Universal Underwriters Insurance Company v. Lou Fusz Automotive Network, Inc.Universal Underwriters Insurance Company v. Lou Fusz Automotive Network, Inc.
Karl W. Dickhaus (argued), St. Louis, MO, for appellee, Onsite Computer.
Jay L. Kanzler (argued), St. Louis, MO, for appellee, Lou Fusz Automotive, etc.
Before MELLOY, SMITH, and COLLOTON, Circuit Judges.
MELLOY, Circuit Judge.
Onsite Computer Consulting Services (“Onsite“) brought a class action lawsuit against Lou Fusz Automotive Network, Inc. (“Lou Fusz“) in state court under the Telephone Consumer Protection Act,
Onsite brought its state court, class-action petition on behalf of all persons harmed by Lou Fusz‘s alleged transmission of unsolicited fax advertisements. Onsite sought class certification, injunctive relief, and “[a]n award of the full amount of statutory damages allowed under
In response to the present declaratory judgment action, Onsite and Lou Fusz joined forces to argue in favor of coverage under the policy. Universal presented numerous arguments against coverage that depended upon the policy‘s definitions of the terms “INJURY” and “DAMAGES.”2 Universal argued that Onsite sought only fixed damages of $500 per violation as permitted under the Act and that the fixed damages were “civil penalties, fines or assessments” excluded from the policy‘s definition of DAMAGES. Universal also argued that the alleged violations of the Act did not qualify for coverage under any of the policy‘s definitions of INJURY. Finally, Universal argued that violations of the Act were intentional and therefore excluded from coverage.
Lou Fusz moved for summary judgment, which the district court granted. The district court concluded that Onsite sought all available damages, not merely fixed damages. The district court also concluded that even if Onsite had sought only fixed damages, such damages were not “civil penalties” that would be excluded from coverage under the policy, but rather, were at least in part a liquidated sum representing uncertain and hard-to-quantify actual damages. The district court determined that an alleged violation of the Act qualified as a private nuisance, and therefore a Group 3 INJURY under the policy, but the district court did not address whether a violation of the Act satisfied any of the other definitions of INJURY. The district court found that the issue of intent was unresolved and therefore Universal could not be relieved of its duty to defend based on the allegedly intentional nature of Lou Fusz‘s actions. Finally, the district court found Universal‘s claim regarding a duty to indemnify Lou Fusz premature and dismissed that claim without prejudice.
II. Discussion
Under Missouri law, the interpretation of an insurance policy is a question of law. Standard Artificial Limb, Inc. v. Allianz Ins. Co., 895 S.W.2d 205, 209 (Mo.Ct.App.1995). Accordingly, our review is de novo. In addition, this case comes to us following a grant of summary judgment, which we review de novo. Royal Ins. Co. of America v. Kirksville Coll. of Osteopathic Med., Inc., 304 F.3d 804, 806 (8th Cir.2002).
“The duty to defend is broader than the duty to indemnify.” McCormack Baron Mgmt. Servs. Inc. v. American Guarantee & Liab. Ins. Co., 989 S.W.2d 168, 170 (Mo.1999) (en banc). The duty to defend exists where there is a potential liability. Id.; Royal Ins. Co. of America, 304 F.3d at 807 (“[Under Missouri law] the insurer‘s duty to defend arises when there is merely the potential for coverage.“). In assessing whether there is a duty to defend, we must compare “the language of the policy with the allegations in the petition.” Auto Club Family Ins. Co. v. Jacobsen, 19 S.W.3d 178, 182 (Mo.Ct.App.2000). In construing the policy, we must give each term its ordinary, lay meaning unless the policy expressly defines a term in a technical manner. Farmland Inds., Inc. v. Republic Ins. Co., 941 S.W.2d 505, 508 (Mo.1997) (en banc). Finally, we must resolve any ambiguities in favor of coverage. Aetna Cas. & Sur. Co. v. Haas, 422 S.W.2d 316, 321 (Mo.1968) (“[T]he language must be construed so as to give the insured the protection which he reasonably had a right to expect; and to that end any doubts, ambiguities and uncertainties arising out of the language used in the policy must be resolved in his favor.“) (internal quotation omitted).
Onsite sought “[a]n award of the full amount of statutory damages allowed under
Universal also argues that Onsite failed to allege any harm, and therefore only stated a claim for fixed damages. The facts as alleged, however, plainly identify harm to Onsite. Onsite alleged that it received an unsolicited fax. Although the monetary impact of a single unsolicited fax is minor, it is nevertheless a cost borne by the recipient and recognized by Congress as a compensable harm. See, e.g., Missouri ex rel. Nixon v. American Blast Fax, Inc., 323 F.3d 649, 654-55 (8th Cir.2003) (listing the various harms caused by the receipt of unsolicited faxes).
Even if Onsite had sought only fixed damages under the Act, we would still construe the complaint as having alleged DAMAGES under the policy. Universal elected not to define the term “civil penalties” when it drafted the policy. Because the policy does not contain a technical definition for the phrase “civil penalty,” we must use the term‘s lay meaning. If we find that the lay meaning is ambiguous, or that there is more than one reasonable lay meaning for the term, we must adopt the meaning that supports a finding of coverage. Aetna Cas. & Sur. Co., 422 S.W.2d at 321. According to Universal, the lay meaning of the term “civil penalty” is any award that exceeds dollar for dollar compensation for actual loss and has a punitive or deterrent effect. Lou Fusz and Onsite, on the other hand, argue that a lay person would understand a “civil penalty” to be an amount awarded to a public or governmental body. We disagree with the former interpretation and need not adopt the latter.
Initially, we note that Universal‘s proffered interpretation is unworkable when read “in the context of the policy as a whole.” Columbia Mut. Ins. Co. v. Schauf, 967 S.W.2d 74, 77 (Mo.1998) (en banc). The policy‘s definition of DAMAGES includes amounts awarded as punitive damages. Accordingly, we cannot accept a definition for “civil penalty” that excludes from the definition of DAMAGES all awards with a punitive or deterrent effect. Such an interpretation would create an internal inconsistency in the policy in which one section would authorize the coverage of punitive awards and another would specifically exclude such awards from coverage.
We also believe that Congress intended the fixed damages available under the Act to be, at least in part, an incentive for private parties to enforce the Act. See Forman v. Data Transfer, Inc., 164 F.R.D. 400, 404 (E.D.Pa.1995) (“The statutory remedy is designed to provide adequate incentive for an individual plaintiff to bring suit on his own behalf.“). Because the actual losses associated with individual violations of the Act are small, this added incentive is necessary. Whether we view the fixed award as a liquidated sum for actual harm or an incentive for aggrieved parties to act as private attorneys general, or both, it is clear that the fixed amount serves more than purely punitive or deterrent goals. Also, the fact that Congress elected to make treble damages available separate from fixed damages strongly suggests that the fixed damages serve additional goals other than deterrence and punishment.
We also find that the complaint alleges an “INJURY” under the policy. The policy lists “private nuisance (except pollution), [and] invasion of rights of privacy or possession of personal property” under the definition of INJURY. It does not limit or qualify these terms in any manner. It sets forth technical definitions for neither “private nuisance” nor “invasion of rights of privacy.” Accordingly, under Missouri law, we must apply ordinary, lay definitions to these terms. Looking at how Congress described unsolicited fax advertisements, see Nixon, 323 F.3d at 654-55, it is clear that Congress viewed violations of the Act as “private nuisances” and as “invasions of privacy” under ordinary, lay meanings of these phrases. Congress also stated:
Unrestricted telemarketing, however, can be an intrusive invasion of privacy and, when an emergency or medical assistance telephone line is seized, a risk to public safety.
Many customers are outraged over the proliferation of intrusive, nuisance calls to their homes from telemarketers.
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Individuals’ privacy rights, public safety interests, and commercial freedoms of speech and trade must be balanced in away that protects the privacy of individuals and permits legitimate telemarketing practices.
Evidence compiled by the Congress indicates that residential telephone subscribers consider automated or prerecorded telephone calls, regardless of the content or the initiator of the message, to be a nuisance and an invasion of privacy.
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Banning such automated or prerecorded telephone calls to the home ... is the only effective means of protecting telephone consumers from this nuisance and privacy invasion.
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Businesses also have complained to the Congress and the Federal Communications Commission that automated or prerecorded telephone calls are a nuisance, are an invasion of privacy, and interfere with interstate commerce.
Finally, we note that our case is distinct from a recent Seventh Circuit case which held an insurer did not owe its insured a defense against claims under the Act. See American States Ins. Co. v. Capital Assocs. of Jackson County, Inc., 392 F.3d 939 (7th Cir.2004). There, the intentional nature of the violations appeared undisputed, and the policy specifically excluded from coverage any losses that were “expected or intended from the standpoint of the insured.” The Seventh Circuit analyzed the issue of coverage under a definition for “invasion of privacy” where that term appeared only as a subpart of the broader term “advertising injury.” The court noted that the term “invasion of privacy” had many meanings, including privacy in the sense of a right to seclusion (that could be violated by intrusions into private space) or a right to secrecy (that could be violated by public dissemination of private information). The court concluded that because the policy at issue only addressed “invasion of privacy” as a form of “advertising injury,” “invasion of privacy” under that specific policy was limited to secrecy-type privacy rights. The court further determined that intrusive and unsolicited fax advertisements only touched upon the seclusion-type privacy rights. Accordingly, invasions of seclusion through unauthorized faxes failed to meet the policy‘s limited definition of “advertising injury.”
In the present case, by contrast, the policy defines advertising injury in a section that is entirely separate from the definition of INJURY that includes “invasion of privacy.” There is no support in the present policy for a limited reading of the term “invasion of privacy.” In short, differences both as to the insurance policies under examination and the facts of the alleged offenses make the Seventh Circuit‘s case inapplicable to the current situation.
We affirm the judgment of the district court.
Notes
INSURING AGREEMENT — WE will pay all sums the INSURED legally must pay as DAMAGES (including punitive DAMAGES where insurable by law) because of INJURY to which the insurance applies caused by an OCCURRENCE arising out of GARAGE OPERATIONS or AUTO HAZARD.
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We have the right and duty to defend any SUIT asking for these DAMAGES. WE may investigate and settle any claim or SUIT WE consider appropriate. OUR payment of the limit shown in the declarations ends OUR duty to defend.
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“DAMAGES” means amounts awardable by a court of law.... DAMAGES does not mean civil penalties, fines or assessments.
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“INJURY” means, with respect to:
Group 1 — bodily injury, sickness, disease or disability (including death resulting from any of these) or damage to or loss of use of tangible property;
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Group 3 — false arrest, false imprisonment, wrongful eviction, wrongful detention, malicious prosecution, abuse of process, libel, slander, defamation of character, private nuisance (except pollution), invasion of rights of privacy or possession of personal property;
Group 4 — plagiarism, misappropriation of advertising ideas or style, infringement of copyright, title, slogan or trademark;
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With respect to INJURY Groups 3, 4, 5 and 6, OCCURRENCE means acts of the INSURED during the Coverage Part period which result in such INJURY.