Hartford Cas. Ins. Co. v. Gelshenen

• Citation: 387 F.Supp.3d 634
• Decision Date: 06 May 2019
• Docket Number: DOCKET NO. 3:17-cv-00182-MOC-DSC
• Court: U.S. District Court — Western District of North Carolina
• Parties: HARTFORD CASUALTY INSURANCE COMPANY, Plaintiff, v. John J. GELSHENEN Jr., Davis & Gelshenen, LLP, Defendants.

387 F.Supp.3d 634

HARTFORD CASUALTY INSURANCE COMPANY, Plaintiff,

v.John J. GELSHENEN Jr., Davis & Gelshenen, LLP, Defendants.

DOCKET NO. 3:17-cv-00182-MOC-DSC

United States District Court, W.D. North Carolina, Charlotte Division.

Signed May 6, 2019

Christopher C. Frost, Pro Hac Vice, Michael D. Mulvaney, Pro Hac Vice, John Alan Little, Jr., Pro Hac Vice, Joshua B. Baker, Maynard Cooper & Gale, PC, Birmingham, AL, for Plaintiff.

Richard Leonard Pinto, Pinto, Coates, Kyre & Bowers, PLLC, Greensboro, NC, for Defendants.

ORDER

Max O. Cogburn Jr., United States District Judge

THIS MATTER is before the Court on Hartford's Motion for Judgment on the Pleadings. Having considered Hartford's motion and reviewed the pleadings, the Court will grant the motion and dismiss this action.

I. Background

A. The Underlying Action

In 2016, Defendants Davis & Gelshenen, LLP and John J. Gelshenen, Jr. (collectively, "Gelshenen"), a personal injury lawyer and firm, were named as defendants in a single-count putative class-action lawsuit, Hatch v. Demayo, No. 1:16-CV-925, 2017 WL 4357447, at *1 (M.D.N.C. Sept. 29, 2017) (the "Underlying Action"). The plaintiffs, drivers who had been involved in automobile accidents in North Carolina, alleged that the defendants, including Gelshenen, violated the federal Driver's Privacy Protection Act ("DPPA"), 18 U.S.C. §§ 2721 – 2725 (2012), by obtaining plaintiffs' names and addresses from copies of official accident reports maintained by the State of North Carolina and using that information to mail legal advertisements to plaintiffs.¹

B. The Present Action

Gelshenen tendered defense of the Underlying Action to Plaintiff Hartford Casualty Insurance Company ("Hartford") under a series of business liability insurance policies (the "Policies")² that Gelshenen purchased from Hartford. The Policies generally provide that Hartford would defend and indemnify Gelshenen against damages for personal and advertising injuries that Gelshenen became legally obligated to pay. Hartford denies that it owes Gelshenen any duty to defend or indemnify the Underlying Action because the DPPA claim asserted in that action falls under two different exclusionary provisions in the Policies.

The first provision excludes coverage for personal and advertising injury arising out of the violation of a right of privacy created by a federal statute, such as the DPPA (the "Privacy Exclusion"). The second provision excludes coverage for personal and advertising injury arising from the alleged violation of a statute that limits the communication or distribution of material or information, such as the DPPA (the "Communication Exclusion"). Because an alleged violation of the DPPA falls squarely within the plain language of both of these exclusions, and because the only claim asserted in the Underlying Action is based on the DPPA, Hartford has no duty to defend Gelshenen in the Underlying Action. See Hartford Cas. Ins. Co. v. Greve, No. 3:17-CV-183, 2017 WL 5557669 (W.D.N.C. Nov. 17, 2017) (finding that the underlying DPPA actions fell squarely within both policy exclusions, granting Hartford's Fed. R. Civ. P. 12(c) motion for judgment on the pleadings, and entering a declaratory judgment in favor of Hartford), aff'd, 742 F. App'x 738, 741 (4th Cir. 2018).

II. Standard for Judgment on the Pleadings

Federal Rule of Civil Procedure 12(c) provides that "[a]fter the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings." In resolving a motion for judgment on the pleadings, the court must accept the non-movant's factual statements as true and draw all reasonable inferences in his favor. Bradley v. Ramsey, 329 F. Supp. 2d 617, 622 (W.D.N.C. 2004) ; Atwater v. Nortel Networks, Inc., 394 F. Supp. 2d 730, 731 (M.D.N.C. 2005). Judgment on the pleadings is warranted where the undisputed facts demonstrate that the moving party is entitled to judgment as a matter of law. Bradley, 329 F. Supp. 2d at 622. The standard is similar to that used in ruling on a Rule 12(b)(6) motion, "with the key difference being that on a 12(c) motion, the court is to consider the answer as well as the complaint." Continental Cleaning Serv. v. United Parcel Serv., Inc., 1999 WL 1939249, at *1 (M.D.N.C. April 13, 1999) (internal citations omitted).

In resolving a motion for judgment on the pleadings, the court may rely on admitted facts in the pleadings, documents attached to the pleadings, and facts contained in materials of which the court may take judicial notice. Bradley, 329 F. Supp. 2d at 622 (noting the court should consider documents attached to the pleadings); Hebert Abstract Co. v. Touchstone Prop., Ltd., 914 F.2d 74, 76 (5th Cir. 1990) (holding the court should consider pleadings and judicially noticed facts). Where an instrument is "integral to and explicitly relied upon in the complaint," the instrument itself should be considered along with the factual allegations of the complaint and answer. Colin v. Marconi Commerce Sys. Emps.' Retirement Plan, 335 F. Supp. 2d 590, 596 (M.D.N.C. 2004) (insurance policy at issue).

III. Discussion

A. Insurer's Duty to Defend

Under North Carolina law, "[a]n insurer's duty to defend is ordinarily measured by the facts as alleged in the pleadings.... When the pleadings state facts demonstrating that the alleged injury is covered by the policy, then the insurer has a duty to defend, whether or not the insured is ultimately liable." Waste Mgmt. of Carolinas, Inc. v. Peerless Ins. Co., 315 N.C. 688, 691, 340 S.E.2d 374 (1986) ; see also Firemen's Ins. Co. of Washington D.C. v. Glen-Tree Investments, LLC, 2012 WL 4191383, at *5 (E.D.N.C. Sept. 19, 2012) ("An insurer has a duty to defend when pleadings allege facts that impose upon an insured a liability covered by the policy."). "Conversely, when the pleadings allege facts indicating that the event in question is not covered, and the insurer has no knowledge that the facts are otherwise, then it is not bound to defend." Waste Mgmt., 315 N.C. at 691, 340 S.E.2d 374.

To decide an insurer's duty to defend, North Carolina courts apply the "comparison test." Harleysville Mut. Ins. Co. v. Buzz Off Insect Shield, L.L.C., 364 N.C. 1, 6–7, 692 S.E.2d 605 (2010) ("[E]ven a meritorious allegation cannot obligate an insurer to defend if the alleged injury is not within, or is excluded from, the coverage provided by the insurance policy."). Applying the comparison test, the court must read the policies and the underlying pleading side-by-side to determine whether the events as alleged are covered or excluded by the policy terms. Atain Specialty Ins. Co. v. Luxury Auctions Mktg., Inc., No. 3:17-CV-368, 2017 WL 6503648, at *2 (W.D.N.C. Dec. 19, 2017) (quoting Kubit v. MAG Mut. Ins. Co., 210 N.C. App. 273, 278, 708 S.E.2d 138 (2011) ). The court's analysis of the facts are limited to those alleged in the underlying pleading, not any and every version of the facts. Penn. Nat. Mut. Cas. Ins. Co. v. Sharpe Images, Inc., No. 3:11-CV-150, 2012 WL 3962747, at *2 (W.D.N.C. Sept. 11, 2012).

An insurer's duty to defend is not, however, limited to the allegations in the underlying complaint. The insurer has a "duty to investigate and evaluate facts expressed or implied in the third-party complaint as well as facts learned from the insured and from other sources." Waste Mgmt., 315 N.C. at 692, 340 S.E.2d 374 (indicating such duty is based on the modern acceptance of notice pleading and of the plasticity of pleadings in general). Thus, where the insurer knows or reasonably could discover facts outside the pleadings that would cover a claim under the policy, these facts may trigger the duty to defend. Sharpe Images, 2012 WL 3962747, at *2 (citing Waste Mgmt., 315 N.C. at 693, 340 S.E.2d 374 ). If the insurer fails to defend the insured but it is later established that the policy covers a particular claim, then the insurer must pay the cost of the insured's defense. Lozada v. Phoenix Ins. Co., 237 F. Supp. 2d 664, 670 (M.D.N.C. 2003).

When a dispute arises regarding the duty to defend, the insured must initially show that the asserted facts arguably fall within the policy's coverage. Sharpe Images, 2012 WL 3962747, at *2 (citing Wm. C. Vick Co. v. Penn. Nat. Mut. Cas. Ins. Co., 52 F. Supp. 2d 569, 592 (E.D.N.C. 1999) ); see also Waste Mgmt., 315 N.C. at 693, 340 S.E.2d 374 ("Any doubt as to coverage is to be resolved in favor of the insured."). An insurer has a duty to defend where some of the allegations fall within the policy's coverage even if others do not. Sharpe Images, 2012 WL 3962747, at *2. "If the insured meets this burden, then the insurer must show that the policy precludes coverage based on an exclusion. Exclusionary clauses are interpreted narrowly while coverage policies are interpreted broadly to provide the greatest possible protection to the insured." Id. (citations omitted). Once an insurer establishes that an exclusion precludes coverage, the burden shifts to the policyholder to show that an exception to the exclusion exists and applies to restore coverage. See Home Indem. Co. v. Hoechst Celanese Corp., 128 N.C.App. 189, 494 S.E.2d 774, 783 (1998) ; see also Greve, 2017 WL 5557669, at *4 (finding Greve did not meet his burden to show that the exception applied because Underlying Action could not support a common law claim for invasion of privacy).

The Court notes that the meaning of language used in an insurance policy is a question of law for the court. See Wachovia Bank & Trust Co. v. Westchester Fire Ins. Co., 276 N.C. 348, 172 S.E.2d 518, 522 (1970). "[I]f the language of the policy is clear and unambiguous, the court must enforce the contract of insurance as it is written." N.C Farm Bureau Mut. Ins. Co. v. Mizell, 138 N.C. App. 530, 532, 530 S.E.2d 93 (2000).

B. Hartford Has No Duty to Defend Gelshenen

Gelshenen argues Hartford's Motion for Judgment on the Pleadings should be denied for four reasons. As stated below, the Court...