June 18, 2019

Tenth Circuit: Junk Fax Claims Against Commercial Insurer Barred by Policy Language

The Tenth Circuit Court of Appeals issued its opinion in Emcasco Insurance Co. v. CE Design, Ltd. on Monday, May 4, 2015.

In April 2008, Custom Mechanical Equipment, Inc., an Oklahoma company, faxed an unsolicited advertisement to CE Design, Inc. in Illinois. Rather than simply throw the fax away, CE Design sued Custom in Illinois state court and sought to certify a class of others who had received unsolicited faxes from Custom. CE Design alleged Custom breached the Telephone Consumer Protection Act (TCPA), which provides $500 in damages for each violation, as well as alleging common law conversion based on the use of paper, toner, the fax machine, and CE Design staff time. Custom submitted the claim to its insurer, Emcasco, which denied coverage and declined to defend Custom. In June 2011, CE Design and Custom settled, entering into an agreement for $1,276,000 in damages ($500 for each of the 2,552 junk faxes Custom sent) whereby CE Design agreed to enforce the judgment only against Emcasco. The Illinois trial court approved the settlement in September 2011.

CE Design brought suit against Emcasco in the U.S. District Court for the Western District of Oklahoma, seeking a declaratory judgment that Emcasco’s policy legally obligated it to pay the CE Design’s judgment. Emcasco then filed suit in the U.S. District Court for the Northern District of Illinois, seeking a declaratory judgment that it was not liable. Upon CE Design’s motion, the Illinois district court transferred the case to Oklahoma. In June 2013, both parties moved for summary judgment. Emcasco argued it had properly denied coverage and refused to defend because Custom’s fax was neither an “occurrence” causing property damage nor a “personal and advertising injury,” and alternatively argued that three policy exclusions barred coverage. CE Design responded that the policy covered Custom and no exclusion applied. After hearing arguments, the district court granted summary judgment in favor of Emcasco and denied CE Design’s motion. CE Design appealed.

On appeal, the parties agreed that Oklahoma law regarding insurance contracts governed the dispute. At oral argument, CE Design conceded the statutory violation language in the policy removed Emcasco’s duty to defend the TCPA claim. The Tenth Circuit agreed. Turning next to the conversion claim, the Tenth Circuit found that CE Design sufficiently pleaded conversion, but in doing so defeated policy coverage, since by pleading conversion CE Design acknowledged that the fax was not an “accident” for policy purposes. The Tenth Circuit next turned to CE Design’s “negligent conversion” claim, alleging conversion under a mistaken belief of right to appropriation of the property. The Tenth Circuit agreed that such “negligent conversion” could qualify as an “accident” under the policy, but CE Design’s bare allegations of mistake were not supported by anything in the record, noting that “[i]f this sufficed as an accident, it is hard to imagine what would not.” The Tenth Circuit found Emcasco had no duty to defend under the “negligent conversion” theory. Tenth Circuit similarly rejected CE Design’s Illinois Consumer Fraud Act (ICFA) claim, finding CE Design was required to prove the defendant intended the plaintiff to rely on a deceptive act in order to further an ICFA claim, and further finding such a deceptive act would trigger all of the same exceptions from Emcasco’s coverage.

The Tenth Circuit next analyzed Emcasco’s argument that its statutory violation exclusion barred coverage under all three of CE Design’s claims. The Tenth Circuit, looking at the plain language of the insurance policy, agreed that coverage would have been barred, since all of CE Design’s claims relied at their core on violations of the TCPA. Because TCPA claims were barred by the contract, all of CE Design’s claims failed.

The Tenth Circuit affirmed the district court’s grant of summary judgment to Emcasco.

Tenth Circuit: Insurance Exclusions for Broadcasting Applied to Dish Network’s Business

The Tenth Circuit Court of Appeals issued its opinion in Dish Network Corp. v. Arrowood Indemnity Co. on Tuesday, November 25, 2014.

Between 2001 and 2004, Dish Network purchased primary and excess commercial general liability insurance policy from five insurers: Arrowood Indemnity Company; Travelers Insurance Company of Illinois; XL Insurance of America, Inc.; National Union Fire Insurance Company of Pittsburgh, PA; and Arch Specialty Insurance Company. In 2007, Dish was a defendant in a patent infringement suit brought by Ronald A. Katz Technology Licensing, L.P. (RAKTL). Dish requested its five insurers to defend it in the patent infringement action, but they declined. Dish brought suit against the insurers, seeking a judgment that they had a duty to defend and also alleging breach of contract and the duty of good faith and fair dealing. The district court granted summary judgment to the insurers, but on appeal, the Tenth Circuit remanded for further determination of the issues (DISH Network Corp. v. Arch Spec. Ins. Co., 659 F.3d 1010 (10th Cir. 2011) (DISH I)). On remand, the insurers again moved for summary judgment but on different grounds. The district court again granted summary judgment, and Dish appealed.

Dish’s first argument on appeal was that the district court violated the law of the case and exceeded the scope of its jurisdiction by allowing the insurers to present new arguments on remand. The Tenth Circuit evaluated the law of the case doctrine and its prior decision, and determined that the district court was not precluded from allowing additional arguments on remand. The district court properly looked to the Tenth Circuit’s mandate for restrictions on appeal, and exercised its discretion accordingly. The Tenth Circuit did not decide that the insurers had a duty to defend Dish in DISH I. Rather, the Tenth Circuit noted that the district court did not decide several issues regarding the duty to defend. It did not preclude the court from resolving additional duty-to-defend issues on remand.

In its second, third, and fourth points on appeal, Dish challenged the district court’s grant of summary judgment to the insurers. The district court concluded that the policies’ business exclusions for “broadcasting” and “telecasting” precluded coverage. Dish argued that its business did not fall under these terms because Dish provides service only to specific subscribers, not the public at large. The Tenth Circuit looked to the plain meaning of “broadcasting” and “telecasting” and found the definitions to encompass Dish’s business activity. Dish’s attempt to draw a distinction between subscription broadcasting and public broadcasting made no sense in the business exclusion sense, and the Tenth Circuit found that the terms in the policy language encompassed Dish’s business activity. The Tenth Circuit found that coverage for Dish’s business activity was unavailable under the policies at issue.

Next, the Tenth Circuit turned its attention to Dish’s umbrella policies provided by National, Arch, and XL. Because the Tenth Circuit had found that coverage was unavailable under the primary policies, the umbrella policies were not implicated and summary judgment to these three insurers was appropriate. Dish conceded that summary judgment in favor of Arch was appropriate, and the district court noted that even if the National and XL policies were available, the coverage would have been excluded because they contained the same language regarding advertising injuries when engaged in the business of broadcasting.

The district court’s grant of summary judgment was affirmed as to all insurers.

Tenth Circuit: No Ambiguity in Insurance Policy Exclusions for Environmental Pollution

The Tenth Circuit Court of Appeals issued its opinion in Headwaters Resources, Inc. v. Illinois Union Insurance Co. on Monday, October 20, 2014.

Headwaters Resources, Inc., constructed a golf course at the Fentress site in Chesapeake, Virginia. Residents of neighborhoods surrounding the Fentress site sued Headwaters in Virginia state court, alleging property damage and bodily injury sustained due to pollution generated during the golf course construction. Plaintiffs in the Virginia case alleged that between 2002 and 2007 Headwaters used 1.5 million tons of toxic fly ash and byproducts, which contaminated its groundwater, surface water, and the air; diminished the property values of the surrounding homes; and exposed community members to serious bodily injury risks from the fly ash. Headwaters sought reimbursement of its litigation expenses from its two insurers, ACE Insurance Co. and Illinois Union Insurance Co. (collectively, ACE). ACE denied coverage under its environmental pollution exclusion, and Headwaters brought suit in Utah District Court to enforce coverage. ACE moved for summary judgment, arguing that the pollution exclusions expressly precluded coverage. Headwaters filed a cross-motion for summary judgment, but the district court agreed with ACE, finding the insurance policies unambiguously barred coverage for environmental pollution. Headwaters appealed.

The Tenth Circuit analyzed Headwaters’ claims, which contended the district court failed to appreciate ambiguities in coverage under the policies. According to Headwaters, those ambiguities precluded summary judgment in favor of ACE. Upon analysis of the pollution exclusions and the claims against Headwaters, however, the Tenth Circuit found no ambiguity. Applying Utah’s “eight corners rule” and contract law, the Tenth Circuit found the insurers had no duty to defend. Headwaters argued the language of the insurance policies’ exclusions impermissibly abolished all coverage, but the Tenth Circuit disagreed, finding instead multiple possible scenarios in which coverage would have been applicable. In the instant case, the allegations of pollution fell within the policies’ exclusions. The Tenth Circuit noted that Headwaters could have purchased additional coverage that would have provided a duty to defend against environmental claims.

The Tenth Circuit affirmed the district court’s grant of summary judgment in favor of ACE.