Opinion
Case No. 2:03-CV-00967PGC.
April 6, 2005
ORDER DENYING PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT AND GRANTING DEFENDANTS' CROSS-MOTIONS FOR SUMMARY JUDGMENT
This case is an action for insurance coverage. The plaintiff, Reagan National, seeks a declaratory judgment of the defendants' duty to defend and indemnify Reagan in a lawsuit filed against Reagan in Texas. Reagan has filed a motion for partial summary judgment, and the defendants, Hartford Casualty and National Casualty, have each filed cross-motions for summary judgment. The sole issue before the court is whether the Texas lawsuit is covered by the insurance policies issued by Hartford and National to Reagan. The court concludes that Reagan is not entitled to coverage under the insurance policies and therefore DENIES Reagan's motion for partial summary judgment (#20-1) and GRANTS the cross-motions filed by Hartford (#30-1) and National (#24-1).
BACKGROUND
On January 14, 2003, a class action lawsuit was filed against Reagan in Texas, Harrill et al. v. Reagan National Advertising of Austin, Inc., ("the Texas litigation"). The class action was filed by landowners and competitors of Reagan in the billboard advertising market around Austin, Texas. The complaint centers around allegations that Reagan has attempted to monopolize the billboard market in violation of Texas antitrust laws by abusing the regulatory regime in place for billboard advertising.
C.A. No. A03CA-51H.
Reagan alleges Hartford and National are required by contracts for insurance to defend and indemnify Reagan in the Texas litigation. National agreed to defend Reagan in the lawsuit, but did so under a reservation of rights. Hartford refused to defend Reagan in the Texas litigation. The only issue before this court is whether the terms of Reagan's insurance policies with Hartford and National (who have both filed cross-motions for summary judgment) cover the Texas litigation.
The Hartford Policy
The Hartford Policy is broken into two sections — Coverage A and Coverage B. Coverage A guarantees insurance for claims alleging "Bodily Injury and Property Damage Liability." Under this section, Hartford has agreed to defend Reagan "against any `suit'" seeking damages for "property damage." Property damage is defined as the "loss of use of tangible property that is not physically injured." But the insurance "applies to . . . `property damage' only if . . . caused by an `occurrence'. . . ." Occurrence is defined by the policy as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."
Coverage B of the Hartford policy guarantees insurance for "Personal and Advertising Injury Liability." Under Coverage B, Hartford agrees to defend Reagan against any "suit" seeking damages for "personal and advertising injury." Personal and advertising injury is defined in the policy as including claims "arising out of . . . malicious prosecution." The coverage provision states, however, that Hartford "will have no duty to defend the insured against any `suit' seeking damages for `personal and advertising injury' to which this insurance does not apply." The policy then has a section entitled "Exclusions." The exclusions section states, "This insurance does not apply to:. . . . `Personal and advertising injury' arising out of a violation of anti-trust law." In other words, the policy excludes coverage for malicious prosecution claims which arise out of a violation of anti-trust law.
Reagan seeks insurance coverage under both the Coverage A agreement and the Coverage B agreement. Hartford contends that it has no duty to defend Reagan under this insurance contract because: (1) the property damage alleged in the Texas litigation was not the result of an "occurrence" and is therefore not covered by the Coverage A agreement; and (2) the malicious prosecution claim in the Texas litigation "arises out of" a violation of antitrust law and is therefore excluded from coverage under the Coverage B agreement.
The National Policy
The insurance coverage obtained by Reagan through National is a "Media Special Perils Policy." The National policy covers damages for "claims arising out of . . . malicious prosecution." The coverage, however, is limited to acts "committed in the utterance or dissemination of matter by or with permission of the Insured during the Policy Period in the broadcast, telecast, cablecast, publication, distribution, display, or exhibition of advertising and in advertising services. . . ." Malicious prosecution is not defined in the policy. The National policy also contains "Exclusions." One of the exclusions exempts insurance coverage resulting from claims "for or arising from antitrust, restraint of trade, or unfair or deceptive business practices." The policy also generally exempts coverage for claims "for or arising from unfair competition" unless the unfair competition claim arises out of another enumerated claim such as plagiarism or copyright violation.
Reagan alleges that National is required to defend Reagan because the underlying Texas litigation includes a claim for malicious prosecution. National argues, among other things, that it has no duty to Reagan in the Texas litigation because: (1) the allegations in the Texas litigation do not arise out of the dissemination of "matter" as defined in the policy; and (2) the malicious prosecution claim arises out of claims for antitrust violation and is therefore excluded from coverage.
DISCUSSION
Pursuant to Rule 56 of the Federal Rules of Civil Procedure, summary judgment "shall be rendered . . . if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits . . . show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." In applying this standard, the court must examine the evidence and reasonable inferences therefrom in the light most favorable to the non-moving party. Because this case involves cross-motions for summary judgment, the court must "`construe all inferences in favor of the party against whom the motion under consideration is made.'"
See Gaylor v. Does, 105 F.3d 572, 574 (10th Cir. 1997).
Pirkheim v. First Unum Life Ins., 229 F.3d 1008, 1010 (10th Cir. 2000) (quoting Andersen v. Chrysler Corp., 99 F.3d 846, 856 (7th Cir. 1996)).
As explained above, the sole issue before this court is whether the insurance policies issued by Hartford and National to Reagan obligate Hartford and National to defend and indemnify Reagan in the underlying Texas litigation. Normally there would be a choice of law issue to resolve, since arguably the insurance policies could be interpreted under either Utah or Texas law. All sides agree, however, that the laws of the two states are similar enough that the outcome would be the same regardless of whether Utah or Texas law applies. Under such circumstances, it is not necessary to adopt the law of one state over the other as governing the case.
Excell, Inc. v. Sterling Boiler Mechanical, Inc., 106 F.3d 318, 320-21 (10th Cir. 1997).
All sides also agree that in resolving the issue before it, the court should look only to the terms of the insurance policies and the allegations of the complaint in the Texas litigation. In Texas, this has been called the "eight corners" rule — that is, the issue is resolved by looking at the four corners of the policy and the four corners of the complaint. If the complaint states claims which are covered by the insurance policy, the insurers have a duty to defend, regardless of the merits of the complaint. It should also be noted that the duty to defend is broader than the duty to indemnify. The duty to defend "arises when the insurer ascertains facts giving rise to potential liability under the insurance policy." The potential liability is "determined by referring to the allegations in the underlying complaint." "An insurer denying a duty to defend must establish that the claims fall outside the coverage of the policy or the claims are exempted from coverage." The duty to indemnify only arises once liability has been found. Insurance policies are interpreted according to contract rules.
Fire Ins. Exchange v. Therkelsen, 27 P.3d 555, 560 (Utah 2001) (holding that "`an insurer's duty to defend is determined by comparing the language of the insurance policy with the allegations in the complaint'") (citation omitted).
Pennsylvania Pulp Paper Co. v. Nationwide Mutual Ins. Co., 100 S.W.3d 566, 570 (Tx.Ct.App. 2003).
Sharon Steel Corp. v. Aetna Casualty Surety Co., 931 P.2d 127 (Utah 1997).
Id. at 133.
Id.
Simmons v. Farmers Ins. Group, 877 P.2d 1255, 1258 n. 3 (Utah 1994).
Fire Ins. Exchange v. Estate of Therkelsen, 27 P.3d 555 (Utah 2001).
Bergera v. Ideal Nat'l Life Ins. Co., 524 P.2d 599, 600 (Utah 1974).
The Antitrust Exclusions
Both National and Hartford argue that they are not required to defend or indemnify Reagan based on the underlying claim for malicious prosecution because that claim arose out of alleged antitrust violations. As explained above, the National insurance policy excludes coverage for claims "for or arising from antitrust, restraint of trade . . . unfair or deceptive business practices . . . [or] unfair competition. . . ." The Hartford policy excludes coverage under the Coverage B agreement for malicious prosecution claims "arising out of a violation of any anti-trust law." Both defendants argue that these exclusions preclude coverage of the Texas litigation. The court agrees."The scope of an exclusion will be interpreted according to its clear and unambiguous language." Thus, while an exclusion clause is construed against the insurer, an insurer may limit coverage "by using language which clearly and unmistakably communicates to the insured the specific circumstances under which the expected coverage will not be provided." If an insurance policy is ambiguous, any doubt is resolved against the insurer. But if the language is not ambiguous, it is construed according to its usual and ordinary meaning.
Bear River Mutual Ins. Co. v. Wright, 770 P.2d 1019, 1020 (Utah App. 1989).
LDS Hosp. v. Capitol Life Ins. Co., 765 P.2d 857, 859 (Utah 1988).
Dawson v. Dawson, 841 P.2d 749, 750 (Utah Ct.App. 1992).
Alf v. State Farm Fire Cas. Co., 850 P.2d 1272, 1274 (Utah 1993).
Id.
The claims raised in the Texas litigation clearly "arise out of" allegations of antitrust violations. Any fair reading of the complaint in the Texas litigation reveals that the sole purpose of the lawsuit is to enforce antitrust law. A piece by piece review of the complaint makes this clear.
Section I of the complaint simply sets out the plaintiffs attitude toward discovery. Section II lists the parties. The meat of the complaint begins in section III with the "Factual Background." It is evident from the factual background that the complaint is grounded in antitrust law. The plaintiffs allege that "Reagan currently controls over 900 faces, or over 80% of the total billboard faces in the Austin area [giving] Reagan monopoly power in renewing leases with landowners and preventing competition from other billboard companies." The entire factual background section is thereafter geared towards showing how the "anticompetitive actions" of Reagan are designed to "stifle competition" and "maintain its monopoly."
Section IV gives a brief background of how billboards are regulated in the Austin area. Section V is entitled "Reagan Has Maintained Its Monopoly Illegally." This section details the "anticompetitive actions" of Reagan and how Reagan abuses the regulatory and licensing process to maintain its alleged monopoly and prevent competition. A sampling of quotes from this section reveals that the complaint is grounded in antitrust law:
• "Reagan uses this `incentive' to keep competitors out of the market and keep the rents paid to landowners well below market rates."
• "Reagan abuses this provision by intimidating and threatening landowners and potential purchasers to keep rents below market and insure that there is no opportunity for a competitor to obtain a grandfathered billboard site by purchasing the property."
• "The difference from the prior negotiation is that now Reagan is the only billboard company that can put up a billboard, so there will be no competition."
• "Reagan has effectively removed all competition. . . . Reagan . . . has essentially insured the continued renewal of that lease by eliminating any future competition."
• "These appeals have several anticompetitive ramifications."
• "This permit is completely worthless to Reagan, except that it prevents a replacement sign from being erected to compete with Reagan."
• "Reagan has successfully kept a competitor from putting up a replacement billboard. . . ."
• "This litigation is simply an abuse of the legal process for the sole purpose of maintaining Reagan's monopoly by increasing costs, causing delay, and unfairly harming landowners and Reagan's competitors."
• "This is simply another case of Reagan abusing the process to discourage competition and retain its monopoly of the Austin market."
Section VI of the complaint is entitled "Intent to Monopolize." This section consists of a single paragraph which alleges that "Reagan has displayed a specific intent to monopolize. . . . [I]t has engaged in the anti-competitive acts described with the specific intent to eliminate competition in the billboard lease market . . . [and] it has succeeded in its attempt to monopolize that market."
Section VII of the complaint is entitled "Landowners Antitrust Injury." This section alleges that because of Reagan's "monopolistic conduct" the plaintiffs "have suffered antitrust injury." "Because of Reagan's monopolization or attempted monopolization, Reagan is able to control prices and limit competition for leases from landowners with grandfathered off-premises billboards." The plaintiffs further allege that because of Reagan's "monopolistic conduct" Reagan pays lease rates which "are less than one-half of those that would prevail in a competitive market. . . ."
Section VIII is entitled "Competitor's Antitrust Injury." This section alleges that Reagan's competitors, such as Acme Partnership and Capital Outdoors "have been damaged by the inability to consummate agreements and prospective agreements with landowners who have been bullied by Reagan's anti-competitive tactics into remaining with Reagan." This section specifically cites to Section 15.25 of the Texas Antitrust Act and alleges that the damages have been caused by Reagan's "anti-competitive conduct."
Section IX of the complaint sets forth the class allegations. These allegations are again related to Reagan's "monopolistic conduct." "The claims of the class representatives are typical of the claims of the class. That is, that Reagan's anti-competitive activities stifled competition in the Austin area. . . ."
Section X of the complaint asks for treble damages for "Reagan's anti-competitive and monopolistic conduct. . . . as provided in Section 15.21 of the Texas Antitrust Act." Section XI requests injunctive relief. Section XII simply notes that affidavits have been attached. And Section XIII asks for declaratory relief.
Finally, sections XIV through XVII set forth additional common law claims for relief, including claims for tortious interference, tortious interference with prospective business relations, interference with property rights, and breach of contract. None of these claims set forth any additional facts but are based on the "actions of Defendant Reagan set forth above. . . ."
One of the plaintiffs, Acme Partnership, filed an amended complaint, which generally mirrors the original complaint. The facts section of the amended complaint states: "Reagan has engaged in unlawful practices to try to monopolize, attempt to monopolize, attempt to maintain a monopoly, and conspire to monopolize trade or commerce in the billboard lease market in the Austin market." The amended complaint goes into great detail about how Reagan abuses the regulatory process in Texas to maintain its monopoly. The amended complaint, however, also adds a claim for malicious prosecution, stating, "Reagan's acts outlined above also constitute malicious prosecution of claims that were prosecuted maliciously, without cause and with intent to injury Acme."
Reagan does not dispute that some of the claims in the Texas litigation fall within the antitrust exclusion of the Hartford and National policies. But Reagan alleges there were other claims "which were capable of standing alone as entirely separate causes of action from the antitrust claims, including the claims of malicious prosecution, abuse of process, and sham litigation." It should be noted that the complaint does not in fact state an actual claim for "abuse of process" or "sham litigation," but does state a claim for malicious prosecution. Even so, all of these "claims" fall within the antitrust exclusion in the Hartford and National insurance policies.
Reply Memo in Support of Plaintiffs' Motion for Partial Summary Judgment Against Hartford and Memorandum in Opposition to Hartford's Motion for Summary Judgment at 6 (filed Mar. 7, 2005).
The allegations of malicious prosecution, abuse of process, and sham litigation clearly "aris[e] out of a violation of anti-trust law" as stated in the Hartford policy, and "aris[e] from antitrust, restraint of trade, or unfair or deceptive business practices" as stated in the National policy. In the amended complaint, under the heading "Sham litigation," Acme contends:
When Reagan is not successful with all of its other devices, Reagan repeatedly sues the COA, TxDOT, landowners, and its competitors in an effort to stop the issuance of permits and the construction of replacement billboards. Reagan has seldom succeeded in this effort, despite numerous lawsuits in state and federal court. In fact, when Reagan has found itself in a difficult legal position, Reagan has sometimes dismissed lawsuits, only to refile the same causes of action in another form. This litigation is simply an abuse of the legal process for the sole purpose of maintaining Reagan's monopoly by increasing costs, causing delay, and unfairly harming landowners and Reagan's competitors.
The next paragraph of the amended complaint, entitled "Sham administrative litigation," alleges that Reagan files "sham litigation with the State Office of Administrative Hearings in an effort to collaterally attack adverse judicial rulings and ambush landowners and competitors." The amended complaint alleges that this litigation "is simply another case of Reagan abusing the process to discourage competition and retain its monopoly in the Austin market." Finally, the actual claim for malicious prosecution does not state any additional facts. Rather, it is the facts "outlined above" in the complaint, all of which relate to the alleged antitrust violations of Reagan, which are also the basis for the malicious prosecution claim. In other words, the sole basis for the claim of malicious prosecution is litigation begun by Reagan "for the sole purpose of maintaining Reagan's monopoly." The allegation is simply that in violating antitrust laws in an attempt to create and maintain a monopoly, Reagan was also guilty of malicious prosecution. The malicious prosecution claim, therefore, arises out of the alleged antitrust violations and is therefore excluded by the insurance policies.
This conclusion gains support from the only other case which the court can find which has addressed this specific issue. In Upsher-Smith Laboratories, Inc. v. Federal Insurance Co., the United States District Court for the District of Minnesota denied insurance coverage under an antitrust exclusion where the plaintiffs had stated common law causes of action as well. The court in Upsher was faced with the same issue before this court:
264 F.Supp.2d 843 (D. Minn. 2002).
Defendant asserts that because the causes of action alleged in the FTC complaint and each private civil action complaint fall squarely within the antitrust exclusion, defendant has no duty to defend plaintiff, and defendant is entitled to summary judgment as a matter of law. Plaintiff counters that it is entitled to summary judgment because the antitrust exclusion: (1) is inapplicable to the common law and non-antitrust claims in the private civil actions, (2) is internally ambiguous, or (3) alternatively, is ambiguous when read in pari materia with the other operative language of the policy. The court rejected the plaintiffs' arguments, stating that "while some of the numerous private civil action complaints include common law causes of action, those common law causes of action flow directly from the underlying antitrust allegations." The court also rejected the plaintiffs' claim "that the antitrust exclusion, when construed, only excludes the `discreet antitrust claims' and does not apply to exclude the common law and non-antitrust statutory claims." The court first noted that "the factual basis for all of the `separate common law and non-antitrust claims' is the underlying antitrust actions." The court also noted that "each of these non-statutory causes of action expressly incorporate the alleged antitrust allegations as the basis for the separate common law relief."
Id. at 849.
Id.
Id.
Id.
Id. at n. 12.
The same is true in this case. The factual basis for the malicious prosecution claim are "those acts outlined above" in relation to the antitrust claims of the complaint. Not a single additional fact is pled. Indeed, the very allegations which form the basis for the malicious prosecution claim assert that Reagan's actions were "an abuse of the legal process for the sole purpose of maintaining Reagan's monopoly by increasing costs, causing delay, and unfairly harming landowners and Reagan's competitors." In other words, the complaint itself acknowledges that the alleged malicious prosecution was part and parcel of the alleged antitrust violations. "If an otherwise covered type of . . . conduct . . . is wholly dependent upon, or `inextricably linked' to, an excluded underlying event . . . the exclusion at issue . . . applies."
Homestead Ins. Co. v. The Ryness Co., 851 F.Supp. 1441, 1444 (N.D.Cal. 1992).
In sum, it is clear that the malicious prosecution claim arises out of antitrust violations and is therefore covered by the exclusions. Additionally, the phrase "arising out of' is broad unambiguous.
Established Utah law provided [that] the term "arising out of" is ordinarily understood to mean originating from, incident to, or in connection with the item in question. As used in a liability insurance policy, the words "arising out of" are very broad, general and comprehensive. They are commonly understood to mean originating from, growing out of, or flowing from, and require only that there be some causal relationship between the injury and the risk for which coverage is provided.
Meadow Valle Contractors, Inc. v. Transcontinental Ins. Co., 27 P.3d 594, 597 (Utah Ct.App. 2001) (citation omitted).
As stated by the court in Upsher, "With this broad interpretation of the `arising out of' language . . . this court must read all of the counts of the underlying complaints as `flowing from' or `having their origins in' the alleged antitrust violations. . . ." The Eighth Circuit affirmed in Upsher on the basis of the district court's "well-reasoned order. . . ."
Upsher-Smith, 264 F. Supp. 2d at 851.
Upsher-Smith v. Federal Ins. Co., 67 Fed.Appx. 382 (8th Cir. 2003).
Inasmuch as the malicious prosecution claim was the sole alleged basis for coverage by National, the court grants summary judgment in favor of National. The court also rules that Hartford was not required to insure Reagan under Coverage B in the Hartford policy. Coverage A of the Hartford policy will be discussed below.
The "Occurrence" Limitation
The Coverage A agreement in the Hartford policy is also inapplicable to the Texas litigation. As explained above, in the Coverage A agreement of the Hartford policy, Hartford agreed to defend and indemnify Reagan in cases seeking damages for "property damage." The policy contains a limitation on this provision, however. "This insurance applies to . . . `property damage' only if [it] is caused by an `occurrence' that takes place in the coverage territory[.]" An "occurrence" is defined in the policy as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."This "occurrence" limitation is common in general liability insurance policies. In Nova Casualty Co. v. Able Construction, Inc., a case which involved the exact definition of "occurrence" that is at issue in this case, the court went on to define "accident":
983 P.2d 575 (Utah 1999).
[T]he word accident is descriptive of means which produce effects which are not their natural and probable consequences. . . . An effect which is the natural and probable consequence of an act or course of action is not an accident, nor is it produced by accidental means. It is either the result of actual design, or it falls under the maxim that every man must be held to intend the natural and probable consequences of his deeds.
Id. at 579.
The issue, therefore, is whether the property damage alleged in the Texas litigation was an accident, or was the natural and probable consequence of Reagan's actions. "If there is no `accident', there is no `occurrence' to trigger coverage under the Policy."
H.E. Davis Sons, Inc. v. North Pacific Ins. Co., 248 F.Supp.2d 1079, 1084 (D. Utah 2002).
The allegations of property damage in the Texas litigation involve Reagan's alleged attempts to deprive landowners of "grandfathered" rights in their property through abuse of the regulatory regime of billboards in the Austin, Texas area. The complaint alleges, for example:
When Reagan's lease on a grandfathered site along a regulated highway expires, that landowner can enter into a new lease with a competitor. However, not only must a replacement permit be issued from the COA, but a TxDOT permit must also be obtained in order to erect the billboard. If Reagan still holds an old TxDOT permit for that grandfathered site, Reagan can manipulate the administrative process to prevent a TxDOT permit from ever being issued for a replacement billboard [to the competitor].
The complaint also alleges:
Even if the landowner and competitor are ultimately successful in obtaining a TxDOT permit, it is almost certain that [the] TxDOT permit will not be obtained within 90 days of the replacement permit being issued by the COA. After 90 days, the replacement permit expires and the grandfathered status is lost forever. So as long as Reagan can stall the issuance of the TxDOT permit for 90 days, Reagan has successfully kept a competitor from putting up a replacement billboard and has permanently deprived a landowner of their grandfathered rights.
It is abundantly clear from reading the complaint in the Texas litigation that the alleged property damage was not the result of any kind of accident, but was the "natural, expected, [and] intended" consequence of Reagan's alleged actions. Reagan has not pled any facts or set forth any evidence tending to show otherwise. Indeed, in response to Hartford's motion for summary jdugment, Reagan simply states, without any support, that this issue "is fact intensive, and is something which is more appropriately left to a jury to decide." Reagan does not state which facts it believes support its position, or which material facts are in dispute. At any rate, the correct answer is clear. The allegations in the Texas litigation clearly establish that the alleged harm was not accidental, but was the intended consequence of the alleged actions of Reagan. As such, Reagan is not entitled to insurance coverage under Coverage A of the Hartford policy. Because the court found above that Reagan was also not entitled to coverage under Coverage B of the Hartford policy, summary judgment in favor of Hartford is appropriate.
Id.
Reply Memo. in Support of Plaintiffs' Motion for Partial Summary Judgment and Against Hartford and Memorandum in Opposition to Hartford's Motion for Summary Judgment at 11.
The "Dissemination of Material" Limitation
Although the issues set forth above are dispositive of these cross-motions for summary judgment, there is an additional reason to grant summary judgment in favor of National. The National policy extends coverage to an enumerated list of actions — including malicious prosecution. But those actions must be "committed in the utterance or dissemination of matter by or with permission of the Insured during the Policy Period in the broadcast, telecast, cablecast, publication, distribution, display, or exhibition of advertising and in advertising services, regardless of when claim is made or suit is brought." "Matter" is defined in the policy as "printed, audio, visual or informational content, and the use of such matter by others."
It is clear that coverage for malicious prosecution is limited by the dissemination of matter clause. Coverage for malicious prosecution was added to the policy after it had been issued. That same amendment adjusted the dissemination of matter clause with respect to the newly added coverage. The relevant portion of the policy now reads: "[National] shall pay on behalf of [Reagan] all damages . . . which [Reagan] becomes legally obligated to pay because of liability imposed by law or assumed under contract as a result of one or more claims arising out of . . . malicious prosecution . . . committed in the utterance, dissemination, gathering, obtaining or acquisition of matter [meaning printed, audio, visual or informational content]." Thus, under a plain reading of the insurance contract, National is only required to cover Reagan damages arising out of a claim of malicious prosecution where the malicious prosecution arose out of the "dissemination, gathering, obtaining or acquisition of [printed, audio, visual or informational content]."
Reagan argues that if the court accepts National's assertion on this issue, then claims of malicious prosecution would never be covered by the policy. That may or may not be the case. Regardless, the court must give a contract its plain and ordinary meeting, and it is clear that the insurance contract does not cover all claims of malicious prosecution, but only those claims arising out of the dissemination, gathering, obtaining or acquisition of certain matter. Reagan has pled no facts and made no showing on this issue tending to demonstrate that such is the case.
Two cases placed before the court by National lend credence to their position on this issue. Reagan has cited no opposing case law, nor could the court locate any. The first case, McDonald's Corp v. American Motorists Insurance Co., also involved a "Media Special Perils" policy. The policy at issue in the McDonald's case also limited coverage to damages arising out of certain enumerated causes of action "committed in the utterance or dissemination of matter. . . ." "Matter" was defined in the policy as "the content of advertising, publicity or promotion in any form including, but not limited to, the artistic, literary, printed, pictorial, statistical, musical, audio, audio-visual or dramatic content of such advertising, publicity or promotional material, and use of such matter by others with the permission of the Named Insured." McDonald's became involved in litigation and filed a separate declaratory judgment action arguing that its insurers were required to indemnify McDonald's in the underlying litigation. The underlying litigation involved a claim of misappropriation of trade secrets by McDonald's. The trade secrets were used to develop the "Temperfect Oven." The complaint also alleged that McDonald's "promotion of the `Temperfect Oven' exposed plaintiff's trade secrets to the market place."
748 N.E. 2d 771 (Ill.Ct.App. 2001).
Id. at 778.
Id.
Id. at 775.
McDonald's argued that the most significant claim of the plaintiff in the underlying litigation was for "cloud on title" and that this "cloud on title" theory arose directly out of McDonald's dissemination of advertising material concerning the Temperfect Oven. The court set forth a three-part test for determining liability coverage in situations such as this. "[I]nsurers have a duty to indemnify . . . if (1) the . . . plaintiffs were pursuing one of the offenses enumerated in the policy; (2) the enumerated offense was committed in the content of advertising, publicity, or promotion; and (3) the enumerated offense arose out of the publication of advertising, publicity, or promotional material." The court then rejected McDonald's claim because "cloud on title" was not one of the enumerated offenses. The court went on to recognize, however, that even if Illinois recognized a cause of action for "cloud on title" coverage would not be available. "Coverage under the . . . policy is available only if the enumerated offense arose out of the publication of the advertising, publicity, or promotional material." There must be "a direct causal connection between [the] promotional activities and an enumerated offense."
Id. at 778.
Id. at 781.
Id. at 782.
The three-part test from the McDonald's case can be restated here as follows: National has agreed to defend Reagan only if (1) the plaintiffs were pursuing one of the enumerated offenses; (2) the enumerated offense was committed in the dissemination, gathering, obtaining or acquisition of printed, audio, visual or informational content; and (3) the enumerated offense arose out of the dissemination, gathering, obtaining or acquisition of printed, audio, visual or informational content. In this case, the offense alleged, malicious prosecution, is clearly enumerated in the policy. The analysis ends there, however. Reagan has not alleged, and there are no facts in evidence, which show that the malicious prosecution allegations arose out of the dissemination, gathering, obtaining or acquisition of printed, audio, visual or informational content. Indeed, there is no allegation that such "matter" is involved in this case at all. Reagan made no mention of this limitation in its motion for summary judgment. Indeed, Reagan seems to have pled around this limitation in the National policy altogether.
In a case out of the Supreme Court of Delaware which interpreted provisions "nearly identical" to those at issue in the McDonald's case, the court agreed with the McDonald's court that there must there "must be . . . a causal connection" between the alleged injury and the advertising activities. In this case, there is no "causal connection" because there is no allegation that the malicious prosecution injury was the result of the dissemination, gathering, obtaining or acquisition of printed, audio, visual or informational content.
In sum, the National policy is simply inapplicable to the malicious prosecution cause of action alleged in the Texas litigation. Reagan has not even attempted to demonstrate that any "matter" was involved, as defined in the National policy, much less that the alleged injury was the result of the dissemination, etc. of such "matter." Summary judgment is therefore appropriate in favor of Reagan based on this issue as well.
CONCLUSION
The court hereby GRANTS summary judgment in favor of Hartford Casualty Insurance (#30-1) and in favor of National Casualty Insurance (#24-1), and DENIES Reagan National's motion for partial summary judgment (#20-1). A hearing was set for this matter for April 12, 2005. That hearing is no longer necessary and is therefore stricken. The parties shall file a status report with this court by April 15, 2005 stating what claims, if any, remain. If there are no remaining claims the court will order the case closed.