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Philadelphia Indemnity Insurance Co. v. Professional Security Associates, Inc.

United States District Court, E.D. New York

March 30, 2018

PHILADELPHIA INDEMNITY INSURANCE COMPANY, Plaintiff,
v.
PROFESSIONAL SECURITY ASSOCIATES, INC., EDWARD COLVELL, and FOFO's TOY, INC. d/b/a THE EMPORIUM, Defendants.

          MEMORANDUM AND ORDER

          STEVEN I. LOCKE, United States Magistrate Judge.

         Presently before the Court is Plaintiff Philadelphia Indemnity Insurance Company's (“PIIA” or “Plaintiff”) motion for default judgment against Defendant Professional Security Associates, Inc. (“PSA”).[1] See Docket Entry (“DE”) [22]. By way of Complaint filed on December 2, 2016 (the “Complaint”), PIIA commenced this diversity action against Defendants PSA, Edward Colvell (“Colvell”), and FoFo's Toy, Inc. d/b/a The Emporium (“FoFo's”) pursuant to 28 U.S.C. § 2201 and Rule 57 of the Federal Rules of Civil Procedure seeking, among other things, a declaratory judgment that it has no duty to defend or indemnify its insured, PSA, in connection with claims made in the lawsuit captioned Edward J. Colvell v. Fofo's Toy, Inc. d/b/a The Emporium, Index No. 060853/2014 (N.Y. Sup. Ct.) (the “Underlying Action”). See DE [1]. Colvell filed an Answer on December 23, 2016, see DE [8], but both PSA and FoFo's failed to timely answer or otherwise respond to the Complaint. On April 12, 2017, at Plaintiff's request, the Clerk of the Court entered Certificates of Default against PSA and FoFo's. See DEs [17], [18]. PIIA then filed the instant motion for default judgment against PSA on July 6, 2017. See DE [22]. For the reasons set forth herein, Plaintiff's motion is denied without prejudice to renewal pending the outcome of the case against Colvell.

         I. BACKGROUND AND PROCEDURAL HISTORY [2]

         A. The PIIC Policy

         Plaintiff issued a Commercial General Liability Policy to PSA bearing policy number PHPK957183 (the “Policy”) for the period of December 14, 2012 through December 14, 2013. See Declaration of Edward Fogarty (“Pl.'s Decl.”), Exhibit (“Ex.”) B, DE [23-2]. The Policy provides coverage for losses resulting from personal bodily injury with a limit of $1 million per occurrence. Id. Among other conditions, the Policy prescribes a number of “[d]uties” on the part of an insured “[i]n [t]he [e]vent [o]f [o]ccurrence, [o]ffense, [c]laim [o]r [s]uit[, ]” including requirements that the insured promptly notify PIIC of any claim or suit, provide Plaintiff with necessary documentation, and cooperate with PIIC in connection with defending the claim or suit. See Id. Section IV.

         B. The Underlying Action

         On or about April 2, 2013, PSA's chief executive officer, Phil Fogarty (“Fogarty”), informed Plaintiff via email of a potential lawsuit arising from bodily injuries allegedly sustained by Colvell on March 17, 2013 while PSA was performing security services at The Emporium, a nightclub owned by FoFo's. See Pl.'s Decl., Ex. C. Immediately after learning of the possible suit, PIIC began to investigate the alleged incident. See Complaint ¶ 22. On multiple occasions throughout 2013, Plaintiff conferred with Fogarty in an effort to obtain additional information concerning the incident and determine whether a lawsuit had in fact been filed against PSA. See Id. ¶ 23. In mid- to late-2013, however, PSA ceased communicating with PIIC entirely. See Id. ¶ 27. Between September 2013 and February 2014, Plaintiff made numerous attempts to contact PSA via both telephone and email, all of which went unanswered. See Id. ¶ 29.

         Colvell commenced the Underlying Action against FoFo's and PSA in the Supreme Court of the State of New York, County of Suffolk, on February 10, 2014. See E-Filed Verified Complaint, Pl.'s Decl., Ex. A, DE [23-1] (the “Underlying Action Complaint”). Colvell alleges in the Underlying Action Complaint that security officers employed by PSA detained, assaulted, battered, and falsely arrested him while he was lawfully present at The Emporium. See Id. ¶¶ 31-22. Colvell claims he sustained bodily injury and emotional harm as a result of the officers' conduct. See Id. ¶¶ 33, 41.

         PSA was served with a summons and the Underlying Action Complaint through the Secretary of State of the State of New York on or about March 21, 2014 and via mail on May 15, 2014. See Id. ¶¶ 31, 32. Following service, however, PSA did not advise Plaintiff that suit had actually been filed against it; rather, PIIA learned of Colvell's claims against PSA from its own search of the court docket. See Id. ¶¶ 33, 34. On May 27, 2014, Plaintiff again contacted Fogarty to inform him that claims had been asserted against PSA and to discuss representation of PSA in connection with the lawsuit. See Id. ¶ 35; Pl.'s Decl., Ex. D. PIIC then retained counsel to represent PSA in the Underlying Action subject to a reservation of rights. See Complaint ¶ 36.

         On or about July 9, 2014, counsel for PSA visited the company's last known address and informed Plaintiff that this location was an empty storefront with unopened mail present dating back to May 31, 2014. See Id. ¶ 37. Thereafter, counsel located Fogarty's wife, Christine Fogarty, who stated that PSA had moved from its original address but, apparently, provided no further information. See Id. ¶ 38. PIIC also retained a private investigator in an attempt to locate PSA and Fogarty and to obtain their cooperation in connection with the Underlying Action, but such efforts were unsuccessful. See Id. ¶ 39.

         By letters dated October 7, 2014 and September 8, 2015, Plaintiff once again requested PSA's cooperation, informed PSA that its continued absence was prejudicing PIIC's ability to defend the Underlying Action, and warned PSA that Plaintiff would be forced to disclaim coverage for the incident at issue under the Policy unless PSA contacted PIIA. See Id. ¶ 40; Pl.'s Decl., Ex. E. In addition, Plaintiff informed PSA that the court would strike PSA's pleadings if no discovery was produced and that this would prejudice Plaintiff's ability to defend the Underlying Action. See Complaint ¶ 41.

         In light of PSA's continued failure to respond or cooperate, on or about September 22, 2015, PIIA sent a letter to PSA explaining, among other things, that Plaintiff was disclaiming coverage for the Underlying Action under the Policy and informing PSA that PIIA would no longer pay for its defense. See Complaint ¶¶ 43, 44; Pl.'s Decl., Ex. F. On December 17, 2015, Justice Joseph A. Santorelli granted an application filed by counsel assigned to defend PSA in the Underlying Action requesting leave to withdraw. See Declaration of Zachary M. Beriloff, DE [33], Ex. 1. Subsequently, on September 29, 2016, Justice Gerard W. Asher entered an Order striking PSA's Answer in the Underlying Action. See id., Ex. 2.

         C. The Instant Declaratory Judgment Action

         Plaintiff filed its Complaint in this matter on December 2, 2016 seeking, among other things, a declaratory judgment that it has no duty to defend or indemnify PSA in the Underlying Action. See DE [1]. PIIA effectuated service of the Summons and Complaint upon PSA on December 21, 2016 after delivering a copy of such pleadings to the Secretary of State of the State of New York, affixing copies to the door of PSA's last known business address, and sending a copy to PSA via first class mail. See DE [9]; Pl.'s Decl., Exs. H-J. After PSA failed to timely answer ...


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