American St Ins. v. Capital Assoc. Jackson Co

• Decision Date: 23 December 2004
• Docket Number: No. 04-1659.,04-1659.
• Citation: 392 F.3d 939
• Parties: AMERICAN STATES INSURANCE COMPANY, Plaintiff-Appellant, v. CAPITAL ASSOCIATES OF JACKSON COUNTY, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 939

392 F.3d 939

AMERICAN STATES INSURANCE COMPANY, Plaintiff-Appellant, v. CAPITAL ASSOCIATES OF JACKSON COUNTY, INC., et al., Defendants-Appellees.

No. 04-1659.

United States Court of Appeals, Seventh Circuit.

Argued November 8, 2004.

Decided December 23, 2004.

Perry M. Shorris (argued), Bollinger, Ruberry & Garvey, Chicago, IL, for Plaintiff-Appellant.

Robert J. Selsor (argued), Christopher C. Swenson, Polsinelli Shalton Welte Suelthaus, John W. Hoffman (argued), Korein Tillery, St. Louis, MO, for Defendants-Appellees.

Before BAUER, EASTERBROOK, and KANNE, Circuit Judges.

EASTERBROOK, Circuit Judge.

According to a complaint filed in state court, Capital Associates of Jackson County sent an unsolicited advertisement to the fax machine of JC Hauling Company, thus violating 47 U.S.C. § 227(b)(1)(C). JC Hauling launched a class action on behalf of all recipients of Capital Associates' junk faxes. Capital Associates tendered the defense to American States Insurance Co., which had issued a policy covering "advertising injury," among other harms. American States, which has undertaken the defense under a reservation of rights, filed this federal suit seeking a declaratory judgment that the policy does not call for either defense or indemnity.

"Advertising injury" is defined to include "[o]ral or written publication of material that violates a person's right of privacy." Another portion of the policy excludes injury that is "expected or intended from the standpoint of the insured." American States contended that sending unsolicited advertising by fax does not cause "advertising injury" and that, if it does, the recipient's loss is "expected or intended from the standpoint of the insured." But the district judge held that an unsolicited fax invades the recipient's "privacy" and that American States therefore must defend its insured. The judge did not discuss the policy's exclusion of expected or intended consequences and left several items dangling. Some of the omissions are understandable. For example, the judge thought it premature to decide whether American States must indemnify Capital Associates (and, if so, in what amount), given the unresolved status of the underlying suit. Other omissions are harder to appreciate. For example, Capital Associates filed a counterclaim seeking punitive damages on the ground that American States has vexatiously and wilfully refused to defend or indemnify its insured. That absurd claim should have been dispatched promptly. American States has not refused to defend; it has provided a defense under a reservation of rights. It has not refused to indemnify; the time to pay has not arrived. It has not acted vexatiously; this suit represents an effort to clear up an interpretative disagreement. Presenting a dispute to a court for resolution is hardly a reason to award punitive damages! But instead of resolving all claims that were ready for decision, the district court dismissed them "without prejudice" — indeed, it dismissed the whole suit "without prejudice," even though its resolution of the duty-to-defend issue is conclusive.

By dismissing everything without prejudice, without distinguishing between claims that had been fully addressed and those whose resolution had been postponed, the district judge created a jurisdictional problem for the parties and this court. Dismissals without prejudice are canonically non-final and hence not appealable under 28 U.S.C. § 1291. See, e.g., Brown v. Argosy Gaming Co., 360 F.3d 703 (7th Cir.2004). The prospect facing American States, however, is that, if Capital Associates should win the state suit, there would be no further dispute about indemnity and no reason to renew the federal litigation. That would leave American States without a means to obtain appellate review of the duty-to-defend question, for by then it would be too late to appeal the federal judgment. A duty-to defend issue will survive the state case whether or not Capital Associates prevails, for if American States is right it is entitled to reimbursement from its client for the expenses of putting on the defense. But if American States may appeal now in light of the risk that a dispute about who pays for the defense will evade appellate resolution later there is a substantial chance that the dispute will return to this court if Capital Associates loses the state case and the parties dispute the amount of required indemnification, or Capital Associates reasserts its demand for punitive damages.

It would have been better had the district court stayed proceedings until the underlying suit reached a conclusion. The loser or losers in the federal litigation then could have appealed from a truly final disposition. That would have avoided any risk that Capital Associates could be deprived of effective appellate review, while avoiding all risk that this court would have to grapple with the same dispute more than once. But unless we treat the district court's actual disposition as "final," we lack authority even to remand for entry of such a stay. A corollary to the norm that dismissals without prejudice are non-final is recognition that when the district judge misdescribes as "without prejudice" a disposition that is conclusive in practical effect, the court of appeals possesses jurisdiction. See, e.g., Dixon v. Page, 291 F.3d 485 (7th Cir.2002). Our situation calls the corollary into play. And because the parties have fully briefed the duty-to-defend question, and it turns out to be dispositive of all issues, we resolve it now rather than simply direct the district to put the case on ice. See Crum & Forster Corp. v. Resolution Trust Corp., 156 Ill.2d 384, 398, 189 Ill.Dec. 756, 620 N.E.2d 1073, 1081 (1993) (where there is no duty to defend, there is also no duty to indemnify).

"Privacy" is a word with many connotations. The two principal meanings are secrecy and seclusion, each of which has multiple shadings. See Restatement (Second) of Torts § 652 (1977); Richard S. Murphy, Property Rights as Personal Information, 84 Geo. L.J. 2381 (1996). A person who wants to conceal a criminal conviction, bankruptcy, or love affair from friends or business relations asserts a claim to privacy in the sense of secrecy. A person who wants to stop solicitors from ringing his doorbell and peddling vacuum cleaners at 9 p.m. asserts a claim to privacy in the sense of seclusion. Some other uses of the word "privacy" combine these senses: for example, a claim of a right to engage in consensual sexual relations with a person of the same sex, or to abort an unwanted pregnancy, has both informational (secrecy) and locational (seclusion) components, with an overlay of substance (the objection to governmental regulation).

American States contends that its advertising-injury coverage deals with secrecy rather than seclusion. The language reads like coverage of the tort of "invasion of privacy," where an oral or written statement reveals an embarrassing fact, see Briscoe v. Reader's Digest Association, Inc., 4 Cal.3d 529, 93 Cal.Rptr. 866, 483 P.2d 34 (1971), overruled on first amendment grounds by Gates v. Discovery Communications, Inc., 101 P.3d 552, 21 Cal.Rptr.3d 663 (S.Ct.Cal. Dec. 6, 2004), or, as in Time, Inc. v. Hill, 385 U.S. 374, 87 S.Ct. 534, 17 L.Ed.2d 456 (1967), brings public attention to a private figure, or casts someone in a false light through publication of true but misleading facts. See Lovgren v. Citizens First National Bank, 126 Ill.2d 411, 417-18, 128 Ill.Dec. 542, 534 N.E.2d 987, 989 (1989). See also Curtis-Universal, Inc. v. Sheboygan Emergency Medical Services, Inc., 43 F.3d 1119, 1124 (7th Cir.1994); Haynes v. Alfred A. Knopf, Inc., 8 F.3d 1222 (7th Cir.1993) (Illinois law). Perhaps the language reasonably could be understood to cover improper disclosures of Social Security numbers, credit records, email addresses, and other details that could facilitate identity theft or spamming. See Reno v. Condon, 528 U.S. 141, 120 S.Ct. 666, 145 L.Ed.2d 587 (2000) (rejecting constitutional challenge to a federal statute limiting access to information in drivers' records). See also Leopold v. Levin, 45 Ill.2d 434, 259 N.E.2d 250 (1970) (recognizing identity misappropriation as a tort). Cf. Kyllo v. United States, 533 U.S. 27, 121 S.Ct. 2038, 150 L.Ed.2d 94 (2001) (discussing privacy interest in thermal emissions from homes); Jeffrey Rosen, The Unwanted Gaze (2000).

JC Hauling does not allege that Capital Associates published any information about it, and the district judge did not directly address whether the policy is limited to publication of secret information. Indeed the judge did not remark the difference between secrecy and seclusion. Instead the judge stated that § 227(b)(1)(C) has been understood to protect privacy — see International Science & Technology Institute, Inc. v. Inacom Communications, Inc., 106 F.3d...