Hartford Cas. Ins. Co. v. ContextMedia, Inc.
| Decision Date | 28 August 2014 |
| Docket Number | Case No. 12–cv–9975 |
| Citation | 65 F.Supp.3d 570 |
| Parties | Hartford Casualty Insurance Company, Plaintiff, v. ContextMedia, Inc., Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Ashley L. Conaghan, Michael John Duffy, Tressler LLP, Chicago, IL, for Plaintiff.
Angela R. Elbert, Eric Y. Choi, Neal, Gerber & Eisenberg, Chicago, IL, for Defendant.
Before the Court is Plaintiff's motion for partial summary judgment [21] and Defendant's cross-motion for summary judgment [29]. Plaintiff Hartford seeks a declaratory judgment from the Court determining that it has no duty to defend ContextMedia in a suit brought by Healthy Advice Networks LLC, a competitor of ContextMedia, in the Southern District of Ohio. ContextMedia's counterclaim seeks the opposite ruling, as well as damages resulting from Hartford's alleged breach of its duty to defend ContextMedia to date. For the reasons stated below, the Court grants Hartford's motion for partial summary judgment as to Count XII and denies Hartford's motion as to Counts I, VI, and VII as moot [21]. The Court denies ContextMedia's cross-motion for summary judgment [29].
ContextMedia transmits health information to patients in the waiting rooms of physicians' offices through a “digital media platform.” Pl. Resp. to Def's SOF ¶ 29 [35]. According to its website, ContextMedia provides “patient marketing,” “deliver[ing] messages to millions where and when they want it.” Def's Resp. to Pl. SOF ¶ 29[31]. The company does this by supplying literature directly to the offices of physician, and, mostly, by displaying programming on television screens that the company provides to physicians for their waiting rooms so that patients can view ContextMedia's programming while waiting to see the doctor. [31] at ¶ 31. The programming is delivered via a secure internet connection to a computer that is mounted behind each television set. [31] at ¶ 32. ContextMedia's programming includes both educational content and advertising. [31] at ¶ 30. The company provides the service to physicians free-of-charge and derives its revenue from pharmaceutical, nutrition, fitness, and device manufacturing companies that advertise on ContextMedia's network. [31] at ¶ 33. Pharmaceutical companies, in particular, purchase ads because marketers “view the point-of-care channel as a strategic and relevant place from which to message” since programming reaches patients minutes before they make decisions about pharmaceutical products with their doctors. [31] at ¶¶ 34–35. In fact, more than 75% of all global pharmaceutical companies are counted among ContextMedia's advertising clients. [31] at ¶ 36. Not surprisingly, various articles appear on ContextMedia's website, toting the advantages of point-of-care and place-based advertising. [31] at ¶¶ 37–41.
ContextMedia's insurer, Hartford Casualty Insurance Company (“Hartford”), issued a series of business liability policies to ContextMedia that insured against certain risks for the period beginning August 1, 2008 and ending August 1, 2013. [31] at ¶ 23. Among other things, ContextMedia's policy covered (1) “property damage” caused by an “occurrence” and (2) “personal and advertising injury,” as defined by the policy and subject to exclusions. [31] at ¶ 26. By the policy's terms, “property damage” is both “[p]hysical injury to tangible property, including all resulting loss of use of that property” and “[l]oss of use of tangible property that is not physically injured.” Id. An “occurrence” is “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Id. And “personal and advertising injury” includes, among other things, “injury” “arising out of” “[o]ral, written, or electronic publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products, or services.” Id.
Relevant here, the policy excluded property damage to “personal property in the care, custody, or control of the insured.” [31] at ¶ 26. The policy also excluded “personal and advertising injury” “[a]rising out of an offense committed by an insured whose business is advertising, broadcasting, publishing, or telecasting.” Id. at ¶ 27. On September 28, 2009, ContextMedia's insurance broker asked Hartford if the “Business of Advertising, Broadcasting, Publishing, or Telecasting” exclusion could be deleted from the policy. [37] at ¶ 24. Hartford informed ContextMedia's broker that Hartford “cannot delete this exclusion off of the policy for this classification,” but that if ContextMedia “needs this coverage,” Hartford could “send a request to [its] Alternative Market Placement team and see if coverage [could] be obtained that route.” [37] at ¶ 25; [35–2] Exh. 2–B. The Declarations page on each of Hartford's policies identified ContextMedia as an “Advertising Agency,” ( [31] at ¶ 24), but, despite that label, ContextMedia maintains that it is not actually an advertising agency (or a company in the business of “advertising, broadcasting, publishing, or telecasting,” for that matter). [31] at ¶¶ 27–28.
The policy imposed on ContextMedia a duty to notify Hartford “of an ‘occurrence’ or an offense which may result in a claim” “as soon as practicable.” [31] at ¶ 26. It also obligated ContextMedia to “[i]mmediately send [Hartford] copies of any demands, notices, summonses or legal papers received in connection with the claim or ‘suit.’ ” Id.
On January 20, 2011, ContextMedia received a letter from competitor Healthy Advice Networks LLC (“HAN”). [31] at ¶ 16. In the letter, HAN alleged that ContextMedia had “accessed, removed, damaged and taken possession of various media equipment and other materials licensed to [HAN]” from the offices of several physicians. Id. at ¶ 17. The letter also evinced HAN's belief that ContextMedia had “intentionally interfered with contractual relationships between [HAN] and each Physician Office” and “generated and sent misleading and deceptive termination letters purportedly from the Physician Offices to Healthy Advice.” Id. According to the letter, HAN had “already suffered material damages” as a result of ContextMedia's alleged conduct and was “prepared to protect its rights to the fullest extent of the law, including civil and criminal penalties.” Id.
According to ContextMedia's Chief Financial Officer James Demas, upon receipt of the letter, ContextMedia interviewed employees and internally investigated the accusations. Pl. Resp. to Def's SOF ¶ 5 [35]. None of HAN's property turned up in the investigation, Demas says, and ContextMedia's legal counsel assured it that HAN's allegations of “interference” and those concerning “termination letters” were simply a “tactic by a fearful competitor.” [35] at ¶¶ 6–8. Its investigation and discussions with counsel therefore convinced ContextMedia that HAN's allegations were unfounded. [35] at ¶ 8. In the words of Demas, “ContextMedia did not believe it had done anything wrong, did not believe it would face any liability for the allegations in the January 20, 2011 letter, and did not believe insurance coverage was at issue.” [35] at ¶ 9. Therefore, on January 28, 2011, ContextMedia responded to HAN's letter, disavowing any wrongdoing, but did not notify Hartford of HAN's accusations at that time. [35] at ¶ 10. In the January 28 letter, ContextMedia's counsel informed HAN that it had returned to HAN “any equipment that ha[d] come into ContextMedia's possession” and of its legal position that ContextMedia had not interfered with HAN's contractual relationships because of ContextMedia's “broad privilege to solicit physicians to provide” its services and because HAN's physician contracts are “terminable at will.” Def's Resp. to Pl.'s SOAF [37] ¶ 7; [15–3] at p. 1.
ContextMedia and HAN exchanged additional rounds of letters in the weeks that followed. Def's Resp. to Pl. SOF ¶ 20[31]. On February 8, HAN responded to ContextMedia's January 28 letter by “reiterat[ing] its demand that ContextMedia return” all of HAN's property ( that the property it had received via mail had been shipped from ContextMedia's office) and that it “cease and desist” from any illegal activities with regard to HAN's contractual relationships. [23–5] at p.2. HAN also reminded ContextMedia that, at least as early as January 20, ContextMedia had been “under a continuing legal duty to preserve all documents ... that are relevant or potentially relevant to this matter or risk court-imposed sanctions, fines, or other penalties for spoliation of evidence.” Id. HAN informed ContextMedia that it was “prepared to prosecute ContextMedia's unlawful actions to the full extent of civil and criminal law,” if ContextMedia did not meet HAN's demands by February 11. Id. ContextMedia answered HAN's letter, as demanded, on February 11, renewing its position that it had returned all of HAN's property that ContextMedia had removed from physician's offices (with the exception of a media player that FedEx lost after ContextMedia attempted to mail it to HAN) and holding firm to its position that HAN's contracts with physicians are “terminable at will” by a physician who prefers the services of a “competitior with a superior service.” Id. at p. 7. Given that, the letter described HAN's demands as “baseless.” Id. ContextMedia made clear that its letter was “for settlement purposes only,” was not “an admission of any liability or facts,” and did not “waive any right, remedy, or position ContextMedia may have.” [37] ¶ 9.
In a subsequent letter, dated March 1, 2011, HAN demanded that ContextMedia pay it $9,825—$1,425 for missing equipment that HAN accused ContextMedia of taking from physician's offices and $8,400 in attorney's fees—and threatened to “pursue legal action against ContextMedia” if ContextMedia did not pay (and cease the other activity about which HAN complained in its letters) by...
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