the Cincinnati Insurance Company v. Eric W. Trosch

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 07-3412
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THE CINCINNATI INSURANCE COMPANY,
Appellant
v.
ERIC W. TROSCH; BRENDAN GEBHART;
CHRISTOPHER GEBHART
__________
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civil No. 07-cv-00399)
District Judge: Honorable Nora B. Fischer
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Submitted Under Third Circuit LAR 34.1(a)
on January 28, 2008
Before: SCIRICA, Chief Judge, and RENDELL, Circuit Judge,
and RODRIGUEZ,* District Judge.
(Filed March 20, 2008)
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OPINION OF THE COURT
__________
__________________
* Honorable Joseph H. Rodriguez, Senior Judge of the United States District Court
for the District of New Jersey, sitting by designation.

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1Because we conclude that the order of the District Court entering the stay is a final
order, we have jurisdiction to hear this appeal. See Terranova Ins.Co. V. 900 Bar, Inc.,
887 F.2d 1213, 1216 (3d Cir. 1989). As we noted in Terranova, “the stay is effectively
final as to [the insurer’s] obligation to provide a defense in the underlying state tort action
and is not inherently tentative.” Id. The ruling in the District Court Action puts
(continued...)
2
RENDELL, Circuit Judge.
Appellant, the Cincinnati Insurance Company (“Cincinnati”), brought a
declaratory judgment action in the District Court (“District Court Action”) seeking a
declaration that the homeowner insurance policy issued by it to Dr. James R. Gebhart and
Cynthia A. Gebhart did not provide liability insurance coverage to resident relatives. The
resident relatives, Brendan and Christopher Gebhart (“Gebhart Defendants”), had been
sued by Eric W. Trosch (“Trosch”) in the Court of Common Pleas of Mercer County,
Pennsylvania, for allegedly creating a defamatory profile of Trosh on MySpace.com
(“Underlying Action”).
In the District Court Action, Cincinnati sought a declaration that it did not owe a
duty to defend the Gebhart Defendants in the Underlying Action based on an exclusion
for certain defamation claims. At a settlement conference held on July 5, 2007, the
parties agreed to stay the District Court Action pending resolution of the Underlying
Action. Three days later, Cincinnati moved to vacate the stay, but the District Court
denied the motion without opinion. On July 17, 2007, the Court entered an order
officially staying the District Court Action. It is from this order that this appeal has been
taken.1

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1(...continued)
Cincinnati “effectively out of court,” Moses H. Cone Mem’l Hops. v. Mercury Constr.
Corp., 460 U.S. 1, 10 (1983) (internal quotation marks omitted), as to the duty to defend
issue, and thus, the Cincinnati is entitled to appeal.
3
Cincinnati urges that when one compares the averments of the complaint in the
Underlying Action to the policy exclusion, it is clear that there is no coverage and, thus,
no duty to defend. The policy at issue provides coverage for “personal injury,” which
includes “[d]efamation of character.” (App. 65, 42.) However, there is an exclusion from
coverage if the personal injury has been “[c]aused by . . . an ‘insured’ with the knowledge
that the act would violate the rights of another and would inflict ‘personal injury’” or if it
is “[a]rising out of . . . [o]ral or written publication of material, if done by . . . an ‘insured’
with knowledge of its falsity.” (Id. at 70-71.) Because Trosch has alleged that the
Gebhart Defendants knew that the defamatory statements were not true and published the
statements with the intent of harming his reputation, the allegations clearly fall within the
exclusions. Cincinnati contends that this is a sufficient basis for finding no duty to defend
and that there is no need for further investigation of the facts.
In response, the Gebhart Defendants urge that claims in the Underlying Action
potentially come within the coverage because the Gebhart Defendants could be held liable
for defamation even if their conduct is not found to fit squarely within the exclusion,
particularly as to the issues of knowledge and intent. They argue that coverage depends
upon facts to be determined in the Underlying Action, and thus the District Court Action
was properly stayed.

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4
We review the District Court’s determination to enter a stay for abuse of
discretion. Wilton v. Seven Falls Co., 515 U.S. 277, 289-90 (1995). We find no abuse
here. As the Gebhart Defendants point out, the duty to defend is triggered when the
complaint involves an injury that is “actually or potentially” within the scope of the
policy. Aetna Cas. & Sur. Co. v. Roe, 650 A.2d 94, 99 (Pa. Super. Ct. 1994). Although
the complaint in the Underlying Action avers conduct that would be excluded because of
the alleged intent and knowledge of the Gebhart Defendants, there is the potential for the
claim to be covered if a different level of knowledge or intent were to be found by the
jury. Thus, it was not an abuse of discretion for the District Court to stay the District
Court Action while the Underlying Action proceeds. Accordingly, we will not disturb the
District Court’s entry of the stay.
In light of the foregoing, we will AFFIRM the Order of the District Court.

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