Auto-Owners Insurance Company v. Stevens & Ricci Inc
2016 U.S. App. LEXIS 16182
| 3rd Cir. | 2016Background
- Stevens & Ricci hired a third‑party advertiser to send fax advertisements; 18,879 unsolicited faxes were sent in Feb. 2006.
- Hymed filed a TCPA class action against Stevens & Ricci alleging unsolicited faxes; statutory damages were $500 per fax, treble if willful, exposing defendant to very large liability.
- Stevens & Ricci was insured under Auto‑Owners’ Businessowners Policy, which covers damages for "property damage" (physical/tangible injury) and "advertising injury" (four enumerated content‑based harms, including publication that "violates a person’s right of privacy").
- Auto‑Owners filed a declaratory judgment action seeking a declaration that it had no duty to defend or indemnify; the district court granted summary judgment for Auto‑Owners, holding neither property damage nor advertising injury covered the TCPA claims.
- The parties settled the underlying class action for $2,000,000; the district court approved and the insurer’s coverage dispute remained for appeal.
Issues
| Issue | Plaintiff's Argument (Auto‑Owners) | Defendant's Argument (Hymed) | Held |
|---|---|---|---|
| Subject‑matter jurisdiction / amount in controversy | Amount in controversy exceeds $75,000 measured from insurer’s perspective (total potential indemnity + defense costs) | Must look to individual class members’ claims; anti‑aggregation bars reaching $75,000 | Court: Jurisdiction proper — insurer’s unitary dispute with insured meets amount; defense costs may be included |
| Whether unsolicited faxes caused "property damage" under policy | Sending faxes did not cause an "accident" or physical/tangible injury covered by policy | The unintended consumption of paper/toner and temporary loss of fax use are tangible property damage | Court: No coverage — harms were the foreseeable, natural result of intentionally sent faxes, not an "accident" |
| Whether unsolicited faxes caused "advertising injury" (privacy) | "Advertising injury" clause is content‑dependent and protects privacy in secrecy (publication of confidential material), not seclusion from unsolicited contact | TCPA protects seclusion (right to be left alone); policy language covers "publication that violates a person’s right of privacy" and thus covers unsolicited faxes | Court: No coverage — clause construed to address content‑based privacy (secrecy), not mere receipt of unsolicited ads; TCPA seclusion harms are excluded |
| Choice of law (Pennsylvania v. Arizona) | Apply Pennsylvania law (forum) | Apply Arizona law (place of contract formation) | Court: Apply Pennsylvania choice‑of‑law (Griffith framework); no relevant conflict with Arizona on accident/advertising injury analysis |
Key Cases Cited
- St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283 (establishes the good‑faith pleading rule for amount in controversy)
- Werwinski v. Ford Motor Co., 286 F.3d 661 (anti‑aggregation rule for separate plaintiffs’ claims)
- Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d 536 (7th Cir.) (insurer‑perspective, unitary controversy approach to amount in controversy)
- Powell v. State Farm Mut. Auto. Ins. Co., 87 F.3d 93 (attorneys’ fees may be included in amount in controversy when contract mandates payment)
- Donegal Mut. Ins. Co. v. Baumhammers, 938 A.2d 286 (Pa.) (undefined "accident" construed as unexpected/fortuitous; intentional acts’ foreseeable results not accidental)
- Telecommunications Network Design v. Brethren Mut. Ins. Co., 5 A.3d 331 (Pa. Super. Ct.) (interpreting identical "advertising injury" language as protecting privacy in secrecy, not seclusion)
- Packard v. Provident Nat’l Bank, 994 F.2d 1039 (discusses risks of measuring amount in controversy by defendant’s total cost and aggregation concerns)