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Maryland Casualty Company v. Express Products

September 22, 2011

MARYLAND CASUALTY COMPANY
v.
EXPRESS PRODUCTS, INC.
CUMBERLAND MUTUAL FIRE INS. CO.
v.
EXPRESS PRODUCTS, INC.



The opinion of the court was delivered by: Tucker, J.

MEMORANDUM AND ORDER

September ___ , 2011

Presently before this Court are the Cross-Motions for Summary Judgment in two consolidated actions.*fn1 For the reasons set forth below, the Court denies Defendant's Motions for Summary Judgment and grants summary judgment in favor of both Plaintiffs Maryland Casualty Company and Cumberland Mutual Fire Insurance Company.

I. BACKGROUND

This is a consolidated action. Both Plaintiffs, Maryland Casualty Company ("MCC") and Cumberland Mutual Fire Insurance Company ("Cumberland"), bring these declaratory judgment actions for the purpose of determining the relative duties and rights under commercial general liability insurance policies subscribed to by Defendant Express Products Inc. ("Express" and "Defendant") with respect to claims in an underlying lawsuit.

Defendant is a Pennsylvania corporation. Plaintiff Cumberland is a New Jersey corporation. Plaintiff MCC is a Maryland corporation. According to Plaintiff Cumberland, the Cumberland insurance policy (S201221-2) was in effect from April 26, 2001 through April 26, 2002. According to Plaintiff MCC, it issued a policy (PPS 42097015) that was in effect from April 26, 2003 through April 26, 2004 and which was renewed from April 26, 2004 through April 26, 2005. The policy language at issue is the same in both the Cumberland and MCC policies.

Details concerning the underlying lawsuit are as follows. On December 30, 2004, Business Pro Communications ("BPC") initiated a class action lawsuit against Defendant in Illinois state court. In BPC's amended complaint, it alleged conduct that occurred during Cumberland's and MCC's policy periods. Specifically, BPC accused Defendant of transmitting thousands of unsolicited advertisements to the fax machines of the plaintiffs between February 27, 2002 through October 5, 2004, thereby violating the Telephone Consumer Protection Act ("TCPA"), the Illinois Consumer Fraud Act ("ICFA"), and committing the tort of conversion. If proven to be true, the potential damages alleged against Defendant will likely exceed $75,000 since both the TCPA and ICFA provide statutory damages of $500.00 per violation and the potential class includes at least forty (40) persons.

Plaintiff Cumberland seeks a declaration from this Court that no coverage exists for the claims against Defendant in the BPC suit. Plaintiff's Complaint contains four counts. Count I is for the Duty to Defend and Indemnify Property Damage. Count II is for the Duty to Defend and Indemnify Advertising Injury. Count III is for the Duty to Defend and Indemnify Expected of Intended Injury. Count IV is for the Duty to Indemnify Knowing Violation of Rights. Plaintiff argues that the Policy covers accidental property damage, and that Defendants act of sending the unsolicited ads was not accidental. Plaintiff also argues that Defendants conduct does not fall within the "advertising injury" coverage contained in the Policy because the conduct did not violate a person's right to privacy. Plaintiff next argues that the Policy explicitly excludes coverage for expected or intended injury, and that Defendant had to expect that each facsimile would use the ink, paper and tie up the machine of each recipient. Finally, Defendant argues that the Policy excludes coverage for knowing violations of the rights of others, and that Defendant knew that transmitting the faxes may violate others' rights.

Plaintiff MCC also seeks a declaration from this Court that no coverage exists for the claims against Defendant in the BPC suit. Plaintiff's Complaint contains three counts. Count I claims there is no coverage because Defendant's conduct did not result in bodily injury or property damage, because Defendant's conduct was not accidental, and because Defendant's conduct is excluded since the injuries were expected or intended. Count II claims there is no coverage because there was no "personal advertising injury" since there was no invasion of personal privacy rights, and because Defendant's conduct is excluded as knowing violations of the rights of others. Finally, Count III claims that because Defendant's alleged conduct took place over more than one policy period, an actual controversy exists concerning their respective rights and duties under the policies.

II. PROCEDURAL HISTORY

Plaintiff Cumberland filed its Complaint in federal court on June 20, 2008. On October 15, 2008, Defendant filed its Answer. On June 24, 2009, Defendant filed a Motion for Judgment on the Pleadings, which the Court denied on October 15, 2009. On January 8, 2010, Defendant filed a Second Motion for Judgment on the Pleadings, which the Court is treating as a Motion for Summary Judgment. On March 8, 2010, Cumberland filed a Cross-Motion for Summary Judgment. On May 7, 2010, Defendant filed a Response in Opposition thereto. On May 21, 2010, Cumberland filed a Reply. On July 21, 2010 and August 19, 2010, Defendant filed Supplemental Memos in Support of its Motion. On October 26, 2010, Cumberland filed a Sur-Reply Brief.

Plaintiff MCC filed its Complaint in federal court on February 27, 2009. Defendant filed its Answer on April 22, 2009. On June 25, 2009, Defendant filed a Motion for Judgment on the Pleadings, which the Court denied on October 15, 2009. On January 8, 2010, Defendant filed a Second Motion for Judgment on the Pleadings, which the Court is treating as a Motion for Summary Judgment. On March 8, 2010, MCC filed a Cross-Motion for Summary Judgment.

On October 21, 2010, Defendant filed a Response in Opposition thereto. On November 18, 2010, MCC filed a Reply Brief.

On December 9, 2010, the Court heard oral argument on the cross-motions for summary judgment in both actions. The Court now addresses these pending motions.

III. LEGAL STANDARD

Summary judgment is appropriate where the moving party establishes that "there is no genuine issue as to any material fact and that [it] is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). See Levy v. Sterling Holding Co., LLC, 544 F.3d 493, 501 (3d Cir. 2008).*fn2

A factual dispute between the parties will not defeat a motion for summary judgment unless it is both genuine and material. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S. Ct. 2505 (1986); Dee v. Borough of Dunmore, 549 F.3d 225, 229 (3d Cir. 2008). A factual dispute is genuine if a reasonable jury could return a verdict for the non-movant, and it is material if, under the substantive law, it would affect the outcome of the suit. See Anderson, 477 U.S. at 248; Fakete v. Aetna, Inc., 308 F.3d 335, 337 (3d Cir. 2002).

The moving party must show that if the evidentiary material of record were reduced to admissible evidence in court, it would be insufficient to permit the non-moving party to carry its burden of proof. See Celotex v. Catrett, 477 U.S. 317, 327 (1986). Once the moving party has carried its burden under Rule 56, "its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Scott v. Harris, 550 U.S. 372, 380 (2007).

Under Fed. R. Civ. P. 56(e), the opposing party must set forth specific facts showing a genuine issue for trial and may not rest upon the mere allegations or denials of its pleadings. See Martin v. Godwin, 499 F.3d 290, 295 (3d Cir. 2007).

At the summary judgment stage the court's function is not to weigh the evidence and determine the truth of the matter, but rather to determine whether there is a genuine issue for trial. See Anderson, 477 U.S. at 249; Jiminez v. All American Rathskeller, Inc., 503 F.3d 247, 253 (3d Cir. 2007). In doing so, the court must construe the facts and inferences in the light most favorable to the non-moving party. See Horsehead Indus., Inc. v. Paramount Communications, Inc., 258 F.3d 132 (3d Cir. 2001). The court must award summary judgment on all claims unless the non-moving party shows through affidavits or admissible evidence that an issue of material fact remains. See, e.g., Love v. Rancocas Hosp., 270 F. Supp. 2d 576, 579 (D.N.J. 2003); Koch Materials Co. v. Shore Slurry Seal, Inc., 205 F. Supp. 2d 324, 330 (D.N.J. 2002).

IV. DISCUSSION

On these cross-motions for summary judgment, the Court must resolve the following four issues: (1) whether there is an actual case or controversy between the parties to this litigation; (2) which state's law governs these actions; (3) whether there exists a duty to defend or indemnify under the "Property Damage" coverage provisions of the insurance agreements between Defendant and the Plaintiffs; and (4) whether there exists a duty to defend or indemnify under the "Personal and Advertising Injury" coverage provision under the insurance agreements between Defendant and the Plaintiffs. After reviewing the parties' arguments, the Court shall address each of these issues in turn.

A. Parties' Arguments

i. Cumberland Action

In Defendant's Second Motion for Judgment on the Pleadings (08-2909 Doc. 15-1 ("Def. Mot. for Summ. J. Cumberland")), which is to be treated as a Motion for Summary Judgment, Defendant argues that judgment should be entered in its favor because the action is moot and there is no longer an actual controversy between the parties. To support this contention, Defendant argues that final judgment of $7,999,999.96 was entered against it and in favor of the plaintiffs in the underlying suit. The judgment stipulates that those plaintiffs may satisfy the judgment "only from [Express's] insurance policies," including those issued by Cumberland. Defendant contends that because the judgment does not allow the underlying plaintiffs to attempt to collect from Defendant, Defendant has no interest in this lawsuit, and there is no actual controversy between it and Cumberland. With respect to the duty to defend issue, Defendant argues that the issue is moot because (1) with the entry to final judgment in the underlying case, there is no longer a suit pending for which Defendant requires defense; and (2) Defendant actually received a defense in the underlying suit from another insurer, Maryland Casualty Company. With respect to the indemnity issue, the judgment places both the interest in indemnity coverage and the ability to secure such coverage from Cumberland firmly in the hands of the underlying plaintiffs. Any opinion this Court would issue on the question would be an advisory opinion; it would not bind those plaintiffs as non-parties, and Express has no interest in the outcome and its own position is not affected at this point whether or not there is indemnity coverage.

In Plaintiff Cumberland's Cross-Motion for Summary Judgment (08-2909 Doc. 21 ("Cumberland Mot. for Summ. J.")), Cumberland argues that Pennsylvania law, and not Illinois law, applies to this dispute because the policy was negotiated, produced, and signed in Pennsylvania. Cumberland claims that there is no duty to defend or indemnify Defendant under the "property damage" coverage provision (coverage A) of the insurance policy, which is available only for damage caused by an occurrence. To support this contention, Cumberland claims that "blast faxing" does not amount to an "occurrence," which the Policy defines as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Cumberland argues that the transmission of unwanted faxes without receiving the recipients' express permission or invitation was not accidental or unintentional. Cumberland also argues that the transmission of unwanted faxes resulted in "expected or intended" injury, and thus is explicitly excluded from coverage by the policy.

Additionally, Cumberland asserts that there is no duty to defend or indemnify Defendant under the "personal and advertising injury" coverage provision (coverage B) of the insurance policy, which defines "personal and advertising injury" as an injury arising out of one or more of several identified offenses. Cumberland claims that the only one of the listed offenses that could potentially apply in this matter is the "oral or written publication of material that violates a person's right of privacy." That said, Cumberland argues that the alleged harm arises solely from the improper transmittal of the faxes, rather than the content of the faxes themselves. Cumberland further posits that statutory construction of the "right to privacy" interest invoked is not related to one's interest in being left alone and instead is related to one's interest in protecting personal information from disclosure. As such, this provision is not applicable to this matter where the potential plaintiff's sole complaint is not related to the content of the faxes but the mere fact that the faxes were sent.

In Defendant's Response in Opposition to Plaintiff's Cross-Motion for Summary Judgment (08-2909 Doc. 24 ("Def. Resp. to Cumberland")), Defendant initially argues that there is no conflict of law between Pennsylvania, New Jersey or Illinois, and the Court should apply the laws of the three states interchangeably. Defendant further argues that an insurer may refuse to defend only if the complaint allegations preclude any possibility of coverage and that clauses providing coverage are interpreted in a manner which affords the greatest possible protection to the insured. Defendant counters that Cumberland owed a defense under the Property Damage provision of the policy. To support this contention, Defendant argues that the policy defines property damage as "physical injury to tangible property" and "loss of use of tangible property that is not physically injured." Defendant also notes that "accidental" is not defined by the policy. Defendants also contend that the underlying complaint alleges Defendant is liable even if its actions were negligent, thus negating Cumberland's exclusion argument, which is based on intended or expected injury. Defendant further notes that its President submitted an affidavit explaining that Defendant did not expect or intend and property damage injuries from the fax transmissions. Rather, Defendant believed it had the consent of the companies listed in its database to receive information by fax because they had provided their fax numbers to Defendant.

Moreover, Defendant counters that Cumberland owed a defense under the Personal and Advertising Injury provision of the policy because the provision covers blast fax claims. Defendant notes that the Telephone Consumer Protection Act ("TCPA") was enacted to protect privacy rights by restricting unsolicited facsimile transmissions. Defendant further notes that the TCPA's concern for "invitation or permission" expressly implicates one's interest in seclusion or privacy. Defendant states that the clause is ambiguous in that it could be interpreted according to Cumberland's plain meaning interpretation or Defendant's interpretation. When such ambiguity exists, Defendant argues, the Court should construe the ambiguous provisions in favor of the insured.

In Plaintiff Cumberland's Reply Brief in Support of its Cross Motion for Summary Judgment (08-2909 Doc. 27 ("Cumberland Reply")), Cumberland argues that contrary to Defendant's arguments, a choice of law analysis is required because of the disparity between Pennsylvania and Illinois law on the ultimate issue of coverage for TCPA claims under the provisions at issue. Cumberland highlights that under Pennsylvania law, an insurer's duties to defend and indemnify are triggered solely by the language of the complaint against the insured and not by any other findings or admissions of fact in the final judgment or elsewhere in the record. Plaintiff further argues that the underlying complaint does not support Defendant's conclusion that sending blast faxes was accidental conduct.

In Defendant's First and Second Omnibus Supplemental Memorandum in Support of its Motion for Judgment on the Pleadings (08-2909 Docs. 28, 30), Defendant writes to inform the Court of developments in the underlying case. Specifically, Defendant notes that the Illinois court decided to exercise jurisdiction over Cumberland and the garnishment claim brought by the underlying plaintiffs. Defendant contends that the garnishment claim will necessarily resolve the issue of coverage. According to Defendant, given that all parties with an interest in the question are litigating the question in Illinois -- and before the Court which presided over the underlying class action itself - the reasons for this Court to decline to exercise its jurisdiction -- and to dismiss the case on the basis of mootness in respect to Defendant-- are even stronger than they were when the parties filed their respective motions.

In Plaintiff Cumberland's Sur-Reply Brief (08-2909 Doc. 34 ("Cumberland Sur Reply")). Plaintiff argues that Defendant's Supplemental Memos are merely repackaged versions of the argument it previously advanced in its First ...


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