Resource Bankshares v. St. Paul Mercury Ins. Co.

• Decision Date: 11 May 2005
• Docket Number: No. 04-1962.,No. 04-1946.,04-1946.,04-1962.
• Citation: 407 F.3d 631
• Parties: RESOURCE BANKSHARES CORPORATION; RESOURCE BANK, Plaintiffs-Appellees, v. ST. PAUL MERCURY INSURANCE COMPANY, Defendant-Appellant. American Casualty Company of Reading, Pennsylvania; Erie Insurance Company; Federal Insurance Corporation; Great Northern Insurance Company, Amici Supporting Appellant. Resource Bankshares Corporation; Resource Bank, Plaintiffs-Appellants, v. St. Paul Mercury Insurance Company, Defendant-Appellee. American Casualty Company of Reading, Pennsylvania; Erie Insurance Company; Federal Insurance Corporation; Great Northern Insurance Company, Amici Supporting Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 631

407 F.3d 631

RESOURCE BANKSHARES CORPORATION; RESOURCE BANK, Plaintiffs-Appellees, v. ST. PAUL MERCURY INSURANCE COMPANY, Defendant-Appellant.

American Casualty Company of Reading, Pennsylvania; Erie Insurance Company; Federal Insurance Corporation; Great Northern Insurance Company, Amici Supporting Appellant.

Resource Bankshares Corporation; Resource Bank, Plaintiffs-Appellants, v. St. Paul Mercury Insurance Company, Defendant-Appellee.

American Casualty Company of Reading, Pennsylvania; Erie Insurance Company; Federal Insurance Corporation; Great Northern Insurance Company, Amici Supporting Appellee.

No. 04-1946.

No. 04-1962.

United States Court of Appeals, Fourth Circuit.

Argued: March 17, 2005.

Decided: May 11, 2005.

ARGUED:

Charles E. Spevacek, Meagher & Geer, P.L.L.P., Minneapolis, Minnesota, for St. Paul Mercury Insurance Company. William Edgar Spivey, Kaufman & Canoles, Norfolk, Virginia, for Resource Bankshares Corporation and Resource Bank.

ON BRIEF:

Alan B. Rashkind, Furniss, Davis, Rashkind And Saunders, P.C., Norfolk, Virginia, for St. Paul Mercury Insurance Company. R. Johan Conrod, Jr., Kaufman & Canoles, Norfolk, Virginia, for Resource Bankshares Corporation and Resource Bank. Andrew Butz, William H. White, Jr., Bonner Kiernan Trebach & Crociata, Washington, D.C., for Amicus Curiae American Casualty Company of Reading, PA, Supporting St. Paul Mercury Insurance Company. Vernon Priddy, III, Sands, Anderson, Marks & Miller, Richmond, Virginia; Daniel J. Cunningham, Kathleen A. Sweitzer, Tressler, Soderstrom, Maloney & Priess, Chicago, Illinois, for Amici Curiae Erie Insurance Company, Federal Insurance Company, and Great Northern Insurance Company, Supporting St. Paul Mercury Insurance Company.

Before KING and GREGORY, Circuit Judges, and HAMILTON, Senior Circuit Judge.

Affirmed in part and reversed in part by published opinion. Judge GREGORY wrote the opinion, in which Judge KING and Senior Judge HAMILTON joined.

OPINION

GREGORY, Circuit Judge:

On March 8, 2002, Cohen & Malad, LLP, an Indiana limited partnership, sued Resource Bankshares Corporation and Resource Bank ("Resource") in Indiana state court on behalf of a class of recipients of Resource's faxes. The lawsuit was based on the private right of action provided by the Telephone Consumer Protection Act, 47 U.S.C. § 227 (2003) ("TCPA"). During the times relevant to the lawsuit, Resource had a series of materially identical one-year general commercial liability insurance policies with St. Paul Mercury Insurance Company ("St.Paul"). Resource sought a declaration in the United States District Court for the Eastern District of Virginia that the class-action suit triggered coverage under two separate provisions of the policies. On cross-motions for summary judgment, the district court found that one of the two provisions mandated a duty to defend. We hold that the policies do not compel St. Paul to defend Resource for the class-action suit, and thus affirm in part and reverse in part the decision of the district court.

I.

The TCPA prohibits, among other things like the use of certain automated telephone equipment for telemarketing, the use of "any telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine." Id. § 227(b)(1)(C). Section 227(b)(3) creates a private right of action so recipients of such faxes can sue the senders. It provides that:

(1) A person or entity may, if otherwise permitted by the laws or rules of court of a State, bring in an appropriate court of that State¹

(A) an action based on a violation of this subsection or the regulations prescribed under this subsection to enjoin such violation,

(B) an action to recover for actual monetary loss from such a violation, or to receive $500 in damages for each such violation, whichever is greater, or

(C) both such actions.

If the court finds that the defendant willfully or knowingly violated this subsection or the regulations prescribed under this subsection, the court may, in its discretion, increase the amount of the award to an amount equal to not more than 3 times the amount available under subparagraph (B) of this paragraph.

Id.

The Indiana class-action complaint alleged that Resource violated the TCPA by engaging in the mass transmission of unsolicited fax advertisements over a period of four years to an unknown class of recipients, numbering at least 40. Consistent with the straightforward and content-free nature of the TCPA, beyond simply noting that the faxes were advertisements, the class-action complaint never claimed that the faxes' content injured anyone (by, for example, claiming that the fax libeled them, divulged a trade secret, or infringed on a trademark). Rather, the complaint indicated that the mere receipt of the ads was harmful.²

The insurance policies at issue, written in admirably plain English, contain two relevant provisions: one describing the coverage for "property damage" caused by an "event" and one for damages resulting from an "advertising injury offense." The property-damage provision states that St. Paul will "pay amounts any protected person is legally required to pay as damages for covered bodily injury or property damage," J.A. 41, and explains that:

Property damage means:

• 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.

J.A. 42. To trigger coverage under this provision, any property damage must flow from an "event," which the policies define as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." J.A. 42 (emphasis added).

As for the "advertising injury" provision, the policies state that:

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, work, or completed work; and

• is caused by an advertising injury offense committed while this agreement is in effect.

J.A. 43. The limitation to "advertising injury offense" means that coverage extends only to damages arising from the following offenses:

• Libel or slander.

• Making known to any person or organization written or spoken material that disparages the products, work, or completed work of others.

• Making known to any person or organization written or spoken material that violates a person's right of privacy.

• Unauthorized use of any advertising idea, material, slogan, style, or title of others in your advertising.

J.A. 43 (emphasis added). The third-listed offense — "making known to any person or organization written or spoken material that violates a person's right of privacy" — is chiefly at issue here.

Resource notified St. Paul of the suit and claimed coverage, which, on June 4, 2002, St. Paul denied. On August 7, 2002, a district court in North Carolina issued an opinion styled Prime TV, LLC v. Travelers Ins. Co., 223 F.Supp.2d 744 (M.D.N.C.2002). Prime TV held that, under North Carolina law, both the "property damage" and "advertising injury" sections of the insurance policy in that case mandated coverage for a suit alleging a TCPA violation. In June of the next year Resource told St. Paul of the Prime TV case and argued that the policy was materially identical to St. Paul's. St. Paul again denied that the policies entitled Resource to coverage. Then, on November 4, 2003, Resource brought this declaratory judgment action. Resource seeks a declaration that St. Paul must defend, indemnify, and reimburse Resource for all costs associated with the class-action litigation.

The parties filed cross-motions for summary judgment. Recognizing that courts of several other jurisdictions had already held for insureds seeking coverage for defense of TCPA suits under generally similar policies,³ the district court held that the "property damage" provision was inapplicable because Resource's conduct was not an "accident," J.A. 81-84, but found that the advertising injury offense provision applied because the faxes violated the recipient's "right to privacy." J.A. 74-80. Both parties appeal the judgments unfavorable to them.

II.

We review de novo a grant of summary judgment, Seabulk Offshore, Ltd. v. Am. Home Assurance Co., 377 F.3d 408, 419 (4th Cir.2004), which is to be given when no genuine issue of material fact remains for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Summary judgment is proper "[u]nless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Id. at 249, 106 S.Ct. 2505 (citations omitted).

A federal court hearing a diversity claim must apply the choice-of-law rules of the state in which it sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Am. Online, Inc. v. St. Paul Mercury Ins. Co., 347 F.3d 89, 92 (4th Cir.2003). This appeal arises from a complaint filed in the Eastern District of Virginia, so we look to Virginia's choice-of-law rules. "Under Virginia law, a contract is made when the last act to complete it is performed, and in the context of an insurance policy, the last act is the delivery of the policy to the insured." Seabulk Offshore, 377 F.3d at 419; Buchanan v. Doe, 246 Va. 67, 431 S.E.2d 289, 291 (1993) ("generally, the law of the place where an insurance contract is written and delivered controls issues as to its coverage."). Since the policies were delivered to Resource in Virginia, the parties correctly agree that Virginia law governs.

"Under Virginia law, an insurer's obligation to defend an action `depends on comparison of the policy language with the underlying complaint to determine whether the claims...