First Mercury Ins. Co. v. Triple Location LLC

Citation536 F.Supp.3d 326
Decision Date29 April 2021
Docket Number19 C 2395
Parties FIRST MERCURY INSURANCE COMPANY, Plaintiff, v. TRIPLE LOCATION LLC d/b/a Club O, Defendant.
CourtUnited States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)

James Joseph Hickey, Bevin A. Carroll, Julie Klein, Kennedys CMK LLP, Chicago, IL, for Plaintiff.

Marty Jay Schwartz, Kevin A. Ameriks, Michelle Lynn Wesley, Thomas John Kupchinsky Schick, Schain, Banks, Kenny & Schwartz, Ltd., Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

Gary Feinerman, United States District Judge

In this coverage suit brought under the diversity jurisdiction, First Mercury Insurance Company seeks a declaration that it does not owe a duty to defend or indemnify its insured, Triple Location LLC d/b/a Club O, in connection with claims asserted in Sears v. Triple Location, LLC , No. 18 C 4808, 2018 WL 8786927 (N.D. Ill. 2018). Doc. 9. First Mercury moves under Rule 12(c) for judgment on the pleadings, Doc. 48, and Triple Location moves under Rule 56 for summary judgment, Doc. 50. Triple Location's summary judgment motion is granted in part as to the duty to defend and denied without prejudice in part as premature as to the duty to indemnify, and First Mercury's motion for judgment on the pleadings is denied.

Background

Because summary judgment will be granted to Triple Location, the court recites the facts as favorably to First Mercury as the record and Local Rule 56.1 permit. See Johnson v. Advocate Health & Hosps. Corp. , 892 F.3d 887, 893 (7th Cir. 2018). At this juncture, the court must assume the truth of those facts, but does not vouch for them. See Gates v. Bd. of Educ. of Chi. , 916 F.3d 631, 633 (7th Cir. 2019).

A. The Underlying Suit

The plaintiffs in the underlying suit—Emily Sears, Lina Posada, and Lucy Pinder—are professional models who allege that Triple Location published their images without their consent "in order to promote its strip club, Club O." Doc. 50-1 at ¶ 1. The unauthorized publications are alleged to have occurred on three dates in 2015, 2016, and 2018 through postings on Club O's Facebook and Instagram pages. Id. at ¶¶ 53, 55, 64, 66, 75, 77. The plaintiffs allege that Club O's postings "create[d] the false impression that [they] ha[d] consented or agreed to promote, advertise, market, and/or endorse Club O," which caused them to "sustain[ ] injury to their images, brands, and marketability by [their] shear affiliation with ... a strip club." Id. at ¶¶ 12, 53, 64, 75. The plaintiffs further allege that Triple Location "totally and completely destroyed" any "copyright" that existed in their photos by "morphing, editing, or otherwise altering the original photographs." Id. at ¶ 44.

The underlying complaint claims that First Mercury "was negligent in its failure to promulgate policies and procedures concerning the misappropriation of the [i]mage[s] of [the] models that were used on the Club O Website and social media accounts." Id. at ¶¶ 148, 218, 288. The complaint claims in the alternative that if such policies were in place, First Mercury "nevertheless negligently failed to enforce those policies, communicate them to employees, and/or [screen, train, and] supervise its employees in order to ensure that these policies, along with [f]ederal and Illinois law, were not violated." Id. at ¶¶ 150, 152, 220, 222, 290, 292. And the complaint also claims that the plaintiffs’ images were published without their authorization as a proximate result of Triple Location's "negligence." Id. at ¶¶ 149, 153, 219, 223, 289, 293.

Based on those allegations, the plaintiffs bring claims under: (1) the Lanham Act, 15 U.S.C. § 1125(a), for false advertising and false endorsement; (2) the Illinois Right of Publicity Act ("IRPA"), 765 ILCS 1075/10 et seq. , for violation of their right to publicity and for being placed in a false light; and (3) state law negligence. Id. at ¶¶ 84-293. The plaintiffs seek damages and injunctive relief. Id. at ¶ 15. Triple Location tendered its defense of the suit to First Mercury, its liability insurer, which declined to accept the tender on the ground that the plaintiffs’ claims are excluded from coverage under Triple Location's policies. Doc. 50 at p. 3, ¶¶ 6-7. First Mercury then filed this suit seeking a declaration that it has no duty to defend or indemnify Triple Location. Id. at p. 3, ¶ 8; Doc. 9.

B. The First Mercury Policies

First Mercury issued Triple Location three insurance policies during the relevant time period. Doc. 50 at p. 3, ¶ 9; Docs. 50-3 (2015 Policy), 50-4 (2016 Policy), 50-5 (2017 Policy). Under each policy, First Mercury has a duty to defend Triple Location against lawsuits seeking damages for "personal and advertising injury." Doc. 50-3 at 15; Doc. 50-4 at 15; Doc. 50-5 at 15. The pertinent coverage provision in all three policies states:

We will pay those sums that the insured becomes legally obligated to pay as damages because of "personal and advertising injury" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "personal and advertising injury" to which this insurance does not apply. ...

Ibid.

The policies define "personal and advertising injury" to mean an injury "arising out of one or more of [several enumerated] offenses." Doc. 50-3 at 23; Doc. 50-4 at 23; Doc. 50-5 at 23. Three of the enumerated offenses are arguably pertinent here: (1) "[o]ral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products, or services"; (2) "[o]ral or written publication, in any manner, of material that violates a person's right of privacy"; and (3) "[i]nfringing upon another's copyright, trade dress or slogan in [the insured's] ‘advertisement.’ " Ibid. The term "advertisement," in turn, "means a notice that is broadcast or published to the general public or specific market segments about [the insured's] goods, products or services for the purpose of attracting customers or supporters." Doc. 50-3 at 21; Doc. 50-4 at 21; Doc. 50-5 at 21.

The policies have several provisions intended to narrow the coverage. Doc. 50 at p. 4, ¶ 13. First Mercury highlights four such provisions. Doc. 53 at 2. Three are labeled as "exclusions," in that they carve out categories of "personal and advertising injury" to which the policies "do[ ] not apply." Doc. 50-3 at 15-16; Doc. 50-4 at 15-16; Doc. 50-5 at 15-16. Exclusion (a) excludes "personal and advertising injury" that is "caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict ‘personal and advertising injury.’ " Doc. 50-3 at 15; Doc. 50-4 at 15; Doc. 50-5 at 15. Exclusion (b) excludes "personal and advertising injury" that "arise[s] out of oral or written publication of material, if done by or at the direction of the insured with knowledge of its falsity." Ibid. And Exclusion (p) excludes "personal and advertising injury" that "aris[es] directly or indirectly out of any action or omission that violates or is alleged to violate" the Telephone Consumer Protection Act ("TCPA"), the CAN-SPAM Act of 2003, or any other "statute, ordinance[,] or regulation ... that prohibits or limits the sending, transmitting, communicating or distribution of material or information." Doc. 50-3 at 16; Doc. 50-4 at 16; Doc. 50-5 at 16.

The fourth provision highlighted by First Mercury is an endorsement titled "Field of Entertainment—Limitation of Coverage." Doc. 50-3 at 54; Doc. 50-4 at 54; Doc. 50-5 at 54. It states in pertinent part:

This insurance does not apply to ... "personal and advertising injury" ... actually or allegedly arising out of, related to, caused by or attributed to by any of the following, but only as each applies to the "Business of The Insured in The Field of Entertainment ."
a. Invasion of the right to privacy;
b. Infringement of copyright, whether under statutory or common law; libel, slander or other forms of defamation; ...

Ibid. "Business of The Insured in The Field of Entertainment" is defined to include "[t]he ownership, licensing, operation maintenance or use of merchandising programs, advertising or publicity material or paraphernalia, characters or ideas, whether or not on premises of the insured or in possession of the insured at the time of the alleged offense or ‘occurrence[.] " Ibid.

Discussion

Triple Location seeks summary judgment on First Mercury's request for a declaration that it does not owe a duty to defend or indemnify Triple Location for the claims asserted against it in the underlying suit. Doc. 50 at p. 2, ¶¶ 4-5; see Doc. 9 at ¶¶ 33-44. The parties agree that Illinois law applies. Doc. 50 at pp. 5-6; Doc. 53 at 5; see McFarland v. Gen. Am. Life Ins. Co. , 149 F.3d 583, 586 (7th Cir. 1998) ("Because this is a diversity case, we look to state law to provide the substantive law regarding interpretation of the insurance policy."). The Seventh Circuit has summarized Illinois law governing the interpretation of insurance policies as follows:

In Illinois, insurance policies are contracts; the general rules governing the interpretation and construction of contracts govern the interpretation and construction of insurance policies. Illinois courts aim to ascertain and give effect to the intention of the parties, as expressed in the policy language, so long as doing so does not contravene public policy. In doing so, they read the policy as a whole and consider the type of insurance purchased, the risks involved, and the overall purpose of the contract. If the policy language is unambiguous, courts apply it as written. Policy terms that limit an insurer's liability are liberally construed in favor of coverage, but only when they are ambiguous, or susceptible to more than one reasonable interpretation.

Clarendon Nat'l Ins. Co. v. Medina , 645 F.3d 928, 933 (7th Cir. ...

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