mericle reply brief

7/31/2019 Mericle Reply Brief

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IN THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________________________________________________________

No. 10-3887

_____________________________________________________________

TRAVELERS PROPERTY AND CASUALTY COMPANY OF

AMERICA, formerly known as The Travelers Indemnity Company of

Illinois,

Plaintiff-Appellee,

v.

ROBERT K. MERICLE; MERICLE CONSTRUCTION, INC.,

Defendants-Appellants.

(Middle District of Pennsylvania District Court 09-cv-1747)

_____________________________________________________________

_____________________________________________________________

REPLY BRIEF OF APPELLANTS ROBERT K. MERICLE

AND MERICLE CONSTRUCTION, INC.

_____________________________________________________________

R. Ted CruzHoward M. RadzelyMORGAN, LEWIS & BOCKIUS LLP1111 Pennsylvania Avenue, NWWashington, D.C. 20004

(202) 739-3000

Richard F. McMenaminMORGAN, LEWIS & BOCKIUS LLP1701 Market StreetPhiladelphia, PA 19103(215) 963-5000

Case: 10-3887 Document: 003110509741 Page: 1 Date Filed: 04/21/2011


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TABLE OF CONTENTS

Page

-i-

I. Introduction ......................................................................................... 1

II. Travelers Has A Duty To Defend Under The Personal InjuryCoverage Provisions............................................................................ 5

A. Underlying Plaintiffs Allege Injuries That Arise Out OfMalicious Prosecution Or False Imprisonment,Triggering The Personal Injury Coverage Provisions .............. 5

B. The Penal Statute Exclusion Does Not Apply BecauseThe Underlying Complaints Do Not Plead, And TheUnderlying Plaintiffs Do Not Need To Prove, That Their

Alleged Injuries Arose Out Of A Willful Violation Of APenal Statute By Or With The Consent of Mericle InOrder To Recover Under 1983............................................... 8

C. The Knowing Violation Exclusion Does Not ApplyBecause The Underlying Complaints Do Not Allege ThatMericle Caused Or Directed An Act With KnowledgeThat It Would Violate Underlying Plaintiffs Rights AndInflict Personal Injury ............................................................. 16

III. Travelers Has A Duty To Defend Under The Bodily Injury

Coverage Provisions Because There Are No Allegations ThatMericle Expected Underlying Plaintiffs Injuries ............................. 20

IV. Public Policy Does Not Bar Coverage .............................................. 25

V. Conclusion......................................................................................... 29



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-ii-

TABLE OF AUTHORITIES

FEDERAL CASES

Agora Syndicate, Inc. v. Levin, 977 F.Supp. 713 (E.D. Pa. 1997)....10, 20, 24

Allstate Insurance Co. v. McClymonds, No. 06-805, 2007 WL2254563 (W.D. Pa Aug. 6, 2007) .......................................................21, 24

America Contract Bridge League v. Nationwide Mutual Fire

Insurance Co., 752 F.2d 71 (3d Cir. 1985) ....................7, 8, 12, 22, 23, 30

Amquip Corp. v. Admiral Ins. Co., No. Civ. A. 03-4411, 2005 WL

742457 (E.D. Pa. Mar. 31, 2005) ............................................................19

CGU v. Travelers Prop. Casualty, 121 F. Supp. 2d 819 (E.D. Pa.2000)...........................................................................................................6

CGU v. Tyson Associate, 140 F. Supp. 2d 415 (E.D. Pa. 2001) ...................25

Carney v. Village of Darien, 60 F.3d 1273 (7th Cir. 1995) ..........................11

Caplan v. Johnson, 414 F.2d 615 (5th Cir. 1969)...........................................7

City of Peoria v. Underwriter's at Lloyd's of London, Unincorporated,290 F. Supp. 890 (S.D. Ill. 1968) ...............................................................6

Clark v. Conahan, No. 3:09-cv-2535, 2010 WL 3398888 (M.D. Pa.Aug. 25, 2010) .........................................................................4, 24, 25, 29

Colton v. Swain, 358 F. Supp. 859 (N.D. Ill. 1973) ........................................7

Crawford Fitting Co. v. J. T. Gibbons, Inc., 482 U.S. 437 (1987)................17

Duff Supply Co. v. Crum & Forster Insurance Co., Civ. Action No.96-8481, 1997 WL 255483 (E.D. Pa. May 8, 1997) ................................23

Green v. Bock Laundry Machine Co., 490 U.S. 504 (1989) .........................17



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Home Insurance Co. v. Perlberger, 900 F. Supp. 768 (E.D. Pa. 1995)........25

Kirkpatrick v. AIU Insurance Co., 204 F. Supp. 2d 850 ((E.D.Pa.2002).........................................................................................................20

Landmark American Ins. Co. v. Rider Univ., No. 08-1250 2010 WL4063199 (D.N.J. 2010) .............................................................................17

Lee v. Aetna Cas. & Sur. Co., 178 F.2d 750 (2d Cir. 1949) ........................29

National Union Fire Insurance Co. of Pitt. v. Alticor, Inc., No. 05-2479, 2007 WL 2733336 (6th Cir. Sept. 19, 2007)....................................5

Nationwide Mutual Insurance Co. v. Sedicum, No. 93-2996, 1993 WL

544414 (E.D. Pa. Dec. 27, 1993)..............................................................26

Pacific Indemnity Co. v. Linn, 766 F.2d 754 (3d Cir. 1985).........................25

Scalise v. Metropolitan Group, 2003 WL 24043984 (D. Conn. Mar.21, 2003) ..................................................................................................11

Schwartz v. Liberty Mutual Insurance Co., 539 F.3d 135 (2d Cir.2008).........................................................................................................30

Selko v. Home Insurance Co., 139 F.3d 146 (3d Cir. 1998). ..........................8

Tellabs Inc. v. Makor Issues & Rights, 551 U.S. 308 (2007)........................10

Toanone v. Williams, 405 F. Supp. 36 (E.D. Pa. 1975).................................18

U.S. Fire Insurance Co. v. Rothenberg, Civ. Action No. 98-2275,1998 WL 778354 (E.D. Pa. Sept. 25, 1998).............................................23

USX Corp. v. Adriatic Insurance Co., 99 F. Supp. 2d 593 (W.D. Pa.2000)...................................................................................................27, 28

Wallace v. Powell, No. 3:09-cv-286, 3:09-cv-291, 3:09-cv-357, 3:09-cv-630, 2010 WL 3398995 (M.D. Pa. Aug. 24, 2010).............4, 24, 25, 29



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-iv-

Westfield Group v. Campisi, No. 2:02CV997, 2006 WL 328415 (W.D.Pa. Feb. 10, 2006).....................................................................................23

Wiley v. State Farm Fire & Casualty Co., 995 F.2d 457 (3d Cir. 1993) ......11

STATE CASES

America States Insurance Co. v. State Automobile Insurance Co., 721A.2d 56 (Pa. Super Ct. 1991) .......................................................17, 18, 19

BLaST Intermediate Unite 17 v. CNA Insurance Cos., 674 A.2d 687(Pa. 1996)..................................................................................................26

Biborosch v. Transamerica Insurance Co., 603 A.2d 1050 (Pa. SuperCt. 1992) .............................................................................................12, 13

Cadwallader v. New Amsterdam Ca. Co., 152 A.2d 484 (Pa. 1959)......12, 29

Central Dauphin Sch. District v. American Casualty Co., 426 A.2d94 (Pa. 1981).......................................................................................27, 28

Eisenman v. Hornberger, 264 A.2d 673 (Pa. 1970)......................................26

Erie Ins. Exchange v. Fidler, 808 A.2d 587 (Pa. Super. Ct. 2002) ..20, 21, 24

Flomerfelt v. Cardiello, 997 A.2d 991 (N.J. 2010).......................................15

Gene's Restaurant v. Nationwide Insurance Co., 548 A.2d 246 (Pa.1988).........................................................................................................21

Hall v. Amica Mutual Insurance Co., 648 A.2d 755 (Pa. 1994) ...................26

Humphreys v. Niagara Fire Insurance Co., 590 A.2d 1267 (Pa. SuperCt. 1991) .......................................................................................12, 13, 14

Kvaerner v. Metals Divisions of Kvaerner U.S. v. Commercial Union

Insurance Co., 908 A.2d 888 (Pa. 2006)..................................................20



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-v-

Minnesota Fire and Casualty Co. v. Greenfield, 855 A.2d 854 (Pa.2004).......................................................................................10, 11, 26, 27

Mohn v. American Casualty Co. of Reading, 326 A.2d 346 (Pa. 1974) .......20

Mutual Benefit Insurance Co. v. Haver, 725 A.2d 743 (Pa. 1999)...........5, 24

Springfield Twp. v. Indemnity Insurance Co. of N.A., 64 A.2d 761 (Pa.1949).........................................................................................................12

Stidham v. Millvale Sportsmen's Club, 618 A.2d 945 (Pa. Super Ct.(1993)........................................................................................................12

Town of Goshen v. Grange Mutual Insurance Co., 424 A.2d 822 (N.H.

1980)...........................................................................................................6

United Services Automobile Association v. Elitzky, 517 A.2d 982 (Pa.Super. Ct. 1986)..................................................................................20, 21



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I. INTRODUCTIONNo one disputes that the allegations at the heart of the underlying

complaints is a scheme in which two corrupt judges engaged in a shameful

scheme to enrich themselves by taking payments from the owner-operator of

two juvenile detention centers in return for denying the constitutional rights

of juveniles who appeared before Ciavarella and helping keep those centers

full. See, e.g., J.A. at A-43-45, A-258-259. That allegedly corrupt bargain,

between Robert Powell and Judges Ciavarella and Conahan, if true, was

contemptible.

But Mericle is not Powell.1 Just because the underlying complaints

allege that Powell engaged in a corrupt quid pro quo does not mean that the

complaints treat other defendants as equally blameworthy. The underlying

complaints allege that Mericle built the centers, but contain no allegations

that Mericle had any involvement in their operation. J.A. at A-67-69, A-

250-257, A-461-463. Nor do they allege that Mericle had any knowledge of

the quid pro quo. Id.

To be sure, the underlying complaints do make broad, generalized

allegations that all Defendants conspired to deprive juveniles of their

constitutional rights. See, e.g., J.A. at A-208-209. But the complaints also



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take pains to explicitly allege that it was Powell who engaged in the quid pro

quo. See, e.g., J.A. at A-174-176, A-197, A-264-265. There is no specific

allegation thatMericle was even aware of it, much less involved. For good

reason as the federal prosecutors have expressly observed in open court,

Mericle had nothing to do with and had no knowledge of the corrupt quid

pro quo. J.A. at A-4470-474.

Appellee Travelers Property and Casualty Co. of America

(Travelers), like the court below, fails to recognize that the underlying

complaints contain numerous specific allegations that expressly distinguish

between the various underlying defendants. Indeed, the distinction made in

the underlying complaints between Powell, on the one hand, and Mericle, on

the other, which Travelers asks this Court to ignore, could not be more stark:

In or before January 2003, defendants agreed thatPowell and Mericle would pay $997,600 toCiavarella and Conahan for their roles infacilitating the construction of the PA Child Carefacility. Powell understood the payments to be aquid pro quo for the judges exercise of their

judicial authority to send juveniles to PA ChildCare and Western PA Child Care and otherdiscretionary Acts.

1 Appellants Robert K. Mericle and Mericle Construction, Inc. will bereferred to collectively as Mericle.



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J.A. at A-174 (emphasis added). This distinction was purposeful it was

made frequently throughout the complaints. See, e.g.,J.A. at A-174-176, A-

197, A-264-265.

The underlying complaints do allege that Mericle built the facilities

and made and concealed payments relating to the construction of the

facilities, and those actions will determine if those payments were industry-

standard referral fees (as Mericle maintains and as the federal prosecutors

agree) or illicit kickbacks (as Travelers urges). Regardless of how Mericles

payments are characterized, one thing is clear they had nothing to do with

the quid pro quo that allegedly harmed the juveniles.

When the specific allegations against Mericle are considered,

Travelers has a clear duty to defend Mericle. As discussed in the opening

brief and further herein, the personal injury coverage provisions apply to

underlying plaintiffs 1983 claims, and the exclusions relied upon by the

district court and Travelers are inapplicable. Travelers is also obligated to

defend under the bodily injury coverage provisions because there is no

allegation that Mericle either expected or intended that the former judges

would maliciously prosecute or falsely imprison the juvenile plaintiffs.

The district courts failure to consider the specific allegations against

Mericle has put Mericle in an impossible position. The district courts Rule



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12 decisions in the underlying actions expressly endorsed a negligence

theory of 1983 recovery, finding that underlying plaintiffs may recover by

showing that defendants set[ ] in motion a series of acts by others which

the actor knows or reasonably should know would cause others to inflict

constitutional inquiry. 2 Wallace v. Powell, No. 3:09-cv-286, 3:09-cv-291,

3:09-cv-357, 3:09-cv-630, 2010 WL 3398995, at *7 n.4 (M.D. Pa. Aug. 24,

2010) (quotations omitted) (emphasis added); Clark v. Conahan, No. 3:09-

cv-2535, 2010 WL 3398888, at *28 n.4 (M.D. Pa. Aug. 25, 2010). At the

same time, the court denied Mericle defense coverage because the

underlying complaints include broad allegations of intentional and criminal

conduct. These decisions are clearly inconsistent and result in an aberration

that is fundamentally inconsistent with Pennsylvania law.

Accordingly, the district courts decision should be reversed and this

Court should order Travelers to defend Mericle in the underlying actions.

2 Mericle vehemently disagrees that a non-state actor such as Mericle canbe held liable under 1983 under such a standard.



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II. TRAVELERS HAS ADUTY TO DEFEND UNDER THE PERSONALINJURY COVERAGE PROVISIONS.

A. Underlying Plaintiffs Allege Injuries That Arise Out OfMalicious Prosecution Or False Imprisonment, Triggering

The Personal Injury Coverage Provisions.

In its opening brief, Mericle established that: (1) the duty to defend a

1983 claim under personal injury coverage depends on the common-law

torts implicated; and (2) courts have uniformly found coverage where 1983

claims sound in malicious prosecution or false imprisonment. Opening Br.

at 28-30 (citing cases). Travelers does not seriously contest this position and

makes no effort to distinguish the uniform line of cases finding personal

injury coverage for 1983 claims that sound in malicious prosecution or

false imprisonment. See Opp. at 27-29.

Rather, Travelers makes two arguments. First, Travelers contends

that 1983, civil RICO, and civil conspiracy are not listed or referenced

anywhere in the list of personal injury offenses. Opp. at 28 (emphasis

omitted). However, in determining whether there is a duty to defend, the

particular causes of action in a complaint are not determinative of whether

coverage has been triggered. Mut. Benefit Ins. Co. v. Haver, 725 A.2d 743,

745 (Pa. 1999). 3 As one court aptly noted in finding personal injury

3 To support its contention, Travelers cites a single unpublished case,National Union Fire Ins. Co. of Pitt. v. Alticor, Inc., No. 05-2479, 2007



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coverage for a 1983 claim: [i]t makes no difference that the claim is

asserted in a statutory cause of action, as distinguished from an action

grounded upon a common law tort theory. City of Peoria v. Underwriters

at Lloyds of London, Unincorporated, 290 F. Supp. 890, 892 (S.D. Ill.

1968); see also, e.g., Town of Goshen v. Grange Mut. Ins. Co., 424 A.2d 822,

824 (N.H. 1980) (The fact that the underlying federal court action is based

upon a statutory claim (42 U.S.C. 1983) rather than a direct common-law

claim in State court does not relieve [the insurer] of the duty to defend if the

policy otherwise insures against the common-law actions that are framed in

a section 1983 pleading.); Opening Br. at 29-30.4

WL 2733336 (6th Cir. Sept. 19, 2007). Alticordid not involve 1983.Moreover, the court expressly noted that the alleged damages were forantitrust violations, not for the covered tort of misrepresentation, andthat merely mentioning misrepresentation did not convert an antitrustclaim into a misrepresentation claim. Id. at *6. Here, by contrast, thefocal point of the underlying complaints is the wrongful prosecution or

detention of juveniles.See

Opening Br. at 9-17.

4 See also, e.g., CGU v. Travelers Prop. Cas., 121 F. Supp. 2d 819, 823-24 (E.D. Pa. 2000) (policy covering slander and defamation obligatedinsurer to defend although only counts pled sought damages under theSherman Act because injuries which underlying plaintiff allegedlysuffered arose out of the defendants allegedly slanderous anddefamatory remarks).



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The 1983 claims against Mericle plainly seek damages for alleged

wrongful adjudications or detentions.5 The underlying plaintiffs allege that:

(1) the juvenile plaintiffs were adjudicated delinquent by Ciavarella, and

some were detained in PACC or WPACC as a result; (2) the delinquency

adjudications were constitutionally flawed; and (3) the delinquency

adjudications and detentions were unlawful. See, e.g., J.A. at A-81-170. Cf.

Caplan v. Johnson, 414 F.2d 615, 616-17 (5th Cir. 1969) (coverage for

1983 claim where liability which was imposed on the insureds arose by

reason of a series of false arrests); Colton v. Swain, 358 F. Supp. 859, 863-

64 (N.D. Ill. 1973) (same).

Second, Travelers contends coverage is unavailable because any false

imprisonment claim against Mericle would be meritless given the district

courts dismissal of a false imprisonment claim against Mericle sounding in

the Clark Action. Opp. at 28 & n.18. Mericle agrees that the 1983 claims

against it are groundless. However, as this Court has recognized,

Pennsylvania law clearly holds that the obligation [to defend] arises

whenever allegations against the insured state a claim to which the policy

5 See, e.g., J.A. at A-85 (B.W.s father was ordered to and paid$3,500to cover the costs of his placements in various facilities.); id.at A-86 (Kevins mother paid $450for the cost of placement.); id. atA-481 (Between November 2002 and 2005, Rauls parents paid$3,837.50to pay for Rauls incarceration and probation.).



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potentially applies even if the allegations are groundless, false or

fraudulent. Am. Contract Bridge League v. Nationwide Mut. Fire Ins. Co.,

752 F.2d 71, 75 (3d Cir. 1985) (internal quotation omitted) (second

emphasis added). Thus, the fact that the underlying plaintiffs 1983 claims

may be groundless does not render personal injury coverage unavailable.

In sum, the district court properly determined that the underlying

complaints 1983 claims trigger personal injury coverage because they

sound in malicious prosecution or false imprisonment.

B. The Penal Statute Exclusion Does Not Apply Because TheUnderlying Complaints Do Not Plead, And The Underlying

Plaintiffs Do Not Need To Prove, That Their Alleged

Injuries Arose Out Of A Willful Violation Of A Penal

Statute By Or With The Consent of Mericle In Order To

Recover Under 1983.

Pennsylvania law regarding the application of exclusionary provisions

is clear they are construed narrowly against the insurer. See, e.g., Selko v.

Home Ins. Co., 139 F.3d 146, 152 n.3 (3d Cir. 1998). The Penal Statute

Exclusion in the January 1, 2000 to January 1, 2005 policies precludes

coverage for personal injury [a]rising out of the willful violation of a

penal statute or ordinance committed by or with the consent of the insured.

J.A. at A-1797, A-2047, A-2415. Travelers raises four arguments in defense

of the district courts erroneous ruling, which failed, as the case law requires,

to consider the specific allegations against Mericle. None has merit.



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First, Travelers contends that Plaintiffs allege that Mericle . . . paid

Ciavarella and Conahan in exchange for their denial of the juvenile

Plaintiffs rights and that the criminal acts of others were committed with

Mericles consent. Opp. at 32 & 33. However, the underlying complaints

are careful to avoid any specific allegation that Mericle made any payments

in exchange for adjudications of juveniles or that Mericle was even aware of

the improper adjudications. See supra pp. 1-4. This careful pleading is

purposeful. Federal Rule of Civil Procedure 11(b)(3) mandates that parties

and their attorneys make certain that the factual allegations have

evidentiary support. The fact that the underlying complaints are hundreds

of pages long and contain detailed, specific allegations regarding the alleged

conduct of each defendant, including the facts concerning the quid pro quo

between the judges and Powell, reflects that the underlying plaintiffs

asserted every factual allegation which they thought they could make

consistent with Rule 11. It is, therefore, telling particularly in the context

of considering the extremely broad duty to defend that the underlying

complaints do not contain a single specific factual allegation that the

underlying plaintiffs personal injuries arose out of a willful violation of

penal statute committed by or with Mericles consent. 6

6 The reason for the absence of such allegations was made clear by the



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Second, Travelers argues that the Penal Statute Exclusion can apply

even where the insured is never convicted of or charged with a crime. Opp.

at 34-37. As an initial matter, the Court need not address this argument

because Mericle did not argue in its opening brief that a prior conviction was

a necessary prerequisite before the exclusion could apply.

This misplaced contention is also the only basis on which Travelers

attempts to argue that the district court properly relied on out-of-jurisdiction

cases involving sexual and child molestation. See, e.g., Opp. at 36. Mericle

prosecutors in the criminal case: there is no evidence that Mericle hadany knowledge of the improper detention of juveniles or Powells illegalquid pro quo. J.A. at A-4470-474. Contrary to Travelers contention,information from the criminal cases can and should be considered giventhat the underlying complaints expressly incorporate by reference thecriminal charges against Conahan and Ciavarella. See J.A. at A-190-

191, 257-259, 324-429, 462, 483; cf. Tellabs Inc. v. Makor Issues &Rights,551 US 308, 322 (2007) (in considering Rule 12 motion, courtsmust consider documents incorporated by reference and matters ofwhich courts may take judicial notice). Moreover, Travelers itself citesto several cases, including Minnesota Fire and Cas. Co. v. Greenfield,855 A.2d 854, 858 (Pa. 2004) and Agora Syndicate, Inc. v. Levin, 977 F.Supp. 713, 715-16 (E.D. Pa. 1997), in which the courts analysis of theduty to defend included consideration of the records in parallel criminalactions. Opp. at 24 n.13.

In any event, the statements by the prosecutors in Mericles criminalcase merely confirm what the four corners of the underlying complaintsalready make clear that Mericle was not aware of the criminal activityby others regarding the judges detention of juveniles or Powellskickbacks for those placements. That is, even looking solely at thefour corners of the underlying complaints, Travelers is obligated toprovide Mericle coverage.



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demonstrated in its opening brief that the district court improperly relied on

these out-of-jurisdiction cases in erroneously concluding that the Penal

Statute Exclusion precludes personal injury coverage for Mericle. Opening

Br. at 38 n.14. Travelers only response is to claim that there are a series of

inconsequential differences between these cases and the instant case and to

cite to another out-of-jurisdiction case also involving child molestation.

Opp. at 35 n.27 & 37 (citing Scalise v. Metropolitan Group, 2003 WL

24043984 (D. Conn. Mar. 21, 2003)).7

Travelers position is incorrect. In

fact, the Pennsylvania Supreme Court has held that cases involving child

molestation are extraordinary and require unique rules in the insurance

coverage context. Minnesota Fire and Cas. Co. v. Greenfield, 855 A.2d 854,

864-65 (Pa. 2004); see also, e.g., Wiley v. State Farm Fire & Cas. Co., 995

F.2d 457, 463-64 (3d Cir. 1993). For this reason, the sexual molestation

7 Carney v. Village of Darien, 60 F.3d 1273 (7th Cir. 1995) does notsupport Travelers argument. Carney involved a police officer whocoerced individuals he arrested into performing sexual acts in exchangefor voiding citations. Id. at 1280-81. Here by contrast it was third a

party Ciavarella who falsely imprisoned the juveniles, and whoseconduct is therefore analogous to that of the police officer in Carney.However, this case concerns coverage for Mericle, notCiavarella. Thereis no allegation that Mericle engaged in any conduct with the intentionof having Ciavarella violate the constitutional rights of the juvenileplaintiffs, and for that matter, no allegation that Mericle knew of themalicious prosecution or false imprisonment.



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coverage cases are neither controlling nor persuasive in regard to the

coverage issue raised here.

Third, Travelers contends that examining whether the underlying

plaintiffs can prove their claims without proving a violation of a penal or

criminal statute is contrary to . . . Pennsylvania insurance law. Opp. at

37-41. But as the Pennsylvania Supreme Court held over half a century ago,

[i]t is clear that where a claim potentially may become one which is within

the scope of the policy the insurer is obligated to defend. Cadwallader v.

New Amsterdam Ca. Co., 152 A.2d 484, 488 (Pa. 1959).8 It is the nature

of the claim which determines whether the insurer is required to defend.

Humphreys v. Niagara Fire Ins. Co., 590 A.2d 1267, 1271-72 (Pa. Super. Ct.

1991) (emphasis added; quoting Springfield Twp. v. Indem. Ins. Co. of N.A.,

64 A.2d 761, 464 (Pa. 1949)).

Pennsylvania courts have squarely held that whether an exclusion

applies depends on what must be proved to recover on a particular claim.

For example, as one court explained: [The underlying plaintiff] may well

succeed in proving a breach of contract without ever establishing malice on

8 See also, e.g., Am. Contract Bridge League, 752 F.2d at 75 (citingCadwallader and concluding that the insurer is obligated to fullydefend its insured until it can confine the possibility of recovery toclaims outside the coverage of the policy); Stidham v. MillvaleSportsmens Club, 618 A.2d 945, 953 (Pa. Super. Ct. 1993) (same).



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[the insureds] part and that recovery may well fall within the coverage of the

policy. Biborosch v. Transamerica Ins. Co., 603 A. 2d 1050, 1058 (Pa.

Super. Ct. 1992) (emphasis added); see alsoHumphreys, 590 A.2d at 1271-

72. Here, because the underlying plaintiffs could prove their 1983 claims

without proving that Mericle committed, or consented to, the commission of

a willful violation of a penal statute, Travelers has a duty to defend.

Travelersattempts to distinguish the controlling Pennsylvania cases

fall short. Travelers argues that Biborosch, supra, does not apply because

the allegations of violations of penal statutes permeate[] all of the claims

against Mericle. Opp. at 38-39. However, although the underlying

complaints are specific in alleging that Powell understood that the judges

were improperly imprisoning juveniles, they do not specifically allege that

Mericle had any involvement in or knowledge of the quid pro quo. See

supra pp. 1-4. Moreover, Travelers fails to respond to the key holding in

Biborosch as applied here: that the underlying plaintiffs do not need to

prove a violation of a penal statute to recover under 1983.

Travelers also argues that Humphreys, supra, is distinguishable

because Humphreys did not address application of the Penal Statute

exclusion. Opp. at 39. However, the criminal acts exclusion inHumphreys

is broader than the Penal Statute Exclusion at issue here, excluding any



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claim arising out of any criminal act or omission of any insured. 590 A.2d

at 1271-72. 9 Humphreys holding applies even more strongly in the context

of a similar, but more stringent exclusion limited to willful violations.

Travelers further seems to argue that Humphreys was wrongly

decided, reasoning that under the courts holding the criminal act exclusion

at issue there would never apply to claims in a civil action. Opp. at 40-41.

But the criminal acts exclusion in Humphreys, like the Penal Statute

Exclusion here, will apply to exclude a duty to defend where the excluded

conduct necessarily must be proved to satisfy the elements of the applicable

civil claim and the underlying complaint contains specific factual allegations

triggering the exclusion. Indeed, in Humphreys, the court applied a

fraudulent acts exclusion to bar coverage for claims where, to establish

violations of the statutes, it is necessary to prove that the defendant acted

with specific intent to destroy competition and that such is tantamount to

intentionally fraudulent . . . acts. Id. at 1272.

Finally, Travelers argues that Mericle is reading a heightened

causation requirement into the Penal Statute Exclusion. Opp. at 41-43. To

9 Ironically, Travelers also argues that the two exclusions are essentiallythe same. See Opp. at 34, 43.



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the contrary, Mericle expressly argued that regardless of how the

Pennsylvania Supreme Court would interpret the arising out of language

in the Penal Statute Exclusion, the alleged injuries do not arise out of any

willful violations of a penal statute committed by or with Mericles consent.

Opening Br. at 36-40. 10 Even under a broad but for standard, the

exclusion does not apply. As Mericle demonstrated in its opening brief at

38-39, it cannot be said that the underlying plaintiffs false imprisonment or

malicious prosecution injuries were caused by Mericles allegedly concealed

payments in connection with the construction of the facilities, even

assuming arguendo that such allegations constitute the willful violation of a

penal statute.

In short, under Pennsylvania law, the Penal Statute Exclusion does not

apply to preclude personal injury coverage because the underlying

complaints do not plead that Mericle committed or consented to the willful

10

The New Jersey Supreme Court recently noted that whether the phrasearising out of is unambiguous depends on the context it is used:Although in [an earlier case] we referred to the arising out oflanguage of the exclusion as clear and unambiguous, the circumstancespresented in this appeal reveal an inherent and heretofore unseenambiguity that requires us to consider the phrase in a new and differentcontext. Flomerfelt v. Cardiello, 997 A.2d 991, 1003 (N.J. 2010).



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violation of a penal statute that led to underlying plaintiffs injuries, and

need not prove that their injuries arose out of the willful violation of a penal

statute in order to recover against Mericle.11

C. The Knowing Violation Exclusion Does Not Apply BecauseThe Underlying Complaints Do Not Allege That Mericle

Caused Or Directed An Act With KnowledgeThat It Would

Violate Underlying Plaintiffs Rights And Inflict Personal

Injury.

Travelers contends that the Knowing Violation Exclusion applicable

to the 2005-2009 policies bars coverage because [t]he underlying

Complaints specifically allege that Mericle . . . . caused and directed the

Plaintiffs harm with knowledge that their actions would violate the

juveniles rights and inflict injury. Opp. at 44 (emphasis added). To the

contrary, while the underlying complaints allege that Powell understood

his payments were for judicial action to further his economic interest and

were a quid pro quo, e.g., J.A. at A-174, the underlying complaints

assiduously avoid making any such factual allegations about Mericle. See

supra pp. 1-4.

Recognizing that the specific allegations against Mericle are limited,

Travelers spends much of its opposition contending that the general,

11 Although broader, the Criminal Acts Exclusion contained in the policiesbeginning January 1, 2005 and ending January 1, 2009, does not apply



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conclusory allegations against all Defendants should trump the specific

allegations against each individual defendant. See, e.g., Opp. at 45-46.12

Travelers does not cite a case for this proposition, which is contrary to

insurance law and general principles of interpretation. See Landmark

American Ins. Co. v. Rider Univ., No. 08-1250, 2010 WL 4063199, at *10-

11 (D.N.J. 2010); cf.Green v. Bock Laundry Mach. Co., 490 U.S. 504, 524-

26 (1989); Crawford Fitting Co. v. J. T. Gibbons, Inc., 482 U.S. 437, 444-45

(1987).

Travelers contends that Landmark American Insurance, which held

that a complaint must be parsed and that the specific allegations as to each

individual defendant considered, is distinguishable because it is not a

Pennsylvania case. Opp. at 45. Although the district court decision in

Landmarkis not controlling, Travelers does not attempt to explain why that

courts analysis and individualized assessment of the specific allegations

against each defendant is not entirely consistent with the approach of

for essentially the same reasons that the Penal Statute Exclusion does notapply. See Opening Br. at 40 n.15.

12 To make its point, Travelers inserts the words including Mericle inbrackets in paragraph after paragraph generally pertaining to allDefendants. Opp. at 11-15. Significantly, Travelers does not insertthe words including Mericle in brackets in the specific quid pro quoallegations as to Powell, likely because doing so would only underscore



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Pennsylvania courts. In fact, there is no difference between Pennsylvania

and New Jersey law on this issue. See, e.g., Am. States Ins. Co. v. State Auto

Ins. Co., 721 A.2d 56, 61 (Pa. Super. Ct. 1991) (noting that there were no

specific allegations); Opening Br. at 44-45 (citing cases).13

Moreover, it is a well-settled rule of pleading that [i]n the

interpretation of plaintiffs pleading, specific allegations control over

general. Toanone v. Williams, 405 F. Supp. 36, 38 (E.D. Pa. 1975) (in the

context of a removal action) (citing 1A J. Moore, Federal Practice, 163(4.-

3)). Travelers offers no reason to depart from this well-established rule here.

Travelers also attempts to dismiss the specific allegations of

knowledge and a quid pro quo by Powell and notMericle by contending that

those isolated allegations simply are not addressed to Mericles

participation in, or knowledge respecting, the quid pro quo agreement

among the co-conspirators. Opp. at 15. But the allegations concerning

quid pro quo between the judges and Powell are not isolated ones. They

are the key allegations regarding the quid pro quo, and the critical point for

the absence of Mericle-specific allegations involving the prosecution ordetention of juveniles.

13 Travelers contends that Pennsylvania cases such as American States areinapposite because they are artful pleading cases. Opp. Br. at 45 n.37.There is nothing about these cases that suggest they involve artful



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purposes of Travelers duty to defend Mericle is that those allegations as

recognized by Travelers do not claim that Mericle had knowledge of, or

consented to, any payments in exchange for sending juveniles to Powells

facilities. Moreover, in one telling paragraph in the underlying complaints,

which is consistent with numerous other paragraphs, the underlying

plaintiffs allege that defendants agreed that Powell and Mericle would pay

$997,600 to Ciavarella and Conahan for their roles in facilitating the

construction of the PA Child Care facility. Powell understood the

payments to be a quid pro quo for the judges exercise of their judicial

authority. J.A. at A-174 (emphasis added).

Neither the district court nor Travelers have cited to a single

allegation stating thatMericle understoodthat the payments were a quid pro

quo in exchange for the placement of juveniles in PACC and/or WPACC or

that Mericle knew Powell made such quid pro quo payments. The absence

of such allegations is conclusive of the inapplicability of the Knowing

Violation Exclusion.14

pleading, and they demonstrate that Pennsylvania, like most otherstates, requires a close examination of the specific factual allegations.

14 The exclusion does not apply for a second, independent reason theunderlying complaints contain numerous allegations of recklessness.See, e.g., Amquip Corp. v. Admiral Ins. Co., No. Civ. A. 03-4411, 2005WL 742457 (E.D. Pa. Mar. 31, 2005) (rejecting insurers argument that



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III. TRAVELERS HAS ADUTY TO DEFEND UNDER THE BODILY INJURYCOVERAGE PROVISIONS BECAUSE THERE ARE NO ALLEGATIONS

THAT MERICLE EXPECTED UNDERLYING PLAINTIFFSINJURIES

The determinative factor of the policies bodily injury provisions is

whether the insuredexpectedto cause the injury alleged by the underlying

plaintiff. See, e.g., Kvaerner v. Metals Divisions of Kvaerner U.S. v.

Commercial Union Ins. Co., 908 A.2d 888, 897-98 (Pa. 2006); Mohn v.

American Cas. Co. of Reading, 326 A.2d 346, 348 (Pa. 1974). In making

such a determination, courts have found that there is no occurrence when it

is alleged that the insuredsubjectively intends or expects to cause the injury

for which the underlying plaintiff seeks damages. See, e.g., Kirkpatrick v.

AIU Ins. Co., 204 F. Supp. 2d 850, 854 (E.D. Pa. 2002). 15 Most of

allegations of intentional conduct triggered knowing violation exclusionwhere, [i]n several paragraphs in the complaint, [plaintiff] alleges that[the insured] and its employees acted with reckless indifference to[plaintiffs] interests (emphasis added)). Once again, Travelers onlyresponse is that the case cited is not a Pennsylvania state court case andthat Pennsylvania applies the four corners doctrine. Opp. at 46 n.40.However, the four corners of the underlying complaints plainly: (1) failto allege any intent by Mericle to falsely imprison juveniles; and (2)contain numerous allegations of recklessness or negligence, see suprapp. 1-4, infra pp. 24-26.

15 Travelers claims that Mericle improperly relies on cases regarding theexpected or intended exclusion. Opp. at 25-26. Yet, Travelers itselfrelies upon such cases. Id. at 24 n.13 (citing Erie Ins. Exchange v.Fidler, 808 A.2d 587 (Pa. Super. Ct. 2002) and Agora, 977 F. Supp. at715-16). Moreover, many courts combine their coverage analysis withan examination of the expected and intended exclusion because thatexclusion is a corollary of the idea that insurance is meant to cover only



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Travelers opposition ignores this critical aspect of the law that the insured

must expect or intend the underlying plaintiffs injury for bodily injury

coverage not to apply.

Thus, Pennsylvania courts have found no bodily injury coverage

where, for example, the underlying complaint alleges physical assault, a tort

that requires plaintiffs to prove intent to cause harm to recover, and for

which there can be little doubt that injury was expected. For that reason,

Travelers reliance on Allstate Ins. Co. v. McClymonds, No. 06-805, 2007

WL 2254563 (W.D. Pa. Aug. 6, 2007), and the cases it cites, is misplaced.

These cases all involve allegations of physical assault and injury. See

Allstate, 2007 WL 2254563, at *6 (insured kick[ed] [victim] in the head);

Genes Rest. v. Nationwide Ins. Co., 548 A.2d 246, 247 (Pa. 1988) (insured

assaulted and beat [victim]); Fidler, 808 A.2d at 589 (insured threw

[victim] with such great force).

As it did with regard to the Knowing Violation Exclusion, the district

court failed to properly evaluate the specific allegations againstMericle and

instead concluded that there is no bodily injury coverage based on the

specific allegations against other defendants. Neither the district court nor

fortuitous losses. United Services Auto. Assn v. Elitzky, 517 A.2d 982,986 (Pa. Super. Ct. 1986).



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Travelers has cited any specific allegations stating that Mericle knew of or

intended underlying plaintiffs harm because there are none. See supra pp.

1-4. The underlying complaints specific factual allegations as to Mericle

speakonly of Mericles payment and alleged concealment of referral fees in

connection with the construction and expansion of the PACC and WPACC

facilities. Id. Because there are no specific allegations that Mericle

participated in, or was even aware of, any quid pro quo to improperly

adjudicate and detain the juvenile plaintiffs, any harm to juveniles appearing

before Ciavarella would necessarily be unintended and unexpected from

Mericles standpoint.

Travelers also contends that civil rights violations, RICO violations,

and civil conspiracy are intent-based. Opp. at 20-23. Mericle agrees.

However, the fact that a plaintiff has brought claims that he or she cannot

prove does not render insurance coverage unavailable, especially where, as

here, the factual allegations do not specifically allege that the insured

engaged in intentional conduct with the intent or expectation that it would

cause bodily injury. Indeed, insurers have an obligation to defend even the

allegations against the insured are groundless, false, or fraudulent. SeeAm.

Contract Bridge League, 752 F.2d at 75.



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Even if the underlying plaintiffs had in clear violation of Rule 11

made specific allegations against Mericle of a quid pro quo to impermissibly

prosecute or detain juveniles, Travelers efforts to avoid its coverage

obligation would still fail. Where the underlying complaint alleges both

intentional and reckless conduct, the insurers duty to defend is triggered

under a policy that covers damages for bodily injury because of an

occurrence. See, e.g., U.S. Fire Ins. Co. v. Rothenberg,Civ. Action No. 98-

2275, 1998 WL 778354, at *10-11 (E.D. Pa. Sept. 25, 1998) (Although

each count does allege intentional acts . . . there are also a number of

allegations to the effect that the defendants acted recklessly rather than with

the specific intention to inflict bodily injury.).16

Here, the underlying complaints contain allegations that defendants

knew or should have known of the likely harm to underlying plaintiffs.

For example:

16 See also Duff Supply Co. v. Crum & Forster Ins. Co., Civ. Action No.96-8481, 1997 WL 255483, at *14 (E.D. Pa. May 8, 1997) (occurrence-based coverage for complaints alleging violations of, inter alia, CivilRights Act of 1964 where the complaints included recklessness

allegations and the claims could have been proven by reckless conduct);Westfield Group v. Campisi, No. 2:02CV997, 2006 WL 328415, at *17(W.D. Pa. Feb. 10, 2006) (An intent to harm may [] be presumed wherethe insured is held liable under a cause of action that implies an intent toharm, but only where potential liability for reckless or negligent conductunder the same cause of action against the insured has beeneliminated.).



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24

Defendants knew or should have known and actedwith deliberate indifference to the fact that theactions of Defendants CONAHAN andCIAVARELLA created the potential for anincreased number of juveniles to be sent to PACCand/or WPACC, thus ensuring high occupancyrates and increasing the revenues of PACC and/orWPACC . . . .

J.A. at A-293 (emphasis added). These allegations of negligence are not a

few isolated allegations. See, e.g., J.A. at A-289, A-293, A-294, A-296, A-

300, A-302-303, A-306, A-313, A-314, A-496.17

These allegations of recklessness and negligence, among others, are

the basis for underlying plaintiffs damages claim under 1983. Because

the district court expressly (albeit erroneously) endorsed the knew or

17 Travelers contends that a few isolated allegations of negligence cannotbe permitted to control a coverage determination where the overarchingnature of a complaint is intent-based. Opp. at 24. That may be truewhen the factual allegations regarding the insuredallege intentional actsthat caused harm and that the insured subjectively intended to cause thatparticular harm. Here, there are no specific allegations that Mericleengaged in any conduct with the intent or expectation that it would causeunderlying plaintiffs harm. By contrast, in all of the cases Travelerscites, the specific factual allegations allege conduct by the insured thatdirectly caused and could be expected to directly cause harm. See

Haver, 725 A.2d at 745 (insured pharmacist sold Schedule III drugs

without prescriptions despite multiple requests from victims family anddoctors that he not do so); Agora, 977 F. Supp. at 716 (looking toinsureds criminal conviction and finding that the conviction, fromwhich the civil suit arose, established that insured acted intentionally);Fidler, 808 A.2d at 589 (insured threw victim against wall and intodesk);McClymonds, 2007 WL 2254563, at *6 (insured kicked victim inhead rendering him unconscious).



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should have known standard as a viable theory of recovery, these

allegations may ultimately be the basis for a recovery against Mericle. See

Wallace 2010 WL 3398995, at *7 n.4 (quotations omitted) (emphasis added);

Clark, 2010 WL 3398888, at *28 n.4.18

Therefore, the district court erred in finding no bodily injury coverage,

and Travelers also has a duty to defend Mericle under those provisions in

effect between 2002 and 2008.

IV. PUBLIC POLICY DOES NOT BAR COVERAGETravelers argues that, even if the district court erred in denying

coverage, public policy prohibits coverage. As an initial matter, Travelers

argument is premature because this issue is not appropriately considered

during the duty to defend analysis. CGU v. Tyson Assoc., 140 F. Supp. 2d

415, 421 (E.D. Pa. 2001)(; see also, e.g., Home Ins. Co. v. Perlberger, 900 F.

Supp. 768, 771 (E.D. Pa. 1995) (public policy argument affects only

18 Mericle agrees with Travelers that the district courts standard is notappropriate for finding a non-state actor liable in connection with a 1983 claim. See Opp. at 25 n.14. However, the district courtsendorsement of the theory makes it possible that Mericle would be liable

in the underlying actions based on conduct by Mericle that wouldconstitute an occurrence, and as to which no exclusion would apply.Thus, Travelers duty to defend is triggered. Pacific Indemnity Co. v.

Linn, 766 F.2d 754, 760 (3d Cir. 1985) (Under Pennsylvania law, aninsurance company is obligated to defend an insured whenever thecomplaint filed by the injured party may potentially come within thepolicys coverage. (emphasis in original)).



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insurers duty to indemnify);Nationwide Mut. Ins. Co. v. Sedicum, No. 93-

2996, 1993 WL 544414, at *3 (E.D. Pa. Dec. 27, 1993).

Even where public policy could override a duty to defend, there would

still be no basis for this Court to re-write the policies in favor of Travelers.

Only in the clearest casesmay a court make an alleged public policy the

basis of a judicial decision. See BLaST Intermediate Unite 17 v. CNA Ins.

Cos., 674 A.2d 687, 689 (Pa. 1996) (quoting Hall v. Amica Mut. Ins. Co.,

648 A.2d 755, 760 (Pa. 1994)). This is not such a case.

The Pennsylvania Supreme Court has primarily considered four

factors in determining whether public policy precludes insurance coverage,

whether: (a) there is evidence that the policies were procured in

contemplation of a crime; (b) the policies promoted the unlawful conduct; (c)

denial of coverage would serve as a deterrent; and (d) the policies save the

insured from the consequences of his criminal act. See Eisenman v.

Hornberger, 264 A.2d 673, 675 (Pa. 1970).

More recently, the Pennsylvania Supreme Court reiterated these

principles:

our decision in Eisenman, reiterating the testtraditionally required for an insurer to disclaimliability; i.e. the insurer must prove that theinsured intended by his act to produce the damage

which did actually occur, retains its validity.



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Greenfield, 855 A.2d at 867 (Pa. 2004) (emphasis added).

Travelers does not make any allegation in its Amended Complaint that:

(a) the policies were procured in contemplation of any crime or violation of

law; (b) the policies promoted any alleged violation of law; (c) denying

coverage would serve as a deterrent; or (d) enforcing the policies as written

somehow saves Mericle from the consequences of its alleged conduct.19 Nor

is there any evidence that Mericle intended by its conduct to harm juvenile

plaintiffs. Rather, an examination of the factual record reflects that Mericle

had no involvement in or knowledge of the alleged quid pro quo involving

the placement of juveniles.20

19

Indeed, Travelers cannot make any such allegations in light of thedistrict courts observation that the underlying plaintiffs can recoveragainst defendants based on a knew or should have known theory.

20 Travelers insists that the Court cannot look beyond the four corners ofthe underlying complaints in considering whether public policy barscoverage. As previously noted, the underlying complaints expresslyincorporate by reference the record in the criminal matter, thusrendering that record part of the four corners for purposes of thecoverage determination. See supra, note 5.

Moreover, the very cases upon which Travelers relies examined theapplicable factual records, including, in the Greenfieldcase, the criminalplea colloquy and deposition testimony. See, e.g.,Greenfield, 855 A.2dat 858; Central Dauphin Sch. Dist. v. American Cas. Co., 426 A.2d 94,96 (Pa. 1981) (referring to proceedings in underlying case); USX Corp.v. Adriatic Ins. Co., 99 F. Supp. 2d 593, 600, 630-35 (W.D. Pa. 2000)(examining and quoting record from underlying case trial).



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The factual allegations in the underlying complaints against Mericle,

and the record in the criminal case, stand in sharp contrast to the facts of the

cases Travelers cited in its Opposition Brief at 49 to 52:

Greenfield, 855 A.2d at 867: public policy precludes coverage tohomeowner convicted of manslaughter, abuse of a corpse, andunlawful delivery of heroin for selling heroin in a bag labeledSuicide to houseguest, leaving her laying semi-conscious forhours, and dumping her body near a creek when he found her deadupon returning from work.

Central Dauphin, 426 A.2d at 95: public policy barred coverageof the insured, a school board, that had unlawfully collected taxesand was required to refund them, because any insurance coveragewould have constituted repayment of the lost taxes to which theinsured was not entitled, resulting in a windfall.

USX Corp., 99 F. Supp. 2d at 600, 630-35: public policy barredindemnification of insured for damages in civil antitrust litigationthat arose from the same conduct for which the insured had beencriminally convicted of violating the Sherman Act.

Here, in contrast, Mericle was not convicted of manslaughter, will not

receive a windfall if provided with defense coverage, and, as federal

prosecutors have expressly noted in open court was unaware of the corrupt

quid pro quobetween Powell, Conahan and Ciavarella. J.A. at A-4470-474.

The federal prosecutors also concluded that the payments Mericle made

were not a kickback or bribe in any sense, and were common practice

between businessmen in real estate transactions. Id. at 4472.



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Accordingly, even were the public policy doctrine applicable at the

duty to defend stage, it simply cannot apply given the facts of this case.

V. CONCLUSIONIn denying coverage, the district court created a situation in which

Mericle will have no insurance coverage because the underlying complaints

include allegations of intentional and criminal conduct, but where it is

possible that Mericle can be found liable on underlying plaintiffs 1983

claims based on a negligence or recklessness theory. See Wallace, 2010 WL

3398995, at *7 n.4; Clark, 2010 WL 3398888, at *28 n.4. The law does not

intend such a result.

As the Pennsylvania Supreme Court stated, citing Judge Learned

Hand, so long as the complaint filed by the injured party covered an injury

which might or might not fall within the coverage of the policy the

insurance company was obligated to defend. Cadwallader, 152 A.2d at

488 (quoting Lee v. Aetna Cas. & Sur. Co., 178 F.2d 750, 752 (2d Cir.

1949)). For this reason, courts are required to construe the allegations of a

complaint in favor of coverage.

Travelers does just the opposite. Moreover, in setting forth a

purported false imprisonment hypothetical, (Opp. at 47-48), Travelers would

have this Court believe that Mericle paid over $1 million in premiums to



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protect itself against a potential liability of mere nuisance value. Companies

like Mericle purchase defense coverage to protect themselves against the

possibility of lawsuits seeking significant damages. See, e.g., Schwartz v.

Liberty Mut. Ins. Co., 539 F.3d 135, 150 (2d Cir. 2008). Insurance

companies like Travelers are in the business of accepting high premiums in

return for providing such protection even where, as Mericle believes is the

case here, the allegations against the insured are groundless, false, or

fraudulent. SeeAm. Contract Bridge League, supra.

The underlying complaints do not allege any involvement of Mericle,

or knowledge concerning, the allegedly improper adjudications and

detentions of juveniles. Travelers acknowledges this when it argues that

underlying plaintiffs cannot possibly prove any involvement of Mericle in

the alleged malicious prosecution and false imprisonment.



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For the foregoing reasons, the Court should reverse the judgment and

find that Travelers owes Mericle a duty to defend.

Respectfully submitted,

/s/R. Ted CruzR. Ted Cruz (TX Id. 24001953; DC Id.459672)Howard M. Radzely (DC Id. 437957)MORGAN, LEWIS & BOCKIUS LLP

1111 Pennsylvania Avenue, NWWashington, D.C. 20004(202) 739-3000

Richard F. McMenamin (PA Id. 26209)MORGAN, LEWIS & BOCKIUS LLP1701 Market StreetPhiladelphia, PA 19103(215) 963-5000

Dated: April 21, 2011



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1

ATTORNEY CERTIFICATIONS

Bar Membership

I am a member in good standing of the bar of this Court.

Word Count and Typeface

1. This brief complies with the type-volume limitation of Fed. R. App. P.32. It contains 6,995 words, excluding the parts of the brief exemptedby Fed. R. App. P. 32(a)(7)(B)(iii);

2. This brief complies with the typeface requirements of Fed. R. App. P.32(a)(5) and the type-style requirements of Fed. R. App. P. 32(a)(6)

because it has been prepared in a proportionally spaced typeface usingMicrosoft Word, Version 2003 in 14-point Times New Roman font.

Service Upon Counsel

This brief was submitted electronically to the Court on April 21, 2011 and10 paper copies will be filed with the Office of the Clerk. In addition, thebrief was served electronically upon Travelers counsel, all of whom areFiling Users:

Samuel J. ArenaKarl S. MyersHeather T. FrittsStradley, Ronon, Stevens & Young2600 One Commerce Square2005 Market StreetPhiladelphia, PA [email protected]@[email protected]



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Identical Compliance of Briefs

The text of the electronic version of this brief is identical to the text of the

paper copies filed with the Court and served upon counsel.

Virus Check

I certify that McAfee VirusScan Enterprise, version 8.7.0i was run on theelectronic file and that no virus was detected.

/s/R. Ted CruzR. Ted CruzMORGAN, LEWIS & BOCKIUS LLP1111 Pennsylvania Avenue, NWWashington, D.C. 20004(202) 739-3000

Dated: April 21, 2011


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