globe Ins. Companies, 444 A.2d 579 (N.J. 1982); Muller Fuel
Oil Co. v. Ins. Co. of North America, 232 A.2d 168 (N.J. Super.,
App. Div. 1967); Harbor Ins. Co. v. Cent. Nat'l Ins. Co., 211
Cal. Rptr. 902 (Cal. App. 1985); Zurich Ins. Co. v. Peterson, 232
Cal. Rptr. 807 (Cal. App. 1986). But two courts have held the
tort of malicious prosecution occurs on the date when the
plaintiff receives a favorable termination of the underlying
proceeding and his claim for malicious prosecution arises. Roess
v. St. Paul Fire and Marine Ins. Co., 383 F. Supp. 1231 (M.D.
Fla. 1974) (applying Florida law); Security Mut. Cas. Co. v.
Harbor Ins. Co., 382 N.E.2d 1 (Ill. App. 1978), rev'd on other
grounds, 397 N.E.2d 839 (Ill. 1979).
8
1.
Courts adopting the majority rule have cited two major
principles to explain why the tort of malicious prosecution
occurs at the time the criminal charges are filed.5 One common
theme is that the "essence", "gist", or "focus" of malicious
prosecution is the filing of the underlying charges. Favorable
termination of the criminal action is merely a "condition
precedent" to bringing the action. See, e.g., Muller, 232 A.2d
at 174-75 ("essence of tort" is making of criminal charge;
favorable termination is "condition precedent"); Freedman, 396
A.2d at 199 (filing of charges is "gist" and "crucial point" of
tort); Harbor Ins. Co., 211 Cal. Rptr. at 907 (element of
favorable termination "is not part of the wrong", but a
"precondition for the cause of action"; "focus" and "gist" of
wrong is institution of underlying suit); American Family Mut.
Ins. Co. v. McMullin, 869 S.W.2d at 864 ("focus" of tort is the
institution of the underlying suit; quoting Harbor Ins. Co, 211
Cal. Rptr. at 907).
The other theme is that reliance on the "time of
favorable termination" to trigger liability has unwise policy
implications, for it allows tortfeasors with information about
their own potential liability to shift the burden to unwary
5. In addition, some courts have held the terms of the specific
insurance policies have evidenced the parties' intent to adopt
the majority rule. See Royal Indemnity, 979 F.2d at 1300;
Patterson Tallow, 444 A.2d at 585 n.5; Harbor Insurance, 211 Cal.
Rptr. at 906. We see no clear intent in the language of the
policies in this appeal favoring either the majority or minority
position.
9
insurance companies. As the Court of Appeals for the Eighth
Circuit noted, " ... a contrary rule might well enable plaintiffs
to lull an unwary insurer into extending coverage after they
perceive an impending difficulty from a suit in which they are
already engaged." Royal Indemnity, 979 F.2d at 1300. See also
Royal Indem. Co. v. Werner, 784 F. Supp. 690, 692 (E.D. Mo. 1992)
("Under this interpretation an individual who sees that his
lawsuit may spawn a malicious prosecution claim cannot purchase
insurance and shift his obligation to an unwary insurer.");
Harbor Insurance Co., 211 Cal. Rptr. at 910 (Under minority rule,
"tortfeasor could purchase a policy such as this after committing
the tort and thereby enjoy excess coverage for its yet-to-be
unfolded consequences."); Muller, 232 A.2d at 175 ("To hold that
coverage existed in such a case would mean that such a tortfeasor
could purchase coverage a day before the injured person was
acquitted in the criminal proceeding and thus shift the burden of
damages to an unwary insurance company.").
2.
We are not entirely convinced by the first argument.
Under Pennsylvania law, favorable termination is an essential
element of the tort of malicious prosecution. Cap v. K-Mart
Discount Stores, Inc., 515 A.2d 52, 53 (Pa. Super. 1986). There
appears to be no basis in Pennsylvania law for holding the
element of favorable termination a mere precondition to suit, or
for treating favorable determination as "less essential" to the
tort than the remaining elements. For that reason, the argument
that the "essence" of the tort requires adoption of the majority
10
rule is not compelling. See Roess, 383 F. Supp. at 1235
(rejecting majority rule; "There is nothing in the Florida cases
to indicate that one element is the 'essence' of the tort, or
might be otherwise regarded as more important than another
element.").
The concerns about "the unwary insurer" are well-
founded. Malicious prosecution is an intentional tort -- the
plaintiff must prove malice in order to prevail. As a
theoretical matter, of course, a municipality that intends
maliciously to bring criminal charges against a person may shift
the burden of liability to an unwary insurance company even under
the majority rule, by purchasing an occurrence policy the day
before charges are filed. See Roess, 383 F. Supp. at 1235.
Notwithstanding this observation, we believe it is more likely
that an unscrupulous insured would purchase insurance after
rather than before the initiation of a questionable prosecution.
This counsels adoption of the majority rule.
3.
At the same time, we do not find convincing the
principal argument cited in support of the minority rule. Under
the minority rule, there is a confluence between the date on
which the tort occurs for insurance purposes and the date on
which the statute of limitation begins to run. See Cap v. K-Mart
Discount Stores, Inc., 515 A.2d 52 (Pa. Super. 1986) (statute of
limitation begins to run on tort of malicious prosecution at time
of favorable determination of underlying proceedings, when claim
arises). But these dates need not necessarily correspond.
11
Reliance on the commencement of the statute of limitation is not
dispositive in determining when a tort occurs for insurance
purposes. Statutes of limitation and triggering dates for
insurance purposes serve distinct functions and reflect different
policy concerns. Statutes of limitation function to expedite
litigation and discourage stale claims. Bigansky v. Thomas
Jefferson University Hosp., 658 A.2d 423, 426 (Pa. Super. 1995).
But when determining when a tort occurs for insurance purposes,
courts have generally sought to protect the reasonable
expectations of the parties to the insurance contract.
Appalachian Ins. Co. v. Liberty Mut. Ins. Co., 676 F.2d 56 (3d
Cir. 1982).
Because of this fundamental difference in purpose,
courts have consistently rejected the idea they are bound by the
statutes of limitation when seeking to determine when a tort
occurs for insurance purposes. See ACandS, Inc. v. Aetna Cas.
and Sur. Co., 764 F.2d 968, 972 (3d Cir. 1985) (statute of
limitation cases "are not particularly relevant" to determining
what event triggers insurance coverage); Keene Corp. v. Ins. Co.
of North America, 667 F.2d 1034, 1043-44 (D.C. Cir. 1981)
(statute of limitation cases "are not at all relevant" and "have
no bearing" in case seeking to determine when tort occurred for
insurance purposes); Insurance Co. of North America v. Forty-
Eight Insulations, Inc., 633 F.2d 1212, 1220 (6th Cir. 1980)
(because of differences in underlying policies, statute of
limitation cases not relevant to determining when asbestos-
related tort occurs for insurance purposes); Commercial Union
12
Assurance Co. v. Zurich American Ins. Co., 471 F. Supp. 1011,
1015 (S.D. Ala. 1979) ("cases dealing with the determination of
the date or occurrence of a continuing injury or disease for the
purpose of applying appropriate statute of limitations are not
controlling for purposes of determining insurance coverage");
Southern Maryland Agric. Ass'n v. Bituminous Cas. Corp., 539 F.
Supp. 1295, 1302-03 (D. Md. 1982) (date on which statute of
limitation begins to run not determinative of date when tort of
malicious prosecution occurs); S. Freedman & Sons v. Hartford
Fire Ins. Co., 396 A.2d 195, 198-99 (D.C. 1978) (statute of
limitation "provides little assistance" and "need not determine"
when tort of malicious prosecution occurs). For this reason, we
do not believe the date on which the statute of limitation begins
to run on malicious prosecution claims should determine when the
tort occurs for insurance coverage purposes.
4.
Except for the need to protect the unwary insurer, none
of the arguments cited in the extensive case law appear to
provide compelling reasons in favor of either the majority or
minority rule. As we have noted, we believe the unwary insurer
rule is supported by strong policy considerations. But of
greater significance, we believe that principles of Pennsylvania
insurance law, which determine when a tort occurs for insurance
purposes, argue strongly in favor of the majority position.
C.
The law of Pennsylvania on the timing of the
"occurrence" of a tort for insurance purposes is rooted in the
13
decision of our court in Appalachian Ins. Co. v. Liberty Mut.
Ins. Co., 676 F.2d 56, (3d Cir. 1982). In Appalachian, we were
asked to decide a question of first impression under
Massachusetts law -- when, for the purpose of determining
liability under an occurrence-based insurance policy, the tort of
employment discrimination occurs. We held "the determination of
when an occurrence happens must be made by reference to the time
when the injurious effects of the occurrence took place." Id. at
61-62. We based our decision on our belief that defining the
timing of an occurrence with reference to the moment at which
injurious effects take place would best protect the expectations
of the parties entering into an occurrence-based insurance
contract. We also noted this rule followed those adopted in
other jurisdictions. Id. at 62, citing Keene v. Insurance Co. of
North America, 667 F.2d 1034 (D.C. Cir. 1981), Eagle-Picher
Indus., Inc. v. Liberty Mut. Ins. Co., 523 F. Supp. 110 (D. Mass.
1981), Deodato v. Hartford Ins. Co., 363 A.2d 361 (N.J. Super.
1976); Peerless Ins. Co. v. Clough, 193 A.2d 444 (N.H. 1963).
In many tort cases, the date on which the injurious
effects manifest themselves may be easily identified. But in
Appalachian we recognized the issue is more difficult with torts
causing injurious effects over a period of time. With torts like
ongoing employment discrimination, for example, we noted the
injurious effects do not occur on a single day. This makes it
more difficult for courts and for the parties to an insurance
contract to determine when the tort "occurred" for insurance
coverage purposes. To resolve this issue, we held in Appalachian
14
that "in this type of a case the occurrence takes place when the
injuries first manifest themselves." Appalachian, 676 F.2d at
62. We believed this rule, adopted by the Court of Appeals for
the First Circuit in Bartholomew v. Appalachian Ins. Co., 655
F.2d 27 (1st Cir. 1981), was required in order to prevent parties
from insuring themselves for events which had already taken place
or were taking place. Id. at 63. The rule solves the inherent
problem in dating for insurance coverage purposes the occurrence
of an ongoing tort, by defining the timing of the occurrence with
reference to a single moment which is usually easy to determine -
- the time at which the injurious effects first became apparent.
Appalachian involved application of Massachusetts law,
but it has been followed in recent years by Pennsylvania
intermediate appellate courts. In D'Auria v. Zurich Ins. Co.,
507 A.2d 857 (Pa. Super. 1986), a plaintiff who developed renal
failure in 1979 sued his former physician alleging that his
medical problem had been caused by the physician's negligence
between 1957 and 1963. The physician's insurers argued they did
not have a duty to defend because the occurrence did not fall
within the coverage period of the occurrence policies, from 1973
to 1982. Citing Appalachian, the Pennsylvania Superior Court
ruled "[a]n occurrence happens when the injurious effects of the
negligent act first manifest themselves in a way that would put a
reasonable person on notice of injury." Id. at 861. The court
held the renal failure was apparent and first manifested itself
in 1963, the tort therefore "occurred" for insurance coverage
purposes in that year, and the insurance companies did not have a
15
duty to defend. Id. at 862. This approach was followed two
years later in Keystone Automated Equipment v. Reliance Ins. Co.,
535 A.2d 648, 651 (Pa. Super. 1988). Thus, under D'Auria and
Keystone, a tort occurs for insurance purposes under Pennsylvania
law at the time when the injuries caused by the tort first
manifest themselves.
Citing Keystone, D'Auria, and Appalachian, the district
court predicted the Pennsylvania Supreme Court would hold the
tort of malicious prosecution occurs for insurance coverage
purposes at the time charges are filed, because this is the first
moment the injuries manifest themselves and when a reasonable
plaintiff would become aware of his injuries. Erie, 935 F. Supp.
at 614-16. We agree. Although a legal claim for malicious
prosecution does not arise in Pennsylvania until the underlying
charges are dismissed or at acquittal, the injuries caused by the
tort -- incarceration, humiliation, suspense, physical hardship,
and legal expenses -- first manifest themselves and become
evident to a reasonable plaintiff at the time of arrest and
filing of charges. Therefore, we hold that the tort of malicious
prosecution occurs for insurance purposes at the time the
underlying charges are filed. Because none of the insurance
policies before the court were in effect at the time charges were
filed against DiNicola, the district court correctly dismissed
the City of Erie's action.6
6. As we have noted, the City of Erie could have obtained
coverage against liability for DiNicola's claim had it obtained
occurrence-based coverage effective at the time the underlying
charges were filed against DiNicola in 1980, or by obtaining a
16
We acknowledge the tort of malicious prosecution is
unusual. Unlike the more commonplace torts involved in
Appalachian, D'Auria, and Keystone, the tort of malicious
prosecution remains legally incomplete until favorable
termination of the criminal proceeding, an event which may take
place years after the initial injury has manifested itself.
Nevertheless, we see no indication the Pennsylvania Supreme Court
would abandon the first manifestation rule in this case. Absent
some support in Pennsylvania case law, we are hesitant to take
such a step. We also note that our alignment with the majority
position assists in the development of a uniform national rule,
an important consideration in view of the interstate nature of
insurance.
(..continued)
"claims made" policy effective at the time when DiNicola filed
his suit against the city in 1994.
17
D.
The City of Erie argues in the alternative the
insurance policies are ambiguous and should be construed against
the insurance companies. We disagree. "Whether an ambiguity
exists is a question of law." 12th Street Gym, Inc. v. General
Star Indem. Co., 93 F.3d 1158, 1165 (3d Cir. 1996) (citing
Hutchison v. Sunbeam Coal Corp., 519 A.2d 385, 390 (Pa. 1986)).
Though the parties here disagree about the terms of their
insurance policies, "[d]isagreement between the parties over the
proper interpretation of a contract does not necessarily mean
that a contract is ambiguous." Id. (citing Vogel v. Berkley, 511
A.2d 878, 881 (Pa. Super. 1986)). A contract is ambiguous only
"if it is reasonably susceptible of different constructions and
capable of being understood in more than one sense." Id.
(quoting Steele v. Statesman Ins. Co., 607 A.2d 742, 743 (Pa.
1992)).
In this appeal, the parties agree the policies are
occurrence-based and provide coverage for the tort of malicious
prosecution. It is true the policies do not define precisely
when the tort of malicious prosecution "occurs." Where, however,
a term is not defined in an insurance policy but possesses a
clear legal or common meaning that may be supplied by a court,
the contract is not ambiguous. See Fidelity and Guar. Ins.
Underwriters, Inc. v. Everett I. Brown Co., 25 F.3d 484 (7th Cir.
1994) (though ambiguous contracts are construed against maker and
term "accident" is not defined in policy, contract not ambiguous
where term has legal meaning defined by courts); Indiana Gas Co.,
18
Inc. v. Aetna Cas. & Sur. Co., __ F. Supp. __, 1996 WL 701051
(N.D. Ind. 1996) (failure to define term "accident" does not
render contract ambiguous where term may be given legal meaning
by court); Borish v. Britamco Underwriters, Inc., 869 F. Supp.
316, 319 (E.D. Pa. 1994) (failure to define terms "claim" and
"notice" does not render contract ambiguous); Coakley v. Maine
Bonding and Cas. Co., 618 A.2d 777, 782 (N.H. 1992) (where term
is undefined in contract but has been defined by judicial
decision, contract is not ambiguous); Coker v. Coker, 650 S.W.2d
391, 393 (Tex. 1983) (contract not ambiguous if it can be given
certain or definite legal meaning by court).
Here, the courts of Pennsylvania have provided a clear
legal definition of when a tort occurs for insurance coverage
purposes. Therefore, the meaning of the policies is not
susceptible of reasonable dispute or differing constructions.
See Triangle Publications, Inc. v. Liberty Mut. Ins. Co., 703 F.
Supp. 367 (E.D. Pa. 1989) (in case seeking to determine when
ongoing toxic waste spill occurs for insurance purposes, failure
of policy to define when tort occurs does not render policy
ambiguous, where rule defining occurrence is supplied by case
law). To alter the settled rule in Pennsylvania that a tort
occurs when the injuries first manifest themselves would
frustrate the reasonable expectations of the parties to these
contracts. Moreover, we note that though the question of when
the tort of malicious prosecution occurs has been heavily
litigated over four decades, no court has ever ruled that a
19
contract which fails to define precisely when the tort "occurs"
for coverage purposes is ambiguous.
E.
Also in the alternative, the City of Erie contends the
tort of malicious prosecution constitutes a continuing injury.
Because, the City argues, the tort does not "occur" on a single
bright-line date, we should adopt a "multiple trigger" theory to
determine insurance coverage. Under a "multiple trigger"
approach, an insurance company has a duty to defend and indemnify
if it has issued a policy in effect at any time during the
continuing tort. The multiple trigger theory has been applied in
Pennsylvania in asbestosis cases. J.H. France Refractories Co.
v. Allstate Ins. Co., 626 A.2d 502 (Pa. 1993); ACandS, Inc. v.
Aetna Cas. and Sur. Co., 764 F.2d 968 (3d Cir. 1985) (applying
Pennsylvania law). Under the City of Erie's suggested approach,
liability for any tort involving ongoing injuries would be
determined under a multiple trigger instead of the "first
manifestation" rule.
Courts adopted the multiple trigger in latent disease
cases like asbestosis because the injuries caused by exposure do
not manifest themselves until a considerable time after the
exposure causing the injury. See, e.g., Keene Corp. v. Insurance
Co. of North America, 667 F.2d 1034, 1046 (D.C. Cir. 1981).
Application of a first manifestation rule, it was feared, would
allow insurance companies facing countless future claims to
terminate coverage during asbestosis' long latency period. The
entire burden of compensation would shift to the manufacturers
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even though the exposure causing injury occurred during the
periods of insurance coverage. See id.
In Armotek Indus., Inc. v. Employers Ins. of Wausau,
952 F.2d 756 (3d Cir. 1991) (applying Pennsylvania law), a toxic
waste spill case, we declined to apply the multiple trigger to a
case not involving a latent disease. We acknowledged we had
applied a multiple trigger theory in ACandS, Inc. v. Aetna Cas.
and Sur. Co., our asbestosis decision applying Pennsylvania law.
We observed, however, that ACandS was informed by "the unique
character of the problem created by the policy language in the
context of diseases with long latency periods", and found there
was "little if any similarity between ACandS, Inc. and the
present case." Armotek, 952 F.2d at 763 (citation omitted). See
also United Brass Works, Inc. v. American Guarantee and Liability
Ins. Co., 819 F. Supp. 465, 470 (W.D. Pa. 1992) (applying
Pennsylvania law; declining to apply multiple trigger to
hazardous waste tort), aff'd, 989 F.2d 489 (3d Cir. 1993)
(table). Armotek and United Brass Works suggest that a
continuing injury not involving the risk of a termination of
insurance coverage during a disease latency period will not
warrant application of the multiple trigger to determine
insurance coverage.
The risk of insurance coverage termination which
justifies use of the multiple trigger in asbestosis and other
latent disease cases is not present here. In malicious
prosecution cases, there is no interval between arrest and injury
that would allow an insurance company to terminate coverage. The
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plaintiff faces incarceration, humiliation, and damage to
reputation as soon as charges are filed. Perhaps for this
reason, no federal or state court has adopted the multiple
trigger theory in malicious prosecution cases. See, e.g.,
Ethicon, Inc. v. Aetna Cas. and Sur. Co., 688 F. Supp. 119, 127
(S.D.N.Y. 1988) (applying New Jersey law) (since the filing of
charges and the manifestation of injuries are contemporaneous,
the circumstances justifying application of a multiple trigger
are absent).7
For these reasons, we do not believe the Pennsylvania
Supreme Court would adopt the multiple trigger analysis to
determine when, for insurance coverage purposes, the tort of
malicious prosecution occurs.
IV. Conclusion
For the reasons expressed, we predict the Pennsylvanbia
Supreme Court would hold the tort of malicious prosecution
occurs, for insurance purposes, on the date the underlying
charges are filed. In this case, that date is March 25, 1980.
Because none of the insurance companies had insurance contracts
with the City of Erie on that date, none has a duty to defend and
indemnify the City of Erie against DiNicola's suit. We will
affirm the judgment of the district court.
7. The court's decision was also based in part on New Jersey
precedent rejecting the multiple trigger in malicious prosecution
cases.
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