Sentry Ins. v. R.J. Weber Co., Inc.
| Decision Date | 20 August 1993 |
| Docket Number | No. 93-1222,93-1222 |
| Parties | SENTRY INSURANCE, a Mutual Company, Plaintiff-Counter Defendant-Appellee, v. R.J. WEBER COMPANY, INC., et al., Defendants, R.J. Weber Company, Inc. and R.J. Weber, Individually, Defendants-Counter Plaintiffs-Appellants. Summary Calendar. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Kevin J. Cook, Payne & Blanchard, Dallas, TX, for appellants.
Robert D. Allen, Aaron Linzy Mitchell, Vial, Hamilton, Koch & Knox, Dallas, TX, for appellee.
Appeal from the United States District Court for the Northern District of Texas.
Before JOLLY, SMITH, and WIENER, Circuit Judges.
Sentry Insurance ("Sentry") insured R.J. Weber and his corporation, R.J. Weber Co., Inc., (collectively "Weber") against claims based on personal and advertising injuries. Sentry brought the declaratory judgment action before us seeking a declaration that it had no duty to defend Weber against a claim of copyright infringement. The district court granted summary judgment in favor of Sentry because it found that the copyright infringement suit was not related to Weber's advertising activity. Finding no error, we affirm.
In January of 1992, Caterpillar, Inc. ("Caterpillar") brought suit against Weber alleging copyright infringement. Caterpillar has copyrighted two original works titled "Numerical Parts Record" and "Parts Book Library." It claimed that Weber infringed its copyrights by copying, publishing, distributing, and selling copies of these works without first obtaining permission from Caterpillar.
Sentry insured Weber against personal and advertising injuries. The policy provides Sentry "will pay those sums that the insured becomes legally obligated to pay as damages because of 'personal injury' or 'advertising injury' to which this insurance applies." In clause IV.B.1.c., the policy further provides that:
This insurance applies to "advertising injury" only if caused by an offense committed:
(1) In the "coverage territory" during the policy period; and
(2) In the course of advertising your goods, products or services. [Emphasis supplied.]
Later on in section V, the policy defines an advertising injury as follows:
"Advertising injury" means injury arising out of one or more of the following offenses:
(1) Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;
(2) Oral or written publication of material that violates a person's right of privacy (3) Misappropriation of advertising ideas or style of doing business; or
(4) Infringement of copyright, title or slogan. [Emphasis supplied.]
Weber believed that the policy covered Caterpillar's suit and asked Sentry to defend it against Caterpillar's claims. Sentry agreed to defend Weber, but it reserved the right to bring suit to determine whether the policy applied.
In June of 1992, Sentry filed this declaratory judgment action seeking a declaration that it had no duty to defend or indemnify Weber against Caterpillar's claims in the underlying lawsuit. Weber counterclaimed that Sentry did have a duty to defend. Sentry moved for summary judgment in October of 1992. After Weber responded, the district court granted Sentry's motion. On January 5, 1993, the district court entered judgment in favor of Sentry. Weber moved the district court to reconsider, and Sentry asked for reimbursement of the attorney's fees it incurred while defending Weber. The district court denied Weber's motion, but it granted Sentry its attorney's fees. Weber filed a timely notice of appeal and brought this appeal.
Weber contends that the district court erred when it granted Sentry summary judgment because there is a potentiality that, liberally construed, Caterpillar's complaint states a claim that was caused by or related to Weber's advertising. Because this is a diversity case, we apply the substantive law of Texas. Stine v. Marathon Oil Co., 976 F.2d 254, 259 (5th Cir.1992) (citing Erie Railroad Co. v. Tompkins, 304 U.S. 64, 77-78, 58 S.Ct. 817, 822, 82 L.Ed. 1188 (1938)). On appeal from the district court's grant of summary judgment, we review the record de novo to ascertain whether any genuine issue exists as to any material fact. Pullman-Standard v. Swint, 456 U.S. 273, 287, 102 S.Ct. 1781, 1789, 72 L.Ed.2d 66 (1982). The reach of an insurance contract, moreover, is a matter of law that we review de novo. Matter of World Hospitality Ltd., 983 F.2d 650 (5th Cir.1993); Stine, 976 F.2d at 260.
In Texas, if the allegations in the complaint will allow the plaintiff to recover on a theory within the scope of the insurance policy, there is potential liability against which the insurer is obligated to defend. Terra Intern. v. Commonwealth Lloyd's, 829 S.W.2d 270, 271 (Tex.App.--Dallas 1992, writ denied). The burden is generally on the insured to show that the claim against him is potentially within his policy's coverage. See, e.g., Employers Cas. Co. v. Block, 744 S.W.2d 940, 944 (Tex.1988). The insurer, however, bears the burden of establishing that one of the policy's limitations or exclusions constitutes an avoidance or affirmative defense to coverage. Tex.Ins.Code Art. 21.58(b).
Weber contends that the district court erred because it placed the burden on Weber to prove the existence of an advertising injury. According to Weber, clause IV.B.1.c. of the insurance contract is a policy limitation. Weber, thus, concludes that the Texas Insurance Code required Sentry to prove that the limitation does not apply. Weber is incorrect. Clause IV.B.1.c. is not a policy limitation. On the contrary, it defines policy coverage with respect to "advertising injuries." Specifically, the policy covers advertising injuries that are caused in "the course of advertising...
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