coverage issue. Beckwith's Appendix PX 9, 11. In a memorandum dated July 14, 1978 Travelers' Regional Assistant, James R. Murphy, acknowledged that the "initial investigation was lacking and we must now pick up the ball and put this file in a good defense posture." Beckwith's Appendix PX 9; Deposition of James R. Murphy at 79-80. At one point, Travelers proposed to resume the defense of the Trumbull case without providing coverage, if Beckwith, in turn, would waive its claim of "prejudice" against Travelers. Beckwith's Appendix PX 5, 19. Beckwith rejected this offer, believing it was owed both defense and coverage. Id., PX 14.
On July 24, 1978, Thorp, Reed and Armstrong notified Travelers that Beckwith had instructed them to take over the entire defense of the Trumbull case. Stipulation of Facts, para. 17. Subsequently, in October of 1978, Stein & Winters petitioned and received leave of this Court to withdraw as Beckwith's counsel. Id., P 18. Moreover, Travelers was put on notice that Beckwith intended to proceed against Travelers for all costs and expenses it incurred in the defense of the Trumbull lawsuit. Id., P 20.
The record discloses that after continued discovery and defense by Beckwith's counsel, the Trumbull case was eventually settled on November 12, 1982, with Beckwith's portion of the settlement payment to Trumbull being $ 100,000.00. Id., P 22. The instant lawsuit followed.
Count One of Beckwith's Complaint alleges that Travelers breached the terms of the manuscript insurance policy by withdrawing its defense of Beckwith and also by refusing to defend the punitive damages claims. Complaint, paras. 14-15. Count Two alleges that Travelers refused to participate in settlement discussions with Trumbull and breached the terms of the policy by not paying the $ 100,000.00 to Trumbull since said payment was tendered for damages allegedly covered by the insurance policy. Id., PP 16-20. Count Three, which is based on an estoppel theory, alleges that Travelers assumed the complete defense of all compensatory damage claims of Trumbull for over one year, which prevented Beckwith from discovering witnesses, documents and facts relevant to its defense for that time period, and that Beckwith relied on Travelers to defend those claims for the entire duration of the Trumbull case and to pay any damage claims or settlements. Id., PP 21-24. The damages which Plaintiff seeks to recover on Counts 1-3 include the $ 100,000.00 which it paid to settle the Trumbull case plus the costs, expenses and attorneys' fees related to the Trumbull case. Count Four of Plaintiff's complaint, which sought punitive damages for Travelers' alleged bad faith withdrawal of its defense and refusal to settle, was dismissed by a Memorandum Order of this Court dated September 21, 1983.
In its motion for summary judgment, Beckwith requests this Court to enter judgment against Travelers for the attorneys' fees and costs of defending the Trumbull case, for the $ 100,000.00 paid by Beckwith in settlement of that case and for attorneys' fees and costs related to the instant litigation. Beckwith contends that Travelers breached its contractual obligations under the insurance policy issued to Beckwith by failing to indemnify and defend the Trumbull claims, which were covered under Travelers' policy. Alternatively, Beckwith claims that even if the Trumbull claims were not covered under the policy, Travelers is responsible and liable for coverage and defense under the doctrine of estoppel.
Travelers, in its motion for summary judgment, argues that it did not breach any contractual obligations under the insurance policy issued to Beckwith, nor is it liable for coverage and defense of the claims made by Trumbull under any legal theory. Further, Travelers asserts that Beckwith was not prejudiced by any act or omission of Travelers, that Travelers did not act in bad faith and that Travelers is not liable for attorneys' fees and costs incurred by Beckwith.
When considering a Motion for Summary Judgment, the court must evaluate the evidence as presented by the pleadings, depositions, answers to interrogatories, admissions and affidavits submitted and determine whether, when viewed in the light most favorable to the nonmoving party, there are material facts in dispute. Fed. R. Civ. P. 56; Goclowski v. Penn Central Transportation Co., 571 F.2d 747, 751 (3d Cir. 1977). The moving party bears the burden of proving that no genuine issues of fact exist. Butz v. Hertz Corp., 554 F. Supp. 1178, 1181 (W.D. Pa. 1983). However, the party opposing summary judgment must not rest upon the mere allegations of its pleadings. If the responding party does not reply to the motion with specific facts showing the existence of a genuine issue for trial, summary judgment, where appropriate, will be granted against it. Fed. R. Civ. P. 56(e); Ness v. Marshall, 660 F.2d 517, 519 (3d Cir. 1981). Any doubts must be resolved in favor of the nonmoving party. Gans v. Mundy, 762 F.2d 338, 341 (3d Cir. 1985).
I. Choice of Law
This Court has diversity jurisdiction over the subject matter of this action. 28 U.S.C. § 1332 (1982). Applying Pennsylvania choice of law rules, it is clear that Pennsylvania substantive law must be applied to the present controversy. American Contract Bridge League v. Nationwide Mutual Fire Insurance Co., 752 F.2d 71, 74 (3d Cir. 1985).
The portion of the manuscript policy upon which Beckwith relies for coverage is as follows:
I. Coverage. To pay on behalf of the insured all sums which the insured shall become obligated to pay by reason of the liability imposed by law upon the insured, or assumed by the insured under any contract, for damages because of bodily injury, personal injury, malpractice injury, advertising injury or property damage to which this policy applies.