In James River Insurance Company v. Med Waste Management LLC, et al., Case No. 1:13-cv-23608-KMM, (U.S. Dist. S. D. Fla., September 22, 2014), the U.S. District Court for the Southern District of Florida upheld a Telephone Consumer Protection Act (“TCPA”) exclusion in a commercial general liability policy (“CGL”) when it determined that there was no duty to defend or indemnify an insured for a $10 million judgment arising out of the settlement of an underlying class action lawsuit (the “underlying lawsuit”). Because the result would be the same under both Florida and New York law, the court concluded there was a “false conflict” regarding the interpretation of the policy and the exclusions in the case.
James River Insurance Company’s (“James River”) insured, Med Waste Management LLC (“Med Waste”), had contracted with another company to send a large number of unsolicited faxes advertising its services. The recipient of one of the unsolicited fax advertisements filed a two-count complaint against Med Waste: Count I alleged violations of the TCPA and Count II alleged a claim for conversion. The parties in the underlying lawsuit entered into a settlement agreement; a settlement class was certified and a judgment of $10 million was entered against Med Waste.
After receiving notice of the underlying lawsuit from Med Waste, James River denied coverage explaining that the TCPA claims and the conversion claims in the underlying lawsuit were excluded from coverage. The CGL policy issued by James River provided coverage for “Bodily Injury and Property Damage” and “Personal and Advertising Injury Liability” but precluded coverage for “Property Damage” and “Personal and Advertising Liability” arising directly or indirectly out of any action or omission that violates or is alleged to violate the TCPA (“TCPA Exclusion”). The policy also precluded coverage for any claim arising out of the conversion, or misappropriation, of others’ funds or property (“Conversion Exclusion”).
After James River denied coverage, it subsequently filed the declaratory judgment action seeking a ruling that it owed no duty to defend or indemnify Med Waste, as the policy’s TCPA Exclusion and Conversion Exclusion precluded coverage. James River and Med Waste filed cross-motions for summary judgment.
After foregoing a choice of law analysis and finding no conflict between New York law and Florida law (Med Waste is a New York Company and the policy was issued in New York; the declaratory judgment action was filed in the Southern District of Florida), the court ruled that the TCPA Exclusion unambiguously excluded coverage for both the TCPA claims and the conversion claims and, therefore, James River owed no duty to defend or indemnify Med Waste for the $10 million judgment under New York law or Florida law. The court found that, “[t]here is nothing ambiguous about the TCPA exclusion.” The court also found that, even if the conversion claims were not excluded from coverage by the TCPA Exclusion, they would be excluded under the “unambiguous” Conversion Exclusion.
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