Emcasco Insurance v. CE Design, Ltd.
784 F.3d 1371
10th Cir.2015Background
- In 2008 Custom Mechanical (Oklahoma) sent unsolicited advertising faxes to CE Design (Illinois) and ~2,551 others; CE Design sued under the TCPA, conversion, and the Illinois Consumer Fraud Act (ICFA).
- CE Design alleged Custom "knew or should have known" the faxes were unsolicited and sought $500 per fax under the TCPA; CE Design and Custom settled, entry of judgment for $1,276,000, and CE Design agreed to pursue recovery from Custom’s insurer, Emcasco.
- Emcasco denied coverage and defense; competing declaratory-judgment actions followed and were consolidated in the W.D. Oklahoma.
- Emcasco’s policy provided Coverage A (property damage) and Coverage B (personal & advertising injury), but included exclusions: an expected-or-intended-injury exclusion, a knowing-violation exclusion, and a broad statutory-violation exclusion covering violations or alleged violations of the TCPA and similar statutes.
- The district court granted summary judgment for Emcasco, holding the insurer had no duty to defend or indemnify; the Tenth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to defend TCPA claim | TCPA claim triggers coverage | Statutory-violation exclusion bars coverage for claims arising from alleged TCPA violations | Held for Emcasco — exclusion removes duty to defend TCPA claim |
| Coverage for conversion (property damage) under Coverage A | Conversion alleged "knew or should have known" — could be an "accident" (occurrence) if Custom mistakenly believed it had consent | Conversion, as pleaded, alleges intentional diversion (no "accident"); unsupported mistake insufficient to create occurrence | Held for Emcasco — no occurrence; insurer had no duty to defend conversion claim |
| Coverage for conversion under Coverage B (privacy/publishing) | Conversion might fit "personal and advertising injury" (publication/privacy) | Conversion is appropriation, not publication; TCPA privacy analog covered is excluded by statutory clause; knowing-violation exclusion also applies | Held for Emcasco — conversion not a covered "personal and advertising injury," and exclusions apply |
| Coverage for ICFA claim | ICFA is separate tort; damages independent of TCPA | ICFA requires intent to deceive, which triggers expected/knowing exclusions and also arises from the TCPA-related faxing so statutory-violation exclusion applies | Held for Emcasco — no duty to defend ICFA claim (intent element and statutory exclusion defeat coverage) |
Key Cases Cited
- Park Univ. Enters., Inc. v. Am. Cas. Co. of Reading, 442 F.3d 1239 (10th Cir. 2006) (an occurrence may exist where insured has a reasonable, fact-supported belief that fax consent existed)
- Harmon v. Cradduck, 286 P.3d 643 (Okla. 2012) (conversion requires intentional diversion for personal benefit)
- Dodson v. St. Paul Ins. Co., 812 P.2d 372 (Okla. 1991) (insurance policies construed liberally for insured; ambiguous terms resolved for insured)
- G.M. Sign, Inc. v. State Farm Fire & Cas. Co., 18 N.E.3d 70 (Ill. App. Ct.) (statutory-violation exclusion defeated TCPA, conversion, and related claims arising from unsolicited faxes)