Hartford Cas. Ins. v. SoftwareMedia.com
| Decision Date | 19 March 2012 |
| Docket Number | Civil No. 2:10-CV-01098 BSJ |
| Parties | HARTFORD CASUALTY INSURANCE, an Indiana corporation, and TWIN CITY FIRE INSURANCE COMPANY, an Indiana corporation, Plaintiffs, v. SOFTWAREMEDIA.COM, a Washington corporation, PERSEUS TRADING CORPORATION, a Washington corporation a/k/a PERSEUS TRADING, INC., ADAM CHILDERS and TODD FRANCIS, Defendants; SOFTWAREMEDIA.COM, a Washington corporation, PERSEUS HOLDING CORPORATION, a Washington corporation, and PERSEUS TRADING CORPORATION, a Washington corporation, Counterclaimants, v. HARTFORD CASUALTY INSURANCE, an Indiana corporation, and TWIN CITY FIRE INSURANCE COMPANY, an Indiana corporation, Counterclaim Defendants. |
| Court | U.S. District Court — District of Utah |
On November 4, 2010, the plaintiffs filed their Complaint commencing the above-entitled action, invoking the diversity jurisdiction of this court pursuant to 28 U.S.C. § 1332(a)(1) (2006 ed.).1
As pleaded in the Complaint, plaintiffs Hartford Casualty Insurance ("Hartford") and Twin City Fire Insurance Company ("Twin City") seek a declaratory judgment that that neither of them are obligated to defend or indemnify SoftwareMedia.com, Inc., Perseus Trading, Adam Childers, and Todd Francis for any and all losses arising out of the events that became the subject matter of the civil action entitled Microsoft Corp. v. SoftwareMedia.com, Inc., Adam Childers, & Todd Francis, Civil No. 2:10-CV-00526 CW (D. Utah, filed June 7, 2010), said action having been settled and dismissed with prejudice in or about September of 2010.2
Defendants SoftwareMedia.com and Perseus Trading Corporation, together with non-defendant Perseus Holding Corporation (collectively "SoftwareMedia") counterclaimed against Hartford and Twin City for breach of contract, seeking an award of damages exceeding $1,800,000, resulting from the insurers' refusal to defend or indemnify SoftwareMedia in connection with the 2010 Microsoft litigation.
On August 25, 2011, Hartford and Twin City filed a motion for summary judgment asserting that as a matter of law, Hartford and Twin City "owe no duty to defend or indemnify Defendants Softwaremedia.com, Inc., Perseus Trading Corporation, Adam Childers, and Todd Francis for the claims alleged" in the 2010 Microsoft litigation.3 They argue that in 2010, Microsoft did not plead that the defendants caused "personal or advertising injury" within the scope of coverage under the two policies: "the gravamen of Microsoft's complaint is that Defendants offered their customers one type of Microsoft product, but then actually sold them a less valuable product, thereby engaging in the 'bait and switch' sales activities that allegedly harmed Microsoft."4 Further, even if coverage under the Hartford policy was triggered by Microsoft's complaint, "a number of exclusions are implicated that independently bar any coverage for this claim," given Microsoft's allegations concerning SoftwareMedia's conduct; the Twin City policy "isnot even potentially implicated, as it contains an endorsement that excludes all coverage for 'personal and advertising injury.'"5
On September 26, 2011, SoftwareMedia filed a cross-motion for summary judgment, asserting that "when compared to the language of the civil complaint filed by Microsoft against Defendants and Counterclaimants, the subject insurance policies triggered plaintiffs' duty to defend under Utah law," and when Hartford and Twin City "refused to provide a defense in that action," SoftwareMedia "were forced to settle with Microsoft"; having refused to defend, Hartford and Twin City "are now estopped from contesting the reasonableness of the settlement under Utah law and must reimburse" SoftwareMedia "for all moneys expended in that settlement, and for defense fees and costs incurred" in the 2010 Microsoft litigation.6 SoftwareMedia argues that "when read in conjunction with extrinsic evidence provided to The Hartford," the 2010 Microsoft Complaint pleaded "Lanham Act print-media slogan infringement claims - a type of 'personal and advertising injury' expressly covered by" the Hartford policy.7 Concedingthat Microsoft's fraud-based claims against SoftwareMedia were not covered by Hartford's policy and ultimately would not be paid under the policy, SoftwareMedia argues that the insurer nevertheless owed a duty to defend the entire Microsoft action, given the claim for alleged Lanham Act print-media slogan infringement that falls within the policy's "personal and advertising injury" coverage.8
Both sides insist that "no material facts are in dispute," and that summary judgment is appropriate on all claims as a matter of law.9 See, e.g., Valdez v. Squier, --- F.3d ----, 2012 WL 547404, at *7 (10th Cir., February 21, 2012) ("Summary judgment is appropriate when 'there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.'" (quoting Fed. R. Civ. P. 56(a)).
The parties agree that at pertinent times, SoftwareMedia was insured under a commercial general liability policy (viz., the Commercial General Liability Coverage Form) issued by Hartford, viz., Policy No. 34 UUQ TZ4569 SC, with effective dates fromJanuary 1, 2007, through January 1, 2008 (the "CGL Coverage Form"), which was renewed annually. The parties also agree that SoftwareMedia was insured under an umbrella liability policy (the "Umbrella Liability Policy") issued by Twin City, Policy No. 34 XHQ XR3759, with effective dates from January 1, 2007, through January 1, 2008, which was renewed annually.
The policy language defining the pertinent coverage in the Hartford CGL Coverage Form states: 10 The CGL Coverage Form defines "personal and advertising injury" as "injury . . . arising out of one or more of the following offenses":
"Suit" is defined by the policy as "a civil proceeding in which damages because of 'bodily injury,' 'property damage' or 'personal and advertising injury' to which this insurance applies are alleged."12 The policy also defines "advertisement"13 and "advertising idea."14
The CGL Coverage Form also includes a series of exclusions, such as a "Your Web Site" exclusion, which excludes coverage for "'personal and advertising injury' arising out of 'your web site' or an electronic chat room or bulletin board hosted, owned,or over which control is exercised by any insured."15 In turn, "your web site" means "a web page or set of interconnected web pages prepared and maintained by you, or by others on your behalf, that is accessible over an internet."16 Other coverage exclusions include "Breach of Contract,"17 "Infringement of Intellectual Property Rights,"18 'Knowing Violation Of Rights Of Another,"19 "Material Published With Knowledge Of Falsity,"20 and "Material Published Prior To Policy Period."21
The Twin City Umbrella Liability Policy states that "[w]e will pay those sums that the 'insured' becomes legally obligated to pay as 'damages' in excess of the 'underlying insurance,'" because of an injury "to which this insurance applies caused by an 'occurrence',"22 as that term is defined by the underlying insurance policy.23 The Umbrella Liability Policy also contains an exclusion of coverage that reads: "This policy does not apply to 'personal and advertising injury.'"24 This ¶ B.4 exclusion itself includes an "EXCEPTION" stating that "[t]his exclusion does not apply if 'underlying insurance' is applicable to 'personal and advertising injury' and to claims arising out of that 'personal and advertising injury'."25 These terms of the Umbrella Liability Policy are themselves modified by an Endorsement (form XL 21 33 11 00), which "modifies insurance provided under the UMBRELLA LIABILITY POLICY" as follows: "Thispolicy does not apply to 'personal and advertising injury.'"26
SoftwareMedia argues that the pertinent Umbrella Liability Policy language, namely its Endorsement modifying an exception to the ¶ B.4 exclusion27 as to "personal and advertising injury," is ambiguous, and should be construed strictly against the insurer and in favor of coverage.28
Remembering that in this context, an endorsement is "[a]n amendment to an insurance policy," Black's Law Dictionary 607 (9th ed. 2009), the terms of the Umbrella Liability Policy as thus amended are clear on this point: "This policy does not apply to 'personal and advertising injury.'"
To continue reading
Request your trial