Zurich Am. Ins. Co. v. Ocwen Fin. Corp., 19-3052
| Decision Date | 12 March 2021 |
| Docket Number | No. 19-3052,19-3052 |
| Citation | 990 F.3d 1073 |
| Parties | ZURICH AMERICAN INSURANCE COMPANY, et al., Plaintiffs-Appellees, v. OCWEN FINANCIAL CORPORATION, et al., Defendants-Appellants. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Julian Dayal, Attorney, Akerman LLP, Chicago, IL, Anthony Wyatt Morris, Attorney, Akerman LLP, Atlanta, GA, for Plaintiffs-Appellees.
Kevin B. Dreher, Attorney, Michael Patrick Yingling, Attorney, Reed Smith LLP, Chicago, IL, Richard Hugh Lumpkin, Attorney, Christopher Kuleba, Attorney, Reed Smith LLP, Miami, FL, for Defendants-Appellants.
Before Easterbrook, Rovner, and Wood, Circuit Judges.
Thanks to the diversity jurisdiction, federal courts are often asked to decide questions of insurance coverage; state law almost always provides the rule of decision in such cases. This is one of them. Zurich American Insurance sold a policy to Ocwen Financial, a debt-collection company. After a disgruntled consumer sued Ocwen, it tendered the dispute to Zurich, but Zurich asserted that policy exclusions relieved it of any duty to defend. Zurich then asked a federal court to decide whether this was indeed the case. The district court issued a judgment declaring that Zurich had no duty to defend Ocwen in the underlying litigation, and Ocwen has appealed. We agree with the district court's reading of the policy and therefore affirm.
At the time this suit was filed, Ocwen was a limited liability company whose sole member was Ocwen Mortgage Servicing, a company incorporated in the U.S. Virgin Islands with its principal place of business there. Zurich is incorporated in New York and has its principal place of business in Illinois. Since the parties were of diverse citizenship and the amount in controversy exceeds $75,000, the district court had jurisdiction under 28 U.S.C. § 1332(a).
Ocwen collects and services debts. In 2015, Tracy A. Beecroft sued Ocwen in federal court in Minnesota for its attempts to collect on a mortgage loan that Beecroft had discharged in bankruptcy. The bankruptcy discharge should have been the end of things, but it was not. To Beecroft's displeasure, Ocwen aggressively pursued her for this debt. The effects were traumatic for Beecroft: she suffered emotional and physical distress, including a stress-induced miscarriage, and she was later denied a mortgage because Ocwen wrongly reported the alleged default to credit agencies. Counts I through III of her complaint relied on the Fair Debt Collection Practices Act (FDCPA) and the Telephone Consumer Protection Act (TCPA); Count IV alleged common-law defamation; and Count V alleged common-law invasion of privacy.
From September 2010 to September 2016, Zurich insured Ocwen under a series of commercial general liability policies—a type of policy that entitles the insured to indemnification for various types of tort claims brought against it. The policies were largely identical and covered all damages caused by both "bodily injury" and "personal and advertising injury." But two provisions in the policies expressly excluded injuries resulting from conduct that violates certain laws.
The first exclusion, for "Recording and Distribution of Material or Information in Violation of Law," precludes coverage for bodily injury and personal and advertising injury:
The second exclusion, for "Violation of Communication or Information Law," is similar in scope. It excludes bodily injury, property damage, and personal and advertising injury:
Soon after Beecroft filed her suit, Ocwen asked Zurich to provide a defense pursuant to the insurance agreement. Zurich refused; instead, it filed this declaratory judgment action against Ocwen, arguing that the policy exclusions just noted absolved it of any duty to defend or indemnify Ocwen in the Beecroft lawsuit. See 28 U.S.C. § 2201. Ocwen counterclaimed that Zurich breached its duty to defend, and Zurich responded with a motion for judgment on the pleadings. In order to resolve that motion, the court had to compare the policy language with the allegations in Beecroft's complaint.
Beecroft's initial complaint alleged that Ocwen frequently attempted to contact her as part of a debt-collection effort that included "letters, billing statements and repeated robocalls to [her] cellular phone." She alleged that Ocwen "made approximately 58 phone calls to [her] cellular telephone using an automated telephone dialing system." The complaint described each of those 58 calls with specificity, including the date, time, and the caller ID. On two occasions, Beecroft picked up the phone and told Ocwen to stop calling.
In her first amended complaint, Beecroft expanded the list of the collection methods to "letters, billing statements and repeated robocalls to [her] cellular and home telephone ." (Our emphasis.) Her initial and amended complaints asserted that Ocwen used an autodialer because, on the two times that Beecroft actually answered, there "was a significant delay before an operator would come onto the line and ask for [her]"—an allegedly telltale sign that Ocwen was using an autodialer before connecting her with a live operator.
Beecroft's second amended complaint added an allegation that "some or all of the call to [her] cellular phone, including but not limited to the [58] calls listed above, were made using: (a) Premier Global Dialer; (b) an IAT Predictive Dialer; (c) a Davox Dialer; (d) Aspect Dialer; or (e) similar dialing system that has the requisite capacity pursuant to the TCPA." In each version of the complaint, Beecroft maintained that Ocwen's actions "were done unfairly, unlawfully, intentionally, deceptively and absent bona fide error, lawful right, legal defense, legal justification or legal excuse." In other parts of the complaint, Beecroft alleged that:
Ocwen and its agents intentionally and/or negligently caused emotional harm to [Beecroft] by engaging in highly offensive conduct in the course of collecting this debt, thereby invading and intruding upon [her] right to privacy. This conduct included over 58 phone calls to [Beecroft's] cellular telephone and additional calls to Plaintiff's home phone ... .
To similar effect, she asserted that Ocwen "intentionally and/or negligently interfered, physically or otherwise, with the solitude, seclusion and/or private concerns or affairs of this Plaintiff, namely, by repeatedly and unlawfully calling Plaintiff's cellular telephone with equipment prohibited by federal law."
After reviewing the insurance policy and Beecroft's complaint, the district court concluded that all of the factual allegations in Beecroft's complaint fell within the scope of the policy exclusions. To the extent that Counts I through III alleged conduct that violated the TCPA, it found that the policy exclusion's "catch-all" clause swept in the FDCPA as an "other statute" that regulates the communication of information. Because the FDCPA prohibits calls made with the "intent to annoy, abuse or harass," the court concluded that even if some of Ocwen's calls to Beecroft did not violate the TCPA, they still violated the FDCPA because they were made after Beecroft had asked Ocwen to stop calling. Calling someone after being asked to stop, the court thought, indicated an intent to abuse, harass, or at the very least annoy. The court also held that the common-law claims in Counts IV and V (defamation and invasion of privacy) were excluded because they were based on conduct "arising out of" the same operative facts as the conduct that was alleged to have violated the enumerated statutes.
Based on these findings, the court held that Zurich had no duty to defend Ocwen in the Underlying Litigation.1 This appeal followed. Ocwen does not disagree with the district court's analysis of Counts I through IV; it argues only that the policy exclusion should not have applied to the common-law invasion-of-privacy claim in Count V. Ocwen contends that the potential for covered liability exists because the Beecroft complaint includes the possibility that (1) some calls were made to Beecroft's home phone using a live operator, and (2) some calls were not made with the intent to annoy, abuse, or harass. The first of these points would preclude TCPA liability, because that statute prohibits calls to landlines only if those calls use artificial or prerecorded voices. The second is designed to knock out the FDCPA theory, because that law does not cover calls that were made negligently, rather than intentionally. According to Ocwen, the Beecroft complaint potentially alleges conduct that neither falls into the enumerated statutes nor "arises out of" conduct that is alleged to violate those statutes.
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