Opinions of the United
2006 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


9-27-2006

Essex Ins Co v. Starlight Mgmt Co
Precedential or Non-Precedential: Non-Precedential

Docket No. 05-3135




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                                                                  NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT

                                      No: 05-3135

                          ESSEX INSURANCE COMPANY,
                                           Appellant

                                                v.

                    STARLIGHT MANAGEMENT CO. and RMJC


                    On Appeal from the United States District Court
                       for the Eastern District of Pennsylvania,
                                (Civ. No. 01-cv-04049)
                        District Judge: Hon. Harvey Bartle, III

                                 Argued: May 15, 2006

                      Before: McKEE and GARTH, Circuit Judges,
                             and LIFLAND, District Judge*


                           (Opinion filed: September 27, 2006 )


Richard W. Yost, Esquire (Argued)
Phillip J Meyer, Esquire
Yost & Tretta
Two Penn Center Plaza
1500 John F. Kennedy Blvd.
Suite 610
Philadelphia, PA 19102
Attorney for Appellant


      *
       The Hon. John C. Lifland of the United States District Court for the District of
New Jersey, sitting by designation.

                                            1
Joel E. Oshtry, Esquire (Argued)
Oshtry & Oshtry
1819 John F. Kennedy Blvd.
Philadelphia, PA 19103
Attorney for Appellee


                                         OPINION

McKEE, Circuit Judge.

       Essex Insurance Company appeals the District Court’s grant of summary judgment

in this declaratory judgment action that Essex filed to determine its obligations under an

insurance policy it had issued to RMJC (the “Policy”).1 The suit was prompted by a tort

action filed against RMJC in state court to recover damages for injuries allegedly caused

by RMJC’s employees. In this coverage dispute, Essex claims that it was not obligated to

indemnify RMJC or defend it against that action because the damages there were

specifically excluded from coverage by the language of the Policy. After cross motions

for summary judgment were filed, the District Court awarded RMJC summary judgment

on the issue of Essex’s duty to defend RMJC. The court stayed resolution of Essex’s

obligation to indemnify pending completion of the state court litigation. That litigation

ultimately resulted in a jury award in favor of the plaintiff and the District Court

thereafter granted RMJC’s motion for summary judgment as to Essex’s obligation to

indemnify it for that award. This appeal followed.



       1
         Because the distinctions are not material to the issues before us, we will refer
collectively to RMJC, Inc., and Starlight Management Company, as “RMJC.”

                                              2
       Although we conclude that the District Court correctly ruled that Essex had a duty

to defend RMJC, we hold that the court erred in ruling that the Policy exclusions did not

apply as a matter of law. Accordingly, we will reverse and remand for further

proceedings on the issue of indemnification.

                                       I. Background

       Mark and Audrey Jaworski sued RMJC and others in the Court of Common Pleas

of Philadelphia County seeking compensation for injuries Mark had sustained at the Show

and Tel Showbar in Philadelphia, Pennsylvania. That establishment is a “bring your own

beverage” nightclub owned by RMJC. It offers what has euphemistically come to be

known as “adult entertainment” that advertises “totally nude live dancing girls.” In the

amended complaint they filed in state court, the Jaworskis alleged that Mark was

attending a bachelor’s party at the Show and Tel when he was struck (or pushed) without

provocation by an RMJC employee. App. 175a. Jaworski was then removed from the

club by force and sustained serious and permanent injuries when he fell down some steps.

App. 175a-76a.

       The amended complaint was grounded in negligence, gross negligence and

recklessness. App. 176a. It alleged, inter alia, that RMJC employees “mistakenly

believed that [Jaworski] was uncooperative and disorderly” and, operating under that

mistaken belief, they “failed to use due care . . . in handling and physically ejecting

[him].” App. 176a. The complaint also alleged that Jaworski was injured as a result of

RMJC’s failure to “exercise due care in the selection and investigation of its employees”

                                               3
and its failure to “provide adequate training to its security employees.” 

Jaworskis filed the suit, RMJC was the named insured under the Policy.

RMJC notified Essex of the suit as required under the Policy, and Essex filed the instant

declaratory judgment action in District Court. As noted at the outset, Essex claimed that it

had no duty to defend RMJC against the tort action, and that it had no duty to indemnify

for any recovery the plaintiffs may be awarded in that action. Essex based that argument

upon the “Assault and/or Battery” and the “Hiring and/or Supervision” exclusions of the

policy. The former stated that coverage was not offered for “any claim, suit or expense

arising out of . . . Assault and/or Battery or out of any act or omission in connection with

the prevention or suppression of such acts, whether caused by or at the instigation or

direction of any insured, insured’s employees, patrons or any other person.” App. 287.

The latter excluded coverage for “any claim, suit or expense arising out of . . . . Charges

or allegations of negligent hiring, training, placement or supervision.” 

that the focus of the state action was whether “RMJC should be held

liable for negligence because it breached the standard of care by leaving [Jaworski] at the

top of the steps and not physically escorting and walking him down the flight of stairs.”

Appellees’ Br. 17. RMJC claims “Jaworski did not present a cause of action at trial based

on negligent hiring/supervision,” 

and that assertion is consistent with our review

of the record from the state tort action.2


       2
           Indeed, Essex only devotes 3 paragraphs of its twenty-two page brief to arguing
                                                                              (continued...)

                                              4
       During the trial in state court, Jaworski testified that he had been standing inside

the Show and Tel when he was approached by Terrence Benson, a security guard

employed by RMJC.3 Benson purportedly told Jaworski to “get the f... out of the way.”

App. 627a. Jaworski said he attempted to comply, but had difficulty moving because the

nightclub was extremely crowded. 

that he then asked Benson what

cigar he was smoking in an effort “to lighten the mood a little.” 

diplomatic mediation was apparently less successful then Jaworski would have liked

because “seconds later [he] turned slightly and was punched by [Benson] and went flying

on [his] back.” 

that he then “proceeded to get punched and kicked

and assaulted” while he was on the ground, and was “picked up, dragged, grabbed,

carried, to the door” and “thrown down the stairs” of the Show and Tel. App. 627a - 28a.

Jaworski’s brother-in-law, Stephen McHenry, who was standing with Jaworski at the time

of the altercation, testified that he saw the initial blow, and “Mark flew about 10 feet . . . .

At that point, everyone just kind of pounced on him.” App. 696a. McHenry did not see

how Jaworski left the club. 

the security personnel involved in the alleged altercation testified at trial,

but RMJC manager, Kevin Stone, testified that he saw Jaworski on top of the landing of



       2
        (...continued)
that the exclusion for negligent hiring applies to the circumstances here. Appellant’s Br.
at 21-23.
       3
           Jaworski learned Benson’s name at some point after the altercation. App. 628a.

                                               5
the club cursing and yelling at the bouncers. App 687a. Stone stated that when he saw

Jaworski at the door of the club, noone was touching him and there was “no bouncer

around him for at least three (sic) to 4 feet.” App. 667a.

       Scott DiGise, a maintenance worker at Show and Tel, testified that he was not able

to clean up a large spill on the floor of the club because Jaworski was standing in the

middle of it. App. 752a. DiGise testified that he twice asked Jaworski to move.

Jaworski appeared drunk, and was uncooperative and verbally abusive, forcing DiGise to

get help from the security personnel. 

that he asked Benson to speak

with Jaworski. Although DiGise said he could not hear the conversation, he did see

Benson bear hug Jaworski and walk him around the corner. App 754a.

       As noted above, Jaworski’s suit was based on negligence only, and not on assault.

The Verdict Form given to the jury asked whether RMJC was negligent and whether any

such negligence was a “substantial factor” in bringing about the harm to Jaworski. App.

839a. The jury returned a verdict in favor of the Jaworskis, finding that RMJC was

negligent and fully liable for Jaworski’s injuries.4

       Essex eventually satisfied that state court judgment and then filed Supplemental

Briefs in support of its original request for declaratory relief from the obligation to

indemnify under the Policy. Thereafter, the District Court denied Essex’s motion and



       4
       The resulting award was affirmed on appeal to the Pennsylvania Superior Court,
Jaworski v. RMJC, Inc., 

(Pa. Super. Ct. 2004) (table), and the
Pennsylvania Supreme Court, Jaworski v. RMJC, Inc., 

(Pa. 2005) (table).

                                              6
granted summary judgment to RMJC. The court thus held that the Policy obligated Essex

to indemnify RMJC for the tort award against RMJC as a matter of law. Essex appeals,

claiming that the District Court erred in requiring it to defend and indemnify RMJC.

                                        II. Discussion.5

       In its brief, Essex states that “[w]hether the court below erred in holding that the . .

. allegations of negligence in the [Jaworski] complaint . . . required Essex to defend

RMJC, even though the factual allegations . . . describe an assault . . . within the scope of

the ‘Assault and/or Battery’ Exclusion and/or the ‘Hiring and/or Supervision’ exclusion

of the Essex policy,” is an issue presented for review, see Appellant’s Br. 1. However,

Essex never addresses the Hiring and/or Supervision issue in the “Argument” portion of

its brief. We have previously explained that including an issue in the “Statement of

Issues Presented for Review” does not raise an issue on appeal if the issue is not also

discussed in the “Argument” portion of a party’s appellate brief. See Matsko v. United

States, 

, 558, n.6 (3d Cir. 2004). Moreover, Essex has already defended

RMJC and has not appealed the District Court’s order requiring it to do so. Accordingly,

that issue is now moot and we need not discuss Essex’s duty to defend except insofar as it

is helpful to our discussion of the duty of indemnification.

       “The proper focus regarding issues of coverage under insurance contracts is the

reasonable expectation of the insured.” Britamco Underwriters, Inc. v. Weiner, 

           All parties agree that this action is controlled by Pennsylvania law.

                                                7
649, 651 (Pa. Super. Ct. 1994). That expectation is governed by the unambiguous

language of the insurance policy. 

above, this dispute focuses on the Policy’s Assault and/or Battery

exclusion. Under Pennsylvania law, an individual is guilty of the crime of assault if

he/she “attempts to cause or intentionally or recklessly causes bodily injury to another” or

“attempts by physical menace to put another in fear of imminent serious bodily injury.”

18 Pa. C.S.A. § 2701. The tort of assault is defined as “an intentional attempt by force to

do any injury to the person of another, and a battery is committed whenever the violence

menaced in an assault is actually done, though in ever so small a degree, upon the

person.” Renk v. City of Pittsburgh, 

, 293 (1994).

       Essex relies upon Acceptance Ins. Co. v. Seybert, 

(Pa. Super. Ct.

2000) and Erie Insurance Exchange v. Filder, 

(Pa. Super. Ct. 2002) to

argue that the Jaworski complaint clearly alleges that Mark’s injuries arose from an

assault even though it is cloaked in negligence. Neither case aids Essex to the extent

Essex claims.

       In Seybert, the insured, Michael Seybert, sued a bar and several individuals who

allegedly attacked him “following a night of drinking” that began at the defendant 

. He alleged that the attack was the direct result of the bar serving his

assailants after they had become visibly intoxicated, thus “rendering them incapable of

safe and prudent conduct, and contributing to the attack.” 

was covered under

a policy of liability insurance issued by Acceptance Insurance Company, and Acceptance

                                             8
brought a declaratory judgment action in an effort to have the court declare that the

resulting injuries were within the scope of the assault and battery exclusion in the policy.

Acceptance prevailed, and the insureds appealed. On appeal, the Superior Court agreed

that Acceptance had no duty to defend. The court compared the allegations in the

complaint before it with the allegations in the complaint at issue in Britamco, supra.6

and concluded that “Seybert’s complaint . . . contains no allegations that Seybert’s actual

injuries were caused in any way other than by assault and battery by the [individuals] in

the . . . parking lot. There is no suggestion that Seybert’s injuries were an accident, as

was suggested in [Britamco], or were negligently caused by [the bar’s] employees.” 

As we noted above, that is not the case here. The Jaworskis’ amended complaint

clearly includes allegations that could lead a fact finder to conclude that Mark’s injuries

are a result of negligent conduct, and the complaint is carefully tailored to request relief

only for RMJC’s negligence.7

       Fidler affords Essex no more support than Seybert. Fidler was sued in a tort action


       6
          The Britamco court held that because the plaintiff, who had been struck in a bar,
asserted alternative theories of liability sounding in assault and battery, negligent
infliction of emotional distress and claims of general negligence, the insurer owed a duty
to 

.
       7
         We also note that it is of no consequence under Pennsylvania law that the
original Jaworski complaint did sound in assault because allegations of assault are not
contained in the amended complaint before us. In Fidler, the court noted that the
“original complaint included descriptions of the incident as an ‘assault and battery.’ This
language was eliminated in the amended complaint, presumably to avoid application of
[the] exclusionary 

, n.2. The court then evaluated the duty to
defend based solely on the amended complaint.

                                              9
by parents who alleged that he “threw [their minor son] with such great force that the

Plaintiff’s head struck the wall and a desk causing him to fall unconscious to the floor.

The complaint further alleged that, in so behaving, [the defendant] failed to act with due

and reasonable care . . . [and that he acted] 

. Fidler

requested a defense from Erie Insurance under his homeowners’ policy. Erie filed a

declaratory action arguing that since the injury resulted from an assault, coverage was

excluded. The court agreed with Erie because it was clear from the allegations in the

complaint that the injuries were caused by Fidler’s intentional conduct. The court

explained: “[r]egardless of the language used in the complaint to ‘create’ an issue of fact

surrounding Fidler’s specific intent, it is clear from the undisputed facts alleged therein

that Fidler’s assault . . . was 

.

       Again, that is not our situation. Although one could argue that the amended

Jaworski complaint alleges an intentional assault by RMJC’s employees and negligent

failure to train, we think the complaint more closely resembles the complaint in Britamco,

which the court discussed in deciding Seybert. The Seybert court noted that the

complaint in Britamco “asserted alternative theories of liability sounding in assault and

battery . . . and claims of general negligence.” 

. The allegations

of negligence were sufficient to trigger the insurance company’s duty to defend even

though the allegations of assault and battery would have precluded coverage if the

injuries had arisen out of the assaultive behavior. Our case is even clearer because no

such alternative theory is pled. The amended complaint clearly seeks recovery based only

                                              10
upon negligence. Based upon the allegations of the amended complaint, it cannot be

determined as a matter of law that Jaworski’s injuries “arise out of” assault and/or

battery.8

       The Policy provided coverage for “bodily injury” which “is caused by an

‘occurrence’ that takes place in the ‘coverage territory.’” App. 132a. Given the

unambiguous language of the Policy, Jaworski’s allegation that he was injured when

RMJC employees negligently “failed to use due care and proper restraint methods, in

handling and physically ejecting [him] while in the mistaken belief that he was

uncooperative” falls within RMJC’s “reasonable expectation” of coverage. Accordingly,

the District Court correctly concluded that Essex had a duty to defend RMJC in the

Jaworski tort action. As we explained earlier, that duty extends to potential claims as

well as claims that are actually covered. See United Services Auto. Ass’n. v. 

.

       Essex claims that it was entitled to summary judgment on its claim for

indemnification because, although Jaworski’s recovery was based on the theory of

negligence, “the undisputed actions of RMJC’s employees constitute an assault and/or a

battery within the meaning of the Essex policy.” Appellant’s Br. 11. According to



       8
        We also note that, the injuries do not necessarily arise out of a failure to train or
supervise as a matter of law, even though that exclusion was not really at issue in Essex’s
summary judgment motion. Of course, we do not suggest that Essex is in any way
precluded from establishing that the exclusion for negligent hiring/supervision applies on
remand.

                                             11
Essex, “Jaworski obviously could not have sought damages from RMJC, but for that

assault.” 

However, in relying upon this argument to request summary

judgment, Essex presented no evidence beyond the state court complaint and trial

transcripts.9 The District Court rejected Essex’s motion, because “the evidence was

sufficient for the jury to find that RMJC’s employees were negligent,” and the court

entered summary judgment in favor of RMJC. Essex Ins. Co. v. RMJC, No. 01-4049,

, at *3 (E.D. Pa. 2005).

       Summary judgment is appropriate when the record “show[s] that there is no

genuine issue as to any material fact and that the moving party is entitled to judgment as

a matter of law.” Fed. R. Civ. P. 56©). A genuine issue is one in which the evidence is

such that a reasonable jury could not return a verdict for the nonmoving party. See

Anderson v. Liberty Lobby, Inc., 

, 248 (1986).

       On this record, Essex was not entitled to summary judgment on its claim that it

was not obligated to indemnify RMJC, and the District Court correctly denied that

motion. Although Essex argues that the evidence of assault on Jaworski was

“undisputed,” that contention is based almost entirely on the fact that none of the security

personnel involved in the altercation testified at trial. The argument is flawed for several

reasons.



       9
         For reasons not at all apparent to us, Essex even failed to produce the additional
evidence that Terrence Benson had been convicted of simple assault in Philadelphia
Municipal Court for his conduct at the Show and Tel that night. See App. 618a.

                                             12
       First, as Essex concedes, “the issue of whether [RMJC’s] conduct amounted to

assaultive behavior was never directly litigated.” App. 423a. In fact, Jaworski’s counsel

made clear throughout the trial that the case was about what “what happen[ed] at the

doorway area,” about “the ejection.” App. 609a; See also App. 796a. RMJC was

defending against allegations that it was negligent in its failure to ensure Jaworski got

down the steps safely after he was removed.

       Second, RMJC’s decision to not call its bouncers as witnesses does not constitute

an adoption of Jaworski’s testimony. Kevin Stone estimated that the bouncers were

typically 6'6" and weighed around 350 pounds. App. 688a. RMJC may well have

assumed that allowing the jury to see their not insubstantial bouncers would do more

harm than good, regardless of the quality of their testimony.

       Third, rather than rely upon its imposing bouncers to rebut Jaworski’s claim that

he was assaulted without provocation and forcefully thrown down the steps, RJMC

introduced testimony that Jaworski was loud, disruptive, and intoxicated. This testimony

would have allowed the jury to find that Jaworski fell down the steps rather than being

thrown or pushed, and that his injuries arose from his own inebriation, and not out of the

actions of RJMC’s employees.10

       Jaworski claimed that he was standing inside the Show and Tel when Benson


       10
          We realize, of course, that the jury found that Jaworski as not contributorily
negligent. That finding was relevant to Jaworski’s ability to recover for RMJC’s
negligence, but it is not conclusive on the issue of whether his injuries “arose out of” an
assault, as that issue was never litigated.

                                             13
attacked him without provocation. App. 627a. However, DiGise tells an entirely

different story. He testified that Jaworski was drunk, belligerent, abusive, and

uncooperative to such a degree that DiGise was forced to seek help from Benson. App

752a. Although Jaworski denies even seeing DiGise, app. 636a, DiGise’s testimony

clearly contradicts Jaworski’s claim of an unprovoked attack.

       Moreover, even if the physical altercation was tantamount to an assault, it cannot

be said as a matter of law that Jaworski’s injuries “arose out of” that assault based on the

state record. It is clear that Jaworski sustained injuries when he fell down the stairs of the

Show and Tel, and he testified that he was carried to the door and thrown down the stairs.

App. 627a. However, Stone (RMJC’s manager) testified that he saw Jaworski standing

on the landing of the Show and Tel screaming and cursing. App 687a. As we noted

above, Stone stated that noone was touching Jaworski and that no bouncer was within

three or four feet of him. App. 667a. Clearly, if Jaworski was carried out of the club

and thrown down the stairs, he did not also stand around on the landing screaming at the

bouncers. Jaworski was emphatic that he was not “pushed out” of the door but “thrown

down” the stairs. App. 628a. There is clearly a factual dispute about the cause of his

injury as well as the circumstances leading up to it.

       Thus, none of the testimony Essex relies upon to prove an assault can be

considered “proven at trial.” The District Court could not possibly have evaluated the

veracity of the trial testimony in the state tort action, nor can we. Only the jury that heard



                                             14
the testimony can determine which facts were proven. However, because the jury was

only asked to decide if RMJC was negligent and whether that negligence caused

Jaworski’s injuries, a factual dispute remains about whether an assault occurred and

whether, if it did occur, Jaworski’s injuries “arose out of” it. Additional testimony is

required to resolve those factual issues.

       This case, and Essex’s attempt to rely only upon the record from the state tort

action to obtain declaratory relief in a coverage dispute, illustrates the dilemma that

insurance companies face in this situation. Essex was obligated to defend RMJC against

Jaworski’s claim of negligence in state court under the terms of the Policy. Thus, it had

an ethical obligation to RMJC, its client, to vigorously defend it against all liability. In

defending against Jaworski’s claim of negligence, Essex could not argue that its client’s

employees assaulted Jaworski, even though such an assault could have relieved Essex of

the duty of indemnification under the Policy. Thus, Essex’s obligation to defend its

insured against liability in the tort action deprived it of any opportunity to establish that it

was not obligated to indemnify RMJC for the resulting judgment. That is what it

attempted to do in this coverage action, but it could not accomplish that objective by

relying only upon a state court record where the action was tried on a theory of

negligence; an “occurrence” covered under the Policy.

       This “Catch-22," was first addressed in Pennsylvania in Vaksman v. Zurich

General Accident & Liability Ins. Co., 

(Pa. Super. Ct. 1953). There, the



                                              15
court had to determine whether a tort judgment obtained on the basis of negligence

precluded the insurer from denying coverage based upon the latter’s contention that the

loss actually resulted from the intentional actions that were excluded under the liability

policy it had issued to the defendant in the underlying tort action. In holding that the tort

judgment did not automatically trigger the duty of indemnification, the court explained:

              It was not possible for [t]he company . . . to defend the
              insured, and at the same time to protect its own interests. It
              could not exculpate itself by showing that the injurious acts of
              the insured were beyond the scope of the policy, for this
              showing would establish the liability of the insured to the
              injured parties to an even greater extent than that claimed in
              the complaints.

(internal quotation marks omitted, ellipsis in original).

       We addressed a very similar situation in Ranger Ins. Co., v. General Accident Fire

and Life Assur. Corp. 

(1986). There, we cited Vaksman and Dally v.

Pennsylvania Threshermen & Farmers’ Mut. Cas. Ins. Co., 

(1953), to

explain the conflict of interest that arises between an insurance company and its insured

when an issue that would determine coverage has been litigated in a prior suit between

the insured and a third 

.

       The District Court cited recognized this dilemma. In granting Essex’s motion for

summary judgment, the court explained:

              In the underlying action, Essex and RMJC likewise had a
              conflict of interest. It was in the interest of Essex to assert that
              Jaworski suffered from an assault and battery since if
              successful Essex would not have been required to indemnify
              RMJC. However, this tact would have been highly prejudicial

                                              16
              to RMJC if it had been left bare of insurance coverage.
              Consequently, it was not until the conclusion of the Jaworski
              action and after the judgment had been paid that Essex could
              fairly litigate the issue of indemnification without harming
              RMJC at the underlying trial.

Essex Ins. Co. v. RMJC, No. 01-4049, 

, at *5 (E.D. Pa. 2005).

       Nevertheless, Essex’s motion for summary judgment on its request for a

declaration that it was not obligated to indemnify was premature. Essex apparently

believed that evidence of assaultive behavior in the tort action was sufficient for its

purposes even though the jury’s verdict only established that RMJC was negligent.

However, its failure to present additional evidence on this issue is fatal to its motion for

summary judgment because material issues of fact remain.

       Accordingly, although Essex was not entitled to summary judgment on the basis

of the state court record, it is also clear that RMJC was not entitled to summary judgment

on its claim for indemnity. As is clear from our entire discussion of Essex’s duty to

indemnify, disputed issues of material fact also preclude granting RJMC’s cross motion

for summary judgment on Essex’s claim that it owes no duty of indemnification. Rather,

in its declaratory judgment action, Essex must litigate whether Jaworski’s injury actually

“arose out of” an assault or battery (or the hiring/supervision exclusion), and RMJC will

be free to rebut evidence to that effect.

                                       III. Conclusion.

       For the reasons set forth above, we will vacate the order granting summary

judgment in favor of RMJC on the issue of indemnification and remand to the District

                                              17
Court for further proceedings consistent with this opinion.




                                            18