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UNITED STATES FID. & GUARANTY v. LEHIGH VALLEY ICE ARENA

Mar 3 2004

UNITED STATES FIDELITY AND GUARANTY COMPANY, Plaintiff
v.
LEHIGH VALLEY ICE ARENA, INC., Defendant vs. PHILIP WAGONER, PAUL GETZ, NATHAN BEIL, MICHAEL TOTH, MICHAEL MACAULAY, MAXIMILLIAN SORENSEN, MATTHEW C. SMITH, JOHN YORKS, JEFFREY DAHLGREN, EDWARD KEEGAN, DOMENICO GALATI, DANIEL REINERT, DALE HOWE, JENNIFER LYNN WINCER, BRIAN WINCER, BRANDON MURPHY, WILLIAM CLEARY, BENJAMIN WESTERMANN AND ANDREW KOCH, and JOHN M. FOX, Intervenors



The opinion of the court was delivered by: JAMES KNOLL GARDNER, District Judge Page 2

OPINION

This matter is before the court on Plaintiff, United States Fidelity and Guaranty Company's Motion for Summary Judgment filed December 23, 2003 and the Cross-Motion for Summary Judgment of Defendant Lehigh Valley Ice Arena, Inc. filed January 16, 2004.*fn1 Because we conclude that the Page 3 unambiguous language of the insurance contract governing the relationship between plaintiff and defendant excludes coverage for the averments made by the intervenors in the underlying state court action, we grant plaintiff's motion for summary judgment and deny defendant's cross-motion for summary judgment.

  Procedural Background Page 4

  The within civil action was initiated by a Complaint filed October 14, 2003 on behalf of United States Fidelity and Guaranty Company ("USF & G"). Plaintiff seeks a declaratory judgment pursuant to 28 U.S.C. § 2201. The action is before the court on diversity of citizenship jurisdiction.*fn2 See 28 U.S.C. § 1332. Venue is appropriate because the defendant may be found in Lehigh County, Pennsylvania, and the facts and circumstances giving rise to the cause of action appear to have occurred in Lehigh County. See 28 U.S.C. § 118, 1391.

  Facts

  Based upon the pleadings and record papers, the following are the pertinent facts.

  On July 10, 2003, Andrew Koch, Benjamin Westermann, William Cleary, Brandon Murphy, Brian Wincer, Jennifer Lynn Wincer, Dale Howe, Daniel Reinert, Domenico Galati, Edward Page 5 Keegan, Jeffrey Dahlgren, John Yorks, Matthew C. Smith, Maximillian Sorensen, Michael MacAulay, Michael Toth, Nathan Beil, Paul Getz and Philip Wagoner (collectively referred to as the "Koch intervenors"*fn3) filed a Complaint against Lehigh Valley Ice Arena, Inc. ("Lehigh Valley") and Resurfix, Inc.*fn4 in the Court of Common Pleas of Philadelphia County, Pennsylvania. Subsequently, the Koch intervenors filed a First Amended Complaint in the Court of Common Pleas. This First Amended Complaint asserts causes of action sounding in negligence against Lehigh Valley and Resurfix, Inc.

  In their First Amended Complaint, the Koch intervenors make a number of factual averments. They claim that they were all members and associates of the Millersville Page 6 University ice hockey team. They claim that on or about September 29, 2002, the team traveled to Lehigh Valley's ice arena to play an intercollegiate game with the Lafayette College ice hockey team.

  When the Koch intervenors arrived at the rink they prepared for the game in the visiting team's locker room. They claim that this locker room was located near the storage area in which Lehigh Valley stored its Zamboni machine. While the team was at the arena, the Koch intervenors aver that they were exposed to harmful levels of carbon monoxide and nitrogen dioxide.

  The Koch intervenors specifically aver that the carbon monoxide and nitrogen dioxide emanated from the Zamboni machine. They further contend that the gases flowed through, but were not caused by, the arena's heating and ventilation system. As a result of the exposure to these gases, the Koch intervenors aver that they were harmed.

  On November 10, 2003, John M. Fox, another member of the Millersville University ice hockey team, filed a Complaint against Lehigh Valley and Resurfix, Inc. in the Court of Common Pleas of Philadelphia County, Pennsylvania. Mr. Fox's averments are equivalent to those made by the Koch intervenors. Page 7

  Although USF&G expressly reserved its rights under the insurance contract, USF & G retained counsel on behalf of Lehigh Valley, and that counsel entered an appearance in the underlying state court action. On October 14, 2003, USF & G determined that the conduct averred in the underlying Koch complaint did not fall within the coverage of its insurance contract with Lehigh Valley. Accordingly, in a letter sent from USF & G to Lehigh Valley, USF & G disclaimed coverage and notified Lehigh Valley that it would discontinue its defense of the state court action. Subsequently, during the course of this litigation, the Fox complaint was filed. During the Rule 16 conference held by the undersigned on December 9, 2003, the parties agreed to incorporate the Fox matter into this action.

  Standard for Summary Judgment

  Summary judgment is proper when no genuine issue of material fact is in dispute and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Federal Home Loan Mortgage Corp. v. Scottsdate Insurance Company, 316 F.3d 431, 443 (3d Cir. 2003). "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of Page 8 summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202, 211 (1986); see Federal Home Loan Mortgage Corp., 316 F.3d at 443.

  Thus, a "material" fact is one that is necessary to establish an element under the substantive law governing a claim. A fact is "genuine" if it is such that a reasonable factfinder could return a verdict for the non-moving party. Anderson, 477 U.S. at 248, 106 S.Ct. at 2510, 91 L.Ed.2d 211.

  Discussion

  An insurer's duty to defend and to indemnify its insured under Pennsylvania law is summarized as follows:*fn5

  The duty to defend is a distinct obligation separate and apart from the duty to indemnify. Erie Ins. Exchange v. Transamerica Ins. Co., 516 Pa. 574, 582, 533 A.2d 1363, 1368 (1987). The duty to defend arises whenever claims asserted by the injured party potentially come within the coverage of the policy, Gedeon v. State Farm Mutual Automobile Ins. Co., 410 Pa. 55, 56, 188 A.2d 320, 321 (1963), while the Page 9 duty to indemnify arises only when the insured is determined to be liable for damages within the coverage of the policy. See, e.g., Employers Reinsurance Corp. v. Sarris, 746 F. Supp. 560, 566-68 (E.D. Pa. 1990). It follows then, that when the claims in the underlying action have not been adjudicated, the court entertaining the declaratory judgment action must focus on whether the underlying claims could potentially come within the coverage of the policy. Air Products and Chemicals, Inc. v. Hartford Accident and Indemnity Co., 25 F.3d 177, 179 (3d Cir. 1994). If there is a possibility that any of the underlying claims could be covered by the policy at issue, the insurer is obliged to provide a defense at least until such time as those facts are determined, and the claim is narrowed to one patently outside of coverage. C. Raymond Davis & Sons, Inc. v. Liberty Mut. Ins. Co., 467 F. Supp. 17, 19 (E.D. Pa. 1979). On the other hand, ...


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