CURTIS-UNIVERSAL, INCORPORATED, Plaintiff,
v.
SHEBOYGAN EMERGENCY MEDICAL SERVICES, INCORPORATED, doing
business as Orange Cross; et al., Defendants.
FIRST NATIONAL INSURANCE COMPANY OF AMERICA, Intervening
Plaintiff-Appellee,
v.
SHEBOYGAN EMERGENCY MEDICAL SERVICES, INCORPORATED, doing
business as Orange Cross, Defendant-Appellant.
No. 94-1858.
United States Court of Appeals,
Seventh Circuit.
Argued Oct. 3, 1994.
Decided Dec. 14, 1994.
Rehearing and Suggestion for
Rehearing En Banc Denied
Jan. 12, 1995.
K. Scott Wagner, Hale & Lein, Milwaukee, WI, for Curtis-Universal, Inc.
Craig W. Nelson (argued), Nelson, Dries & Zimmеrman, Brookfield, WI, for First Nat. Ins. Co. of America.
Michael Fischer, James T. McKeown (argued), Foley & Lardner, Milwaukee, WI, for Sheboygan Emergency Medical Services, Inc.
Before POSNER, Chief Judge, and CUMMINGS and ENGEL,* Circuit Judges.
POSNER, Chief Judge.
We are asked to decide whether an insurance company (First National Insurance Company of America) that has promised to indemnify its insured for liability resulting from the infliction of "advertising injury" has a duty under the law of Wisconsin to defend the insured against a wide-ranging antitrust and tort suit. The district judge held that there was no duty and granted a declaratory judgment to that effect to the insurance company, which had intervened in the suit.
Together with the two hospitals that own it, Orange Cross has been sued in an 86-paragraph complaint by a competing ambulance service, Curtis-Universal. The complaint charges the defendants with conspiring to exclude Curtis from the Sheboygan market in ambulance service, in violation of federal antitrust law and state tort law. The City of Sheboygan had decided to privatize its emergency ambulance service ("911 service"). To this end it invited bids for the provision of the sеrvice on a contract basis. Curtis won the bidding contest, beating Orange Cross, the 911 provider in the surrounding county. Determined to reverse the outcome of the contest, Orange Cross and its parent hospitals organized a boycott of Curtis's ambulance service. Patients brought to either hospital in a Curtis ambulance were told, even if they requested that Curtis be used to take them home or to some other destination when their hospital stay was over, that it was the hospital's policy to use only Orange Cross's ambulance service for the transportation of patients. The hospitals refused to stock Curtis's ambulances with medication, equipment, and supplies, threatened to discontinue referrals to nursing homes that used Curtis's service, and sold their services below cost--all in an effort to run Curtis out of the market. The defendants' scheme was successful; Orange Cross obtained a monopoly of ambulаnce services in Sheboygan. That is the antitrust claim; among the other claims in Curtis's complaint is a claim for tortious interference with contract in which Orange Cross and the other defendants are accused of "disseminating false information about Curtis" and "campaigning to get the public to call 911 and ask for Orange Cross."Needless to say, in reciting the allegations of the complaint we do not vouch for their truth. But it is conceded (and is obvious from the insurance policy itself, as we are about to see) that the insurance company's duty to defend depends on what is alleged in the suit against its insured rather than on the insured's actual conduct. City of Edgerton v. General Casualty Co.,
The insurance policy that First National had issued to Orange Cross is entitled "Broad Form Comprehensive General Liability Endorsement" and promises to indemnify the insured for "all sums which the insured shall become legally obligated to рay as damages because of personal injury or advertising injury," and "to defend any suit against the insured seeking damages on account of such injury, even if any of the allegations of the suit are groundless, false or fraudulent." The policy defines "advertising injury" as "injury arising out of an offense committed during the policy period occurring in the course of the named insured's advertising activities, if such injury arises out of libel, slander, defamation, violation of right of privаcy, piracy, unfair competition, or infringement of copyright, title or slogan." There are various exclusions, which we shall take up later.
The policy does not cover antitrust injury, but the district judge ruled correctly that if any part of the suit would if successful require the insurance company to indemnify the insured for "advertising injury," the insurance company was obligated to defend against the entire suit. School District of Shorewood v. Wausau Ins. Cos.,
In reaching this conclusion the judge thought it significant that Curtis's complaint did not use the term "unfair competition" and that the complaint as a whole was centered in the antitrust allegations. Neither point is significant. The insurer's obligations are not circumscribed by the plaintiff's choice of legal theories. The plaintiff's complaint, upon which the insurer's duty depends, need not even set forth the plaintiff's legal theories. See, e.g., Fed.R.Civ.P. 8(a); Fed.R.Civ.P. Form 9. What is important is not the legal label that the plaintiff attaches to the defendant's (that is, the insured's) conduct, but whether that conduct as alleged in the complaint is at least arguably within one or more of the categories of wrongdoing that the policy covers. U.S. Fire Ins. Co. v. Good Humor Corp.,
So we must decide whether facts alleged in or implied by the claim of tortious interference with the contract between Curtis and the City of Sheboygan constitute "unfair competition" within the meaning of the insurance contract. This may in turn depend on whether the policy should be understood as using "unfair competition" broadly, perhaps in a layman's sense, or whether it must be сonfined to its core legal meaning. Taken broadly--and even without regard to section 5 of the Federal Trade Commission Act, 15 U.S.C. Sec. 45, which forbids "unfair methods of competition," a term that has been interpreted to encompass everything forbidden by federal antitrust law and then some, FTC v. Brown Shoe Co.,
We think it more likely that "unfair competition" bears its normal legal meaning in the insurance policy that First National issued to Orange Cross. But what is that meaning? Originally, "unfair competition" just meant the infringement of an unregistered trademark. 1 Rudolf Callmann, The Law of Unfair Competition, Trademarks and Monopolies Sec. 2.01 (Louis Altman ed., 4th ed. 1981 with 1994 supp.). With the enactment in 1946 of section 43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a)(1)(A), the term expanded to include other false representations concerning goods. 1A Callmann, supra, Sec. 5.04. But that was almost fifty years ago. The insurance policy in our case wasn't written fifty years ago. Issued to Orange Cross in 1988, it tracks the 1981 version of the "Broad Form Comprehensive General Liability Endorsement," an industry-wide form that was altered in 1986--to drop "unfair competition." Terri D. Keville, "Advertising Injury Coverage: An Overview," 65 S.Cal.L.Rev. 919, 926-28 (1992). A lot of insurance had been written under the 1981 version, however--judging from this case, it continued to be written even after the 1986 revision--and the cases interpreting the 1981 version are divided on how broadly to read "unfair competition." Id. at 929-36.
The criterion for interpreting a term in an insurance policy is how the insured would reasonably have understood it. Elliott v. Donahue,
Maybe; no stronger word is possible. Neither case that we have cited is concerned with the classification of the tort of intentional interference with contractual (or other advantаgeous commercial) relations, and the embryonic Restatement of Unfair Competition, though it defines "unfair competition" very broadly, excludes the intentional-interference tort. Tent.Draft No. 1, Sec. 1, p. 3 (1988). We have misgivings, moreover, about interpreting "unfair competition" in the policy as broadly as it might be interpreted in the modern law of business torts. A word sometimes picks up meaning from its neighbors; and all the other terms in the list of wrongs insured under the rubric of "advertising injury" concern the misuse of information, as befits the word "advertising." Piracy and the infringement of copyrights, titles (presumably of books, songs, products, services, and so forth), and slogans (advertising and other) are simply different forms of theft (broadly conceived) of information. And defamation involves the use of false information, while invasion of the right of privacy the use of true, though misleading or offensive, information. Libel and slander are the two halves оf defamation; why all three terms appear in the list is a mystery, though here the drafting history casts some light: "defamation" was eliminated in the 1986 revision of the standard form apparently on the ground of redundancy. Keville, supra, 65 S.Cal.L.Rev. at 927-28.
Tortious interference with contractual relations can involve the misuse of information, as where a workers' compensation carrier misrepresents the medical condition of an employee to his employer, with the result that the employee is fired. American Surety Co. v. Schottenbauer,
Fortunately, we do not have to determine the outer bounds of the term "unfair competition" as it appears in the insurance policy in order to decide this case. Curtis's complaint elaborates upon the claim of tortious interference with contractual relations in a way that preserves the informational connotations of the traditional legal concept of "unfair competition." The specific allegations of the complaint, recall, are that Orange Cross "disseminat[ed] false information about Curtis" and "campaign[ed] to get the public to call 911 and ask for Orange Cross." The first allegation is either a charge of defamation, in which event we would not even have to reach "unfair competition" in the list of covered offenses, or a charge of product disparagement, see Restatement (Second) of Torts Sec. 623A, comment g, p. 341 (1977); id. Sec. 626, and the latter characterization seems to us to nestle comfortably within a concept of unfair competitiоn that is close to its original meaning of trademark infringement. The traditional trademark infringer gets sales unfairly from a competitor by leading consumers to think that the infringer's product or service is of higher quality than it is. The product disparager gets sales unfairly from a competitor by making the consuming public think that the competitor's product is of lower quality than the disparager's--implying, just as in the trademark case, that the disparager's product or service is of higher quality than it is.
Even closer to a traditional claim of trademark infringement is the allegation that Orange Cross (and the other defendants) tried to get the public to call 911 and ask for Orange Cross. Curtis was the 911 ambulance service. To tell people to call 911 and ask for Orange Cross was in effect to represent to them that Orange Cross was an authorized 911 ambulance service for the City of Sheboygan, when in fact only Curtis was. This was very close to an attempt to pass Orange Cross off as Curtis, the core trademark infringement. If 911 ambulance service = Curtis, and Orange Cross is telling people in effect that 911 ambulance service = Orange Cross, this is almost the same thing as telling people that Orange Cross is Curtis. It is not quite the same thing but it is close enough to count as unfair competition unless the latter term is to be frozen in legal history, which seems to us as implausible as supposing that it is a synonym for "antitrust viоlation."
First National argues that even if Curtis's complaint charges unfair competition within the meaning of the insurance policy, as we believe it does, coverage is barred by various exclusions. The district judge did not consider these alternative grounds for ruling that First National had no duty to defend Orange Cross against Curtis's suit. But they have not been waived and First National is therefore entitled to urge them on us as alternative grounds to the district judge's for upholding the judgment.
The policy excludes coverage for an "advertising injury arising out of the willful violation of a penal statute" by or with the consent of the insured. The antitrust laws contain penal provisions, but so do many other statutes not normally considered penal or criminal, such as the copyright laws, which contain criminal penalties although they are rarely imposed. Wisconsin imposes such penalties for conspiracy to inflict business injury, Wis.Stat. Sec. 134.01, but the same conduct can give rise to a private action for unfair competition, Wis.Stat. Sec. 100.20(5), so the insurer would be excused only from defending the criminal, not the civil, suit.
Perhaps, though, the emphasis in the exclusion belongs on the word "willful," so that what is meant is that anyone who violates a statute in circumstances that would expose the violator to criminal punishment under the statute does forfeit coverage, contrary to our assumption in the preceding paragraph. But even if this were right it would be highly unlikely that Curtis's complaint should be understood to be charging Orange Cross with a crime. Almost all criminal prosecutions under the antitrust laws involve conspiracies to fix prices or allocate markets between competitors. (The only federal sentencing guideline for antitrust offenses is entitled "Bid-Rigging, Price-Fixing, or Market-Allocation Agreements Among Competitors." United States Sentencing Guideline Seс. 2R1.1.) Price-fixing is among the many offenses charged in Curtis's lengthy complaint, but it would be a stretch to suppose that the complaint alleges criminal activity. And all this is on the dubious assumption that the advertising injury alleged in the tortious-interference count of Curtis's complaint should be classified as arising out of a willful violation of a penal statute rather than arising out of the tort of unfair competition.
Next, First National points to a provision in the insurance policy barring coverage when the advertising injury arises out of "the publication or utterance of defamatory or disparaging material concerning any person or organization or goods, products or services ... made by or at the direction of the insured with knowledge of the falsity thereof." But Curtis's complaint does not allege, nor is it clear that Curtis would have to prove, that the defendants' alleged campaign of disseminating falsе information about Curtis was made with knowledge that the information was false. The defendants may have disseminated negative information that they believed was true. They might still be guilty of tortious interference with contractual relations, at least if they failed to exercise due care to make sure they were telling the truth about Curtis. Might; there are no pertinent cases in Wisconsin, and few elsewhere--and those few are divided over whether the tort requires knowledge of the falsity of the representations constituting the interference with the plaintiff's business. Compare Delloma v. Consolidation Coal Co.,
Last, and closely related to the preceding point, there is a policy exclusion for "any injury arising out of any act committed by the insured with actual malice." We may assume, at least to begin with, that the reference is to the "actual malice" standard of New York Times Co. v. Sullivan,
Although the term "actual malice" is rarely encountered outside the field of defamation and invasion of privacy, rarely is not never. Nor is it clear that the term as usеd in the insurance policy in this case is meant to be limited to "malice" in the sense that it bears in New York Times Co. v. Sullivan. "Malice" is also used in business tort cases to denote intent to injure, Maleki v. Fine-Lando Clinic Chartered, S.C.,
Since part at least of Curtis's suit alleges conduct within the scope of the insurance policy and none of the exclusions is applicable, First National violated its duty to defend and the judgment in its favor must therefore be reversed with directions to enter judgment for Orange Cross.
REVERSED.
Notes
Hon. Albert J. Engel of the Sixth Circuit