Melrose Hotel v. St Paul Fire and Marine Ins.
| Decision Date | 19 April 2006 |
| Docket Number | Civil Action No. 05-3467. |
| Citation | 432 F.Supp.2d 488 |
| Parties | MELROSE HOTEL COMPANY, Plaintiff, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Thomas J. McGarrigle, Philadelphia, PA, for Plaintiff.
Alan Stuart Miller, Picadio Sneath Miller & Norton, Bridget M. Gillespie, Pittsburgh, PA, Charles E. Spevacek, Meagher & Geer, Minneapolis, MN, for Defendant and Counter Defendant.
The Melrose Hotel Company ("Melrose") hired a third-party vendor to send faxes advertising Melrose's hotel rooms to various travel groups. The Travel 100 Group, Inc. ("Travel 100 Group") filed a class action lawsuit ("Travel 100 Complaint") against Melrose in the Circuit Court of Cook County, Illinois. According to the Travel 100 Complaint, Melrose's unsolicited fax advertisements to Class members violated the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C § 227. Melrose notified its insurance carrier, St. Paul Fire and Marine Insurance Company ("St.Paul"), and requested that St. Paul defend it in connection with the Travel 100 Group litigation. After originally agreeing to defend Melrose subject to a reservation of rights, St. Paul denied coverage. Melrose eventually entered into a settlement agreement with the Travel 100 Group. Thereafter, Melrose filed this action seeking a declaratory judgment that St. Paul must defend and indemnify it in connection with the Travel 100 Group litigation. Presently before the Court are the parties' cross-motions for summary judgment in the declaratory judgment action. For the reasons set forth below, the Court grants St. Paul's motion and denies Melrose's motion.
St. Paul issued Policy Number 602NB2947 ("the Policy") to Select 2 Hotel Insurance Group, a risk purchasing group located in Bellevue, Washington. (Summ. J. J.A. Ex. 1 [Insurance Policy].) Melrose is identified as an insured. (Id.) The Policy obligates St. Paul to:
defend any protected person against a claim or suit for injury or damage covered by this agreement. We'll have such right and duty even if all of the allegations of the claim or suit are groundless, false, or fraudulent. But we won't have a duty to perform any other act or service.
(Id.) At issue in this case are the Policy's "advertising injury" and "property damage" provisions. The Policy covers, inter alia, "advertising injury liability" as follows:
We'll pay amounts any protected person is legally required to pay as damages for covered advertising injury that: results from the advertising of your products, your work, or your completed work; and
is caused by an advertising injury offense committed while this agreement is in effect.
(Id.) An "advertising injury" means:
injury, other than bodily injury or personal injury, that's caused by an advertising injury offense.
(Id.) The Policy defines an "advertising injury offense" as any of the following:
• Libel, or slander, in or with covered material.
• Making known to any person or organization covered material that disparages the business, premises, products, services, work or completed work of others.
• Making known to any person or organization covered material that violates a person's right to privacy.
• Unauthorized use of any advertising idea or advertising material, or any slogan or title, of others in your advertising.
(Id.) "Covered material" is:
any material in any form of expression, including material made known in or with any electronic means of communication, such as the Internet.
(Id.) The Policy also covers "bodily injury and property damage liability." The Policy states:
We'll pay amounts any protected person is legally required to pay as damages for covered bodily injury or property damage that:
• happens while this agreement is in effect; and
• is caused by an event.
(Id.) The Policy defines "property damage" as:
• physical damage to tangible property of others, including all resulting loss of use of that property; or
• loss of use of tangible property of others that isn't physically damaged.
(Id.) The Policy defines an "event" as:
an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
(Id.)
The Court turns to the facts surrounding Melrose's advertisements and the Travel 100 Group litigation. At the time the Policy was in effect, Melrose was a hotel located in New York City, owned by Barbizon Hotel Associates, L.P. and operated by MHC Barbizon, L.P. (Summ. J. J.A. Exs. 16 [Lahood Dep.] at 13-14 & 15 [Kelly Dep.] at 27-28, 33.) Melrose entered into an agreement with Captaris MediaLinq ("Captaris"), whereby Captaris would broadcast faxes to travel agents in locations selected by Melrose. (Summ. J. J.A. Exs. 4 [Service Agreement], 5[Sample of Travel Express Broadcast Requests] & 16 at 67; see also Melrose Mem. of Law in Supp. of Mot. for Summ. J. at 4.) Under the Service Agreement, Melrose warranted that it would "comply with all applicable laws and regulations relating to its use of the Services, including . . . laws and regulations relating to sending unsolicited communications." (Summ. J. J.A. Ex. 4.)
From February 13, 2003 through July 30, 2003, Captaris sent 270,958 faxes on behalf of Melrose, and 165,083 of those faxes were received. (Melrose Mot. for Summ. J. Ex. C [Captaris Summary of Faxes Sent/Received].) The faxes provided room rates for the Melrose Hotel as well as the phone number, mailing address and web address for Melrose.1 (Summ. J. J.A. Ex. 5 [].) Captaris invoiced the Melrose Hotel for sending the faxes, but MHC Barbizon paid the bills. (Summ. J. J.A. Ex. 6 [].) MHC Barbizon paid only for those faxes actually received by the intended recipient. (Summ. J. J.A. Ex. 16 at 92.)
On July 29, 2003, the Travel 100 Group filed a class action lawsuit in the Circuit Court of Cook County, Illinois.2 (Summ. J. J.A. Ex. 2.) The Travel 100 Complaint alleged that Melrose caused an advertisement to be faxed to Travel 100 as part of a mass broadcast of unauthorized faxes, without prior express invitation or permission. (Id. ¶¶ 6-8.) According to the Travel 100 Complaint, the faxes shifted the cost of advertising Melrose's products onto Class members and converted the toner and paper belonging to Class members to Melrose's use.3 (Id. ¶ 10.)
The Travel 100 Complaint contains three counts. The Travel 100 Group asserts that Melrose violated the TCPA, which makes it unlawful for any person to "use any telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine."4 47 U.S.C. § 227(b)(1)(C) (2002). According to the TCPA, an "unsolicited advertisement" is "any material advertising the commercial availability or quality of any property, goods or services which is transmitted to any person without that person's prior express invitation or permission." Id. § 227(a)(4). For each violation, the law allows a private party to recover the greater of the actual monetary loss suffered or $500. Id. § 227(b)(3)(B). Willful or knowing violations of the law permit the court, in its discretion, to award treble damages. Id. § 227(b)(3).
The Travel 100 Complaint also contains claims for common law conversion and common law trespass to chattels.5 (Summ. J. J.A. Ex. 2 ¶¶ 20-3 1.) The Travel 100 Group maintains that through Melrose's "wrongful conduct of sending the unsolicited and unauthorized faxes, [Melrose] appropriated to its own use the paper and toner used to print the faxes and used them in such manner as to make them unusable." (Id. ¶ 23; see also id. ¶ 29.)
The Travel 100 Group further asserts that "[Melrose] know [sic] or should have known that its appropriation of the paper and toner, and thereby shifting its advertising costs to [Travel 100] and the class, was wrongful and without authorization." (Id. ¶¶ 24, 30.)
On November 20, 2003, Brian Himmel, Counsel for Melrose, provided formal notice of the Travel 100 litigation and provided a copy of the Travel 100 Complaint to St. Paul. (Summ. J. J.A. Ex. 9 [Nov. 20, 2003 Letter].) By letter dated January 29, 2004, James Zacharski of St. Paul informed Himmel that "St. Paul has no duty under the CGL policy to defend or indemnify Melrose against the allegations in the complaint filed by Travel 100." (Summ. J. J.A. Ex. 10 [Jan. 29, 2004 Letter].) The letter set forth St. Paul's position that the Travel 100 complaint did not seek to recover damages for "bodily injury," "property damage," "personal injury," or "advertising injury" as those terms were defined in the Policy. (Id.) Furthermore, even assuming the Travel 100 Group sought damages arising out of such injuries, St. Paul claimed those injuries or damages were not the result of an "event" as defined in the Policy and fell within exclusions outlined in the Policy. (Id.) On October 27, 2004, Himmel wrote to Zacharski demanding that St. Paul reconsider its decision not to defend "[i]n light of continuing developments in the caselaw regarding coverage for TCPA claims." (Summ. J. J.A. Ex. 11 [Oct. 27, 2004 Letter].) Zacharski subsequently notified Himmel on December 10, 2004 that St. Paul "now agreed to participate in the defense of Melrose in the Travel 100 Group Inc. lawsuit under a reservation of rights." (Summ. J. J.A. Ex. 12 [Dec. 10, 2004 Letter].)
In an attempt to settle the Travel 100 Group litigation, the Travel 100 plaintiffs made a demand on Melrose, seeking $1.45 million from St. Paul. (Summ. J. J.A. Ex. 13 [Stipulation] ¶ 1.) On December 22, 2004, Zacharski informed. Thomas McGarrigle also Counsel for Melrose, that McGarrigle was authorized to offer the...
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