Zurich Am. Ins. Co. v. Gutowski

• Decision Date: 08 December 2022
• Docket Number: Civil Action 22-2834
• Parties: ZURICH AMERICAN INSURANCE COMPANY, Plaintiff, v. ERIK J. GUTOWSKI, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

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ZURICH AMERICAN INSURANCE COMPANY, Plaintiff, v. ERIK J. GUTOWSKI, Defendant.

Civil Action No. 22-2834

United States District Court, E.D. Pennsylvania

December 8, 2022

MEMORANDUM OPINION

EDWARD G. SMITH, J.

The defendant allegedly caused an automobile accident while operating an equipment rental company's truck. The accident victim then sued the defendant and the equipment rental company for negligence in state court. The plaintiff insurer, which had issued a business automobile policy to the rental company that was in effect at the time of the accident, agreed to provide a defense to the defendant, but under a reservation of rights. The insurer has now filed this action where it seeks a declaration that it is not obligated to defend or indemnify the defendant in the state-court action.

Although the insurer recognizes that the rental company's policy provided that the insurer would cover individuals who used the rental company's vehicles with its permission, the insurer asserts that the defendant was not a permissive user of the rental company's truck as evidenced by the defendant pleading guilty to the unauthorized use of the truck and the accident victim's acknowledgment in the operative state-court complaint that the defendant was not permitted to use the truck. Therefore, the insurer contends that the defendant was not insured under its policy with the rental company and, thus, it has no obligation to defend or indemnify the defendant in the statecourt action.

Unfortunately despite being properly served with the complaint, the defendant has chosen to not participate in this action. Currently before the court is the plaintiff's motion for a default judgment. The defendant also has not responded to this motion.

Although the court favors having a matter heard on the merits, the court's review of the factors applicable when considering a motion for a default judgment demonstrates that the entry of a default judgment is the appropriate result in this action. Accordingly, the court will grant the motion for a default judgment.

I. ALLEGATIONS AND PROCEDURAL HISTORY

The plaintiff, Zurich American Insurance Company (“Zurich”), commenced this action by filing a declaratory judgment complaint against the defendant, Erik J Gutowski (“Gutowski”), on July 20, 2022. Doc. No. 1. In the complaint, Zurich alleges that there is a negligence action pending in the Court of Common Pleas of Montgomery County titled, Noble v. The Party Center and Erik Gutowski, Civ. A. No. 2020-10928. See Compl. at ¶¶ 7, 14, and Ex. A. In the operative complaint in that state-court action, the plaintiff, Karen Noble (“Noble”), avers that on August 10, 2019, at 12:30 a.m., Gutowski was operating a 2004 Chevrolet Silverado (the “Silverado”) owned by Total Rental, Inc. (“Total Rental”) in Upper Merion Township, Pennsylvania, when he crossed over into the oncoming lane and struck a vehicle Noble was operating. See id. at ¶¶ 4, 5, 12 (citing 3d Am. Compl. at ¶ 8, Noble v. The Party Ctr. and Erik Gutowski, Civ. A. No. 2020-10928 (Montgomery Cnty. Ct. Com. Pl.) (“Noble 3d Am. Compl.”)).^[1]Noble alleges that Total Rental was employing Gutowski at the time of this accident. See id. at ¶ 13 (citing Noble 3d Am. Compl. at ¶ 17).

Total Rental, which rents equipment for events and parties, had a business automobile policy with Zurich which was effective at the time of the accident (the “Policy”).^[2] Id. at ¶¶ 4, 22, and Ex. D. This Policy granted the following coverage:

We will pay all sums an “insured” legally must pay as damages because of “bodily injury” or “property damage” to which this insurance applies, caused by an “accident” and resulting from the ownership, maintenance or use of a covered “auto”.

We will also pay all sums an “insured” legally must pay as a “covered pollution cost or expense” to which this insurance applies, caused by an “accident” and resulting from the ownership, maintenance or use of covered “autos”. However, we will only pay for the “covered pollution cost or expense” if there is either “bodily injury” or “property damage” to which this insurance applies that is caused by the same “accident”.

We have the right and duty to defend any “insured” against a “suit” asking for such damages or a “covered pollution cost or expense”. However, we have no duty to defend any “insured” against a “suit” seeking damages for “bodily injury” or “property damage” or a “covered pollution cost or expense” to which this insurance does not apply. We may investigate and settle any claim or “suit” as we consider appropriate. Our duty to defend or settle ends when the Covered Autos Liability Coverage Limit of Insurance has been exhausted by payment of judgments or settlements.

Id. at ¶ 23 (quoting Policy). The Policy also defined an “insured” as follows:

1. The following are “insureds”:

a. You^[3]for any covered “auto”.

b. Anyone else while using with your permission a covered “auto” you own or borrow except:

(1) The owner or anyone else from whom you hire or borrow a covered “auto”. This exception does not apply if the covered “auto” is a “trailer” connected to a covered “auto” you own.

(2) Your “employee” if the covered “auto” is owned by that “employee” or a member of his or her household.

(3) Someone using a covered “auto” while he or she is working in a business of selling, servicing, repairing, parking or storing “autos” unless that business is yours.

(4) Anyone other than your “employees”, partners (if you are a partnership), members (if you are a limited liability company) or a lessee or borrower or any of their “employees”, while moving property to or from a covered “auto”.

(5) A partner (if you are a partnership) or a member (if you are a limited liability company) for a covered “auto” owned by him or her or a member of his or her household.

c. Anyone liable for the conduct of an “insured” described above but only to the extent of that liability.

Id. at ¶ 24 (quoting Policy) (footnote added). In addition, the Policy contained an endorsement which provided that “[a]ny ‘employee' of yours is an ‘insured' while using a covered ‘auto' you don't own, hire or borrow in your business or your personal affairs.” Id. at ¶ 25 (quoting Policy).

Although Zurich informed Gutowski that it would provide a defense in the Noble action subject to a reservation of rights, it now asserts that Gutowski does not qualify as an “insured” under the Policy. See id. at ¶¶ 15, 33. In this regard, Zurich points out that although Total Rental permitted its employees to operate the Silverado for matters related to its business, see id. at ¶ 6, Gutowski did not have permission to use the Silverado at the time of the accident. See id. at ¶¶ 2832.

In support of the allegation that Gutowski lacked permission to use the Silverado at the time of the accident, Zurich avers that Gutowski pleaded guilty to Unauthorized Use of Automobiles and Other Vehicles on December 17, 2019 in the Court of Common Pleas of Chester County. See id. at ¶ 18 (citing to Docket, Commonwealth v. Gutowski, No. CP-15-CR-3222-2019 (Chester Cnty. Ct. Com. Pl.)). Gutowski's charges and plea arose out of the August 10, 2019 accident at issue in this case. See id. at ¶¶ 18, 19. During the plea hearing, Gutowski admitted that he was no longer an employee at Total Rental because it had fired him. See id. at ¶ 19 (quoting Dec. 17, 2019 Tr. at 5, Commonwealth v. Gutowski, No. CP-15-CR-3222-2019 (Chester Cnty. Ct. Com. Pl))^[4]. Gutowski also admitted that he took the Silverado “without [Total Rental's] permission and operated [it]” on August 10, 2019. See id. (quoting Dec. 17, 2019 Tr. at 5, Commonwealth v. Gutowski, No. CP-15-CR-3222-2019 (Chester Cnty. Ct. Com. Pl)).

In addition to this plea evidencing Gutowski's lack of permission to use the Silverado, Zurich asserts that Noble “concedes that Gutowski operated the . . . Silverado ‘without authorization' of Total Rental” when she alleged in her complaint that

. . . Plaintiff believes, and therefore avers, that under the circumstances alleged herein, it was reasonable and foreseeable that Defendant Gutowski would operate Total Rental Vehicles at times when Defendant Gutowski was outside the course and scope of his employment with Defendant Total Rental.

. . . Plaintiff believes, and therefore avers, that by permitting Defendant Gutowski to operate Total Rental vehicles under the circumstances alleged herein, it was reasonable and foreseeable that Defendant Gutowski would operate Total Rental Vehicles without authorization from Total Rental.

Id. at ¶ 20 (quoting Noble 3d Am. Compl. at ¶¶ 29, 30).

Since Gutowski did not use the Silverado with Total Rental's permission, Zurich asserts that Gutowski did not qualify as an “insured” under the Policy at the time of the accident. See Id. at ¶ 33. As such, Zurich claims that it does not have (1) “an obligation under the terms and conditions of the Zurich Policy to defend or indemnify Gutowski in the Noble Litigation” and (2) “any insuring obligation owing [to] Gutowski under the Zurich Policy for the [accident] and the Noble Litigation.” Id. at ¶¶ 34, 35. Accordingly, Zurich seeks a declaration under the Declaratory Judgment Act, 28 U.S.C. § 2201, 2202 (“DJA”), that it is not obligated to defend or indemnify Gutowski in the Noble action. See id. at 8.

Zurich properly served Gutowski with the summons and complaint on September 19, 2022, when its process server hand-delivered those documents to Gutowski. See Aff. of Service at 1, Doc. No. 5. Based on this date of service, Gutowski had until October 11, 2022, to file a responsive pleading to the complaint. See Fed.R.Civ.P. 12(a)(1)(A)(i) (“Unless another time is specified by this rule or a federal statute, the time for serving a...