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May 13, 2003


The opinion of the court was delivered by: Malachy E. Mannion, United States Magistrate Judge


Before the court is the plaintiff Scottsdale Insurance Co.'s ("Scottsdale") motion for summary judgment, together with a memorandum of law in support. (Doc. Nos. 36 & 37). Also before the court is the defendant Ralph Sparaney's brief in response to the motion for summary judgment, as well as his cross-motion for summary judgment and supporting brief. (Doc. Nos. 41 & 42).

By way of background, this action was commenced by a declaratory judgment complaint filed on October 30, 2000. (Doc. No. 1). An answer and affirmative defenses were filed by the defendant Bieber & Associates on December 14, 2000. (Doc. No. 11). An answer was also filed by the defendant Sparaney on December 18, 2000. (Doc. No. 10). Following a joint case management conference held on April 24, 2001, various case management deadlines were set in accordance with those proposed by the parties. In addition, the defendant Bieber & Associates advised the other parties that it intended to file a motion to stay these federal court proceedings pending a resolution by the Pennsylvania Commonwealth court of an appeal on the underlying default judgment issue previously decided in the Lackawanna County Court of Common Pleas. (Doc. Nos. 21 & 22). On May 31, 2001, Bieber & Associates filed a motion and brief in support of their request to stay these proceedings. (Doc. Nos. 25 & 26). The motion to stay was granted on June 14, 2001. (Doc. No. 28).

Following notification from the plaintiff that the Commonwealth court had affirmed the decision of the Lackawanna County Court of Common Pleas, the stay of these proceedings was lifted in an order dated November 16, 2001. (Doc. No. 30). Because the stay had significantly disrupted the case management dates, the court and the parties held a status conference on November 29, 2001 and established new case management dates that would control. Those dates were set forth in an order of November 30, 2001. (Doc. No. 32). Following a teleconference among all counsel on July 11, 2002, the trial was continued generally because of the parties' request for additional time to file motions for summary judgment. (Doc. No. 35). It appears that Scottsdale Insurance Co., included an affidavit of a Mr. Udayan De, who had not previously been identified to the defendants. As such, the defendants objected to the affidavit and requested time to depose Mr. De in order to adequately address the affidavit attached to the plaintiff's motion for summary judgment. The court granted the request in an order dated July 31, 2002. (Doc. No. 38). An additional discovery dispute conference was held on September 10, 2002 in which additional disputed matters were resolved. (Doc. No. 39). The only outstanding matter remaining before the court now are the above-mentioned cross-motions for summary judgment.

I. Background

This action arises out of an incident that occurred on August 27, 1995 when Ralph Sparaney was attending a concert at the Montage Ski Area. (Doc. No. 1, Exh. A, ¶ 7). While attempting to purchase a beverage at the concession stand, it appears that he was stabbed in the back with a knife, sustaining serious injuries. (Id. at ¶ 10). The court further adopts the facts as set forth by the Commonwealth Court of Pennsylvania, in their decision on the underlying matter:

On August 22, 1997, Ralph Sparaney, III, (plaintiff) filed a writ of summons which was served on the following named defendants: County of Lackawanna ("County"); Metropolitan Entertainment, Inc. ("Metropolitan"); Bieber and Montage Ski Resort ("Montage"). Subsequently, the plaintiff filed a complaint alleging that an unknown assailant stabbed him while he attended a concert at Montage on August 27, 1995. The complaint further alleged that plaintiff suffered injury due to the inadequate security furnished by the property owners, Montage and County, the concert promoter, Metropolitan, and the security agency hired for the event, Bieber.
All defendants except Bieber filed timely answers to the complaint. On August 20, 1998, plaintiff served Bieber a notice of intent to take default judgment. After Bieber failed to respond, plaintiff filed a praecipe to enter default judgment on October 13, 1998, and default judgment was entered against Bieber that day. Thereafter, Bieber filed a petition to open default judgment alleging that it did not receive proper service of plaintiff's intent to take default judgment. Additionally, Bieber asserted that it forwarded all documents pertaining to the underlying civil suit to its insurance carrier, Scottsdale Insurance Co. ("Scottsdale") and assumed that Scottsdale would handle the matter. The parties proceeded to discovery regarding the issues raised in Bieber's petition.
On May 26, 2000, the trial court denied the petition and Bieber then appealed to (the Commonwealth Court of Pennsylvania) arguing that the trial court erred as a matter of law and abused its discretion by denying Bieber's petition to open default judgment. As (the Commonwealth Court of Pennsylvania) agrees with the trial court's well reasoned decision denying Bieber's petition to open default judgment . . . (It) affirm(ed) the trial court's order . . .
(Doc. No. 29).

Following Bieber & Associates unsuccessful attempt to open the default judgment in the Pennsylvania State Court's, its insurance company, Scottsdale brought this declaratory judgment action seeking "an order declaring that Scottsdale has no obligation to defend or indemnify Bieber & Associates, Inc. for any claims asserted in the Sparaney action." (Doc. No. 1, p. 7). Scottsdale brings this action because they claim that Bieber & Associates violated the provisions of the policy issued to Bieber by not providing Scottsdale notice of the Sparaney action until several months after default judgment was entered against Bieber. (Id., p. 6, ¶ 21). Additionally "in failing to provide timely notice of the Sparaney action, Bieber failed to comply with its obligation under the "duties in the event of a current claim or suit" clause of the Scottsdale policy. (Id. at ¶ 25).

As noted in the complaint filed by Scottsdale, Metropolitan, Lackawanna, and Montage are named as defendants because they have asserted claims against Bieber in the Sparaney action and are, therefore, parties that are potentially interested in the outcome of this action." (Id. at p. 7, ¶ 30).*fn1

In support of their motion for summary judgment, Scottsdale relies upon Section IV of the Scottsdale Policy titled "Commercial General Liability Conditions". It further relies upon Section IV-2 "Duties in the Event of Occurrence, Claim or Suit, which in pertinent part states:

(b). If a claim is made or "suit" is brought against any insured, you must:
(1) Immediately record the specifics of the claim or "suit" and the date received; and
(2) Notify us as soon as practicable. You must see to it that we received written notice of the claim or "suit" as soon as practicable.
(c). You and any other involved insured must:
(1) Immediately send us copies of any demands, notices, summons or legal papers received in connection with the claim or "suit";
(2) Authorize us to obtain records and other information;
(3) Cooperate with us in the investigation, settlement or defense of the claim or "suit";
(4) Assist us, upon our request, in the enforcement of any right against any person or organization which may be liable to the insured because of injury or damage to which this insurance may also apply.
(Doc. No. 37, pp. 2-3);(Doc. No. 37, Exh. C).

Scottsdale argues that Sparaney initiated the action on August 22, 1997 by filing the writ of summons as noted above. The writ was served upon Bieber on or about September 4, 1997. Ultimately, a complaint was served upon Bieber on or about April 20, 1998. (Id. at p. 3). Because of Bieber's failure to respond to the complaint, default judgment was entered against it on October 13, 1998 by the Court of Common Pleas of Lackawanna County. According to Scottsdale, "Bieber did not provide Scottsdale notice of the Sparaney action until several months after default judgment was entered against Bieber." (Id. at 3-4). Interestingly, however, Scottsdale states the following in its brief:

It is undisputed that Bieber had been on notice of a potential claim since early 1996. Metropolitan Entertainment's insurer, CNA, notified Scottsdale of the claim in July 1996. Scottsdale retained Jordan & Co. to conduct a limited investigation of Ralph Sparaney's claim. Jordan's assignment was limited to interviewing George Bieber and attending a concert to observe Bieber & Associates security procedures (Affidavit of Donald Jordan, attached hereto as Exhibit "D"). It is undisputed that Scottsdale and CNA attempted to settle the claim in July 1997, and that Sparaney rejected the offer. (Id. at p. 4, fn. 1).
As a result of the foregoing, Scottsdale argues that it has no obligation to provide coverage because Bieber "failed to provide timely notice of the lawsuit and cooperate in its defense." (Id. at p. 7).

Sparaney, on the other hand, argues that Scottsdale brought this declaratory judgment action,

". . . four years and three months after Scottsdale's admitted receipt of notice of claim being made by Ralph Sparaney, III, against its insured, four years after it performed substantial investigation of the circumstances surrounding the underlying claim, two years after default judgment was entered against its insured and one and a half years after legal counsel hired by Scottsdale entered an appearance with ...

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