Claims And Issues

UNSOLICITED FAXES WERE UNCOVERED.

"This case began with the improper use of what now seems an old-fashioned method of communication: fax machines."   Auto-Owners Ins. Co. v. Stevens & Ricci Inc., ___ F.3d ___, No. 15–2080, 2016 WL 4547641, at *1 (3d Cir. September 1, 2016).  It developed into a class action settlement that was not covered, unfortunately for the policyholder.

The policyholder, Stevens & Ricci, received a solicitation from a faxer.  The fax solicitation was fake, or at least people who sued over it argued that this was not true, for the fax advertising solicitor represented that blast faxes under its program complied with the Federal Telephone Consumer Protection Act.  The policyholder bought the advertising program and 18,879 unsolicited faxes were sent to advertise the policyholder's goods and services in a one-month period.

Many recipients of the unsolicited faxes were unhappy with this.  They banded together and filed a class action against the policyholder.  The faxees sued under the TCPA.  Basically, the Act makes unsolicited faxes an actionable offense.

Unfortunately for the policyholder, it did not make the act of sending unwanted faxes either a covered occurrence or a covered offense.  The policyholder settled in essence for Two Million Dollars ($2,000,000.00).

The policyholder's liability carrier sued for declaratory relief of no coverage.  The District Court entered summary judgment for the liability carrier that there was simply no coverage under the policyholder's Businessowners Liability Policy.  There was no covered "property damage" because there was no covered "occurrence" and there was no covered "advertising injury" because there was no covered "offense," the District Court held.  The Third Circuit Court of Appeals affirmed.

What seemed like a good business idea at the time turned out to be not so good in reality.  On the other hand, a little doubt is a good thing when it leads to checking your policy before pursuing what seems like a good idea.

Unsolicited postscript:  On the face of the TCPA provisions quoted in the Third Circuit's opinion, and without researching the questions involved including coverage questions, it is at least arguable that the TCPA prohibits unsolicited advertising Emails as well as unsolicited faxes.  To say again, a little doubt is a good thing when it leads to checking insurance policies before pursuing what seems like a good idea at the time.

Please Read The Disclaimer.  © By Dennis J. Wall.  All Rights Reserved.

ADULT ENTERTAINMENT DISPLAYED ON INTERNET BUT NOT ADVERTISED: NO COVERAGE.

Perfect 10, Inc. is an adult entertainment company.  In its operative complaint in a federal court in California, Perfect 10 alleged copyright infringement by two internet purveyors, Giganews, Inc. and Livewire Services, Inc.  The operative facts alleged by Perfect 10 were that these defendants displayed its copyrighted adult materials even as they offered them for sale on the Internet.

St. Paul insured Giganews and Livewire under a commercial general liability policy.  After disclaiming all coverage for the claim in California, St. Paul filed its own action in a federal court in Texas requesting a declaration that it did not owe any coverage including no duty to defend.

The federal judge in Texas granted St. Paul's motion for summary judgment that it had no CGL coverage for Perfect 10's alleged copyright infringement claim.  The Court ruled that the CGL did not extend "advertising" coverage in large part because there was no "advertising" alleged.  St. Paul Fire & Marine Ins. Co. v. Giganews, Inc., No. A-15-CA-89-SS, 2016 WL 3457620, at *6-*8 (W.D. Tex. June 17, 2016).

Since St. Paul in this case owed no coverage, it owed no duty to defend and, in addition, the Texas federal court joined a host of other Courts in holding that where there is no coverage, there can be no bad faith.  In this case, moreover, the carrier did not commit any independent torts recognized in Texas even as it disclaimed all coverage.  St. Paul Fire & Marine Ins. Co. v. Giganews, Inc., No. A-15-CA-89-SS, 2016 WL 3457620, at *8 (W.D. Tex. June 17, 2016).

In addition to internet porn sales, this case highlights an interesting feature of declaratory relief actions in federal courts.  This case illustrates that a policyholder can be sued in California but may have to defend its claims to coverage, if any, not in California but somewhere else, in this case, Texas.

Please Read The Disclaimer.  ©2016 by Dennis J. Wall.  All rights reserved.

"INSURANCE CLAIMS AND ISSUES," THE BOOK: COMING IN 2016!

 

 Storm Clouds lined up over the Gulf of Mexico.  Photograph and text copyright 2015-2016 by Dennis J. Wall.

I am hard at work on an anthology of the best blogs from "Insurance Claims and Issues."  The anthology I submit to my publisher will keep all hyperlinks intact, including links to the Insurance Claims and Bad Faith Law blog.  When articles posted on Insurance Claims and Bad Faith Law blog are important to the anthology of "Insurance Claims and Issues," I am including them in the anthology too.

As each previously posted article is updated, the posted articles will remain just as available here as they always have been.  New articles will benefit from me being better informed and better equipped to discuss future insurance claims and issues.

I have contracted with Thomson Reuters (West Publishing Company to those fortunate to have the experience) to publish "Insurance Claims and Issues," the Book, in the late Spring or early Summer of 2016.  Best wishes to everyone for a joyous and Happy New Year!

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of "Insurance Claims and Issues" (forthcoming Thomson Reuters 2016).  All rights reserved.

Related articles

Convincing Anyone Yet? Coverage, Contraception, and the Court.

CYBERINSURANCE:  MANY DATA-LESS RISKS TO UNDERWRITE & PREMIUMS TO CHARGE.

THE ALI RESTATEMENT PROJECT OF THE LAW OF LIABILITY INSURANCE.

Majority Holds No Negligence Cause of Action by Insured Against I.A.

Trademark, Copyright Infringement Exclusions Used to Inflict Pain, Terror.

   Hard on the heels of a new case applying Infringement Exclusions under Florida Insurance Law, posted here on December 17, 2010, comes this report from a newspaper columnist of how these Exclusions are known to Claimants and, sometimes at least,  are used for coercion:

   Going after websites using trademark law is the kind of tactic that deep-pocketed companies have been deploying more and more frequently to shut down negative commentary about them ....  Even if the plaintiffs in these cases don't prevail in court, they can stifle their opponents by bleeding them of cash.

Yvonne Abraham, "A Victory For Free Speech" (Boston Globe Online, Sunday, December 19, 2010).

   Insurance Policy Exclusions as weapons of destruction.  Realistically, a part of modern life.

Remember the Poor!

Exclusions under Liability Insurance Policies, including Exclusions of Claims "Arising Out Of" various conduct, are addressed in the context of Coverage and alleged Insurance Bad Faith Claims by  Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" (Shepard's/McGraw-Hill Second Edition; West Publishing Company 2010 Supplement).  See generally id., Chapter 5, "Insurer's Defenses Against Action by Insured":  first, in § 5:14 (Settlement); next, in  § 5:24 (Defense), and finally, in § 5:49 (Inadequacy of Defense).

Please Read The Disclaimer.  See also the analysis of other features of the Sanderson v. Zurich American Insurance Company decision applying Florida Insurance Law to Infringement Exclusions, on Insurance Bad Faith Law Blog posted on Friday, December 17, 2010.

"Personal," "Advertising Injury" Claims "Arising Out Of" Infringement, Excluded.

   In Sanderson v. Zurich American Insurance Co., Download Sanderson v. Zurich Am. Ins. Co. (M.D. Fla. Case No. 8.09.cv.1755, Order Filed December 6, 2010) PUBLIC ACCESS, also published as 2010 WL 5058519 (M.D. Fla. December 6, 2010)(authorized password required to access Westlaw), a Federal Court was faced with Claims alleged in an Underlying Complaint against the Insured for alleged Trademark Infringement and Copyright Infringement.

   The several Insurance Policies at issue in that case all provided Coverage for "Personal and Advertising Injury".  However, each Policy also contained an Exclusion of otherwise covered Personal and Advertising Injury "[a]rising out of" Copyright Infringement and Trademark Infringement, and each Policy also contained another Exclusion of Personal and Advertising Injury "[a]rising out of the unauthorized use of another's" domain name, in pertinent part.  Sanderson v. Zurich American Insurance Co., 2010 WL 5058519 at *2-*3.  

   The Federal Judge in that Case held that the Underlying Claims alleged against the Policyholder are excluded under Florida Law:  "Each claim is predicated upon the bad faith, deceptive, or misleading use of a registered trademark."  Id. at *7.  In addition, "each claim that consists of the same elements as a trademark infringement claim falls comfortably with [the Trademark Infringement Exclusion's] 'arising out of' language."  Id.

Exclusions under Liability Insurance Policies, including Exclusions of Claims "Arising Out Of" various conduct, are addressed in the context of Coverage and alleged Insurance Bad Faith Claims by  Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" (Shepard's/McGraw-Hill Second Edition; West Publishing Company 2010 Supplement).  See generally id., Chapter 5, "Insurer's Defenses Against Action by Insured":  first, in § 5:14 (Settlement); next, in  § 5:24 (Defense), and finally, in § 5:49 (Inadequacy of Defense).

Please Read The Disclaimer.  See also the analysis of other features of the above Sanderson v. Zurich American Insurance Company decision on Insurance Bad Faith Law Blog posted today.