Opinion
CIVIL ACTION NO. 1:20-cv-3948-AT
2021-08-10
ELITE INTEGRATED MEDICAL, LCC, et al., Plaintiffs, v. HISCOX, INC., et al., Defendants.
Atlee Willis Wampler, III, Pro Hac Vice, Law Office of Atlee Willis Wampler, III, Pinecrest, FL, D. Brandon Hornsby, Hornsby Law Group, Atlanta, GA, for Plaintiffs. Seth M. Friedman, Lewis Brisbois Bisgaard & Smith, Allison Gowens, Troutman Pepper Hamilton Sanders LLP, Atlanta, GA, for Defendants Hiscox, Inc., Certain Underwriters at Lloyd's Subscribing to Policy Number MEO1505941.19.
Atlee Willis Wampler, III, Pro Hac Vice, Law Office of Atlee Willis Wampler, III, Pinecrest, FL, D. Brandon Hornsby, Hornsby Law Group, Atlanta, GA, for Plaintiffs.
Seth M. Friedman, Lewis Brisbois Bisgaard & Smith, Allison Gowens, Troutman Pepper Hamilton Sanders LLP, Atlanta, GA, for Defendants Hiscox, Inc., Certain Underwriters at Lloyd's Subscribing to Policy Number MEO1505941.19.
ORDER
Amy Totenberg, United States District Judge
This is a straightforward insurance dispute. Plaintiffs Elite Integrated Medical, LLC ("Elite") and Justin C. Paulk ("Paulk") seek a declaratory judgment finding that Defendant Hiscox, Inc. and Hiscox Dedicated Corporate Member Limited ("Hiscox") have a duty to defend them in connection with Georgia Fair Business Practices Act ("GFBPA") claims brought against them by the Attorney General for the State of Georgia. Now before the Court is Hiscox's Motion to Dismiss [Doc. 16]. Hiscox argues that the operative insurance policy does not extend coverage to the claims at issue and that, even if it did, two specific exclusions unambiguously preclude coverage. For the reasons that follow, Hiscox's Motion [Doc. 16] is GRANTED . I. Factual Background
The Parties:
Plaintiff Elite formerly operated an integrated medical regenerative medicine practice for patients with pain in the joints and spine and extremities. (Complaint, Doc. 1. ¶ 3.) Plaintiff Paulk was an officer and the President of Elite. (Id. ¶ 7; Paulk's Notice to Hiscox, Doc. 1-2 at 4 .) In connection with its regenerative medicine practice, Elite was a named insured on a professional liability insurance policy administered by Defendant Hiscox with an effective policy period running from August 30, 2019 to August 30, 2020. (Insurance Policy number ME01505941.19, Doc. 1-1 at 3.)
Plaintiffs attach to their Complaint a host of relevant documents including the operative insurance policy (Doc. 1-1), Paulk's notice of claim letter (Doc. 1-2), the State's Notice of Contemplated Legal Action (Doc. 1-3), Hiscox's denial of coverage (Doc. 1-5) and more. The Court may consider these documents without converting the motion to a motion for summary judgment. Day v. Taylor , 400 F.3d 1272, 1275-76 (11th Cir. 2005) (citing Horsley v. Feldt , 304 F.3d 1125, 1134 (11th Cir. 2002) ).
The Attorney General's Action:
On March 2, 2020, the Georgia Attorney General's Office ("the State") interviewed Plaintiff Paulk and informed him that it was investigating Elite's advertising of its regenerative medicine products and services. (Paulk's Notice to Hiscox at 3.) At this interview, according to Paulk, the State explained that it planned to send Elite a notice of contemplated legal action related to alleged "marketing misstatements" made by Elite. (Id. ) Two days after this interview, Paulk sent Hiscox notice of the impending litigation and requested that Hiscox provide Elite a defense to the State's threatened actions and cover all related expenses. (Id. at 4; see also , Compl. ¶ 27.) In his notice, Paulk declared Elite's innocence as to the State's allegations and explained that he believed that the State's investigation was a result of "defamatory" Fox 5 news reports. (Paulk's Notice to Hiscox at 3; Compl. ¶ 29.) Paulk's notice of claim was assigned a claim number 146001338. (Compl. ¶ 30.)
Days later, on March 9, 2020, the State served its official "Notice of Contemplated Legal Action" ("the State's Notice") against Elite as well as Paulk, individually. (Compl. ¶ 31; State's Notice, Doc. 1-3.) The State's Notice details that the Attorney General "is contemplating taking or initiating legal action" against Elite and Paulk "pursuant to O.C.G.A. § 10-1-397, for alleged violations of the Fair Business Practices Act, O.C.G.A. § 10-1-390 et seq. " (State's Notice at 1.) Expounding, the State's Notice provided that "the Attorney General has reason to believe that the Company has engaged in the following unfair and deceptive business practices and that Justin Paulk had actual knowledge of and directly authorized, supervised, ordered and/or participated in the following unfair and deceptive business practices." (Id. at 2) (emphasis added.)
The State's Notice then lists a series of alleged "unfair and deceptive business practices," including: (1) making false and/or misleading representations that Elite's stem therapy and regenerative medicine products and/or services cure, treat, or mitigate specific diseases or health conditions, for example, Parkinson's Disease, COPD, cystic fibrosis, rheumatoid arthritis, congestive heart failure, and other conditions; (2) making false and/or misleading representations that Elite's stem cell therapy and regenerative medicine products are comparable to or superior to conventional medical treatments in curing, mitigating or treating specific diseases; (3) making false and/or misleading representations that their stem cell therapy and regenerative medicine products are approved by the FDA; (4) using customer testimonials without reliable scientific evidence regarding the effectiveness of Elite's stem cell therapy and regenerative medicine products without disclosing the customer's interest in the company; (5) making false and/or misleading representations that Elite has doctors that will be directly involved in providing stem cell therapy ; (6) making false and/or misleading representations about Elite's stem cell therapy and regenerative medicine products in internet websites, through email and social media, with the targeted demographic being elderly and disabled individuals. (Id. at 2-3.)
Upon receiving the State's Notice, Plaintiffs forwarded it to Hiscox on March 12, 2020, referencing their claim, Claim No. 146001338. (Compl. ¶¶ 30, 32.) Five days later, Hiscox responded to Plaintiff's notice by denying coverage on Plaintiffs’ claim. (Id. ¶ 33; Hiscox's Denial Letter, Doc. 1-5 at 1) ("Unfortunately, we must advise that there is no coverage available for this matter because the claim is excluded under the policy."). Hiscox's denial letter stated that it was not required to provide defense or indemnification coverage in connection with the State's claims that Elite and Paulk made false and/or misleading statements under the GFBPA because those claims did not fall within the policy's coverage for "professional services." (Id. at 2.) Hiscox also cited three exclusions that precluded coverage in full or in part: Exclusion 1, the Antitrust/Deceptive Trade Practices Exclusion; Exclusion 13, the Intentional Acts Exclusion; and Exclusion 7, the Excluded Costs and Damages provision. (Id. at 2-3.)
The Policy Language:
Under Elite's professional liability insurance policy, Policy No. ME01505941.19, Hiscox promises to pay coverage for damages and claim expenses "for covered claims against you alleging a negligent act, error, or omission in your professional services performed on or after the retroactive date," including breach of any duty of care; bodily injury; or personal or advertising injury. (Insurance Policy at 11) (emphasis added). The definitions section of the policy defines "professional services" as "only those services identified as "Covered Professional Services" under the Declarations section. (Id. at 17) (emphasis added.) The Declarations section of the policy defines "Covered Professional Services" as conduct:
Solely in the performance of services as a physical medicine clinic including chiropractic, hormone therapy, neurotherapy, medical and non-medical weight loss, allergy testing, durable medical equipment therapy and/or instruction, PRP, and amniotic human tissue injections and naltrexone implants.
(Id. at 4) (emphasis added.)
As noted above, the policy also outlines certain exclusions for claims that are not covered. There are three particular exclusions discussed by the Parties here and referenced in Hiscox's denial letter (Doc. 1-5.). In its denial letter, Hiscox first referenced the Antitrust/Deceptive Trade Practices Exclusion, which states:
We will have no obligation to pay any sums under this Coverage Part, including any damages or claim expenses , for any claim"
1. based upon or arising out of any actual or alleged:
a. false, deceptive, or unfair trade practices ;
b. unfair competition, impairment of competition, restraint of trade, or antitrust violations;
c. violation of the Sherman Anti-Trust Act, the Clayton Act, the
Robinson-Patman Act, all including as may be amended, or any similar federal, state, or local statutes, rules, or regulations in or outside the U.S.; or
d. deceptive or misleading advertising.
(Insurance Policy at 13) (original emphases omitted; emphases added). The second exclusion referenced in the denial letter is the Intentional Acts Exclusion that denies coverage
based upon or arising out of any actual or alleged fraud, dishonesty, criminal conduct, or any knowingly wrongful, malicious, or intentional acts or omissions, except that:
a. we will pay claim expenses until there is a final adjudication establishing such conduct; and
b. this exclusion will not apply to otherwise covered intentional acts or omissions resulting in personal and advertising injury.
(Id. at 15) (original emphases omitted).
Finally, the third relevant cited exclusion is Exclusion 7 that details certain Excluded Costs and Damages. (Id. at 14.) Under this provision, the policy excludes coverage for any claim to the extent that the claim seeks or includes:
a. fines, penalties, taxes, or sanctions against you, except we will pay fines and penalties if they are part of a covered claim under Section II. Coverage enhancements, Subsection C. HIPAA violations sublimit;
b. overhead costs, general business expenses, salaries, or wages incurred by you;
c. the return, reduction, or restitution of fees, commissions, profits, or charges for goods provided or services rendered;
d. liquidated or multiple damages;
e. restitution, disgorgement of profits, any advantage to which you were not legally entitled, or unjust enrichment; or
f. the cost of complying with injunctive relief.
(Id. at 14) (original emphases omitted).
Months after Hiscox's denial in March of 2020, the State filed a lawsuit against Elite and Paulk in the Superior Court of Fulton County on September 14, 2020, asserting four counts, all for violations of the Georgia Fair Business Practices Act ("GFBPA"), O.C.G.A. § 10-1-390 et seq. (See, State of Georgia v. Elite Integrated Medical, LLC and Justin C. Paulk , 2020CV340369 (Fulton Super. Ct. Sept. 14, 2020), Doc. 1-11). Now, in this action, Plaintiffs seek declaratory judgment that Hiscox is required to defend them and pay all costs in connection with their defense against the State's action.
II. Legal Standard
To survive a motion to dismiss under Rule 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). For the purposes of a motion to dismiss, the court must accept all factual allegations in the complaint as true; however, the court is not bound to accept as true a legal conclusion couched as a factual allegation. Twombly , 550 U.S. at 555, 127 S.Ct. 1955. "While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations." Iqbal , 556 U.S. at 679, 129 S.Ct. 1937. Although the plaintiff is not required to provide "detailed factual allegations" to survive dismissal, "threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Twombly , 550 U.S. at 555, 570, 127 S.Ct. 1955 ; Iqbal , 556 U.S. at 678, 129 S.Ct. 1937.
III. Discussion
In its Motion, Hiscox argues that Plaintiffs cannot show that the terms of the policy require Hiscox to either defend or indemnify Plaintiffs in connection with the GFBPA allegations brought by the State. First, Hiscox argues that the policy does not provide coverage for the conduct alleged, as the policy only covers risks of negligent acts, errors, or omissions in "professional services," and the State's allegations do not involve negligent acts or omissions in Plaintiffs’ "professional services," as defined by the policy. (Motion to Dismiss, Doc. 16-1, at 2.) Even if the State's allegations against Plaintiffs did fall within the ambit of the policy, Hiscox argues, two exclusions also separately and unambiguously preclude coverage: (1) the Deceptive Trade Practices Exclusion, and (2) the Excluded Costs and Damages Exclusion. (Id. at 3.) Hiscox additionally argues that Paulk, in particular, does not qualify as an "insured" under the policy and therefore is not entitled to coverage in connection with the State's suit against him in his individual capacity. (Id. at 2.) Plaintiffs argue in response that the "true facts" show that they are entitled to defense coverage under the policy and that the policy language is ambiguous, entitling them to coverage. (Pl. Resp., Doc. 19 at 6, 12-21.)
Plaintiffs state that they "do not seek indemnity from Defendant but only seek a declaration that Hiscox has a duty to defend and/or pay Plaintiffs’ claims expenses in connection with disputed allegations of misconduct. (Pl. Resp. at 1.) Hiscox replies that it is entitled to a judgment as to both its duty to defend and its duty to indemnify in this action. (Reply, Doc. 22 at 13.) As the Court explains herein, if there is no duty to defend, there is no duty to indemnify. See Shafe v. Am. States Ins. Co. , 288 Ga.App. 315, 653 S.E.2d 870 (2007). As the Court finds that Hiscox has no duty to defend, it also has no duty to indemnify in connection with Plaintiffs’ coverage request. Id.
Under Georgia law, "[a]n insurance policy is simply a contract, the provisions of which should be construed as any other type of contract." Am. Empire Surplus Lines Ins. Co. v. Hathaway Dev. Co. , 288 Ga. 749, 707 S.E.2d 369, 371 (2011) (quoting RLI Ins. Co. v. Highlands on Ponce , 280 Ga.App. 798, 635 S.E.2d 168 (2006) ) (internal citations omitted). "Construction of the contract, at the outset, is a question of law for the court." Id. The party seeking coverage bears the burden to establish that he sustained a loss covered by the policy. Chix v. Ga. Farm Bureau Ins. Co. , 150 Ga.App. 453, 258 S.E.2d 208, 209 (1979).
In assessing the relevant contract dispute, a court should be mindful that "an insurer's duty to pay and its duty to defend are separate and independent obligations." Penn-Am. Ins. Co. v. Disabled Am. Veterans, Inc. , 268 Ga. 564, 490 S.E.2d 374, 376 (1997). However, if an insurer "does not have a duty to defend on a claim, it will likewise not be required to indemnify the insureds if they are ultimately held liable for that claim." Allstate Ins. Co. v. Harkleroad , No. 409CV011, 2010 WL 2076941, at *3 (S.D. Ga. May 24, 2010) ; Maryland Cas. Co. v. Salon Ave. Suite 2 , 1:13-cv-3056-TWT, 2014 WL 4925623, at *3, n. 60 (N.D. Ga. Sept. 29, 2014) (citing Shafe v. Am. States Ins. Co. , 288 Ga.App. 315, 653 S.E.2d 870 (2007) ).
Whether an insurer has a duty to defend "turns on the language of the insurance contract and the allegations of the complaint asserted against the insured." City of Atlanta v. St. Paul Fire & Marine Ins. Co. , 231 Ga.App. 206, 498 S.E.2d 782, 784 (1998) ; Elan Pharm. Research Corp. v. Emp'rs Ins. , 144 F.3d 1372, 1375 (11th Cir. 1998) (explaining that courts should "compare the allegations of the complaint, as well as the facts supporting those allegations, against the provisions of the insurance contract"). "[I]t is only where the complaint sets forth true factual allegations showing no coverage that the suit is one for which liability insurance coverage is not afforded and for which the insurer need not provide a defense." Disabled Am. Veterans , 490 S.E.2d at 376. Specifically, an insurer's duty to defend is excused if the facts as alleged in the underlying complaint "unambiguously exclude coverage under the policy." Id. at 376. Yet, any "doubt as to liability and insurer's duty to defend should be resolved in favor of the insured." Id.
Keeping this direction in mind, the Court turns to assess whether the policy at issue requires Hiscox to pay the costs of Plaintiffs’ defense in connection with the action brought against them by the State of Georgia.
A. The Policy's "Covered Professional Services"
To refresh, the policy promises to cover "claims against you alleging a negligent act, error, or omission in your professional services" including breach of any duty of care; bodily injury; or personal or advertising injury. (Insurance Policy at 11.) The policy further defines "Covered Professional Services" as conduct:
Solely in the performance of services as a physical medicine clinic including chiropractic, hormone therapy, neurotherapy, medical and non-medical weight loss, allergy testing, durable medical equipment therapy and/or instruction, PRP, and amniotic human tissue injections and naltrexone implants.
(Id. at 4) (emphasis added.)
Based on this policy language, Hiscox argues that the allegations by the State against Plaintiffs — involving alleged false and misleading statements and advertisements in violation of the GFBPA — do not concern, or are incidental to, any negligent acts or omissions in connection with Plaintiffs’ "performance of services as a physical medicine clinic" and therefore Hiscox has no duty to defend or indemnify. (Mot. at 19.) In response, Plaintiffs argue that a consideration of the "true facts" shows that Plaintiffs’ advertising of its stem cell therapies were not incidental to Plaintiffs’ professional services but were exactly the type of claim the policy covers. (Pl. Resp. at 13-14.) Plaintiffs rely specifically on allegations in the State's lawsuit (Doc. 1-11) that Elite's chiropractors made false and misleading statements about the stem cell therapies at seminars, on Facebook, or in emails. (Pl. Resp. at 12.)
Accordingly, the Court must determine whether the State's GFBPA claims against Plaintiffs allege that Plaintiffs performed "negligent acts, errors, or omissions" in their "professional services," i.e. , "[s]olely in the performance of services as a physical medicine clinic" including, for example, various therapies, injections, and implants.
"In determining what types of actions by an insured constitute the providing of ‘professional services,’ [courts] look to the nature of the act the insured performed, rather than the title or status of the insured." Garland, Samuel & Loeb, P.C. v. Am. Safety Cas. Ins. Co. , 287 Ga.App. 254, 651 S.E.2d 177, 179 (2007) (citing St. Paul Fire & Marine Ins. Co. , 498 S.E.2d 782 ). To constitute professional services, "[s]omething more than an act flowing from mere employment or vocation is essential." Id. Rather, "[t]he act or service must be such as exacts the use or application of special learning or attainments of some kind." Id. Further, " ‘professional services,’ as defined in professional liability policies, necessarily entails an application of special learning unique to the insured's profession." Id. at 180 (citing St. Paul Fire & Marine Ins. Co. v. Alderman , 216 Ga.App. 777, 455 S.E.2d 852, 853-54 (1995) ).
Under different circumstances but comparable policy language, the Georgia Court of Appeals determined that allegations that a law firm breached a fee-splitting agreement were "incidental" to the firm's business and therefore did not arise from the firms acts or omissions in rendering "professional services" as lawyers. Garland , 651 S.E.2d at 180. Similarly, in Alderman, supra , 455 S.E.2d 852, the Georgia Court of Appeals held that allegations that a doctor sexually assaulted a patient during an examination did not constitute "medical treatment," was not "inextricably intertwined" with his examination of the patient, and thus did not arise from his "professional services" as a doctor. Id. at 853-54.
Here, as detailed above, the State's Notice of Contemplated Legal Action (Doc. 1-3), explicitly alleges that Plaintiffs violated the Georgia Fair Business Practice Act, O.C.G.A. § 10-1-390 et seq. by making various flavors of false and/or misleading representations regarding their stem cell therapies, the effectiveness of those therapies, the FDA's approval of those therapies, customer testimonials regarding the therapies, and more. (State's Notice, Doc. 1-3 at 2-3; see supra at 1311–12.) The later lawsuit alleges four counts, all for violations of the GFBPA. (Doc. 1-10.)
Simply put, these allegations of false advertising do not assert negligent acts in the performance of "professional services," i.e. , services "as a physical medicine clinic," such as, for example, negligence in the administering of "hormone therapy," "amniotic human tissue injections," or "naltrexone implants." (Insurance Policy at 4.) The acts alleged, making false or misleading statements and advertisements, also do not "exact[ ] the use or application of special learning or attainments of some kind" or involve the "application of special learning unique to the insured's profession. " See, Garland , 651 S.E.2d at 179 ; Alderman , 455 S.E.2d at 853. Instead, any advertising regarding stem cell therapies — whether on Facebook, via email, or at seminars — was "incidental" to Elite's professional services as a medical clinic actually providing injections, implants, therapies, and medical services. Garland , 651 S.E.2d at 180.
Plaintiffs’ arguments to the contrary are unavailing. First, their attempt to distinguish Garland backfires. (Pl. Resp. at 10-11.) Plaintiffs put stock in the fact that the Garland Court noted that the insurance policy in that case specifically excluded breach of contract (the claim for which coverage was sought) from coverage. Id. Yet, the breach of contract exclusion was not the basis for the Garland Court's holding; rather, it was an additional reason that supported the Court's conclusion that allegations that the firm breached a fee splitting agreement did not arise from the lawyer's "professional services." Garland , 651 S.E.2d at 180. Moreover, a parallel reasoning bolsters the Court's conclusion here. As in Garland , Hiscox's policy with Elite specifically excludes any claim based on any actual or alleged for "false, deceptive, or unfair trade practices" and "deceptive or misleading advertising" – the exact conduct alleged in the State's Notice (and later, lawsuit), as discussed in more detail below in Section B. Accordingly, as in Garland , this directly relevant exclusion only supports an interpretation that the claims at issue are "not the type of claims" Hiscox "is required to defend." Garland , 651 S.E.2d at 180.
Plaintiffs’ position that other policy language, listing coverage for "personal and advertising injury," establishes coverage here is not persuasive. (Pl. Resp. at 11-12.) As noted above, the policy outlines coverage for damages and claim expenses
for covered claims against you alleging a negligent act, error, or omission in your professional services performed on or after the retroactive date, including but not limited to:
1. breach of any duty or care;
2. bodily injury;
3. personal and advertising injury ,
provided the claim is first made against you during the policy period and is reported to us in accordance with Section V. Your obligations.
(Insurance Policy at 11) (emphasis added.) But Plaintiffs do not follow the analysis through because they do not address the policy's definition of "personal and advertising injury." The policy defines "personal and advertising injury" narrowly and specifically as "injury, arising out of one or more of the following offenses":
1. false arrest, detention, imprisonment;
2. malicious prosecution;
3. wrongful eviction from, wrongful entry into; or invasion of the right of private occupancy of premises;
4. slander, libel, or defamation, or disparagement of goods, products, or services, whether in connection with your professional services or your advertising of it; or
5. oral or written publication of material, whether in connection with your professional services or your advertising of it, that violates a person's right of privacy.
(Insurance Policy at 16.) Plaintiffs have not argued that any of these specific listed offenses are at issue here and the Court's review of the State's Notice and lawsuit indicates that none are. Certainly, if the State were alleging slander or defamation claims against Plaintiffs, that would be a different story. But those are not the allegations here. Accordingly, the State's allegations against Plaintiffs for violations of the GFBPA are not allegations for "personal and advertising injury" as defined by the policy itself. The "personal and advertising injury" language is therefore not relevant to, and does not provide coverage for, the claims at issue. Next, the Court addresses Plaintiffs’ vehement and repeated reliance on the "true facts," i.e. , facts showing that Plaintiffs did not actually violate the GFBPA, as alleged by the State. (Pl. Resp. at 3-6, 12-15.) Plaintiffs repeatedly note that they provided Hiscox with these "true facts," denying all of the State's allegations of wrongdoing, and that a consideration of these "true facts" places their claim within the policy's coverage. (Id. ) Plaintiffs contend that Hiscox's failure to investigate and accept Plaintiffs’ "true facts" led it to erroneously deny coverage. (Id. at 5, 12.)
On this note, Plaintiffs’ reliance Hullverson Law Firm P.C. v. Liberty Ins. Underwriters, Inc. , 25 F.Supp.3d 1185 (E.D. Mo. 2014) is unpersuasive. Not only is Hullverson nonbinding authority interpreting the law of another state, but it involves policy terms wholly different than the ones at play here. Id. at 1189-90. Indeed, in that case — where a law firm sought insurance defense in connection with allegations brought against it for, inter alia , violations of the Lanham Act — the policy language broadly promised to cover damages for all claims caused by wrongful acts. It then defined wrongful acts as acts, errors, or "personal injury" arising out of professional legal services. Id. The parties in Hullverson disagreed as to whether the allegations at issue arose in the context or "professional legal services." Id. The policy in that case also defined "personal injury" as injury arising out of an offense occurring "in the course of the named insured's advertising activities, including but not limited to infringement of copyright, title[,] slogan, patent, trademark, trade dress, trade names, service mark or service number." Id. The parties there agreed that this definition of "personal injury" covered the claims at issue. In assessing the plaintiffs’ claims, the Court determined that — under that policy language — the alleged injuries did not arise out professional legal services. Id. at 1194. However, it then held that the alleged injuries were covered under the policy's definition of "personal injury." Accordingly, the court determined that that discrepancy rendered the policy illusory as a whole. Id. at 1194-95. That is not the situation here, where the provision outlining coverage terms and the provision defining "personal and advertising injury" comport and are not in conflict, as they were in Hullverson. Because of the different policy language and claims at issue, Hullverson is inapplicable.
While courts should indeed consider the "true facts" in determining an insurance coverage dispute, such consideration does not allow an insured to create coverage where the allegations unambiguously do not fall within the policy. See State Farm Fire & Cas. Co. v. Brewer , No. 1:06-cv-2296-RWS, 2008 WL 450817, at *3 (N.D. Ga. Feb. 15, 2008) ("[M]erely denying the allegations in the underlying action does not entitle the insured to coverage; rather the insured must present affirmative evidence in the declaratory action that the true facts show coverage) (internal quotation omitted). As explained in Shafe, supra , 653 S.E.2d at 873-74,
the applicable law [ ] does not allow an insured to create coverage simply by ‘reinterpreting’ the factual allegations made so as to come within the scope of the insurance contract. Rather, the rule requires that, if the complaint fails to allege facts that bring the claim within the policy's coverage, a duty to defend may nevertheless exist where the insured informs the insurer of additional facts related to the claim that would entitle him to a defense of the same under the policy. See Yeoman & Assocs. [Agency, Inc. v. Bowen Tree Surgeons, Inc.], supra 274 Ga. App. [738] at 745(1)(b), 618 S.E.2d 673 [(2005)]. Here, the only additional facts alleged in [the insured's] affidavit are that the Insureds derived no specific profit from the sale ... and that any benefits derived from that work resulted from the Insured's use of the same in marketing their services. Assuming arguendo the truth of [insured's] assertions, they are insufficient to transform [the underlying] claims into ones arising out of an advertising injury.
Id. (emphasis added.)
Indeed, the cases Plaintiffs rely on to support their "true facts" argument (see Pl. Resp. at 10) illustrate this distinction, as all of those cases involve situations where the issue of coverage turned on a factual determination that was in dispute. See e.g., Nautilus Ins. Co. v. Flor , 801 F. App'x 703, 708-09 (11th Cir. 2020) (assessing whether auto policy provided coverage where it provided that any person using a covered automobile "with your permission" is an "insured," and whether or not driver had permission to drive car was a genuine issue of material fact); Anderson v. Southern Guar. Ins. Co. of Ga. , 235 Ga.App. 306, 508 S.E.2d 726, 729-30 (1998) (explaining that where policy limited coverage to "accidental occurrences" and whether or not the occurrence at issue was an "accident" was in dispute, the claim was arguably within the policy coverage and insurer had duty to conduct reasonable investigation). In those cases, therefore, an acceptance of the "true facts," as argued by the insured, placed the claims within the policy's coverage.
Plaintiffs also cite Hallum v. Provident Life and Acc. Ins. Co. , 257 F. Supp.2d 1373 (N.D. Ga. 2001). That case involved a plaintiff's claim for coverage under a disability income policy and the parties disputed whether plaintiff's carpel tunnel syndrome and related concerns were disabilities due to "injury" or instead were due to "sickness" under the terms of the policy. Id. at 1375-76. A review of relevant medical testimony – that is, the relevant facts – was necessary to determine whether or not the policy provided coverage. But in the instant case, as noted above, the policy defines coverage based on the allegations brought against the insured, which are plain and not in dispute. Taking all of Plaintiffs’ true facts as true does not change the calculus.
But here, that is not the case. Nothing in Plaintiffs’ "true facts" can bring it within the policy's coverage because the policy only promises to defend "covered claims against you alleging a negligent act, error, or omission in your professional services," (Doc. 1-1 at 11) which, as reasoned above, does not include the GFBPA claims brought by the State against Plaintiffs that allege false and misleading statements and advertising. Put another way, the policy at issue defines coverage based on the claims and allegations brought against the insured, not the conduct itself. Here, there is no question or dispute about the claims and allegations brought against Plaintiffs, as outlined in the State's Notice (Doc. 1-3) or subsequent lawsuit (Doc. 1-11), which are clearly for making false and deceptive statements in violations of the GFBPA. Thus, accepting Plaintiffs’ "true facts" that they did not engage in the conduct alleged makes no difference. Plaintiffs’ innocence of the State's GFBPA claims does not bring their claim for coverage within the policy's provisions. Brewer , 2008 WL 450817 at *3 Shafe , 653 S.E.2d at 873-74.
Indeed, Plaintiffs agree in their brief that the State's Notice and lawsuit "do not expressly allege negligent acts in professional services or advertising of them." (Pl. Resp. at 12.)
Plaintiffs throw various arguments at the wall, but none stick. Because the claims do not allege conduct involving Plaintiffs’ "professional services" as defined by the policy, there is no coverage and no duty to defend or indemnify. Moreover, even if State's claims were for negligent actions in Plaintiffs’ "professional services," coverage would be precluded by at least one exclusion, as detailed below.
Because the Court finds that the policy does not cover the claims at issue, it need not address the Parties’ arguments as to whether Plaintiff Paulk specifically qualifies as an insured under the policy, since there is no coverage regardless.
B. The Antitrust/Deceptive Trade Practices Exclusion
As noted in the factual background section above, the policy includes an Antitrust/Deceptive Trade Practices Exclusion, which states:
We will have no obligation to pay any sums under this Coverage Part, including any damages or claim expenses, for any claim"
2. based upon or arising out of any actual or alleged:
a. false, deceptive, or unfair trade practices;
b. unfair competition, impairment of competition, restraint of trade, or antitrust violations;
c. violation of the Sherman Anti-Trust Act, the Clayton Act, the Robinson-Patman Act, all including as may be amended, or any similar
federal, state, or local statutes, rules, or regulations in or outside the U.S.; or
d. deceptive or misleading advertising.
(Insurance Policy at 13) (original emphases omitted). Hiscox argues that this language unambiguously excludes coverage because it explicitly denies coverage for any claim based upon or arising out of "actual or alleged false, deceptive, or unfair trade practices" or "deceptive or misleading advertising"—exactly what is alleged in the State's lawsuit. (Mot. at 20-21.)
Plaintiffs do not respond directly to Hiscox's argument on this front and effectively concede that the Deceptive Trade Practices Exclusion applies. Instead, Plaintiffs argue that the Deceptive Trade Practices Exclusion, and the entire policy, is ambiguous and therefore the Court should adopt the construction of the policy most favorable to Plaintiffs. (Pl. Resp. at 18-21.) Specifically, Plaintiffs argue that the Deceptive Trade Practices Exclusion conflicts with a different exclusion not relied upon by Hiscox in its motion to dismiss — the Intentional Acts Exclusion — and that this conflict renders the policy ambiguous. As noted in the background section, under the Intentional Acts Exclusion, Hiscox has no obligation to provide any coverage for any claim:
based upon or arising out of any actual or alleged fraud, dishonesty, criminal conduct, or any knowingly wrongful, malicious, or intentional acts or omissions, except that:
c. we will pay claim expenses until there is a final adjudication establishing such conduct; and
d. this exclusion will not apply to otherwise covered intentional acts or omissions resulting in personal and advertising injury.
(Insurance Policy at 15) (emphases omitted). Plaintiffs argue that this language is applicable to their claims and that there is ambiguity because the Intentional Acts Exclusion promises to pay claim expenses until a final adjudication but the Deceptive Trade Practices Exclusion denies coverage altogether. (Pl. Resp. at 18.)
First, as noted, Hiscox does not rely on the Intentional Acts Exclusion in arguing that it is not required to provide defense coverage. In addition, Plaintiffs’ contention that there is an inherent conflict if both exclusions were to apply rests on the premise that somehow the Intentional Acts Exclusion provides coverage under the policy while the Deceptive Trade Practices Exclusion takes it away, and therefore these contract provisions are in conflict. But the Intentional Acts Exclusion does not provide coverage at all and is in fact among the listed exclusions that take away coverage. The policy is structured so that, if a claim is covered under the policy, that coverage is taken away if any one of the exclusions apply, that is: if A or B or C, etc. If A clearly applies, there is no coverage, regardless of whether B or C also apply. The Court notes, however, that the policy appears to anticipate some circumstance in which the two exclusions would overlap such that Defendant would be required to provide defense coverage for a fraud claim. For example, if Plaintiffs were sued for both GFBPA claims and fraud claims, Defendant might be required to defend the fraud claims. But that is not the situation at issue here.
Here, the policy unequivocally excludes defense and indemnification coverage for the claims at issue under the Deceptive Trade Practices Exclusion. (Insurance Policy at 13.) That the policy also might exclude indemnity coverage under a different exclusion does not alter this conclusion. Thus, even assuming that Plaintiffs are correct that the State's allegations of false and misleading advertising assert "intentional acts" that could implicate the Intentional Acts Exclusion (Pl. Resp. at 4, 12, 16), there is no overall conflict in the policy. Accordingly, the Deceptive Trade Practices Exclusion serves to unambiguously exclude coverage regardless of whether the Intentional Acts Exclusion also applies as another layer barring indemnity coverage.
The Court's conclusion is reinforced by the principle that an insurance policy "is to be considered as a whole and each provision is to be given effect and interpreted so as to harmonize with the others." See Boardman Petroleum, Inc. v. Federated Mut. Ins Co. , 269 Ga. 326, 498 S.E.2d 492, 494 (1998). Further, "Georgia law permits an insurance company to fix the terms of its policies as it sees fit, so long as they are not contrary to the law, thus companies are free to insure against certain risks while excluding others." Georgia Farm Bureau Mut. Ins. Co. v. Smith , 298 Ga. 716, 784 S.E.2d 422, 424 (2016). "Where the contractual language unambiguously governs the factual scenario before the court, the court's job is simply to apply the terms of the contract as written, regardless of whether doing so benefits the carrier or the insured." Reed v. Auto-Owners Ins. Co. , 284 Ga. 286, 667 S.E.2d 90, 92 (2008). Reading the policy as a whole in light of the relevant facts and allegations, the Court finds no ambiguity or conflict amongst the policy's relevant provisions. The Deceptive Trade Practices Exclusion unambiguously precludes coverage for defense of the GFBPA claims.
As noted above, Plaintiffs ask the Court to construe the policy against Hiscox and in favor of coverage. (Pl. Resp. at 21) (citing Ga. Farm Bureau Mut. Ins. Co. v. Huncke , 240 Ga.App. 580, 524 S.E.2d 302 (1999) ). But the Court cannot apply the rules of construction, such as construing the contract against the insurer as drafter, absent ambiguity in the policy. Evanston Insurance Company v. Sandersville Railroad Company , 761 F.App'x 940, 944 (11th Cir. 2019) (explaining that where the language is unambiguous, "[c]anons of interpretation used to resolve ambiguity simply do not apply").
Accordingly, in addition to finding that there is no coverage because the State's allegations against Plaintiffs are not for negligent errors or omissions in Plaintiffs’ "professional services," the Court finds that, even if the State's claims were encompassed within the policy, the Deceptive Trade Practices Exclusion would preclude coverage because it squarely applies to the present case.
It also appears that the second exclusion cited by Hiscox (Mot. at 22-23) — the Excluded Costs and Damages Exclusion — bars coverage, as the relief sought by the State against Plaintiffs is encompassed within that Exclusion. In responding to this argument, Plaintiffs misunderstand the exclusion and focus on the relief they seek in this action as opposed to the relief the State seeks against Plaintiffs. (Pl. Resp. at 22). However, as the Court has already determined that the policy does not provide coverage in the first place, and that the Deceptive Trade Practices Exclusion applies, it need not rule on the application of the Excluded Costs and Damages Exclusion.
IV. Conclusion
Because the State's claims against Plaintiffs allege acts not within the risks covered by the policy, Hiscox does not have a duty to defendant or indemnify Plaintiffs under the plain language of the contract. On top of this, the policy also unambiguously excludes coverage for the claims at issue. Consequently, Hiscox's Motion to Dismiss [Doc. 16] is GRANTED . Plaintiffs’ Complaint is DISMISSED .
IT IS SO ORDERED this 10th day of August, 2021.