‘Kids for cash’ figure’s insurer gets off hook

SCRANTON – A federal judge has ruled an insurance company is not obligated to defend or pay any damages that may be assessed against local real estate developer Robert Mericle in the “kids-for-cash” lawsuits.

U.S. District Judge A. Richard Caputo on Tuesday said Travelers Property Casualty Co. of America has no duty to defend Mericle because his alleged conduct was an intentional and possibly criminal act, therefore it triggers exclusions within policies Mericle held with the firm.

The ruling marks the fourth time within the past year that Caputo has ruled in favor of insurance companies seeking to free themselves from liability in a class-action lawsuit and master individual complaint filed on behalf of hundreds of juveniles who allege they were wrongly incarcerated.

In March, Caputo ruled Colony Insurance Co. was not obligated to defend attorney Robert Powell, who once co-owned the PA Child Care and Western PA Child Care juvenile detention centers, based on allegations his conduct was deliberate. Caputo issued a similar ruling in April in favor of Alea London and Atrium Underwriters Limited, which also insured Powell and PA Child Care.

The specific allegations in each suit vary, but all are based on the general premise that Mericle, who built the two detention centers, conspired with Powell and former judges Mark Ciavarella and Michael Conahan to improperly detain juveniles to ensure the centers maintained a high occupancy rate.

Conahan and Ciavarella were charged last year with improperly accepting $2.8 million from Mericle and Powell in connection with rulings they issued that benefited the two centers. Conahan pleaded guilty in July. Ciavarella is awaiting trial.

Mericle pleaded guilty in September 2009 to withholding information on a crime for his role in helping the ex-judges conceal the source of the money he and Powell paid them. He has adamantly denied he knew of any scheme to deprive juveniles of their constitutional rights, however.

Mericle’s attorneys had argued Travelers was obligated to defend Mericle in the civil suits because the allegations that he willingly participated in the conspiracy have not been proven.

Caputo rejected that argument, saying his ruling must be based on an interpretation of contract law based on the premise that everything the plaintiffs are alleging is true.

“If everything the underlying plaintiffs are alleging is true, this court must determine whether those allegations would arise out of the willful violation of a penal statute,” Caputo said.

Caputo said the plaintiffs clearly allege Mericle engaged in willful and deliberate conduct, therefore the injury they suffered cannot be deemed an “accident,” which would require coverage, but an intentional act, which triggers an exclusion within the contracts.

“The entire thrust of the underlying complaints is that Mericle and Mericle Construction caused personal injury to the underlying plaintiffs by intentionally and willfully engaging in a vast criminal conspiracy to bribe members of the judiciary to ensure a constant flow of juvenile offenders to create the need for more facilities that would be built by Mericle,” Caputo wrote.

Mericle’s attorney, Kimberly Borland, declined to comment on whether Mericle will appeal the ruling or to say whether he has any other policies that might provide him coverage.

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Developer Robert Mericle had wanted the Travelers company to defend him in civil suits.

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