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w . v i l l a no va . e du/thir dc ir c uit_2004/514NOT PRECEDE NTIAL UNIT ED STA TES C OURT OF A PPE AL FO R T HE TH IRD CIR CU IT
No. 03-2673
SC OT TS DA LE IN SU RA NC E C O., Appellant

v. BIEB ER & A SSO CIA TES , INC.; R AL PH SPA RA NE Y, III
On A ppeal from the Un ited States District Co urt for the M iddle D istrict of P enns ylvania (D.C. Civi l No. 00-cv- 01916) Distri ct Judge: Hon. Malachy E. Mannion

Argued April 13, 2004 BE FO RE : RE ND EL L, C OW EN and LA Y* , Circuit Judges (Fil ed July8, 2004) Richard W. Yost, Esq. (Argued) Yo st & T retta 1500 Jo hn F. K enned y Boulevard Two Penn Center Plaza, Suite 610 Philadelphia, PA 19102 Counsel for Appell ant

*H ono rable D onald P. La y, Senior U nited S tates C ircuit Jud ge fo r the E ighth C ircuit, sitting by designation.2

Jeffrey M. Kornblau, Esq. Gary Sol omon, Esq. (Argued) Kornblau & Kornblau 610 Harper Avenue Jenkint own, PA 19102 Cou nsel for A ppellee R alph Sp araney, III

OPI NION

CO W EN , Circuit

Judge
. Scottsdale Insu rance C omp any (“Scottsdale”) ap peals an ord er granting sum mary judgment i n favor of appel lee Ralph Spar aney, III ( “Sparaney ”) in t he above-captioned declar atoryacti on. The District Court granted summary j udgment after determi ning that Scotts dale coul d not deny coverage t o its insure d based on a brea ch of an insur ance policy ’s noti ce provis ion where it had notic e of the i niti al cl aim, but may not ha ve recei ved notic e of a subsequent suit file d in connection with t hat cl aim. The Dist

rict Co urt had jurisdictio n un der 2 8 U .S.C. § 133 2, and we exerc ise jurisd iction p ursua nt to 28 U.S.C. § 1291. Because we conclude that the Distri ct Court ba sed it s decis ion to gr ant
su mmar y ju dgm en t u pon an erro ne ous in te rp re ta ti on o f the in su ra nc e p ol ic y at is su e, we will r everse and remand for further consi derati on of the parties ’ cross -motions for
sum mary jud gm ent. I.1 In addition to Bie ber, Scot tsdal e also named as defendants in it s complaint Sparaney (the party-in-interest), Lackaw anna C ounty, Metrop olitan Entertainm ent, Inc. (the conce rt promoter), and Montage Sk i Resort (the concert venue). The legal issues before us, how ever, only involve the re lationship betw een Sc ottsdale and B ieber. 3 The factual background of the disput e is as follows. Scotts dale provi ded a comp rehensive liability insurance po licy to appellee Bieber & Assoc iates, Inc. (“Bieber”), a small private securi ty agency . On August 27, 1995, Sparaney was injur ed by an unknown assail ant in Lacka wanna County, Pennsyl vania, at a concert for which Bi eber
wa s prov iding s ecurity. A ppro xima tely two yea rs later, Sp arane y sued B ieber, th e Co unty of Lackawanna, the c oncert pr omoter, and the skiresort at which the concert

was held, claim ing that h is inju ries r esu lted f rom alleg edly in ade qua te se cur ity at the con cert. Bieb er failed to resp ond to the la wsu it, and S paran ey succe ssfully ob tained a def ault jud gm ent a gain st it. 

### Scottsdale, acting on behalf of Bieber, attempted unsuccessfu lly to open the d efault jud gment. Subseq uently it filed the complaint in this action, seekin g to be absolved from its responsibility t o provide coverage to Bieber because of Bieber’s alleged failure

to provide it with timely notice of t

he stat e court a ction. 1 

### Scottsdale had learned of the Sparaney claim in July

1996, when the concert promoter’s insurer sent it a letter notifying it of Sparaney’s alleged assault. A ttached to the letter were

a copy of a lia

bility and damage evaluation submit ted by Sparaney ’s attorne y, a copy of the init

ial cr ime r eport des cribing t

he incide nt, and a demand for $175,000. Scottsdale entered into settlem ent discussions with Sparaney as early as November 1996; settlement talks continued through August 19, 1997. No tes mainta ined4



### by Sc ottsdale esta

blish tha t Scotts dale wasaware by at lea st July

1997 that the

statut e of limitations on Sp araney’s claim would run o n Augu st 27, 199 7. Sparaney filed h is writ of summ ons in sta te court on August 22, 1997, a

nd the writ

was ser ved on Bieber

on or about Sep tember 4, 1997 . The actual co mplaint was served o n Bieber on or about A pril 20, 1998. Bieber di d not respond t

o the laws uit, and default judgm ent was entered in favor of Sparan ey on October 13 , 1998. It is u ndisputed that Bieber nev er forward ed the writ of summons, complain t, or notice of intent to take a d efault jud gment directly to Scottsdale. Geo rge Bieber, testifying in d eposition o n behalf o f his company, initially stated that he did not recall ever h aving seen an y of these documents. In a subsequent affidavit , however, Bieber c laim ed to have pl aced the

writ of sum

mons in a n envelope and sent it to the fi

rm of Jor dan & Compa

ny ( “Jordan” ). Jorda

n had been hir

ed by Scottsdale to in vestigate the claim, intervie w Bieber, and observe Bieb er’s security operations. T he parties dispu te whether Jor dan acted in a ny sort of agency capacity through out the settlement neg otiations as a liaison between Sco ttsdale and Bieb er. Also in dispute is whe

ther Scot tsdale received actua

l notice of the laws uit from Sparaney. Jeffrey

Kornblau, Sparaney’scounsel, filed an affidavit stating that “[s]o met ime afte r the ser vice of the Summ ons upon Biebe r & As soci ate s, Inc., I [] contact ed [Scotts dale cl aimsrepres entative] Coreen Bogden to advise of the filing of the Summons and to further discu ss that they settle the claim or proceed w ith the litigation
.5



### During our conve

rsati on, Ms. Bogden a

dvised m e that s he was about

to get married or that she had just gott

en mar ried and s he would get t

o the file as soon as

she could. ” App. at 444a. After receiving the notice of default, Bieber c ontacted Scottsdale. In February 1999, S cottsdale retained counsel to d efend Bieb er under a reserv ation of rig hts. Scottsda le’s a ttem pts to open t

he default

judgment we

re unsucc essful, and the judgm ent was affirmed o n appeal to th e Commonwealth C ourt on O ctober 5, 20 01. Scottsd ale then filed this action, see king a declaration of rights under the term s of Bieber’s insurance po licy. Scottsdale and Sparan ey filed cross-motions for summary judgment,
an d t he Di st ri ct Co ur t g ra nt ed su mma ry j ud gm en t i n f av or of Sp ar an ey. II. Our review of the District C ourt’s order g ranting summary judgment is plen ary. DeWitt v. Penn-Del

Direct ory Corp. , 106 F.3d 514, 520 (3d Cir. 1997). Summary judgment is only a

ppropriate when the pleadings, depositions, answers t o interrogatories and admi ssions on file, toge ther wit h any affidavit s, show tha

t there is no genuine

issue as to any mate rial fa ct and tha t the m oving party

is entitled to judgm

ent as a matt er of law. Sameric Corp. of

Delaware, Inc. v . City of Philadelph ia , 142 F.3d 582, 590 (3d Cir. 1998). The applicable legal sta

ndard when an insurance company s eeks to be release d from its obligatio ns because o f untimely notice was established by the Pennsylvania6



### Supreme Court in Brakeman v. Potomac Insur ance Com

pany , 371 A.2d 193 (Pa. 1977 );
see also Brooks v. Am

erica n Centennia

l Insura nce Compa

ny , 327 F.3d 260, 264-65 ( 3d Cir. 2003) ( discuss ing Brakeman ). In Brakeman , the Court squarel y held that in such a situation, the insurance c ompany m ust prove “that the notice provision was in fact breached and that the breach result ed in prejudice to its position.” Id. at 198. The Dist ric t Cour t bas ed it s opinion on t

he fir st pr ong of Brakeman , finding that Bieber had not breached the notice provision as a matter of law. Further, the c ourt determined that the fact that Scot tsdale was involved in invest

igating a nd attem pting to se

ttle t he Sparaney claim prior to t he suit de monstr ated tha t Scotts dale wasnot prejudic ed by Bieber’s alleged fail

ure to provide notice. Construction of an insurance policy is a matt er of law, so long as a court may fairly read it without ambigu ity. See Trustee s of the Unive rsity of Pennsy

lvania v. Lexington Ins urance Com pany , 815 F.2 d 890, 8 96 (3d C ir. 1987). Wh ile ambiguities in the provisio ns of a po licy must be construed against th e insurer, see McMillian v. S tate Mut. Life As sur. Co. , 922 F.2 d 1073 , 1075 (3 d Cir. 199 0), “a court should i nterpr et the policy so as to a void ambigui ties and give effec t to al l of it s provis ions. ” Little v. MG IC Indem. Corp. , 836 F.2 d 78 9, 79 3 (3 d C ir. 19 87)
. 

### Section IV of the Commercia l General Liability Coverage Fo rm under which Bieber was insu red by Scottsdale conta ins a subsection entitled “DutiesIn The Event Of Occurrence, Claim Or Suit”:
a. You must see to it that we a re notified as soon as practic able of an “occurr ence” or an offense whi ch may

result in a cla im. To t he extent7 

### possible, notice should include: (1) How, when and where the “occurrence” or offense took place; (2) The name s and addre sses of a ny injured pers ons and witne sses; and (3) The nature

and locat ion of any

injury or dama ge aris ing out of the “occurrence” or offense. b. If a claim is made or “suit” is bro ught again st any insured, you must: (1) Immediately record the specifics of th e claim or “suit” and th e date received; and (2) Notify us as s oon as practicable. You must see to it that we r eceive written notice

of the claim or “suit

” as soon as practicable.
c. You and any other involved insured must: (1) Imm

ediately send us copi es of any

demands , notice s, sum

monsesor legal papers receiv ed in conn ection with th e claim or “suit;” (2) Authorize

us to obtain recordsand other informat ion; [and] (3) Cooperate

with us in t

he invest igation, settlement

or defense

of the claim or “suit.” App. at 92a- 93a. In int

erpret ing the poli cy , the Dis trict Court focused on subsect ion ‘b’ of the notice provision, finding that the policy did not require notice of a suit where notice of th e initial claim had already been pro vided. Co nstruing th e disjunctiv e term in the r efer ence to “c laim or a ‘suit’” against

Scottsdale, the Distr

ict Court determined that “[the] poli cy

language specific ally

and unequivoca

lly indicat es that the duty to give notice was fo r an ‘. . . occurren ce, ( or a) claim, ( or

a) suit’. . . . [and does] not require that notice be given of an occurrence andlater a clai m andlater a suit. ” App. at 24a. We do not find t

hat a pla in reading of the policy t

ermsyi elds such a resul

t. The heading “Duties In The Event Of Occurrence, Claim Or Suit” e stablishes three distinct instanc es in which the insur ed mu st act. Th at the in sured ’s resp onsib ility extends to8

relat ed o ccu rren ces , claim s, and suit s is demonst rated by subsection ‘a’ , which provi des an independent

notice requir ement in t he event of an “oc currence ” and prote cts t he insure r by allowing i t to ant icipate and i nvesti gate a pot entia l cla im or sui t. I f, for
exam ple, Bieber h ad beco me aw are of the stab bing inciden t on the nigh t of the con cert and h ad inf orm ed S cottsda le imm ediate ly thereafte r, it wou ld hav e disch arged its duty to prov ide no tice un der su bsec tion ‘a’. T o say then that B ieber w ould have no f urther duty under su bsection ‘b’ to p rovide no tice to Scottsdale on ce it becam e awa re of Sp araney’s actual clai m would be inconsis tent wit h the pla in langua ge of the pol icy , which cont ains no language t o indicate that compli ance with subs ecti on ‘a’ r elease s an insured from the duty to complywith subsec tion ‘ b’. Si milarl y, although t he insur ed’s duties t o the ins urer are the same whether a cl aim is br ought or sui t is file d, use of t he disj unctive alone cannot fairl y be r ead as a re lease f rom any fut

ure dutyto provi de notic e of a lawsui t where noti ce of a clai m has alrea dy been gi ven. This readin g of the p olicy is bolstered by subsection ‘c’, w hich the D istrict Court did not address in i ts rul ing but which s pecifi call y and unequi vocall y i mposes a dutyon the insured to a ssist the insurer 

### by “[i]mmediately send[ing] . . . cop ies of any demands, notices, summ

onses or legal papers rece ived in connection with the claim or ‘ suit’.” Subsection ‘c’ would provide an independent ground fo r finding that Bieber was required to provide Scottsdale with notice of the lawsuit even were we to find an ambiguity

as to whet

her notic e of the cl aim r

elieve s an insur

ed of the duty

to provide9



### notice of the suit. Read in the context of the entire notice provision, subsection ‘c’ de mo ns tr at es th at th e i ns ur ed ha s a co nt in ui ng du ty to provi de the i nsurer wit h legal pap er s i t r ece iv es in con nec ti on wi th an o ngo in g cl ai m. We note that c ommon sense support s such a re ading. Insurer s cannot be e xpected to st ation a gents i n the cl erk’s of fice of ever

y court which may or may not have jurisdictio n ov er a po tential cla im, w aiting u ntil the sta tutes of limitation for all p ossible causes of act

ion have el apsed. Not eve ry occurrenc e for which an i nsured faces potenti al liability will resu lt in the filin g of a claim , and n ot eve ry unreso lved c laim w ill result in the filing of a la wsu it. Con tinuing notice requ ireme nts suc h as th e one reflec ted in subsections ‘a ’ and ‘b’ acknowledge the fa ct that, however i nvolved the insure r becomes in defendi ng a clai m, the i nsured re mains the partywith pri mary ac cess t o the inf ormation
nece ssary to do so at ea ch of the thre e relev ant stag es. Be caus e the in sured is the pa rty in the best position to know when legal acti on has been taken against it, notifying the i nsurer of such act ion is simil ar in i mportance t o but functionall y di fferent from providi ng notice of an o ccurrence or claim. W hile the facts of this ca se indicate that Sco ttsdale was aw are of Sparaney ’ int ent to f

ile a lawsuit , the refore, we hold that this knowledge does not relea se Bieber f

rom its obligat

ion under t

he polic y t o provide Scot tsdal e with noti ce once Sp aran ey ha d do ne s o. We further hol d that t

he District Court

erred i n finding t

hat Scott sdale was not prejudiced because of its “apparent will ful failure t o follow-up on its own activities,10

discuss ions and document ation. ” Rather than focusing on Scot tdale ’s activities before the suit was filed, the court

should have determined whether Scotts dale had act

ual or constructive knowledge of the l awsuit after it had been fil ed, and whether , the refore, Sco ttsdale w as actu ally prejud iced b y any failure o f Bie ber to p rovid e notic e in
acco rdan ce w ith the p olicy. Bec ause there a ppea r to be u nreso lved f actua l issues w ith regard t o whether Jor dan acted as an agent of Scottsdal e and whether Spar aney’ s counsel informed Scottsdal e of the l awsuit’ s fil ing, we l eave the r esolution of thos e matter s (as well as t he legal effect t o be given t o Bieber’s contradi ctorysworn statements, if agency is i n fact shown) t o the Dist rict Court on remand.

III. For the r easons di scussed above , we will revers e the Dist rict Court’s order granti ng Sparaney ’s cros s-moti on for summary judgment and r emand for further consider ation of

the part ies’ cross- motions for

summary j udgment, t o be undertaken in a manner consis tent wit

h this opinion.