STATE FARM FIRE AND CASUALTY COMPANY v. BENZON et al

Filing 10

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE MARY A. MCLAUGHLIN ON 8/6/12. 8/6/12 ENTERED AND COPIES EMAILED.(rf, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
STATE FARM FIRE AND CASUALTY
COMPANY
v.
JOSEPH BENZON, et al.

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CIVIL ACTION

NO. 12-2670

MEMORANDUM
McLaughlin, J.

August 6, 2012

The plaintiff brought this action for a declaratory
judgment in connection with a personal injury suit in the
Philadelphia County Court of Common Pleas, captioned Deeley and
Phillips v. MGR Travel, Ltd., et al., Sept. Term 2011, No. 2856
(the “Underlying Action”), in which Joseph Benzon was made a
defendant pursuant to a joinder complaint.

The Underlying Action

arises out of a chartered bus trip to a hockey game in New Jersey
organized by Joseph Benzon.

State Farm seeks a declaration that

it does not owe a duty to defend Joseph Benzon under the home
insurance policy of his father, Robert Benzon.

State Farm filed

this action on May 16, 2012 and the Benzons were served on May
31, 2012.

The Benzons failed to appear, plead, or otherwise

defend before June 21, 2012, and State Farm requested default
against the Benzons on June 22.

The Clerk entered default

against the defendants on that day.
The defendants move now to set aside the default.

They

argue that the default arose from Robert Benzon’s mistaken belief

that he was entitled to counsel from the Fraternal Order of
Police (“FOP”), and that once other counsel was obtained, the
instant motion was filed.

Because the factors governing the

motion counsel in favor of lifting the default, the Court will
grant the motion.
Motions to set aside default are governed by four
factors: (1) prejudice to the plaintiff resulting from granting
the motion; (2) the defendant’s presentation of a prima facie
meritorious defense; (3) the excusability or culpability of the
defaulting defendant’s conduct; and (4) the effectiveness of
alternative sanctions.

Emasco Ins. Co. v. Sambrick, 834 F.2d 71,

73 (3d Cir. 1987) (citing Poulis v. State Farm Fire & Cas. Co.,
747 F.2d 863, 868 (3d Cir. 1984)).

The Court considers those

factors below.
I.

Prejudice to the Plaintiff
The plaintiff will not be prejudiced by the setting

aside of the Clerk’s entry of default in this case.

State Farm

asserts that the delay caused by granting the defendants’ motion
would obligate it to continue providing a defense in the
Underlying Action while the issue of coverage was decided in this
Court on the merits.

Pl.’s Opp. 2.

This is not a proper basis for denial of the instant
motion.

Prejudice may be shown under the circumstances by

showing the potential for fraud or collusion, the loss of
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available evidence, or substantial reliance on the judgment.
Feliciano v. Reliant Tooling Co., Ltd., 691 F.2d 653, 656-57 (3d
Cir. 1982).

State Farm has not argued either of the first two

factors, and it cannot plausibly assert its reliance on the
third.

Although default has been entered against the defendants

by the Clerk, no default judgment has been entered and State
Farm, by its own assertion, continues to provide a defense to the
Benzons in the Underlying Action.

Fewer than ninety days have

passed since the entry of default.

The plaintiff will not be

prejudiced by proceeding to seek a decision on the merits in this
action, which is favored in this Circuit over default judgment.
Gross v. Stereo Component Sys., Inc. 700 F.2d 120, 122 (3d Cir.
1983).
II.

Presentation of a Meritorious Defense
In this action, State Farm asserts that it is not

obligated to defend the Benzons because in organizing the
chartered bus trip that resulted in the Underlying Action, Joseph
Benzon was engaged in a “business pursuit,” which relieves it of
any obligation to defend under Robert’s homeowners policy.
According to the Joinder Complaint in the Underlying Action, the
plaintiffs in that case paid a fee to the trip’s organizer, an
organization known as Center Fuse, and that Joseph Benzon owned
and operated that company.
The defendants offer a proposed answer to the complaint
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in this action as part of their motion.

It asserts that Robert

Benzon had no involvement with the bus trip at all, and that
Joseph Benzon was not the “owner and operator” of Center Fuse,
which was an internet message board to which he posted messages.
The proposed answer denies that Joseph Benzon “advertised” the
bus trip, that he made a profit on the trip, and that he was
engaged in a business pursuit within the meaning of the policy.
Proposed Ans. ¶¶ 42-45, Defs.’ Mot. Ex. 1.
State Farm’s opposition attaches a copy of an agreement
between Elite Coach (the chartering company and defendant in the
Underlying Action) and Benzon, asserting that the document
renders it “clear that Joseph Benzon was engaged in a ‘business
pursuit’ in connection with running the bus trip at
issue . . . .”

Pl.’s Opp. 5 (citing Opp. Ex. A).

The exhibit

attached to the plaintiffs’ opposition is a contract between
Joseph Benzon and the charter bus company, but does not otherwise
demonstrate that he was engaged in a business pursuit.
the plaintiff’s offer of proof is irrelevant.

Moreover,

The second factor

the Court must consider is whether the defendant has presented a
prima facie meritorious defense.

If Joseph Benzon was not

engaged in a business pursuit, that fact would constitute a
meritorious defense here.

This factor thus weighs in favor of

lifting the default.

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III. Culpability and Alternative Sanctions
The defendants have asserted that their failure to
appear arose from a mistaken belief by Joseph Benzon that he
could obtain counsel through the FOP to defend him in this
action.

Joseph Benzon has executed a verification as to the

facts asserted in the motion.

ECF No. 8.

Once Benzon was made

aware that the FOP would not defend him, he sought counsel.
These actions do not constitute actions taken willfully or in bad
faith, as required under this factor.

Gross, 700 F.2d 1t 123-24.

The Court concludes that alternative sanctions are not
necessary in this matter.

The plaintiff agrees that the factor

does not weigh heavily on the instant motion, and that
alternative sanctions are inappropriate here.

The defendants’

failure to timely respond in this matter was inadvertent, or at
most, negligent, they have presented a meritorious defense, and
the plaintiff will not be prejudiced by the lifting of default
here.
An appropriate order will issue separately.

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