Alea London Ltd. v. Am. Home Serv. Inc.

• Decision Date: 13 April 2011
• Docket Number: 10–11645.,Nos. 10–11644,s. 10–11644
• Citation: 638 F.3d 768
• Parties: ALEA LONDON LIMITED, Plaintiff–Appellee,v.AMERICAN HOME SERVICES, INC., a.k.a. A.H.S., Inc., Defendant,A Fast Sign Company, Inc., d/b/a Fastsigns on behalf of That Certain Class Certified by the September 21, 2006 Order of the Fulton County, GA Superior Court in Case No. 2003–CV–77276, Defendant–Appellant.Alea London Limited, Plaintiff–Appellee,v.American Home Services, Inc., a.k.a. A.H.S., Inc., Defendant–Appellant,A Fast Sign Company, Inc., d.b.a. Fastsigns on behalf of That Certain Class Certified by the September 21, 2006 Order of the Fulton County, GA Superior Court in Case No. 2003–CV–77276 doing business as Fastsigns, Defendant.
• Court: U.S. Court of Appeals — Eleventh Circuit

638 F.3d 768

22 Fla. L. Weekly Fed. C 2007

ALEA LONDON LIMITED, Plaintiff–Appellee,

v.AMERICAN HOME SERVICES, INC., a.k.a. A.H.S., Inc., Defendant,A Fast Sign Company, Inc., d/b/a Fastsigns on behalf of That Certain Class Certified by the September 21, 2006 Order of the Fulton County, GA Superior Court in Case No. 2003–CV–77276, Defendant–Appellant.Alea London Limited, Plaintiff–Appellee,

v.American Home Services, Inc., a.k.a. A.H.S., Inc., Defendant–Appellant,A Fast Sign Company, Inc., d.b.a. Fastsigns on behalf of That Certain Class Certified by the September 21, 2006 Order of the Fulton County, GA Superior Court in Case No. 2003–CV–77276 doing business as Fastsigns, Defendant.

Nos. 10–11644

10–11645.

United States Court of Appeals, Eleventh Circuit.

April 13, 2011.

Michael Paul Bruyere, Paul L. Fields, Jr., Fields, Howell, Athans & McLaughlin, LLP, Atlanta, GA, for Alea London Ltd.Roy E. Barnes, The Barnes Law Group, Marietta, GA, John Craig Cotton, Cotton Law Firm, PC, Cordele, GA, Marc Brian Hershovitz, Atlanta, GA, Michael Jablonski, Office of Michael Jablonski, Atlanta, GA, for A Fast Sign Co., Inc. and Am. Home Services, Inc.Appeals from the United States District Court for the Northern District of Georgia.Before HULL and BLACK, Circuit Judges, and HOWARD,^* District Judge.

HULL, Circuit Judge:

Plaintiff–Appellee Alea London Limited (“Alea” or “the insurer”) filed this declaratory judgment action, alleging it had no duty to defend or indemnify its insured, defendant American Home Services, Inc. (“AHS” or “the insured”), in state court litigation brought by A Fast Sign Company, Inc. (“FastSigns”). In the state lawsuit, FastSigns sued the insured, AHS, for sending unsolicited faxes in violation of the Telephone Consumer Protection Act of 1991 (“TCPA”).

In its summary judgment rulings, the district court concluded, inter alia, that (1) the insurer Alea had a duty to defend and indemnify AHS in the state lawsuit; (2) the $500 per-claimant deductible in the Alea policy applied to coverage for AHS's “advertising injury” liability; (3) the punitive damages exclusion in the Alea policy applied to any treble damages awarded against AHS under the TCPA; and (4) the Alea policy covered costs but not attorneys' fees awarded against AHS in the state lawsuit. Both the insured AHS and FastSigns appeal the lack-of-coverage rulings as to punitive damages and attorneys' fees. AHS appeals the ruling as to the $500 per-claimant deductible.

After review of the record and the briefs, and with the benefit of oral argument, we affirm in part and reverse in part.

I. FACTUAL AND PROCEDURAL BACKGROUND

From July 17, 2002, to July 17, 2003, AHS was the named insured on a commercial general liability insurance policy (the “Policy”) issued by Alea. The Policy covers sums AHS must pay because of “advertising injury,” defined as follows:

Coverage B. Personal and Advertising Injury Liability

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of personal injury or advertising injury to which this insurance applies. We will have the right and duty to defend any suit seeking those damages....

....

Section V—Definitions

1. Advertising injury means injury arising out of one or more of the following offenses:

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.¹

(Emphasis added).

A. State Court Litigation

In 2002, the insured AHS began selling and installing windows, siding, and gutters. AHS hired a third-party marketing firm to send advertisements via fax. This third-party firm sent approximately 300,000 fax advertisements on AHS's behalf, including one to FastSigns in March 2003.

On October 31, 2003, FastSigns filed suit against the insured AHS in Georgia state court (the “state lawsuit”), alleging that AHS's fax advertisements violated the TCPA's prohibition on “an unsolicited advertisement to a telephone facsimile machine.” 47 U.S.C. § 227(b)(1)(C).² The TCPA creates a private right of action under which a party can bring suit to recover its “actual monetary loss” or “to receive $500 in damages” per violation, whichever is greater. Id. § 227(b)(3)(B). If the violation was willful or knowing, the TCPA allows the court, in its discretion, to “increase the amount of the award to an amount equal to not more than 3 times the amount available under subparagraph (B)” above. Id. § 227(b)(3) (emphasis added). The TCPA is unusual because it creates a private right of action that may be brought in state court only. Nicholson v. Hooters of Augusta, Inc., 136 F.3d 1287, 1287–89 (11th Cir.), modified on reh'g, 140 F.3d 898 (11th Cir.1998).

In the state lawsuit against the insured AHS, FastSigns asked for class certification of its TCPA claims, $500 in statutory damages for each violation of the TCPA, and the TCPA's statutory trebling of each award for AHS's “willful or knowing” violations. FastSigns also sought to recover its expenses of litigation, including attorneys' fees, under Georgia law, O.C.G.A § 13–6–11. The state trial court certified FastSigns's claims for class adjudication, a decision later upheld on appeal. Am. Home Servs., Inc. v. A Fast Sign Co., 287 Ga.App. 161, 651 S.E.2d 119 (2007).

At the outset of the state lawsuit, AHS requested that its insurer Alea provide a defense and indemnify AHS for any damages. Alea hired counsel to defend AHS under a Bilateral Non–Waiver and Reservation of Rights Agreement. Alea defended AHS for six years in the state lawsuit.³

B. Federal Declaratory Judgment Action

In 2009, the insurer Alea filed this declaratory judgment action against AHS and FastSigns, seeking to resolve several substantive issues regarding what AHS's Policy with Alea did or did not cover. Specifically, Alea sought a declaratory judgment that: (1) it did not have to indemnify AHS for damages because the Policy did not cover the claims in the state lawsuit; (2) even if the Policy covered those claims, Alea did not have to pay any damages award up to $500 per individual because that amount fell within the per-claimant deductible schedule in the Policy; and (3) any award in the state lawsuit increasing the $500 damages award based on a finding of willful or knowing violations of the TCPA by AHS was not covered due to the Policy's exclusion of punitive or exemplary damages.

FastSigns and Alea filed cross-motions for summary judgment.⁴ In rulings not challenged in this appeal, the district court determined: (1) that the Policy obligated Alea to defend and indemnify AHS in the state lawsuit; and (2) that AHS's facsimile transmissions in violation of the TCPA amounted to violations of “a person's right of privacy” for purposes of Advertising Injury Liability under the Policy. ⁵ In rulings now challenged in this appeal, the district court concluded that: (1) the $500 per-claimant deductible applies to AHS's coverage for Advertising Injury Liability; (2) treble damages under the TCPA are punitive in nature and consequently are excluded by the Policy; and (3) the Policy does not cover any attorneys' fees awarded against AHS in the state lawsuit.⁶ The parties do not dispute that the Policy was entered into in Georgia and that Georgia law governs construction of the Policy.⁷ Thus we first examine relevant Georgia law and then the specific parts of the Policy in issue.

II. GEORGIA LAW

Georgia law directs courts interpreting insurance policies to ascertain the intention of the parties by examining the contract as a whole. Ryan v. State Farm Mut. Auto. Ins. Co., 261 Ga. 869, 872, 413 S.E.2d 705 (1992). A court must first consider “the ordinary and legal meaning of the words employed in the insurance contract.” Id. An insurance policy “should be read as a layman would read it.” York Ins. Co. v. Williams Seafood of Albany, Inc., 273 Ga. 710, 712, 544 S.E.2d 156 (2001). “[P]arties to the contract of insurance are bound by its plain and unambiguous terms.” Peachtree Cas. Ins. Co. v. Kim, 236 Ga.App. 689, 690, 512 S.E.2d 46 (1999). “If the terms of the contract are plain and unambiguous, the contract must be enforced as written....” Ryan, 261 Ga. at 872, 413 S.E.2d 705.

An ambiguity exists, however, when the plain words of a contract are fairly susceptible of more than one meaning. Collier v. State Farm Mut. Auto. Ins. Co., 249 Ga.App. 865, 867, 549 S.E.2d 810 (2001). Georgia law teaches that an ambiguity “is duplicity, indistinctness, an uncertainty of meaning or expression.” Id. When a term in a contract is ambiguous, Georgia courts “apply the rules of contract construction to resolve the ambiguity.” Certain Underwriters at Lloyd's of London v. Rucker Constr., Inc., 285 Ga.App. 844, 848, 648 S.E.2d 170 (2007).

Pursuant to Georgia's rules of contract construction, “[t]he construction which will uphold a contract in whole and in every part is to be preferred, and the whole contract should be looked to in arriving at the construction of any part.” O.C.G.A. § 13–2–2(4). Further, ambiguities are construed against the drafter of the contract (i.e., the insurer), and in favor of the insured. Kim, 236 Ga.App. at 690, 512 S.E.2d 46; O.C.G.A. § 13–2–2(5). Accordingly, in this case, any ambiguity will be construed against Alea, the drafter of the Policy, and in favor of coverage.

If the ambiguity remains after the court applies the rules of construction, “the issue of what the ambiguous language means and what the parties intended must be resolved by [the finder of fact].” Rucker Constr., 285 Ga.App. at 848, 648 S.E.2d 170 (quotation marks omitted).

III. DEDUCTIBLE

The district court ruled a $500 per-claimant deductible applies to any damages from Advertising Injury...