Auto-Owners Ins. Co. v. Stevens & Ricci, Inc.
| Decision Date | 31 March 2015 |
| Docket Number | CIVIL ACTION No. 12-7228 |
| Court | U.S. District Court — Eastern District of Pennsylvania |
| Parties | AUTO-OWNERS INSURANCE COMPANY, Plaintiff, v. STEVENS & RICCI, INC. and THE HYMED GROUP CORPORATION, Defendants. |
Henry S. Perkin, M.J.
Before the Court are the Motion for Summary Judgment (Dkt. No. 43) filed on July 15, 2014 by Plaintiff, Auto-Owners Insurance Company ("Plaintiff" or "Auto-Owners")), the Cross-Motion for Summary Judgment of Defendant, The Hymed Group Corporation ("Defendant" or "Hymed") (Dkt. No. 47) filed on September 30, 2014, Auto-Owners' Memorandum of Law in Support of Opposition of the Motion for Summary Judgment (Dkt. No. 52) filed on October 30, 2014, and Hymed's Reply to the Response to the Cross-Motion for Summary Judgment (Dkt. No. 53) filed on November 14, 2014. Following oral argument on the Cross-Motions for Summary Judgment held on December 4, 2014, and for the reasons set forth in this Memorandum, we will grant Auto-Owners' Motion for Summary Judgment and deny Hymed's Cross-Motion for Summary Judgment.
In this insurance coverage dispute, Auto-Owners seeks a declaratory judgment pursuant to 28 U.S.C. § 2201 (2006) that it has no obligation to defend or indemnify Stevens & Ricci in connection with the underlying class action litigation. Hymed has counter-claimed for adeclaratory judgment that Auto-Owners is so obligated.
Defendant Stevens & Ricci was solicited by a fax broadcaster which represented that its fax advertising program complied with the Telephone Consumer Protection Act, 47 U.S.C. § 227 ("TCPA"). Stevens & Ricci then caused 18,879 unsolicited advertisements to be faxed by the fax broadcaster on its behalf, to 9,728 fax machines, including Hymed's, on or about February 8, 2006, and February 27, 2006. In doing so, Stevens & Ricci did not willfully or knowingly violate the TCPA.
Hymed commenced litigation against Stevens & Ricci in this Court, Civil Action No. 12-CV-3093, entitled Hymed Group Corporation, a Pennsylvania corporation, individually and as the representative of a class of similarly-situated persons, Plaintiff v. Stevens & Ricci, Inc., Defendant (the "Underlying Litigation"). In the Underlying Litigation, Hymed alleges that, on or about February 8 and February 27, 2006, it received a fax advertisement from Stevens & Ricci. Hymed alleges that the transmission of that fax violates 47 U.S.C. § 227, the Telephone Consumer Protection Act ("TCPA") which, according to its Complaint, prohibits the "use of any telephone facsimile machine, computer or other device to send an unsolicited advertisement to a telephone facsimile machine." Hymed alleges that it did not invite or give permission to Stevens & Ricci to send the fax or faxes and that, upon information and belief, Stevens & Ricci faxed the same and/or similar advertisements to Hymed and "more than 39 other recipients." Hymed further alleges that the so-called "'junk faxes" "interrupt the recipient's privacy"; that they cause the recipient to lose "the use of its fax machine, paper, and ink toner"; that they "waste[]" therecipient's "valuable time that would have been spent on something else"; and that they prevent the recipient's fax machine "from receiving authorized faxes, prevent their use for authorized outgoing faxes, cause undue wear and tear on the recipient's fax machines, and require additional labor to attempt to discern the source and purpose of the unsolicited message." Hymed further alleges that the "junk faxes" "unlawfully interrupted" its "privacy interests in being left alone." The Complaint in the Underlying Action further alleged that the TCPA is a strict liability statute, so that Stevens & Ricci would be liable even if its actions were only negligent.
Based upon these factual allegations, Hymed asked the Court to certify the matter as a class action, and the class was certified. Hymed also seeks actual or statutory damages, whichever is greater, an injunction against future violations costs, and "such further relief as the Court may deem just and proper."
Auto-Owners issued a "Businessowners Policy" to Stevens & Ricci that includes a "Businessowners Liability Coverage Form," policy number 44-838-627-00 (the "Auto-Owners Policy"). The Auto-Owners Policy was in force and effect from December 5, 2005 through December 5, 2006, at the time Stevens & Ricci allegedly sent unsolicited faxes to Hymed and the other class members. The Auto-Owners Policy obligates Auto-Owners to "pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury,' 'property damage,' 'personal injury' or 'advertising injury' to which this insurance applies." For "bodily injury" or "property damage" coverage to apply under the Auto-Owners Policy, the "bodily injury" or "property damage" must be caused by an "occurrence" and must "occur during the policy period."
The Auto-Owners Policy defines "bodily injury" to mean "bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time." The term "property damage" is defined in the Auto-Owners Policy to mean "physical injury to tangible property, including all resulting loss of use of that property" together with the "loss of use of tangible property that is not physically injured." The term "occurrence" is defined in the Auto-Owners Policy to mean "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." The Policy does not define "accident."
The term "personal injury" is defined in the Auto-Owners Policy to mean injury "other than 'bodily injury'" arising out of one or more of the following offenses:
"Personal injury" is only covered under the Auto-Owners Policy if it arises "out of the conduct of your business, excluding advertising, publishing, broadcasting or telecasting done by or for you."
The term "advertising injury" is defined in the Auto-Owners Policy to mean injury arising out of one or more of the following offenses:
To be covered under the Auto-Owners Policy, "advertising injury" must be committed in the "course of advertising your goods, products or services."
The Auto-Owners Policy contains an exclusion for "bodily injury" or "property damage" which is "expected or intended from the standpoint of the insured."
Stevens & Ricci is incorporated in Arizona and its principal place of business is located in Arizona. When an application for insurance is submitted by an agency to the Mesa, Arizona branch of Auto-Owners, the application will be reviewed by an underwriter to determine what types of insurance the applicant wants placed, the type of risk or risks involved and a review of any prior losses. The underwriter who receives the application at the Mesa, Arizona branch will determine if the application meets Auto-Owners' acceptability and eligibility guidelines.
The underwriting file for the Policy reflects that the Policy was quoted by the Drachman-Leed Insurance Agency in Tucson, Arizona. The underwriting file for the Policy also includes an Insurance Binder issued by the Drachman-Leed Insurance Agency in Tucson, Arizona. The Drachman-Leed Insurance Agency then submitted Stevens & Ricci's application for insurance to Auto-Owners' Mesa Arizona branch. The decision to insure Stevens & Ricci was made by Auto-Owners entirely within the Mesa, Arizona branch of Auto-Owners. Stevens & Ricci's application for insurance was reviewed by Ms. Angela Peters, who is an associate underwriter in the commercial lines department of the Mesa, Arizona branch of Auto-Owners. Ms. Peters reviewed the application and made the decision to write the Policy for Stevens & Ricci. A processor at the Mesa, Arizona branch of Auto-Owners entered the policy intoAuto-Owners' company-wide system.
The underwriting file for the Policy reflects that Stevens & Ricci made Policy premium payments from Arizona, using an account at a bank located in Arizona. The Policy reflects the address of the insured, Stevens & Ricci, Inc., at 7831 Wrightstown Rd., # 107, in Tucson, Arizona. The Policy as issued also reflects that the insured premises were located at 7831 Wrightstown Rd., # 107, in Tucson, Arizona. The Policy includes specific endorsements reflecting that Stevens & Ricci is an Arizona insured and the Policy is underwritten as subject to Arizona laws and regulations.
Stevens & Ricci tendered the Underlying Litigation to Auto-Owners for coverage, and Auto-Owners agreed to defend and has defended Stevens & Ricci in the Underlying Action subject to a reservation of rights. Hymed, Stevens & Ricci and Auto-Owners have reached an agreement to compromise and settle the Underlying Action (the "Settlement Agreement"). Among other things, pursuant to the Settlement Agreement, Hymed, Stevens & Ricci and Auto-Owners have agreed to the entry of judgment in favor of the Class, and against Stevens & Ricci, in the amount of $2,000,000.00 (the "Judgment"). In addition, Hymed...
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