Fight Against Coercive Tactics v. Coregis Ins. Co.
| Decision Date | 31 May 1996 |
| Docket Number | Civil Action No. 96-K-166. |
| Citation | 926 F. Supp. 1426 |
| Parties | FIGHT AGAINST COERCIVE TACTICS NETWORK, INC., et al., Plaintiffs, v. COREGIS INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — District of Colorado |
Jeff Reiman, Reiman & Associates, P.C., Thomas Kelley, Natalie Hanlon-Leh, Faegre & Benson, Denver, CO, for Plaintiffs.
Geri O'Brien-Williams, Cairns, Dworkin & Chambers, P.C., Denver, CO, Jeffrey A. Goldwater, George J. Manos, Bollinger Ruberry & Garvey, Chicago, IL, for Defendant.
On January 26, 1996, Fight Against Coercive Tactics Network, Inc. ("F.A.C.T.Net") and its directors, Lawrence Wollersheim, Robert Penny, and Arnaldo Lerma, filed a complaint against Coregis Insurance Company, asserting claims for (1) breach of contract, (2) bad faith or unreasonable breach of insurance contract, and (3) declaratory judgment. On February 26, 1996, Coregis filed an answer to the complaint and a counterclaim for declaratory judgment.
Jurisdiction exists under 28 U.S.C. § 1332 in that Plaintiff F.A.C.T.Net is a Colorado non-profit organization with its principal place of business in Colorado, Wollersheim and Penny are residents of Colorado, Lerma is a resident of Virginia, and Defendant Coregis Insurance Company is an Indiana Corporation with its principal place of business in Illinois and the amount in controversy exceeds $50,000.00, exclusive of interests and costs.
On March 22, 1996, I ordered the claims for declaratory judgment severed and discovery and summary judgment matters bifurcated. I set an accelerated briefing schedule for the cross-motions for summary judgment and stayed discovery pending ruling on the cross-motions.
I stated oral argument would be held on May 10, 1996 but only if counsel were notified of the hearing, otherwise I would rule on the briefs. After examining the briefs, I conclude oral argument would not materially assist in the determination of the cross-motions for summary judgment.
I deny the motion of Coregis for summary judgment and grant that of Plaintiffs insofar as it seeks declaratory judgment that Coregis has a duty to pay for the Insureds' defense costs as they are incurred. I further award to Plaintiffs the costs incurred in the briefing on the cross-motions for summary judgment.
On August 11, 1995, a copyright infringement and misappropriation of trade secrets suit was filed in the United States District court for the Eastern District of Virginia, Alexandria Division, Religious Technology Center v. Arnaldo Pagliarina Lerma and Digital Gateway Systems, 908 F.Supp. 1353 (the "Virginia Action"). The most recent complaint filed in that action is the second amended complaint for injunctive relief and damages for copyright infringement and trade secrets misappropriation.
On August 21, 1995, a copyright infringement and misappropriation of trade secrets suit was filed in this court, Religious Technology Center and Bridge Publications, Inc. v. F.A.C.T.NET, Wollershein, and Penny, 901 F.Supp. 1528 (the "Colorado Action"). Similarly, in that action, the second amended complaint is for injunctive relief and damages for copyright infringement and trade secrets misappropriation.
Coregis issued to F.A.C.T.Net, as the named insured, a Non-Profit Organization Liability Insurance Policy, having a policy period from May 13, 1995 to May 13, 1996, policy number XXX-XXXXXX-X, with limits of liability of $1 million for each loss and in the aggregate for each policy year and a $2,500 retention for each loss ("Policy"). (Compl., Ex. A.) Each of the Plaintiffs claims to be an "Insured" under the terms of the Policy and to have given Coregis timely notice of the suits.
The Policy's insuring agreement, as modified by Endorsement 1V, provides:
(Policy at 1 of 6 and Endorsement IV.)
The Policy contains the following relevant definitions:
(Policy at 1 of 6.)
Within the Conditions section, the Policy contains the following pertinent provisions regarding the defense and settlement of actions against Insureds:
(Policy at 3 of 6.)
Further, under the Conditions section, the Policy contains the following "no action" clause:
(Id. at 4 of 6.)
The Policy contains no express language requiring Coregis to defend Insureds in any lawsuit filed against them.
Coregis seeks summary judgment on the following grounds: (1) Coregis has no duty to defend Plaintiffs in the Virginia and Colorado actions; (2) Coregis has no duty of interim funding of Plaintiffs' Defense in the Virginia and Colorado actions; (3) the instant case should be dismissed for lack of case or controversy.
Plaintiffs seek summary judgment, asserting: (1) Coregis has a duty to pay for the Insureds' defense costs as they are incurred; (2) none of the contract clauses clearly negates the obligation to pay defense costs as incurred, but at most creates an ambiguity; (3) Plaintiffs are entitled to the cost of the legal fees they expended in bringing the present action to recover benefits under the policy.
"Summary judgment is appropriate if `there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law.'" Hagelin for President Committee v. Graves, 25 F.3d 956, 959 (10th Cir.1994) (quoting Rule 56(c), cert. denied, ___ U.S. ___, 115 S.Ct. 934, 130 L.Ed.2d 880 (1995)).
Because jurisdiction exists based upon the diversity of citizenship of the parties, the choice of law rules of the forum state apply. Broderick Inv. Co. v. Hartford Acc. & Indem. Co., 954 F.2d 601, 606 (10th Cir.), cert. denied, 506 U.S. 865, 113 S.Ct. 189, 121 L.Ed.2d 133 (1992). In contract dispute cases, Colorado has adopted the "most significant relationship" approach of the Restatement (Second) of Conflict of Laws. Webb v. Dessert Seed Co., Inc., 718 P.2d 1057, 1066 (Colo.1986). It is undisputed that, applying this test, Colorado courts would apply Colorado's substantive law to this action.
An insurance policy is a written contract and, as such its construction is to be determined as a matter of law. United States Fidelity & Guar. Co. v. Budget Rent-A-Car Sys., Inc., 842 P.2d 208, 211 (Colo. 1992). Insurance policies must be enforced as written, unless there is an ambiguity in the policy language. Union Ins. Co. v. Houtz, 883 P.2d 1057, 1061 (Colo.1994).
Policy language is ambiguous where it is reasonably susceptible to more than one meaning. Id.; Ballow v. PHICO Ins. Co., 875 P.2d 1354, 1359 (Colo.1993); Hecla Mining Co. v. New Hampshire Ins. Co., 811 P.2d 1083,...
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