United States District Court, E.D. Pennsylvania
July 8, 2004.
STATE FARM FIRE & CASUALTY COMPANY, Plaintiff
WILLIAM J. CORRY, IAN LIPSCHUTZ, LEON SAVAGE, and SPECTRUM ARENA LIMITED PARTNERSHIP, Defendants.
The opinion of the court was delivered by: LOUIS POLLAK, Senior District Judge
In this action brought pursuant to the Declaratory Judgment
Act, 28 U.S.C. § 2201-2202, State Farm Fire & Casualty Company
("State Farm") seeks a declaratory judgment that it has no duty
to defend and indemnify William J. Corry in the underlying
lawsuit. Corry is a third-party defendant in a tort action
pending in the Philadelphia County Court of Common Pleas, and
holds a homeowners insurance policy issued by State Farm.
Presently before the court is State Farm's motion for summary
judgment. For the reasons set forth below, the motion will be
denied, and the declaratory judgment action will be dismissed so
far as it relates to State Farm's duty to defend Corry in the
state court proceeding. A decision by this court on the remainder
of the complaint, as it relates to State Farm's duty to
indemnify, will be stayed pending a final judgment in the Court
of Common Pleas.
Factual and Procedural Background
is declaratory judgment action has its origin in an
altercation that took place during a Philadelphia Flyers hockey
game at the First Union Center in Philadelphia on May 14, 2000.
Ian Lipschutz and Leon Savage, who were attending the game, claim
that they were assaulted inside the arena and in an adjacent
parking lot, causing them serious physical injury. On September
13, 2002, Lipschutz and Savage filed a tort action in the Court
of Common Pleas for Philadelphia County against the owner and
operator of the First Union Center, Spectrum Arena Limited
Partnership ("SALP").*fn1 The state court complaint alleges
that SALP and its employees were negligent and/or reckless in
failing to provide supervision and security adequate to prevent
injury to Lipschutz and Savage.
After filing an answer denying all liability, SALP filed a
joinder complaint against William J. Corry for indemnification
and/or contribution. SALP alleges that it was Corry who assaulted
Lipschutz and Savage, and contends that any injury suffered by
Lipschutz and Savage was due to Corry's "negligence,
carelessness, recklessness and intentional conduct."
Corry held a homeowners insurance policy issued by State Farm.
Upon learning that SALP had filed a joinder complaint against
him, Corry filed a claim with State Farm, asserting that the
insurer was obligated to defend and indemnify him. By letter
dated April 2, 2003, State Farm informed Corry that it would
provide him with a defense, but that it reserved its right to
deny defense or indemnity should it be determined either that
Corry had acted in violation of the policy or that the injuries
claimed fell beyond the scope of the policy.
On May 1, 2003, State Farm filed the instant declaratory
judgment action in this court, seeking a determination regarding
its obligation to defend and indemnify Corry. The underlying suit
in the Court of Common Pleas was subsequently stayed pending this
action's resolution. State Farm filed a motion for summary
judgment on September 23, 2003. There has been no response from
any of the defendants in the declaratory judgment action to
either the complaint or the motion for summary judgment.*fn2
Although none of the parties initially contested this court's
jurisdiction, in a March 29, 2004, memorandum and order I
observed that jurisdiction over a Declaratory Judgment Act case
is discretionary, turning on considerations of practicality and
judicial administration. Noting that common issues appeared to
arise in both the state court proceeding and this federal
declaratory judgment action, I ordered the parties to submit
briefing regarding the question of whether this court should
exercise its discretionary jurisdiction. Having reviewed the
submissions of State Farm and Corry and given the matter further
consideration, I am prepared to issue this opinion.
This court has jurisdiction under 28 U.S.C. § 1332 based on the
diversity of the parties and the amount in controversy, which
exceeds $75,000.*fn3 Venue is proper under
28 U.S.C. § 1391(a) because the events giving rise to State Farm's request
for declaratory judgment occurred in Philadelphia, which is
within the Eastern District of Pennsylvania.
Even when subject matter jurisdiction is otherwise present, the
court's exercise of its power to grant declaratory relief
pursuant to the Declaratory Judgment Act ("Act") is
discretionary. The Act provides in pertinent part:
In a case of actual controversy within its
jurisdiction . . . any Court of the United States,
upon the filing of an appropriate pleading, may
declare the rights and other legal relations of any
interested party seeking such declaration, whether or
not further relief is or could be sought.
28 U.S.C. § 2201(a). "The Act only gives a court the power to
make" such a declaration; "it does not require that the court
exercise that power." Step-Saver Data Sys., Inc. v. Wyse Tech.,
912 F.2d 643
, 646-47 (3d Cir. 1990); see also Brillhart v.
Excess Ins. Co. of Am., 316 U.S. 491
, 494 (1942) (emphasizing
that the district courts are under no compulsion to exercise
their jurisdiction under the Act). A district court has greater
discretion to decline jurisdiction under the Declaratory Judgment
Act than under the traditional abstention doctrine of Colorado
River Water Conservation Dist. v. United States, 424 U.S. 800
813 (1976), which permits abstention only under exceptional
circumstances. See Terra Nova Insurance Co. v. 900 Bar,
887 F.2d 1213
, 1223-24 (3d Cir. 1989). In the declaratory judgment
context, the district court's exercise of jurisdiction "yields to
considerations of practicality and wise judicial administration."
Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995). The
Supreme Court has instructed that when a case is brought pursuant
to the act, the district court should consider declining
jurisdiction when "parallel proceedings, presenting opportunity
for ventilation of the same state law issues, [are] underway in
state court." Wilton, 515 U.S. at 290 (reaffirming
discretionary standard articulated in Brillhart). In Terra
Nova, the Third Circuit identified several additional factors
for a district court to consider in deciding whether to exercise
jurisdiction over a declaratory judgment action. These criteria
include the following:
(1) the likelihood that the declaration will resolve
the uncertainty of obligation that gave rise to the
controversy; (2) the convenience of the parties; (3)
the public interest in a settlement of the
uncertainty of obligation; and (4) the availability
and relative convenience of other remedies.
Terra Nova 887 F.2d at 1224 (quoting Interdynamics, Inc. v.
Wolf, 698 F.2d 157
, 167 (3d Cir. 1982)). The Terra Nova court
also raised the additional concern that, in declaratory judgment
actions arising in the insurance context, a race for collateral
estoppel might ensue if the "same factual question lies at the
heart of both an insurance overage dispute and the underlying
tort action." Terra Nova, 887 F.2d at 1224 (internal quotations
omitted). With these principles in mind, I turn to State Farm's
motion for summary judgment.
Summary judgment is appropriate if the moving party can "show
that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law."
Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317,
322-23 (1986). At the summary judgment stage, the court must view
the evidence, and draw all reasonable inferences, in the light
most favorable to the non-moving party. See Dici v.
Commonwealth, 91 F.3d 542, 547 (3d Cir. 1996).
1. The Duty to Defend
State Farm seeks a declaratory judgment that it has no duty to
defend Corry against SALP's joinder complaint in the Court of
Common Pleas. Under Pennsylvania law, "an insurance company is
obligated to defend an insured whenever the complaint filed by
the injured party may potentially come within the policy's
coverage." Pacific Indem. Co. v. Linn, 766 F.2d 754, 760 (3d
Cir. 1985) (citing, inter alia, Cadwallader v. New Amsterdam
Cas. Co., 152 A.2d 484, 488 (Pa. 1959)).*fn4 Moreover,
"[t]he insurer is required to defend the entire claim if some of
the allegations in the complaint fall within the terms of
coverage and others do not." C. Raymond Davis & Sons, Inc. v.
Liberty Mut. Ins. Co., 467 F. Supp. 17, 19 (E.D. Pa. 1979).
Therefore, if even one claim appearing in the joinder complaint
filed by SALP against Corry could potentially come within the
coverage of Corry's insurance policy, State Farm has a duty to
defend Corry in the state court proceeding. To determine whether
this is so, I will first review the scope of the insurance
coverage and then examine the allegations in SALP's joinder
complaint to ascertain whether they trigger potential coverage.
The insurance policy provides that State Farm is to defend and,
in the event of an adverse judgment, indemnify Corry in any suit
brought against him seeking damages for bodily injury caused by
an "occurrence." The policy defines "occurrence" as "an accident,
including exposure to conditions, which results in (a) bodily
injury; or (b) property damage" during the policy period. The
policy also contains an exclusion stating that State Farm will
not provide coverage for bodily injury or property damage that
was "either expected or intended by the insured" or that was "the
result of willful and malicious acts of the insured." State Farm
maintains that the claims asserted against Corry fall outside the
coverage of the insurance policy, because the injuries allegedly
sustained by Lipschutz and Savage were not caused by "an
accident," but were "expected or intended" by Corry and/or "the
result of" Corry's "willful and malicious acts."
If SALP's joinder complaint is to be construed as only alleging
intentional conduct on the part of Corry, the claims against
Corry would indeed fall beyond the scope of the policy's
coverage. Intentional acts are not "accidents," and thus not
"occurrences." Gene & Harvey Builders v. Pennsylvania Mfrs.'
Ass'n Ins. Co., 517 A.2d 910, 913 (Pa. 1986). However, if the
joinder complaint also alleges negligent acts by Corry, then
Corry has potential coverage under the policy and State Farm is
bound to defend Corry. This is so because, under Pennsylvania
law, injuries caused by negligence are considered to be the
result of "accidents" within the meaning of insurance policies,
Lancaster Area Refuse Auth. v. Transamerica Ins. Co.,
263 A.2d 368, 369 (Pa. 1970), and, correspondingly, negligence claims do
not fall within policy exclusions for injuries "expected or
intended" by the insured. Britamco Underwriters, Inc. v. Emerald
Abstract Co., 855 F. Supp. 793, 798 (E.D. Pa. 1994); see also
United Servs. Auto. Ass'n v. Elitzky, 517 A.2d 982, 985-92 (
Pa. Super. 1986). Furthermore, although I have found no cases
squarely on point, it seems to me highly probable that
Pennsylvania courts would conclude that negligence claims do not
fall within policy exclusions for "willful and malicious acts":
this would seem to follow from the care with which, in somewhat
analogous contexts, Pennsylvania courts distinguish negligent
conduct from willful and malicious conduct. See Lory v. City of
Philadelphia, 674 A.2d 673, 675 n. 2 (Pa. 1996). Therefore, the
question of State Farm's obligation to defend Corry turns on
whether SALP's joinder complaint includes a negligence claim.
The joinder complaint alleges the following:
The occurrence and/or accident referred to in
[Lipschutz and Savage's] Civil Action Complaint . . .
was due to the negligence, carelessness, recklessness
and intentional conduct of Additional Defendant
William Corry which conduct consisted of the
a) failure to follow instructions of the security
guards and other personnel of SALP and Comcast et.
al. with regard to behavior and conduct at the Flyers
game . . .;
b) intentionally assaulted and or struck [Lipschutz
and Savage] . . .;
c) failure to control his own behavior, resulting in
an altercation and/or assault and or battery by
William Corry against [Lipschutz and Savage];
d) failure to act in a reasonable manner within the
SALP facility at the Flyers Hockey game;
e) creating an unsafe situation by which [Lipschutz
and Savage] allegedly were injured.
Motion for Summary Judgment, exh. C at ¶ 6. On the basis of the
allegations its joinder complaint, it appears that SALP may
recover on either a theory of intentional tort or a theory of
negligence. Under Pennsylvania law, an act is intentional only if
"the actor desired to cause the consequences of his act or if he
acted knowing that such consequences were substantially certain
to result." Elitzky, 517 A.2d at 989. While the joinder
complaint certainly makes out claims of intentional tort most
conspicuously, the allegation that Corry "intentionally assaulted
and or struck" Lipschutz and Savage it is also framed in terms
of negligence. The joinder complaint charges Corry with "failure
to follow instructions," "failure to act in a reasonable manner,"
and "creating an unsafe situation" allegations that appear
intended to give content to the more general initial charges of
"negligence" and "carelessness." There is no suggestion with
respect to these allegations that Corry intended to cause the
harm that resulted, or knew that such harm was substantially
certain to result. The allegations in SALP's joinder complaint
thus sound in both intentional tort and negligence. Therefore,
State Farm has a duty to defend Corry in the state court
proceeding at this time. The declaratory judgment complaint will
be dismissed to the extent that it relates to a duty to defend.
2. The Duty to Indemnify
Unlike the duty to defend, which arises whenever the claims
asserted by the injured party potentially come within the
coverage of the policy, the duty to indemnify is triggered only
when the insured is determined to be liable for damages within
the policy's coverage. Home Ins. Co. v. Law Offices of Jonathan
DeYoung, P.C., 107 F. Supp.2d 647, 650 (E.D. Pa. 2000). This
distinction is an important one. Whereas the duty to defend must
typically be decided before the underlying case proceeds, there
is no equivalent need to resolve the question of an insurer's
duty to indemnify prior to the development of facts in the
underlying case. In certain cases, it may in fact be preferable
to permit the state court to evaluate the facts before the
federal court rules on the issue of indemnification. Nationwide
Mut. Fire Co. v. Shank, 951 F. Supp. 68, 71-72 (E.D. Pa. 1997).
This is one of those cases.
In order to issue a declaratory judgment stating that State
Farm has no duty to indemnify, this court would have to determine
that the injuries to Lipschutz and Savage fell outside the scope
of Corry's insurance coverage i.e., that the injuries were an
accident, that they were "expected or intended" by Corry, or that
Corry's conduct was "willful and malicious." To make such a
determination at this stage would be problematic, for two
First, determinations as to the details of the altercation,
Corry's involvement, and Corry's intent depend on a considerably
greater factual exposition than appears before this court.
Setting aside the brief allegations made in the parties'
pleadings, the only evidence that has been presented to this
court is a single, unauthenticated newspaper photograph attached
as an exhibit to State Farm's motion for summary judgment,
ostensibly showing the incident at the Flyers game that gave rise
to the underlying tort action. Neither the photograph nor its
caption even identifies any of the individuals pictured, let
alone provides the court with sufficient evidence to make the
factual determinations just described.
Second, because the Court of Common Pleas has not yet evaluated
the facts, for this court to rule on factual issues that are also
central to the state court proceeding "raises serious questions
of collateral estoppel." Shank, 951 F. Supp. at 72.*fn5 To
rule on the indemnification question would require resolution of
the merits of the underlying dispute, unduly prejudicing one or
more of the litigants in the state court proceeding. See Pac.
Indem. Co. v. Linn, 766 F.2d 754, 766 (3d Cir. 1985).
For these reasons, "[a]s a general rule, the declaratory
judgment court should refrain from determining the insurer's duty
to indemnify until the insured is found liable for damages in the
underlying action." Home Ins. Co., 107 F. Supp. at 650.
Accordingly, I will stay this action with respect to the question
of indemnification, and permit the Court of Common Pleas to
render a decision on the underlying facts of this dispute. Upon
the resolution of the state proceeding, State Farm is directed to
inform the court of the outcome, at which time I will entertain
any motion or motions for summary judgment on the issue of
For the foregoing reasons, State Farm's complaint will be
dismissed so far as it relates to its duty to defend, as I find
that State Farm is under an obligation to defend Corry in the
underlying state court action. State Farm's motion for summary
judgment will be denied. Because it would be improvident to
resolve the issue of indemnification while the state suit is
pending, the remainder of State Farm's declaratory judgment
action will be stayed until the conclusion of the state
An appropriate order follows.
For the reasons set forth in the accompanying opinion, it is
hereby ORDERED that:
(1) State Farm's Declaratory Judgment Complaint
(Docket #1) is DISMISSED so far as it relates to a
duty to defend.
(2) State Farm's Motion for Summary Judgment (Docket
#9) is DENIED.
(3) State Farm is bound by its insurance policy to
defend Corry in the underlying state court suit.
(4) The remainder of State Farm's Declaratory
Judgment Complaint, as it relates to a duty to
indemnify, is STAYED until such time as a final
judgment is entered in the underlying state court
(5) The clerk of this court is directed to place this
case in the civil suspense docket pending the outcome
of the underlying state court action.
(6) Upon the entrance of a final judgment in the
underlying state court action, State Farm shall so
inform the court, whereupon any motion or motions for
summary judgment will be received and considered on