Opinion
Civil Action No. 15-cv-01053-JLK
2020-04-17
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, Plaintiff, v. DISH NETWORK, L.L.C., Defendant.
Daniel I. Graham, Jr., Jonathan Todd Viner, Thomas William Arvanitis, Nicolaides Fink Thorpe Michaelides Sullivan LLP, Chicago, IL, David Stricks Werber, Dagner Schluter Mitzner Werber LLC, Greenwood Village, CO, for Plaintiff. Lee M. Epstein, Weisbrod Matteis & Copley PLLC, Philadelphia, PA, for Defendant.
Daniel I. Graham, Jr., Jonathan Todd Viner, Thomas William Arvanitis, Nicolaides Fink Thorpe Michaelides Sullivan LLP, Chicago, IL, David Stricks Werber, Dagner Schluter Mitzner Werber LLC, Greenwood Village, CO, for Plaintiff.
Lee M. Epstein, Weisbrod Matteis & Copley PLLC, Philadelphia, PA, for Defendant.
ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (ECF NO. 52); DENYING DEFENDANT'S CROSS-MOTION FOR PARTIAL SUMMARY JUDGMENT (ECF NO. 54), AND DENYING PLAINTIFF'S RULE 56(d) MOTION (ECF NO. 58)
Kane, J.
From 2003 to 2009, Plaintiff National Union Fire Insurance Company of Pittsburgh issued seven Commercial Umbrella Policies to Defendant DISH Network, L.L.C. In 2009, the U.S. Government and the States of California, Illinois, North Carolina, and Ohio sued DISH in United States v. DISH Network, L.L.C. , No. 3:09-cv-03073 (C.D. Ill.) (the "Underlying Lawsuit"), alleging that the company had repeatedly engaged in illegal telemarketing practices. At issue in this case is whether National Union's duties to defend and indemnify DISH under its Commercial Umbrella Policies have been triggered by that suit.
DISH was formerly known as EchoStar Communications Corporation, and that entity is the insured under the first two National Union Policies. For ease of reference, I refer to DISH as the insured under all seven policies.
After the Underlying Lawsuit was filed, DISH submitted a claim for defense and indemnity to National Union under the Policies. DISH's claim was rejected, and National Union eventually brought this declaratory judgment action. DISH asserts counterclaims alleging that National Union has breached its Policies by denying DISH's claim for coverage.
By agreement of the parties, this case was stayed pending judgment in the Underlying Lawsuit. The district court there entered judgment against DISH on June 5, 2017. At a hearing held on November 17, 2017, the stay of this action was partially lifted to allow the case to proceed as to National Union's duty to defend DISH. See 11/17/17 Minute Entry, ECF No. 39. The parties acknowledged that, if coverage is not provided under the first or second National Union Polices—the 2003 Policy and 2004 Policy, any dispute specific to the subsequent Policies would be irrelevant. See 11/17/17 Tr. at 29:3-32:17, ECF No. 40. It was also understood that, under Colorado law, when an insurer has no duty to defend, it has no duty of indemnification, because the duty to defend is broader than the duty to indemnify. Id. at 10:8-11; Compass Ins. Co. v. City of Littleton , 984 P.2d 606, 613 (Colo. 1999). Accordingly, the Court directed National Union to file a motion for summary judgment on its duty to defend under the first two Policies, reasoning that determination of the related issues could be dispositive of National Union's duty to defend—and perhaps its duty to indemnify—under all the Policies. Id. at 32:7-17.
Each National Union Policy period ran from August 1 to August 1 of the following year, e.g., August 1, 2003, to August 1, 2004. For simplicity, I refer to each Policy by the year in which its coverage began.
Presently before me are the parties’ summary judgment motions. National Union's Motion (ECF No. 52) seeks declarations that none of the Policies obligate it to defend DISH with regard to the Underlying Lawsuit and that, consequently, it also has no duty of indemnification. DISH's Cross-motion for Partial Summary Judgment (ECF No. 53) seeks a declaration that National Union must undertake its duty to defend.
My colleague Judge Matsch presided over this case and set the course for how it would proceed. The pending motions were fully briefed when the case was assigned to me in 2019. The five National Union policies for the annual periods spanning August 1, 2005, to August 1, 2010, contain an express exclusion which—if enforceable—clearly excludes coverage for the Underlying Lawsuit. DISH contends that exclusion is unenforceable because National Union failed to provide notices of reductions of coverage as required by Colorado Revised Statutes § 10-4-110.5. The parties’ related arguments raise factual disputes. So it was logical and efficient to proceed on the first two policies, which do not contain the exclusion, before permitting broad discovery. Nevertheless, both parties have struggled to respect the bounds set. National Union's Motion cites to the later Policies, see Nat'l Union Mot. at 3-6, ECF No. 52, and DISH's Cross-motion and Opposition Brief includes lengthy argument about National Union's obligation to provide notice of reductions of coverage for the implicated exclusion in those later policies, see DISH Cross-mot. & Opp'n at 54-58, ECF No. 53. I do not consider the language unique to the 2005 to 2009 Policies or the argument related to the exclusion, as they are beyond the scope of what was intended for the summary judgment briefing.
In support of its Cross-motion and in opposition to National Union's Motion, DISH submitted the declaration of Lee M. Epstein, Esq., styled as a declaration under Federal Rule of Civil Procedure 56(d). Mr. Epstein states that, if I am inclined to find in favor of National Union, then DISH requests that I defer consideration of National Union's Motion and allow it a reasonable opportunity to take discovery and present facts essential to its opposition. Epstein Decl. ¶ 3, ECF No. 53-1. DISH did not file a separate Rule 56(d) motion as required by D.C.COLO.LCivR 7.1(d), but National Union has. In its Rule 56(d) Motion (ECF No. 58), National Union requests that I deny or defer ruling on DISH's arguments that are beyond the scope of the summary judgment briefing ordered or, alternatively, that I grant it time for certain discovery.
I find the discovery requested by both parties is not necessary for deciding their summary judgment motions. After extensive review of the filings and record, I conclude National Union has carried its burden of showing that the Underlying Lawsuit has not triggered its duty to defend or consequently its duty of indemnification under the 2003 and 2004 Policies.
I. LEGAL STANDARDS
Summary judgment is only appropriate if "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A fact is "material" if it "might affect the outcome of the suit under governing law." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). And a factual dispute is "genuine" if a "reasonable jury could return a verdict for the nonmoving party." Id. Within the intended scope of the summary judgment motions, there are no genuine disputes regarding any material fact. At issue are only questions of law, specifically ones related to contract interpretation in considering an insurer's duty to defend and indemnify its insured. See Compass , 984 P.2d at 613.
An insurance policy is a contract that should be interpreted pursuant to well-settled principles of contractual construction. Id. (citing Chacon v. Am. Family Mut. Ins. Co. , 788 P.2d 748, 750 (Colo. 1990) ). "Words used in an insurance policy ‘should be given their plain and ordinary meaning unless the intent of the parties, as expressed in the contract, indicates that an alternative interpretation is intended.’ " Compass , 984 P.2d at 613 (quoting Chacon , 788 P.2d at 750 ). "Courts should read the provisions of the policy as a whole, rather than reading them in isolation." Cyprus Amax Minerals Co. v. Lexington Ins. Co. , 74 P.3d 294, 299 (Colo. 2003) (citation omitted). And courts construe ambiguous provisions, i.e., provisions susceptible to more than one reasonable interpretation, against the insurer and in favor of providing coverage to the insured." Id. (citing Chacon , 788 P.2d at 750 ); Hecla Mining Co. v. N.H. Ins. Co. , 811 P.2d 1083, 1091 (Colo. 1991) (citation omitted).
Under Colorado law, the duty to defend and the duty to indemnify are distinct obligations. "The duty to defend pertains to the insurance company's duty to affirmatively defend its insured against pending claims. The duty to indemnify relates to the company's duty to satisfy a judgment entered against the insured." Constitution Assocs. v. N.H. Ins. Co. , 930 P.2d 556, 563 (Colo. 1996).
The parties agree that the law of Colorado governs the substantive legal issues in this case.
The duty to defend is broader than the duty to indemnify and is triggered more easily. Id. An insurer's obligation to defend its insured is determined by comparing the insurance policy and the complaint in the underlying action. Id. ; Cotter Corp. v. Am. Empire Surplus Lines Ins. Co. , 90 P.3d 814, 828 (Colo. 2004). This principle is known as the "complaint rule" (or the "comparison test," "four corners rule", or "eight corners rule"). See Pompa v. Am. Family Mut. Ins. Co. , 520 F.3d 1139, 1145 (10th Cir. 2008) ; Cyprus , 74 P.3d at 299, 301. As the Colorado Supreme Court explained in Hecla Mining Company v. New Hampshire Insurance Company :
An insurer's duty to defend arises when the underlying complaint against the insurer alleges any facts that might fall within the coverage of the policy. The actual liability of the insured to the claimant is not the criterion which places upon the insurance company the obligation to defend. Rather, the obligation to defend arises from allegations in the complaint, which if sustained, would impose a liability covered by the policy. [W]here the insurer's duty to defend is not apparent from the pleadings in the case against the insured, but the allegations do state a claim which is potentially or arguably within the policy coverage, or there is some doubt as to whether a theory of recovery within the policy coverage has been pleaded, the insurer must accept the defense of the claim.
811 P.2d at 1089 (citations, footnote, and internal quotation marks omitted). Thus, when applying the complaint rule, the "court must examine the nature of the facts alleged and claims pled in the complaint or amended complaint liberally with a view toward affording the greatest possible protection to the insured." Cyprus , 74 P.3d at 297. An insurer seeking to avoid its duty to defend faces a "heavy burden" and must establish that "there is no factual or legal basis on which the insurer might eventually be held liable to indemnify the insured." Hecla , 811 P.2d at 1089-90.
An insurer claiming that a policy exclusion avoids coverage must establish that the exclusion applies and that the exclusion is not subject to any other reasonable interpretation. Id. at 1090 (citations omitted). "The insurer has a duty to defend unless the insurer can establish that the allegations in the complaint are solely and entirely within the exclusions in the insurance policy." Id. (citation omitted).
II. FACTS
A. The Underlying Lawsuit
The first step in applying the complaint rule, then, is to examine the Complaint in the Underlying Lawsuit against DISH (the "Underlying Complaint"). The claims in the Underlying Complaint are brought by the United States and the States of California, Illinois, North Carolina, and Ohio under the Federal Telemarketing Sales Rule ("TSR"), 16 C.F.R. §§ 310.1 - 310.9 ; the Federal Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. § 227 ; and similar state statutes and regulations. As stated in the Underlying Complaint, DISH sells its satellite television programming to consumers throughout the country via telemarketing. Underlying Lawsuit Third Am. Compl. ¶¶ 32-33, ECF No. 52-9 ("UL Compl."). DISH engages in telemarketing both to consumers directly and through a network of authorized dealers. Id. ¶ 35. The Underlying Complaint alleges that, since October 2003, DISH has made or was responsible for telemarketing calls in violation of the implicated statutes and regulations by: (1) calling numbers listed on the National Do-Not-Call Registry maintained by the Federal Trade Commission; (2) calling numbers listed on company-specific do-not-call lists maintained by DISH and its authorized dealers; (3) failing to connect calls to a sales representative within two seconds of the consumers’ completed greetings; and (4) using autodialers and prerecorded messages without prior consent. UL Compl. ¶¶ 38-39, 66-69, 71-72, 75-76, 80, 82, 85-86, 89, 93, 95-96.
Both parties examine the Third Amended Complaint, which is the operative pleading in the case and is substantially similar to the prior complaints, so I follow suit. See Nat'l Union Mot. at 8; DISH Cross-mot. & Opp'n at 8 n.5.
According to the Underlying Complaint, DISH received consumer complaints about its telemarketing practices and was the subject of law enforcement actions by various states for violations of state do-not-call laws, and despite such notice, DISH failed to implement effective compliance procedures to prevent continued violations. Id. ¶¶ 56-60. Additionally, the Underlying Complaint alleges DISH caused five of its authorized dealers (the "Marketing Dealers") to violate the Amended TSR by:
(1) directly or indirectly offering to provide or providing financial payments for sales of Dish Network programming; (2) entering into relationships whereby the Marketing Dealers marketed on behalf of DISH Network; or (3) by directly or indirectly offering to provide or providing financial payments for sales of Dish Network programming, or by entering into relationships whereby the Marketing Dealers marketed on behalf of DISH
Network, and failing to monitor and enforce compliance with the Amended TSR.
Id. ¶ 61.
The Underlying Complaint includes twelve counts. Counts One through Four are brought by the United States and allege that, based on the described unlawful telemarketing practices, DISH has violated the TSR. Id. ¶¶ 66-69. The United States requests monetary civil penalties from DISH for every TSR violation and a permanent injunction to prevent future violations. Id. at 25.
Counts Five and Six are brought by the State Plaintiffs under the TCPA, which provides that:
Whenever the attorney general of a State ... has reason to believe that any person has engaged or is engaging in a pattern or practice of telephone calls or other transmissions to residents of that State in violation of this section or the regulations prescribed under this section, the State may bring a civil action on behalf of its residents to enjoin such calls, an action to recover for actual monetary loss or receive $500 in damages for each violation, or both such actions. If the court finds the defendant willfully or knowingly violated such regulations, the court may, in its discretion, increase the amount of the award to an amount equal to not more than 3 times the amount available under the preceding sentence.
47 U.S.C. § 227(g)(1). In Count Five, the State Plaintiffs claim that DISH, "either directly or indirectly as a result of a third party acting on its behalf," violated the TCPA by causing calls to be placed to residential telephone subscribers whose numbers were on the National Do-Not-Call Registry. UL Compl. ¶ 72. In Count Six, the State Plaintiffs claim that DISH, "either directly or indirectly as a result of a third party acting on its behalf," violated the TCPA by causing calls to be placed to residential telephone lines "using artificial or prerecorded voices to deliver a message without the prior express consent of the called party." Id. ¶ 76. For those alleged violations of the TCPA, the State Plaintiffs request that the Court assess damages of $500 for each TCPA violation and $1,500 for each violation of the TCPA found to be committed willfully and knowingly. Id. at 25. The State Plaintiffs also seek a permanent injunction enjoining DISH from future violations of the TCPA and the other implicated statutes and regulations. Id.
The Underlying Complaint refers to § 227(f), but the correct citation is to § 227(g). See DISH Cross-mot. & Opp'n at 10 n.6 (explaining that the TCPA was amended in 2010, after the original complaint was filed).
Counts Seven through Twelve are claims brought by the individual states for alleged violations of their respective consumer protection statutes and do-not-call laws. Id. ¶¶ 78-96. They are based on similar allegations of calls to numbers listed on the National Do-Not-Call Registry and the use of automatic dialers and prerecorded messages. Id. The states seek civil penalties for those violations and permanent injunctions enjoining DISH from engaging in such conduct in the future. Id. at 25-27.
The Underlying Complaint further alleges that consumers "have suffered and will suffer injury" as a result of DISH's violations of the TCPA and other statutes, and it asserts that, "[a]bsent injunctive relief by [the court], [DISH] is likely to continue to injure consumers and harm the public interest." Id. ¶ 97.
After a five-week bench trial, the district court in the Underlying Lawsuit issued its final decision on June 5, 2017. See United States v. DISH Network L.L.C. , 256 F. Supp. 3d 810 (C.D. Ill. 2017). The court found DISH liable for millions of calls that violated the TSR, the TCPA, and related state laws, awarding the plaintiffs $280 million in statutory damages and penalties and entering a permanent injunction against DISH. Id. at 968-75, 982-83, 992. Recently, the Seventh Circuit affirmed the district court's decision except for its measure of damages and its determination that DISH was liable under the TSR for "substantially assisting" one of its agents. United States v. Dish Network, L.L.C. , 954 F.3d 970, 977 (7th Cir. 2020).
B. The National Union Commercial Umbrella Policies
In accordance with the complaint rule, the allegations in the Underlying Complaint, irrespective of the ultimate outcome, must be compared to the National Union Policies to decipher whether they trigger National Union's duty to defend. The first Commercial Umbrella Policy issued by National Union to DISH was effective from August 1, 2003, to August 1, 2004. The other six policies covered the annual periods from August 1, 2004, through August 1, 2010, and are described on their declaration pages as renewal policies. As previously explained, since the parties were ordered to limit their summary judgment briefing to the 2003 and 2004 Policies, I focus this Order on the text of those two Policies.
The summary of coverage in the 2003 Policy provides:
[National Union] will pay on behalf of [DISH] those sums in excess of the Retained Limit that [DISH] becomes legally obligated to pay by reason of liability imposed by law ... because of Bodily Injury, Property Damage, Personal Injury or Advertising Injury that takes place during the Policy Period and is caused by an Occurrence happening anywhere in the world. The amount [National Union] will pay for damages is limited as described in Insuring Agreement III, Limits of Insurance.
2003 Policy, ECF No. 52-7 at 4. The language in the first sentence of the 2004 Policy differs slightly, stating:
[National Union] will pay on behalf of [DISH] those sums in excess of the Retained Limit that [DISH] becomes legally obligated to pay as damages by reason of liability imposed by law because of Bodily Injury, Property Damage , or Personal Injury and Advertising Injury to which this insurance applies....
2004 Policy, ECF No. 52-6 at 4 (italics added). So the 2004 Policy covers sums DISH "becomes legally obligated to pay as damages ," id. (emphasis added), while that sentence in the 2003 Policy only refers to sums DISH "becomes legally obligated to pay by reason of liability imposed by law," 2003 Policy, ECF No. 52-7 at 4. DISH emphasizes this difference, while National Union argues it is insignificant due to the many other provisions in the 2003 Policy that limit coverage to "damages."
Likewise, the defense provisions of the 2003 and 2004 Policies contain a slight variation, the importance of which is disputed by the parties. The 2003 Policy states that National Union has the "right and duty to defend any claim or suit seeking damages covered by the terms and conditions of th[e] policy." 2003 Policy, ECF No. 52-7 at 4. The 2004 Policy, on the other hand, omits the phrase "any claim," so that the provision reads "[National Union] will have the right and duty to defend any Suit against [DISH] that seeks damages" for injury or damage covered by the Policy. 2004 Policy, ECF No. 52-6 at 5.
The parties disagree as to whether the Underlying Complaint alleges injury or damage potentially covered by the Policies and whether coverage is precluded based on the Policies’ relevant exclusions. The categories of injury or damage covered in both Policies are Bodily Injury, Property Damage, Advertising Injury, and Personal Injury. The 2004 Policy defines Personal Injury and Advertising Injury jointly, whereas the 2003 Policy classifies them separately. Nevertheless, the definitions for the terms are substantially similar in the two Policies. As pertinent here, the 2003 Policy defines Advertising Injury as "injury arising solely out of your [i.e., DISH's,] advertising activities as a result of ... [o]ral or written publication of material that violates a person's right of privacy." 2003 Policy, ECF No. 52-7 at 6. Personal Injury in that Policy means "injury other than Bodily Injury or Advertising Injury arising out of ... [o]ral or written publication of material that violates a person's right of privacy." Id. 8-9. The 2004 Policy defines Personal Injury and Advertising Injury together as injury "arising out of ... oral or written publication, in any manner, of material that violates a person's right of privacy." 2004 Policy, ECF No. 52-6 at 24.
The 2003 and 2004 Policies’ definitions for Bodily Injury and Property Damage are identical or nearly identical. Under the 2003 Policy, Bodily Injury means "bodily injury, sickness, disability or disease" and "mental injury, mental anguish, humiliation, shock or death if directly resulting from bodily injury, sickness, disability or disease." 2003 Policy, ECF No. 52-7 at 6. And, under the 2004 Policy, Bodily Injury is "bodily injury, sickness or disease sustained by any person, including death or mental anguish resulting from any of these at any time." 2004 Policy, ECF No. 52-6 at 19. Property Damage, under both Policies, consists of:
1. physical injury to tangible property, including all resulting loss of use of that property ...; or
2. loss of use of tangible property that is not physically injured.
Id. 24-25; 2003 Policy, ECF No. 52-7 at 9.
The parties’ present motions argue whether, even if the allegations in the Underlying Complaint fall within the coverage for Advertising Injury and/or Personal Injury, two exclusions from the Policies preclude coverage. The Insured's Business Exclusion, as I will refer to it, from the 2003 Policy states: "[T]his insurance does not apply to ... Advertising Injury arising out of ... [a]n offense committed by an Insured whose business is advertising, broadcasting, publishing or telecasting." Id. at 11. Under the 2004 Policy, that exclusion applies to the same businesses but for the jointly defined Personal Injury and Advertising Injury, not just Advertising Injury. 2004 Policy, ECF No. 52-6 at 11. The second disputed exclusion, what I will refer to as the Advertising Conduct Exclusion, is contained in an endorsement to both Policies. It provides that the insurance does not apply to Personal Injury and Advertising Injury "committed or alleged to have been committed in any advertising, advertisement, publicity article, book, magazine, brochure, broadcast, written material or telecast in the conduct of the Insured's advertising, broadcasting, re-broadcasting, televising, re-televising, newspaper publishing or other publishing activities." 2003 Policy, ECF No. 52-7 at 20; 2004 Policy, ECF No. 52-6 at 35.
In the 2003 Policy, the Advertising Conduct Exclusion states that the insurance does not apply to "Personal Injury or Advertising Injury," because the terms are defined separately in that policy. 2003 Policy, ECF No. 52-7 at 20.
In short, the inquiry here is whether the facts pled and the remedies sought in the Underlying Complaint potentially implicate the National Union Policies’ coverage for Bodily Injury, Property Damage, Personal Injury and/or Advertising Injury. If only Personal Injury and/or Advertising Injury are potentially implicated, then I must consider whether the allegations fall solely and entirely within the Insured's Business Exclusion or Advertising Conduct Exclusion.
C. The Primary Insurers’ Declaratory Judgment Actions
Relevant to my analysis are three separate, but related, declaratory judgment actions filed by DISH's insurers in connection with the Underlying Lawsuit. The seven National Union Commercial Umbrella Policies sit above commercial general liability ("CGL") policies that DISH obtained from Travelers Property Casualty Company of America and ACE American Insurance Company. Travelers and ACE have also contested whether DISH was entitled to coverage for the Underlying Lawsuit under their policies. The courts presiding over those suits have arrived at opposite conclusions.
1. The Travelers Action
First, Travelers filed suit against DISH in the United States District Court for the Central District of Illinois in 2012, seeking a declaration that the Travelers CGL Policy did not provide coverage for the Underlying Lawsuit. In March 2014, the district court there granted partial summary judgment in favor of DISH, holding that Travelers had a duty to defend DISH in the Underlying Lawsuit. Travelers Prop. Cas. Co. of Am. v. DISH Network L.L.C. , No. 12-03098, 2014 WL 1217668, at *1 (C.D. Ill. Mar. 24, 2014). Specifically, the court concluded that (1) the allegations asserted against DISH in the Underlying Lawsuit fell potentially within the coverage afforded under the Travelers CGL policy for Bodily Injury, Property Damage, Personal Injury, and Advertising Injury; (2) coverage for an Advertising Injury was not precluded by an exclusion similar to the Insured's Business Exclusion in the 2003 National Union Policy; (3) statutory damages under the TCPA that do not require proof of intentional misconduct "may not be of a type that are generally uninsurable as a matter of Colorado public policy"; and (4) Travelers failed to show that the costs of complying with an injunction are not sums payable as damages under the Travelers Policy. Id. at *7-15.
After that order entered, DISH and Travelers reached a settlement. Travelers has authorized DISH to inform this Court that the limits of the Travelers CGL Policy have been exhausted. DISH Reply at 48, ECF No. 61.
2. The ACE Action
In 2013, ACE filed a declaratory judgment action against DISH in this District, in which it asserted that it had no duty to defend or indemnify DISH against the Underlying Lawsuit. In that case, Judge Blackburn granted summary judgment in favor of ACE, holding that the TCPA statutory damages sought in the Underlying Lawsuit are a penalty and therefore uninsurable under Colorado public policy and that the injunctive relief requested did not qualify as "damages" under the ACE Policies. ACE Am. Ins. Co. v. DISH Network, L.L.C. , 173 F. Supp. 3d 1128, 1133-37 (D. Colo. 2016). In addition, the District Court found applicable an exclusion nearly identical to the Insured's Business Exclusion in the 2004 National Union Policy. Id. at 1137-38.
The Court of Appeals for the Tenth Circuit affirmed, arriving at the same conclusions as the District Court with respect to the relief sought in the Underlying Lawsuit. See ACE Am. Ins. Co. v. DISH Network, L.L.C. , 883 F.3d 881, 888-894 (10th Cir. 2018). The Tenth Circuit held that the Underlying Complaint seeks punitive damages and financial penalties that are uninsurable as a matter of Colorado public policy and that the prospective injunctive relief sought does not constitute damages under the ACE policies. Id.
IV. DISCUSSION
National Union owes DISH a duty to defend under Colorado Law unless it can establish that none of the allegations in the Underlying Complaint could potentially impose a liability covered by its Umbrella Policies. See Hecla , 811 P.2d at 1089-90. National Union's primary argument as to that burden is that the relief sought in the Underlying Complaint, including the statutory damages and injunctive relief, could not potentially be covered under the Policies. It relies heavily on the Tenth Circuit's opinion in ACE , which DISH contends is inapplicable and, due to intervening Colorado Supreme Court cases, is no longer valid. Alternatively, National Union asserts that the factual allegations in the Underlying Complaint do not potentially fall within the Policies’ coverage for Bodily Injury, Property Damage, Personal Injury, or Advertising Injury and, even if they did constitute Personal Injury and/or Advertising Injury, coverage is precluded by the Insured's Business Exclusion and the Advertising Conduct Exclusion. DISH challenges National Union on every point. As the parties did, I start with whether the Underlying Complaint seeks relief that could potentially be covered under the National Union Policies.
A. Coverage of the Relief Requested in the Underlying Complaint
The Underlying Complaint prays for statutory damages and penalties as well as injunctive relief under the TCPA. The Tenth Circuit's opinion in ACE speaks to the potential coverage of both types of relief. First, the court held that the statutory damages and penalties sought in the Underlying Complaint are uninsurable as a matter of Colorado public policy. ACE , 883 F.3d at 885 n.1, 892. And, second, it held that the injunctive relief requested does not qualify as "damages" under the ACE policies. Id. at 893.
DISH suggests that the Tenth Circuit's holdings are based on its adoption of the district court's interpretation of the term damages in the ACE policies as meaning " ‘actual damages,’ i.e., compensatory damages for injury." DISH Cross-mot. & Opp'n at 30 (quoting ACE , 883 F.3d at 888 ). Consequently, DISH argues that, since the use of the term "damages" in the 2003 National Union Policy is not identical to its use in the ACE policies, the ACE opinion is inapplicable here. DISH is incorrect.
In its Reply and Opposition Brief, National Union argues that the doctrine of claim preclusion, or collateral estoppel, precludes DISH from relitigating the question of whether the monetary and equitable remedies sought in the Underlying Lawsuit are insurable. Nat'l Union Reply at 17-20, ECF No. 57. That argument is not persuasive. DISH is not estopped from contending that intervening developments in Colorado law compel a different result than that reached by the Tenth Circuit in ACE . Nor is DISH unable to argue that distinctions in policy language are significant to the outcome.
DISH takes the quoted language from the Tenth Circuit's summary of the district court's order. Significantly, DISH omits the full description, which goes on to state:
The court then determined that the TCPA statutory damages were civil penalties not covered by the policies and uninsurable under Colorado law. Finally, the court held the policies did not cover the injunctive relief because they are focused on preventing future violations of the TCPA, not on remedying past violations.
ACE , 883 F.3d at 888 (internal quotation marks, alteration, and citation omitted). The Tenth Circuit considered these two aspects of the district court's order—that TCPA statutory damages were uninsurable under Colorado law and that the policies did not cover the prospective injunctive relief sought—but it did not examine the district court's interpretation of the term "damages" in the policies. As explored below, the Tenth Circuit's conclusions in ACE rest not on its interpretation of what "damages" means in the policies, but on the prospective nature of the injunctive relief sought and the fact that Colorado public policy precludes insurance coverage for punitive damages.
Still, even if ACE turned on the inclusion and interpretation of the term "damages" in the policies, it would be relevant and applicable here. The language in the ACE policies resembles that of the 2004 National Union Policy; it requires the insurer to defend and indemnify DISH for "those sums that [DISH] becomes legally obligated to pay as damages" because of covered injury or damage. ACE , 883 F.3d at 886 ; cf. 2004 Policy, ECF No. 52-6 at 4 (stating that National Union will "pay on behalf of [DISH] those sums in excess of the Retained Limit that [DISH] becomes legally obligated to pay as damages by reason of liability imposed by law") (emphasis added)). The specification "as damages" is absent from the analogous sentence in the 2003 Policy. 2003 Policy, ECF No. 52-7 at 4. However, the absence of the word "damages" in that single sentence of the 2003 Policy is—as National Union contends—a distinction without a difference; numerous other provisions in the Policy limit coverage to damages. Immediately after the disputed sentence, in fact, the 2003 Policy states: "The amount [National Union] will pay for damages is limited as described in the Insuring Agreement III, Limits of Insurance." 2003 Policy, ECF No. 52-7 at 4 (emphasis added). The defense provision of the 2003 Policy further provides: "[National Union] shall have the right and duty to defend any claim or suit seeking damages covered by the terms and conditions of this policy...." Id. at 4 (emphasis added); see also id. ("[National Union] will defend any suit against [DISH] seeking damages on account of [covered injury or damage]"). Likewise, the Limits of Insurance section (Insuring Agreement III) of the 2003 Policy sets the limits in terms of covered "damages." Id. at 5-6 ("The General Aggregate Limit is the most [National Union] will pay for all damages covered under the Insuring Agreement I.... The Products-Completed Operations Aggregate Limit is the most [National Union] will pay for all damages included in the Products-Completed Operations Hazard .... [T]he Each Occurrence Limit is the most [National Union] will pay for the sum of damages covered under Insuring Agreement I because of all Bodily Injury, Property Damage , Personal Injury and Advertising Injury arising out of any Occurrence .... [National Union] will be liable only for that portion of damages in excess of the Insured's Retained Limit...." (italics added)). When read as a whole, the 2003 Policy, like the 2004 Policy and the ACE polices, limits the insurer's defense and indemnity obligations to "damages" because of an otherwise-covered injury. Thus, whether or not the Tenth Circuit's holdings in ACE depend on its interpretation of the term damages in the relevant policies, its reasoning is applicable here.
DISH argues that the phrase "seeking damages" modifies suit and not claim such that National Union has the right and duty to defend any claim covered by the policy, not just a claim seeking damages. In addition to that interpretation being highly dubious, the entirety of the policy makes clear coverage is limited to damages.
In support of its argument, DISH cites Hartford Fire Insurance Co. v. Guide Corp. , in which the court determined that a general coverage provision identical to that in the 2003 Policy either used damages in the second sentence as shorthand for the broad coverage defined in the first sentence or was ambiguous and should be construed in favor of the insured. No. IP 01-572-C-Y/F, 2005 WL 5899840, at *7 (S.D. Ind. Feb. 14, 2005). This authority is neither controlling nor persuasive. The court there does not appear to have considered the use of the term damages in other sections of the policy and does not reconcile that usage.
1. Injunctive Relief
That being resolved, I turn to whether the National Union Policies could potentially provide coverage for the injunctive relief sought in the Underlying Complaint. The State Plaintiffs in the Underlying Lawsuit seek "a permanent injunction and other equitable relief," UL Compl. ¶¶ 71, 75, and assert that, without it, DISH "is likely to continue to injure consumers and harm the public interest." Id. ¶ 97. The Prayer for Relief requests that the court "[p]ermanently enjoin [DISH] from violating the TCPA ... by enumerating the acts in which [DISH] is permanently enjoined from engaging." Id. at 25.
In ACE , the Tenth Circuit focused on the prospective nature of the relief sought in the Underlying Complaint. It acknowledged that under Colorado law, specifically the Colorado Supreme Court case Compass Insurance Co. v. City of Littleton , 984 P.2d at 622-23, the ordinary meaning of the term "damages" is broad enough to cover equitable relief. 883 F.3d at 893. The court distinguished that case, however, stating: "Critically, Compass dealt with the insurability of an equitable remedy intended to ameliorate already existing damage, not—as DISH requests here—an equitable remedy to prevent potential future damages." ACE , 883 F.3d at 893. The court went on to make clear that, "[u]nder the plain language of the policies, ACE is obligated to indemnify damages arising from past injuries, not the cost of preventing future violations." Id. The Tenth Circuit's analysis is applicable to both the 2003 and 2004 National Union Policies. The 2004 Policy contains the same language the court emphasized in the ACE policies. 2004 Policy, ECF No. 52-6 at 4; ACE , 883 F.3d at 893 ("becomes legally obligated to pay ... because of [injuries or damage] to which this insurance applies" (internal quotation marks and citation omitted)). And the 2003 National Union Policy similarly confines coverage to sums that DISH must pay because of past injury or damage. 2003 Policy, ECF No. 52-7 at 4 ("becomes legally obligated to pay ... because of [injury or damage] that takes place during the Policy Period" (emphasis added)). As such, I conclude any cost to comply with the injunctive relief requested in the Underlying Complaint would relate to future injury or damage not potentially covered by the 2003 and 2004 National Union Policies.
2. Statutory Damages under the TCPA
The more complicated assessment is whether the statutory damages sought in the Underlying Complaint are insurable under Colorado law. On top of the coverage bounds set by an insurance contract, "[t]he public policy of Colorado prohibits an insurance carrier from providing insurance coverage for punitive damages." Lira v. Shelter Ins. Co. , 913 P.2d 514, 517 (Colo. 1996). Such "[p]unitive damages are not meant to reimburse an injured plaintiff for harm suffered by that individual, but rather are intended to punish the defendant for his wrongful acts and to deter similar conduct in the future." Id. (citation omitted).
In a footnote in ACE , the Tenth Circuit concluded that the Underlying Complaint's claims of violations of the TSR and state statutes request civil penalties or require proof of knowing violations of the law, and so such claims do not arguably fall within the coverage of the policies. ACE, 772 F.3d at 885 n.1. DISH does not dispute that aspect of the Tenth Circuit's ACE opinion. As a result, I examine only whether the statutory damages sought under the TCPA are uninsurable.
In that regard, the Underlying Complaint prays for the court to "[a]ssess against [DISH] and in favor of the State Plaintiffs damages of $1,500 for each violation of the TCPA found by the [c]ourt to have been committed by Defendant willfully and knowingly" and, "if the [c]ourt finds [DISH] has engaged in violations of the TCPA which are not willful and knowing, then [to] assess[ ] against [DISH] damages of $500 for each violation of the TCPA." UL Compl. at 25.
The Tenth Circuit determined in ACE that those damages sought by the states are a penalty under Colorado law. ACE , 883 F.3d at 892. As such, the court resolved that, "even if [the damages] were otherwise covered under the policies, Colorado's public policy prohibits the insurability of such penalties and bars coverage." Id. at 888. In reaching that conclusion, the Tenth Circuit relied on the Colorado Supreme Court case Kruse v. McKenna , which cemented a three-part test for determining whether statutory damages are penalties and, applying that test, held that a claim for statutory damages under the TCPA is a claim for a penalty that cannot be assigned, 178 P.3d 1198, 1201-02 (Colo. 2008).
Since the Tenth Circuit issued its ACE opinion, the Colorado Supreme Court has decided Rooftop Restoration, Inc. v. American Family Mutual Insurance Co. , 418 P.3d 1173 (Colo. 2018). DISH argues Rooftop Restoration overrules Kruse and constitutes an intervening change in Colorado law such that ACE ’s holding on the punitive nature of the TCPA's statutory damages is no longer valid. Rooftop Restoration announced that the Kruse test for evaluating whether a particular cause of action operates as a penalty "is only appropriate, indeed only necessary, where the intent of the legislature is not clear." Id. at 1175. There, the question before the court was which statute of limitations applies to statutory claims for unreasonable delay or denial of insurance benefits. Id. at 1174. The court declined to employ the Kruse test, instead finding its answer clearly in the statutory text and broader statutory scheme. Id. at 1176-77. The court did not abandon the Kruse test altogether, though; it noted that the test "may still prove useful in cases where the intent of the legislature is not clear from the plain meaning of the relevant statutory text when viewed in the context of the statutory scheme as a whole." Id. at 1176. Here, the text of the TCPA does not reveal the clear intent of the legislature as to whether the specific damages sought in the Underlying Complaint are penal. Nevertheless, even assuming that Rooftop Restoration has invalidated Kruse ’s TCPA analysis, the Tenth Circuit's conclusion in ACE is unavoidable. Applying Rooftop Restoration , I begin "with the statutory language itself and give the text its ordinary and commonly accepted meaning." Id. at 1176 (citation omitted). The relevant provision of the TCPA empowers the attorney general of a state to "bring a civil action ... to recover for actual monetary loss or receive $500 in damages for each violation." 47 U.S.C. § 227(g)(1). And, "[i]f the court finds the defendant willfully or knowingly violated [the] regulations [prescribed under the TCPA], the court may, in its discretion, increase the amount of the award to an amount equal to not more than 3 times the amount available under the preceding sentence." Id.
There is also a strong argument that the Colorado Supreme Court conspicuously has not nullified its specific holding in Kruse that a claim for statutory damages under the TCPA is a penalty. In Rooftop Restoration , the Colorado Supreme Court advised: "Although our decision today does not apply the Kruse test, we note that it may be useful in other contexts and do not necessarily abandon it entirely. E.g., Kruse , 178 P.3d at 1198 (considering whether a claim under the [TCPA] was assignable to a third-party)." 418 P.3d at 1176. This sentence and citation could easily be read to indicate that the court's holding regarding the nature of TCPA statutory damages survives. Additionally, the court explained in Guarantee Trust Life Insurance Co. v. Estate of Casper , decided the same day as Rooftop Restoration , that "to the extent [its] decision in Kruse failed to give meaning to the plain language of the survival statute, that decision is overruled." 418 P.3d 1163, 1169 (Colo. 2018). The court was unambiguous that it was overruling one part of the Kruse decision, not the decision in its entirety and not the holding as it related to the TCPA.
Notably, the Colorado Supreme Court has recognized that statutes can contain both remedial and penal elements. See, e.g. , Carlson v. McCoy , 193 Colo. 391, 566 P.2d 1073, 1074 (1977). The Tenth Circuit considered this fact in ACE and predicted that the TCPA might be found to be dual natured: "[T]he Colorado Supreme Court may decide, when actually faced with the question, that the TCPA is penal in some contexts, but remedial in others." ACE , 883 F.3d at 892. The parties more or less agree, but dispute which parts of the statute fall into which category and in what contexts.
The parties’ main disagreement revolves around the $500 in damages available for each violation. DISH contends those damages must be at least partly remedial under all circumstances. DISH bases this contention on two aspects of the text: (a) the availability of treble damages and (b) the alternative award of actual monetary damages or $500. National Union, on the other hand, insists that the inquiry must be specific to the facts alleged in the Underlying Complaint.
Citing a slew of cases, DISH attempts to bolster its argument, claiming: "Courts around the country unanimously recognize Congress's clear intent in the text of Section 227(b)(3) for the $500 per violation statutory damages to be at least partly compensatory, and they have held that Congress intended for the TCPA to be a remedial statute." DISH Cross-mot. & Opp'n at 27. Two things stand about that statement and the list of cases. First, the provision used by the states here is § 227(g)(1), not the private right of action provision— § 227(b)(3). And, second, in contrast to the Colorado Supreme Court's analysis in Rooftop Restoration , most of the cases look beyond the text of the TCPA in finding that Congress intended for that private right of action to be at least partly remedial. In Sharp v. Ally Financial, Inc. , for instance, the court conducted a thorough analysis of the legislative history of the TCPA and concluded: "while the desired effect of the TCPA's enactment was to diminish the occurrence of inimical telephone and facsimile practices in general, the primary purpose of the TCPA's private right-to-action provision was to remedy the wrongs inflicted upon individual consumers." 328 F. Supp. 3d 81, 90 (W.D.N.Y. 2018) (emphasis added). Perhaps it is conceivable that the $500 in damages per violation could be remedial for some state-brought claims as courts have been found them to be in actions brought by private individuals. But any finding on whether the specific damages sought are penal or remedial "depends on the facts of the case." ACE , 883 F.3d at 891 (internal quotation marks and citation omitted). The Tenth Circuit was explicit in ACE : "even assuming the TCPA has remedial components that would be insurable under Colorado law, whether the plaintiffs have alleged any remedial damage is a fact-specific inquiry." Id. at 892. The ultimate question is whether the plaintiffs in the Underlying Lawsuit actually seek any remedial damages under the TCPA. As the Colorado Supreme Court has differentiated the two, remedial damages act "as redress for private wrongs," while punitive act "as punishment for the public good." Carlson , 566 P.2d at 1075. It is telling that the plaintiffs in the Underlying Lawsuit are all governmental entities. They allege no concrete injuries or damages. And nothing in the Underlying Complaint indicates that any sum awarded will go to compensate individual call recipients for their injuries.
See also Gager v. Dell Fin. Servs., LLC , 727 F.3d 265, 267 (3d Cir. 2013) (evaluating sufficiency of complaint brought by individual alleging defendant used an automated telephone dialing system to call her cell phone; relying on the TCPA's legislative history); Physicians Healthsource, Inc. v. Boehringer Ingelheim Pharms., Inc. , 847 F.3d 92, 93 (2d Cir. 2017) (assessing sufficiency of complaint filed by private entity alleging firm sent unsolicited fax; citing Gager for the proposition that the TCPA is a remedial statute that should be construed to benefit consumers); Parchman v. SLM Corp. , 896 F.3d 728, 731 (6th Cir. 2018) (considering survivability of claim by an individual alleging he received unauthorized calls from student loan servicers; discussing the Congressional Findings regarding the need to protect individuals from unsolicited, automated calls); Universal Underwriters Ins. Co. v. Lou Fusz Automotive Network , 401 F.3d 876, 881 (8th Cir. 2005) (considering insurance coverage of underlying suit in which private entity alleged insured sent unsolicited fax advertisements; examining the specific allegations in the underlying complaint); Van Patten v. Vertical Fitness Grp., LLC , 847 F.3d 1037, 1040-41 (9th Cir. 2017) (determining viability of claims by individual alleging management company of former gym sent unauthorized text messages; citing Gager ); Penzer v. Transp. Ins. Co. , 545 F.3d 1303, 1305 (11th Cir. 2008) (considering insurance coverage for underlying suit in which individual claimed receipt of unauthorized fax transmissions); Ammons v. Ally Fin., Inc. , 305 F. Supp. 3d 818, 820 (M.D. Tenn. 2018) (analyzing the propriety of exercising supplemental jurisdiction over a counterclaim against an individual alleging she received over 500 unauthorized calls to her cell phone; finding support in the Federal Communications Commission's Orders adopting and revising the TCPA rules); Saunders v. Dyck O'Neal, Inc. , 319 F. Supp. 3d 907, 908 (W.D. Mich. 2018) (finding summary judgment inappropriate for claims brought by individual alleging defendant repeatedly left prerecorded voicemails; citing Gager ); Robert W. Mauthe, M.D., P.C. v. Nat'l Imaging Assocs., Inc. , No. 17-cv-1916, 2018 WL 1960945, at *1 (E.D. Pa. Apr. 25, 2018) (dismissing individual's claim alleging defendant sent unauthorized fax; citing Gager ); Meyer v. Bebe Stores, Inc. , No. 14-cv-00267, 2015 WL 1223658, at *1-2 (N.D. Cal. Mar. 17, 2015) (deciding a motion to stay an individual's claims alleging unauthorized text messages were sent; citing Gager ); Hitchman v. Nat'l Enters. Sys., Inc. , No. 12-cv-61043, 2014 WL 912363, at *1 (S.D. Fla. Mar. 10, 2014) (denying summary judgment on an individual's claims alleging defendant telephoned her 87 times using an automatic telephone dialing system; citing Gager ).
DISH does not point to any allegations in the Underlying Complaint regarding specific injuries suffered or damages incurred by call recipients or anyone else, likely because it cannot. DISH notes, instead, that the claims are brought pursuant to the states’ parens patriae powers, and so represent the citizens of the states and bind them in the outcome. DISH Reply at 14-15 (quoting Sierra Club v. Two Elk Generation Partners, Ltd. P'ship , 646 F.3d 1258, 1268 (10th Cir. 2011) ). DISH quotes Sierra Club v. Two Elk Generations Partners , but omits the requirement that the states " ‘articulate an interest apart from the interests of particular private parties.’ " 646 F.3d at 1268 (quoting Satsky v. Paramount Commc'ns, Inc. , 7 F.3d 1464, 1469 (10th Cir. 1993) ); see also id. ("[A] state may not sue to assert the rights of private individuals"). The states in the Underlying Complaint articulate their own interest and sue "as punishment for the public good," Carlson , 566 P.2d at 1075, or in other words, "to punish the defendant for his wrongful acts and to deter similar conduct in the future," Lira , 913 P.2d at 517.
The Underlying Lawsuit does not, therefore, seek any relief which is covered under the 2003 and 2004 National Union Policies and for which there can be insurance coverage under Colorado law. As a result, National Union has no duty to defend DISH in the suit.
B. Potential Implication of the Coverage Provisions of the National Union Policies
Despite that finding, I address National Union's alternative argument that it is entitled to summary judgment because the allegations in the Underlying Complaint do not potentially implicate the Policies’ coverage for Bodily Injury, Property Damage, Personal Injury, or Advertising Injury.
DISH preliminarily claims that National Union's addition of a specific exclusion to the 2005 to 2009 Policies, eliminating coverage for violations of communications or information laws, evidences that the prior policies covered those violations. DISH looks for support in Dupre v. Allstate Insurance Co. , 62 P.3d 1024, 1029 (Colo. App. 2002), which states that "[a]n exclusion is unnecessary unless the excluded event would otherwise fall within the coverage provisions," and DISH Network Corp. v. Arch Specialty Ins. Co. , 659 F.3d 1010, 1020 (10th Cir. 2011), which found that an explicit exclusion demonstrated the insurers could have used more precise language. Neither case endorses inferring coverage solely because an exclusion precluding coverage is later added. As stated in Dupre , the exclusion could simply be unnecessary. Thus, DISH's argument fails.
National Union generally argues that the Underlying Lawsuit does not seek compensation for any alleged injury to the call recipients, so it does not potentially implicate any coverage obligation. Both the 2003 and 2004 Policies cover sums DISH becomes legally obligated to pay "because of" Bodily Injury, Property Damage, Personal Injury and/or Advertising Injury. 2003 Policy, ECF No. 52-7 at 4; 2004 Policy, ECF No. 52-6 at 4. According to National Union, "even if the [Underlying] Lawsuit could be construed as alleging Bodily Injury, Property Damage, or Personal Injury and Advertising Injury to the call recipients, those allegations would fail to potentially implicate coverage under the Umbrella Policies, because the [Underlying] Lawsuit does not potentially seek damages as compensation for any injury or damage to the call recipients themselves." Nat'l Union Mot. at 32-33 (emphasis added). In other words, while the call recipients may have experienced an injury that is potentially covered, it is not the basis for the damages and penalties sought in the Underlying Lawsuit and so is not covered. Although I consider that the Underlying Lawsuit does not allege concrete damages or indicate that the call recipients will be compensated, I do not rule on this particular argument.
Upon consideration of each of the coverages in the 2003 and 2004 National Union Policies, I conclude the allegations in the Underlying Complaint either do not potentially implicate the coverage provisions or fall solely and entirely within the pertinent exclusions.
1. Bodily Injury and Property Damage
The 2003 and 2004 National Union Policies provide coverage for damage or injury "caused by an Occurrence." 2003 Policy, ECF No. 52-7 at 4; 2004 Policy, ECF No. 52-6 at 4. With respect to Bodily Injury and Property Damage, the Policies define Occurrence, in pertinent part, as "an accident." 2003 Policy, ECF No. 52-7 at 8; 2004 Policy, ECF No. 52-6 at 23. The parties dispute the implications of that definition. Because I find the allegations in the Underlying Complaint do not otherwise potentially implicate the Policies’ coverage for Bodily Injury or Property Damage, I assume the wrongful conduct described constitutes an Occurrence. There is no meaningful difference in the 2003 and 2004 Policies, so I consider them together.
The Underlying Complaint alleges that "[c]onsumers in the United States have suffered and will suffer injury as a result of [DISH's] violations of the TSR, the TCPA, California law, Illinois law, Ohio law, and North Carolina law." UL Compl. ¶ 97. The Complaint does not describe the nature of the alleged injury. Yet DISH contends this allegation of generalized injury is sufficient to potentially implicate coverage for Bodily Injury and Property Damage. DISH asserts: "While the full contours of that ‘bodily injury’ and ‘property damage’ are not specified in the Underlying Complaint, that factor militates in favor of a duty to defend, not against it." DISH Reply at 28. DISH references the general principle that when " ‘there is some doubt as to whether a theory of recovery within the policy coverage has been pleaded, the insurer must accept the defense of the claim.’ " Id. (quoting Compass , 984 P.2d at 614 ). This standard focuses on broadly interpreting what is actually alleged, not on anticipating what could possibly be shown at trial. What is actually alleged here is some generic, unspecified injury, which alone does not potentially implicate coverage for Bodily Injury or Property Damage.
Bodily Injury
When the facts alleged in the Underlying Complaint are read liberally with a view toward affording the greatest possible protection to DISH, they imply at most that consumers have suffered emotional distress or mental anguish from being interrupted by unwanted, improper telemarketing calls. For the 2003 Policy, Bodily Injury encompasses "bodily injury, sickness, disability or disease" and "mental injury, mental anguish, humiliation, shock or death if directly resulting from bodily injury, sickness, disability or disease." 2003 Policy, ECF No. 52-7 at 6. Similarly, the 2004 Policy defines Bodily Injury as "bodily injury, sickness or disease sustained by any person, including death or mental anguish resulting from any of these at any time." 2004 Policy, ECF No. 52-6 at 19. Under both Policies, for mental anguish or mental injury to be covered, such mental or emotional suffering must directly result from bodily injury, sickness, disability or disease. Mental injury or mental anguish standing alone does not constitute Bodily Injury within the meaning of the Policies. The Underlying Complaint does not describe any bodily injury, sickness, disability, or disease allegedly suffered. Without such factual allegations, the Underlying Complaint does not implicate the Policies’ coverage for Bodily Injury.
Property Damage
Property Damage is defined in both the 2003 Policy and the 2004 Policy as "physical injury to tangible property, including all resulting loss of use of that property" or "loss of use of tangible property that is not physically injured." 2003 Policy, ECF No. 52-7 at 9; 2004 Policy, ECF No. 52-6 at 24-25. It is undisputed that the Underlying Complaint does not allege any physical injury to tangible property. DISH contends that the Underlying Complaint's allegations can be read to allege loss of use of tangible property that is not physically injured. To support that contention, DISH claims that consumers who receive illegal telemarketing calls temporarily lose use of their telephone lines while the unauthorized calls are in progress. DISH points out that in Travelers the court agreed with that argument and concluded that the Underlying Complaint's allegations fall within the property damage coverage provided by the Travelers policy. See Travelers, 2014 WL 1217668, at *12. The rulings in the Travelers opinion are not binding on this Court, and I decline to follow that court's lead.
The Travelers court principally relied on distinguishable TCPA actions arising from unsolicited advertisements sent to recipients’ facsimile machines. Id. (citing Park Univ. Enters., Inc. v. Am. Cas. Co. of Reading, PA , 442 F.3d 1239, 1244-47 (10th Cir. 2006), abrogated on other grounds by Magnus, Inc. v. Diamond State Ins. Co. , 545 F. App'x. 750, 753 (10th Cir. 2013) ; Pekin Ins. Co. v. XData Solutions, 354 Ill.Dec. 654, 958 N.E.2d 397, 403-04 (2011) ). In those cases, it makes sense that property damage coverage was implicated because the recipients of those fax transmissions suffered loss of paper, ink, and use of the fax machine. But, unlike an unwanted fax transmission, an unwanted telemarketing call does not utilize finite resources like ink or paper. And such a call does not meaningfully prevent use of the phone. The Underlying Complaint does not allege any loss of use of tangible property, and so it does not fall within the Policies’ coverage for Property Damage.
2. Advertising Injury and Personal Injury
With respect to Advertising Injury and Personal Injury coverage, I find that both the Insured's Business Exclusion and the Advertising Conduct Exclusion of the 2003 National Union Umbrella Policy apply. Again, these two categories of coverage are set out separately in the 2003 Policy and jointly in the 2004 Policy. But, in both Policies, Advertising Injury and Personal Injury are defined as an injury arising out of a list of offenses that, as relevant here, includes the oral or written publication of material "that violates a person's right of privacy." 2003 Policy, ECF No. 52-7 at 6, 9; 2004 Policy, ECF No. 52-6 at 24. The parties dispute the scope of the phrase "right of privacy." Since I find an exclusion is applicable for both types of coverage, however, I presume the Underlying Complaint alleges such a right of privacy offense.
The 2003 Policy
The 2003 Policy distinguishes Advertising Injury, which is injury that arises "solely out of your [i.e., DISH's,] advertising activities," from Personal Injury, which is "injury other than Bodily Injury or Advertising Injury." 2003 Policy, ECF No. 52-7 at 6, 8. Thus, under that Policy, an injury may be either Advertising Injury or Personal Injury, but not both.
National Union contends that the only injury alleged in the Underlying Lawsuit arises solely out of DISH's advertising activities, and therefore, the only coverage that could be potentially implicated is that of Advertising Injury. DISH disagrees, arguing that National Union has failed to show that the injury described in the Underlying Complaint arises solely out of DISH's advertising activities. DISH advocates a narrow interpretation of Advertising Injury coverage. It points to the Underlying Complaint's allegations regarding DISH's authorized dealers, third parties who performed telemarketing on DISH's behalf, and DISH's failure to monitor their activities. DISH contrasts other provisions of the 2003 Policy that describe conduct committed by DISH or by others on its behalf with the definition of Advertising Injury, which refers to only DISH's activities, not those of persons acting on its behalf. DISH's arguments fail for two reasons. First, DISH's characterization of the Underlying Complaint is not apt. The claims alleged are predicated entirely on injury occurring as a result of DISH's advertising. The only telemarketing at issue involved DISH's products and services. And DISH is the only named defendant. Second, the coverage for Advertising Injury is not as narrow as DISH suggests. Although the Policy does not explicitly state that the covered advertising activities encompass those of third parties acting on DISH's behalf, that is the only reasonable interpretation. Advertising activities that promote DISH's products and services are DISH's advertising activities regardless of whether those activities are performed by DISH or by an entity DISH has authorized to act on its behalf. For the 2003 National Union Commercial Umbrella Policy, then, the allegations in the Underlying Complaint could potentially fall within the coverage for Advertising Injury and, as a result, do not fit within the definition of Personal Injury. Even if the allegations did potentially trigger Personal Injury coverage, though, it would be precluded by the Advertising Conduct Exclusion, as Advertising Injury coverage is.
The Advertising Conduct Exclusion in the 2003 Policy precludes coverage for Advertising Injury or Personal Injury committed or alleged to have been committed in any advertising or advertisement in the conduct of the insured's advertising, broadcasting, or other publishing activities. 2003 Policy, ECF No. 52-7 at 20. DISH claims that some allegations in the Underlying Complaint fall outside the conduct proscribed by this exclusion, once again highlighting the allegations regarding the Marketing Dealers and DISH's failure to monitor and ensure their compliance with telemarketing laws. That argument fails for the reasons stated above. The Underlying Complaint alleges the injury was caused by DISH's advertising activities. By its plain and unambiguous language, the Advertising Conduct Exclusion precludes coverage for the injury alleged in the Underlying Lawsuit. As a result, DISH insists that the Exclusion is unenforceable on the ground that it completely negates the coverage provided for Advertising Injury. As support for that argument, DISH cites MGA Entertainment, Inc. v. Hartford Insurance Group , No. ED CV 08-0457-DOC(RNBx), 2012 WL 12893266, at *11 (C.D. Cal. Feb. 24, 2012). But Tenth Circuit precedent permits an exclusion to nullify Advertising Injury coverage. See DISH Network Corp. v. Arrowood Indem. Co. , 772 F.3d 856, 872-73 (10th Cir. 2014). Therefore, the Advertising Conduct Exclusion is valid and, by its plain language, excludes the allegations in the Underlying Complaint from Advertising Injury and Personal Injury coverage.
In addition, the Insured's Business Exclusion in the 2003 policy precludes Advertising Injury coverage for an insured whose business is "[a]dvertising, broadcasting, publishing or telecasting." 2003 Policy, ECF No. 52-7 at 11. The Tenth Circuit has previously considered this exclusion in the same 2003 National Union Policy at issue here. In DISH Network Corp. v. Arrowood Indemnity Co. , the court held that DISH is engaged in the business of "broadcasting" and "telecasting," as those terms are commonly understood and, consequently, that coverage for Advertising Injury was unavailable. 772 F.3d at 873. The holding in Arrowood is dispositive. See ACE , 173 F. Supp. 3d at 1138 ("This court is bound by the holding in Arrowood that ‘the commonly-understood definitions of the terms broadcasting and telecasting undoubtedly encompass Dish's transmissions.’ " (quoting Arrowood , 772 F.3d at 872 )). Under the 2003 Policy, the Insured's Business Exclusion thus acts to eliminate any potential coverage for Advertising Injury.
Both the Advertising Conduct Exclusion and the Insured's Business Exclusion, therefore, apply under the 2003 National Union Policy to preclude coverage for Advertising Injury, and the Advertising Conduct Exclusion would similarly preclude coverage for Personal Injury, if it were potentially implicated.
The 2004 Policy
The 2004 Policy defines the terms jointly as Personal Injury and Advertising Injury, so there is no need to distinguish between the two categories of coverage. The Insured's Business Exclusion precludes Personal Injury and Advertising Injury coverage in the 2004 Policy for an insured whose business is, among other fields, "advertising, broadcasting, publishing or telecasting." 2004 Policy, ECF No. 52-6 at 11. The Advertising Conduct Exclusion in the 2004 Policy is identical to that of the 2003 Policy. 2004 Policy, ECF No. 52-6 at 35. Thus, for the reasons stated above, both exclusions apply equally to the 2004 Policy to preclude coverage for Personal Injury and Advertising Injury.
In sum, assuming the Underlying Complaint potentially implicates the 2003 Policy's coverage for Advertising Injury and the 2004 Policy's coverage for Personal Injury and Advertising Injury, that coverage is precluded by the Insured's Business Exclusion and by the Advertising Conduct Exclusion. The allegations in the Underlying Complaint do not otherwise potentially implicate the National Union Policies’ coverages for Bodily Injury or Property Damage under either the 2003 or 2004 Polices or Personal Injury under the 2003 Policy. Accordingly, National Union has no duty to defend DISH in the Underlying Lawsuit under its Commercial Umbrella Policies, both because the Underlying Complaint does not allege any facts that might fall within the Policies’ coverage and because it does not seek any remedy covered by the Policies and insurable under Colorado Law.
Shifting to a previously unraised argument, see, e.g. , DISH Ans. 25-26, ECF No. 21, DISH asserts the 2004 Policy may contain invalid reductions in coverage based on the combining of the Advertising Injury and Personal Injury coverage, the inclusion of the word "damages" in the summary of coverage sentence, and the elimination of "any claim" in the defense provision. Since I find National Union has no duty to defend under the 2003 Policy, it is not apparent how these reduction-of-coverage arguments are relevant.
C. Duty of Indemnification under the National Union Policies
When an insurer has no duty to defend, it has no duty of indemnification, since the duty to defend is broader than the duty to indemnify. Compass , 984 P.2d at 613 ; Constitution Assocs. , 930 P.2d at 563 ; see also ACE , 883 F.3d at 894 n.7. Because the 2003 and 2004 National Union Commercial Umbrella Policies do not obligate National Union to defend DISH in the Underlying Lawsuit, it follows that National Union has no duty of indemnification.
IV. CONCLUSION
Based on the foregoing, Plaintiff's Motion for Summary Judgment (ECF No. 52) is GRANTED. National Union has no obligation to defend or indemnify Defendant DISH Network, L.L.C. in the Underlying Lawsuit captioned United States of America and the States of California, Illinois, North Carolina, and Ohio v. DISH Network L.L.C. , Case No. 3:09-cv-03073, in the United States District Court for the Central District of Illinois. Defendant's Cross-motion for Partial Summary Judgment (ECF No. 54) is DENIED. Plaintiff's Rule 56(d) Motion (ECF No. 58) is similarly DENIED.
National Union is DIRECTED to submit to the court on or before May 11, 2020, a proposed order outlining the judgment to be entered on each claim and counterclaim as a result of this Order. If any other issues remain, the parties have until May 11, 2020, to raise them with the court.