Opinion
Civil Action No. 3:02-CV-2662-L
February 26, 2004
ORDER
Before the court are Plaintiff's Motion for Partial Summary Judgment, filed April 17, 2003; and Defendants Cross-Motion for Complete and Final Summary Judgment, filed May 30, 2003. After careful consideration of the motions, responses, replies, summary judgment evidence, record and applicable law, the court grants Plaintiff's Motion for Partial Summary Judgment; and denies Defendants Cross-Motion for Complete and Final Summary Judgment.
I. Factual and Procedural Background
This is an insurance coverage dispute. Wausau Business Insurance Company ("Defendant" or "Wausau") issued a commercial general liability policy ("CGL policy" or "policy"), policy number 2320-00-064719, to Plaintiff Registry Dallas Associates, L.P. d/b/a Hotel Inter-Continental Dallas ("Plaintiff" or "Registry") covering the time period relevant to this lawsuit.
Coverage A of the CGL policy provides coverage for "damages because of `bodily injury' or `property damage' to which this insurance applies." Pl. App. at 18. For the insurance to apply, the "property damage" must, among other things, be caused by an "occurrence." Id. "Property damage" is defined, in relevant part, as "physical injury to tangible property, including loss of use of that property" and "[l]oss of use of tangible property that is not physically injured." Pl. App. at 36.
Registry does not contend that the allegations in the underlying lawsuit constitute "bodily injury" as defined by the CGL policy.
Coverage B of the CGL policy provides coverage for "damages because of `personal injury' or `advertising injury' to which this insurance applies." Pl. App. at 23. The insurance applies if, among other things, the "advertising injury" is "caused by an offense committed in the course of advertising your goods, products or services." Id. "Advertising injury" is defined as injury arising out of one or more of the following offenses:
Registry does not contend that the allegations in the underlying lawsuit constitute "personal injury" as defined by the CGL policy.
a. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;
b. Oral or written publication of material that violates a person's right of privacy;
c. Misappropriation of advertising ideas or style of doing business; or
d. Infringement of copyright, title or slogan. Id. at 32. Only subpart b, namely, "[o]ral or written publication of material that violates a person's right of privacy," is at issue in this case.
Registry seeks a defense and indemnity from Wausau in a putative class action lawsuit filed against it on July 13, 2001("the underlying lawsuit" or "the Girards lawsuit"). The plaintiff's in the underlying lawsuit claim violations of the Telephone Consumer Protection Act ("TCPA") and section 35.47 of the Texas Business and Commerce Code, invasion of privacy and trespass, arising from unsolicited facsimile advertisements allegedly sent by American Blast Fax, Inc. on behalf of Registry to over 30,000 recipients. Registry forwarded the underlying lawsuit to Wausau for defense and indemnity coverage. Wausau denied the claim.
The underlying lawsuit is styled James E. Girards, Christopher G. Sharp and Christopher G. Sharp, P.C. v. Inter-Continental Hotels Corp., Registry Dallas Associates, L.P., its general partner Dallas Hotel Associates, Ltd., cause number 01-3456-K, 192nd Judicial District Court of Dallas County, Texas.
Registry filed this action on November 14, 2002 in the 192nd Judicial District Court of Dallas County, Texas. Wausau removed the case to federal court on December 12, 2002. In addition to seeking a declaration that Wausau has duties to defend and indemnify in the underlying lawsuit, Registry asserts a breach of contract claim and seeks attorney's fees. Registry moves for summary judgment solely on issue of the duty to defend, and Wausau moves for summary judgment on all claims. The court now considers these motions.
II. Summary Judgment Standard
Summary judgment shall be rendered when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986); Ragas v. Tennessee Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998). A dispute regarding a material fact is "genuine" if the evidence is such that a reasonable jury could return a verdict in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When ruling on a motion for summary judgment, the court is required to view all inferences drawn from the factual record in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986); Ragas, 136 F.3d at 458. Further, a court "may not make credibility determinations or weigh the evidence" in ruling on motion for summary judgment. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); Anderson, 477 U.S. at 254-55.
Once the moving party has made an initial showing that there is no evidence to support the nonmoving party's case, the party opposing the motion must come forward with competent summary judgment evidence of the existence of a genuine fact issue. Matsushita, 475 U.S. at 586. Mere conclusory allegations are not competent summary judgment evidence, and thus are insufficient to defeat a motion for summary judgment. Eason v. Thaler, 73 F.3d 1322, 1325 (5th Cir. 1996). Unsubstantiated assertions, improbable inferences, and unsupported speculation are not competent summary judgment evidence. See Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir.), cert. denied, 513 U.S. 871 (1994). The party opposing summary judgment is required to identify specific evidence in the record and to articulate the precise manner in which that evidence supports his claim. Ragas, 136 F.3d at 458. Rule 56 does not impose a duty on the court to "sift through the record in search of evidence" to support the nonmovant's opposition to the motion for summary judgment. Id.; see also Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 915-16 n. 7 (5th Cir.), cert. denied, 506 U.S. 832 (1992). "Only disputes over facts that might affect the outcome of the suit under the governing laws will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 248. Disputed fact issues which are "irrelevant and unnecessary" will not be considered by a court in ruling on a summary judgment motion. Id. If the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to its case and on which it will bear the burden of proof at trial, summary judgment must be granted. Celotex, 477 U.S. at 322-23.
III. Analysis
A. Interpretation of Insurance Contracts
The interpretation of an insurance policy is a question of law. New York Life Ins. Co. v. Travelers Ins. Co., 92 F.3d 336, 338 (5th Cir. 1996). Insurance policies are contracts and are governed by the principles of interpretation applicable to contracts. Amica Mut. Ins. Co. v. Moak, 55 F.3d 1093, 1095 (5th Cir. 1995) (citing Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663, 665 (Tex. 1987)). As this is a diversity case, Texas rules of contract interpretation control. See id.; see also Potomac Ins. Co. v. Jayhawk Medical Acceptance Corp., 198 F.3d 548, 550 (5th Cir. 2000).
B. Duty to Defend
In determining whether an insurer has a duty to defend, the court must examine the pleading upon which the insurer based it refusal to defend the action. See Canutillo Indep. Sch. Dist. v. National Union Fire Ins. Co., 99 F.3d 695, 701 (5th Cir. 1996). Texas courts follow the "eight corners" or "complaint allegation" rule, which requires the trier of fact to examine only the allegations in the underlying complaint and the insurance policy, see id.; see also Gulf Chem. Metallurgical Corp. v. Associated Metals Minerals Corp., 1 F.3d 365, 369 (5th Cir. 1993), without reference to their veracity. See Argonaut Southwestern Ins. Co. v. Maupin, 500 S.W.2d 633, 635 (Tex. 1973). In reviewing the underlying pleadings, the court must focus on the factual allegations that show the origin of the damages rather than on the legal theories alleged. American States Ins. Co. v. Bailey, 133 F.3d 363, 369 (5th Cir. 1998); National Union Fire Ins. Co. v. Merchants Fast Motor Lines, 939 S.W.2d 139, 141 (Tex. 1997) (citing Adamo v. State Farm Lloyds Co., 853 S.W.2d 673, 676 (Tex.App. — Houston [14th Dist] 1993, writ denied) ("It is not the cause of action alleged that determines coverage but the facts giving rise to the alleged actionable conduct.")).
The allegations in the underlying petition are to be interpreted liberally, resolving any doubt in favor of the insured. National Union, 939 S.W.2d at 141. The duty to defend arises when the facts alleged in the petition, if taken as true, potentially state a cause of action within the terms of the policy. Canutillo, 99 F.3d at 701. Thus, it is the insured's burden to show that the claim against it is potentially within the policy's coverage. Id. An insurer has an obligation to defend an insured if the petition alleges at least one cause of action within the policy's coverage. Id. If, however, under the facts alleged, there is a prima facie showing that the claim is not covered under the policy, the insurer has no duty to defend. See National Union, 939 S.W.2d at 141.
C. The Underlying Lawsuit
The Girards petition need not allege specific causes of action to trigger Wausau's duty to defend. See St. Paul Fire Marine Ins. Co. v. Green Tree Fin. Corp., 249 F.3d 389, 393 (5th Cir. 2001) (citing St. Paul Ins. Co. v. Texas Dep't of Transp., 999 S.W.2d 881, 886 (Tex.App.-Austin 1999, pet. denied)). "The duty arises if the factual allegations in third party's pleading potentially state a cause of action covered under the insurance policy." Id. (citing Houston Petroleum Co. v. Highlands Ins. Co., 830 S.W.2d 153, 155 (Tex.App.-Houston [1st Dist.] 1990, writ denied)) (emphasis in original). "While courts may liberally interpret the allegations in a pleading to determine whether the facts could potentially support a cause of action, courts may not read facts into the pleadings, may not look outside the pleadings, and may not imagine factual scenarios which might trigger coverage." Id. at 394 (quoting St. Paul Ins. Co., 999 S.W.2d at 885 (quoting Merchants Fast Motor Lines, Inc., 939 S.W.2d at 142)) (internal quotation marks omitted). The court must, therefore, consider whether the factual allegations in the Girards petition potentially state a case triggering coverage.
The Girards petition contains the following alleged facts:
(1) Registry used, or had others use on its behalf and with its knowledge, telephone facsimile machines, computers or other devices to fax unsolicited advertisements to the Girards plaintiff's. Pl. App. at 87 ¶¶ 2, 3; 88 ¶ 7.
(2) Registry contracted with American Blast Fax, Inc. to send facsimile advertisements in the Dallas area. Id. at 88 ¶ 8.
(3) "Whenever an unsolicited facsimile is sent, the TCPA gives a right of action for damages, injunctive relief, or both. 47 U.S.C. § 227(b)(3). The measure of damages is the actual damages sustained or $500 for each violation, whichever is greater. 47 U.S.C. § 227(c)(5)." The Girards plaintiff's do not seek recovery of their actual damages but rather seek "to recover the $500 liquidated reward." Id. at 89 ¶ 10.
(4) "The sending of unauthorized facsimiles in violation of [the TCPA] . . . violates the [ Girards plaintiffs'] right to privacy. Id. at 89-90 ¶ 11.
(5) The Girards plaintiffs incurred "expense[s] which they did not request, including but not limited to, the loss of business opportunity and the valuable time and productivity that a business or individual loses in receiving, reading, distributing, circulating, calling, faxing or writing to the sender to get them to stop and usually trashing the junk fax." Id. at 90 ¶ 11.
(6) Registry's actions deprived the Girards plaintiffs of the full use of their property. Id.
(7) Registry's actions violated the TCPA and Section 35.47 of the Texas Business and Commerce Code and constituted invasion of privacy and trespass. Id. at 90 ¶ 12.
(8) "Upon information an belief, many of [Registry's] violations of the [TCPA] were not committed negligently, but alternatively, were committed willfully and/or knowingly. Consequently, the award should be increased to three times the amount of damages as authorized by [TCPA] or alternatively, [the Girard plaintiffs] are entitled to punitive damages for the intentional and malicious acts of [Registry]." Id. at 92 ¶ 18.
1. Advertising Injury
Wausau contends that the factual allegations in the underlying lawsuit do not allege an "advertising injury," and therefore it has no duty to defend. Specifically, Wausau contends that no advertising injury exists because the Girards petition does not allege (1) an injury arising from a "publication;" or (2) an injury arising from "material that violates a person's right of privacy." Registry counters that the factual allegations in the Girards petition are sufficient to establish both "publication" and injury resulting from "material that violates a person's right to privacy."
The court notes that there are two cases directly on point: Western Rim Inv. Advisors, Inc. v. Gulf Ins. Co, 269 F. Supp.2d 836 (N.D.Tex. 2003), which is relied on by Registry; and TIG Ins. Co. v. Dallas Basketball, Ltd., __ S.W.3d ___, 2004 WL 243773 (Tex.App.-Dallas 2004, no pet. h.). Both cases involve facts that are virtually identical to those in this case. Although the decisions in Western Rim and Dallas Basketball are not binding on this court, the court finds their reasoning solid and persuasive. The Western Rim and Dallas Basketball decisions aptly discuss the same issues that are present in this case, and this court can do nothing to enhance the excellent analysis and reasoning in those decisions. Accordingly, the court finds Western Rim and Dallas Basketball dispositive on the issues in this case and adopts their analyses and reasoning.
In Western Rim, the plaintiffs sought a declaratory judgment that their CGL insurance carrier owed them a duty to defend in a TCPA lawsuit arising out of the sending of unsolicited facsimile advertisements. 269 F. Supp.2d at 838. The CGL policy defined advertising injury "as, among other things, `[o]ral or written publication of material that violates a person's right of privacy.'" Id. at 846. The plaintiffs argued that the act of faxing the unsolicited advertisements constituted "publication." Id. at 845-46. The defendant disagreed, contending that "publication" necessarily involved a third party. Id. at 845. The Western Rim court held that when used in the context of invasion of privacy torts, the term "publication" does not require communicating material to a third party, as it would when used in the context of defamation. Id. at 846 ("`Publication,' however, does not necessarily carry the same baggage when employed in the context of invasion-of-privacy torts. An invasion-of-privacy claim based on intrusion upon seclusion, for instance, does not require that its factual underpinnings include an allegation of publication to a third-party.") (footnotes omitted). The elements of a claim for intrusion upon seclusion are simply "(1) an intentional intrusion, (2) upon the seclusion, solitude, or private affairs of another; (3) which would be highly offensive to a reasonable person." Id. at 847 n. 13 (citing Farrington v. Sysco Food Servs., Inc., 865 S.W.2d 247, 253 (Tex.App-Houston [1 Dist] 1993, writ denied)). The court further noted that the CGL policy did not define the term "publication" and therefore did not necessarily require communication to a third party. Id. at 847. Consequently, the Western Rim court held that the alleged acts of faxing unsolicited advertisements to the plaintiffs in the underlying lawsuit could constitute a "publication." Id.
The Western Rim defendants next contended that no "advertising injury" existed because there were no factual allegations in the underlying lawsuit that the content of the facsimiles were offensive or invasive; thus, there was no showing that the facsimiles were "material that violates a person's right of privacy." Id. at 847. In the underlying lawsuit, the plaintiffs alleged that the receipt of the unsolicited facsimiles violated their privacy rights. Id. The court in Western Rim held that the unsolicited faxed advertisements, themselves regardless of their content, could constitute "material that violates a person's right of privacy" given that "the purpose of the TCPA . . . is to protect the privacy of individuals from receiving unsolicited faxed advertisements." 269 F. Supp.2d at 847.
Wausau contends that Western Rim is incorrect in both respects because it "overlooks the plain language and clear intent of the Policy's definition of `advertising injury.'" Def. Reply at 6. The court disagrees. Indeed, the same analysis and reasoning used in Western Rim was followed by a Texas appellate court in Dallas Basketball. Moreover, as previously stated, the court has closely analyzed the Western Rim decision and finds the decision to be a thorough discussion and analysis of the applicable law.
In Dallas Basketball, the plaintiffs filed suit against their CGL insurer for refusing to defend them in two TCPA lawsuits arising out of the sending of unsolicited facsimile transmissions. 2004 WL 243773 at *1. The Dallas Basketball court held that the factual allegations in the petitions in the underlying TCPA lawsuits were sufficient to fall within the "advertising injury" coverage section of the CGL policy. The court reasoned that as the term "publication" was not defined in the policy, it "must be given its plain, ordinary, and generally accepted meaning. The word "publish" is generally understood to mean to disclose, circulate, or prepare and issue printed material for public distribution." Id. at * 4 (internal citations omitted). Accordingly, the court held that "we cannot read the term `publication' to mean only the communication of offending material to a third party." Id. (citing Western Rim, 269 F. Supp.2d at 847). The court, therefore, concluded that the "distribution of the advertising to the telephone facsimile machine owners was "publication' of the offending material." Id. at 5.
The Dallas Basketball court also held that the receipt of the unsolicited facsimile advertisements, regardless of their content, constituted "material that violates a person's right of privacy." Id. at 4-5. The court reasoned that the TCPA "presumes all advertising, so long as it is unsolicited, is an offensive intrusion into the recipient's solitude." Id. at * 4 (citing Western Rim, 269 F. Supp.2d at 847).
For the reasons herein stated, the court determines that the factual allegations in the Girards petition satisfy the "publication" requirement and the requirement that the "material violates a person's right to privacy." Thus, the Girards petition falls within the advertising injury coverage section of the CGL policy. Accordingly, the court determines and declares that Wausau has a duty to defend Registry in the Girards lawsuit.
2. Property Damage
Wausau also contends it does not owe Registry a duty to defend because the factual allegations in the Girards petition do not constitute "property damage" as defined in the CGL policy, as the alleged damage was not caused by an accident and thus is not an "occurrence;" and the alleged damage is purely economic damage and thus is not "property damage." Even if "property damage" is alleged in the underlying lawsuit, Wausau contends that coverage is precluded pursuant to the "expected or intended injury" exclusion. Registry counters that Wausau owes it a duty to defend because the factual allegations in the Girards petition establish "property damage" resulting from an "occurrence."
Having found that Wausau owes Registry a duty to defend pursuant to the "advertising injury" section of Coverage B of the CGL policy, the court need not address whether Registry is also entitled to a defense pursuant to the "property damage" section of Coverage A of the policy. See, cf, Canutillo, 99 F.3d at 701 (An insurer has an obligation to defend an insured if the petition alleges at least one cause of action within the policy's coverage.).
IV. Conclusion
For the reasons herein stated, there is no genuine issue of material fact regarding Wausau's duty to defend. Accordingly, the court grants Plaintiff's Partial Motion for Summary Judgment. As the court has granted summary judgment on the duty to defend issue, a favorable ruling on Defendant's motion for summary judgment would be wholly inconsistent with the court's ruling granting summary judgment in favor of Plaintiff. Therefore, the court denies Defendant's Motion for A Complete and Final Summary Judgment. The court determines and declares that Wausau has a duty to defend Registry in the Girards lawsuit, styled James E. Girards, Christopher G. Sharp and Christopher G. Sharp, P.C. v. Inter-Continental Hotels Corp., Registry Dallas Associates, L.P., its general partner Dallas Hotel Associates, Ltd., cause number 01-3456-K, 192nd Judicial District Court of Dallas County, Texas.
It is so ordered.