UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

HARTFORD INSURANCE COMPANY Hon. Dennis M. Cavanaugh

OF THE MIDWEST,

OPINION

Plaintiffs,

Civil Action No, 1 O-CV-644 I (DMC)(MF)

v.

MEECORP CAPITAL MARKETS, LLLC:

Defendants.

DENNIS M. CAVANAUGH, U.S.D.J.:

This matter comes before the Court upon Motion for Summary Judgment by Defendant

Meecorp Capital Markets, LLC (June 1, 2012, ECF No. 45) and Motion for Summary Judgment by

Plaintiff Hartford Insurance Company of the Midwest (June 1, 2012. ECF No. 46). Pursuant to

Federal Rule ofCivil Procedure 78, no oral argument was heard. After considering the submissions

of all parties, and for the reasons set forth below, it is the decision of this Court that Deflndant’s

Motion is denied and Plaintiffs Motion is granted in part, denied in part.

L BACKGROUND

A. The Underlying Lawsuit 1

Evans and Green, LLP (“E&G”) commenced suit against Meecorp Capital Markets, LLC

(“Meecorp”) and two of its officers in the Circuit County of Green County, Missouri (hereinafter.

This section is taken from the parties’ pleadings.

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“E&G Matter”). The Amended Complaint was flied in March 2009, and the Second Amended

Complaint was filed in August 2011.

The complaints allege that Meecorp is liable for damages sustained h E&G as a result of

Meecorp sending them on July 1 2, 2004 an alleged unsolicited advertisement via facsimile machine.

s Second Amended Complaint asserts the following causes of action against Meccorp:

(1) Violation of Federal Telephone Consumer Piotection Act ( I CPA ) (2) Cons crsion (3)

Violation of the Missouri Computer Tampering Act (“MCTA”); (4) Invasion of Privacy -

Intrusion on Seclusion; and (5) Negligence.

The Second Amended Complaint seeks to have the E&G Matter treated as a class action,

alleging that there exists a class of plaintiffs who were likewise harmed by the actions of Meecorp

between July 19, 2002 and June 10. 2008.

The Court in the E&G Matter has yet to decide whether the class will he certified. Following

that determination, the Court will schedule a trial date. If the class is not certified, the amount of

damages at issue in the E&G Matter will likely be less than a thousand dollars; if the class is

certified, the potential liability of Meecorp will increase significantly, to over $9,000,000.

B. The Hartford Policies

From October 13. 2002 and at all relevant times thereafter, Meecorp has had general

commercial liability policies through Hartford insurance Co. of the Midwest (Hartford”). Since

March 2010, l-lartford has been providing for the legal defense of Meecorp in the E&G Matter under

a reservation of rights. Hartford issued Policy No. 13 SBA LZ6892 SB to 1eecorp. initially issued

for the policy term October 13, 2003 to October 13, 2004. and renewed for the following pertinent

policy periods: (i) October 13, 2004 to October 13, 2005; (ii) October 13,2005 to October 13, 2006;

(iii) October 13, 2006 to October 13, 2007; (iv) October 13. 2007 to October 13. 2008: (v) October

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1 3. 2008 to October 1 3, 2009: (vi) October 1 3, 2009 to October 1 3. 20 1 0: and (vii ) October 1 3. 2010

to October 13, 201 1 (collectively referred to herein as “the Hartford Policies”).

The Hartford Policies set forth their terms governing coverage, in pertinent part reproduced

below:

A. COVERAGES

I BUSiNESS LIABILITY COVERAGE (BODILY INJURY PROPER I

DAMAGE. PERSONAL AND ADVERTISING INJURY)

Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as

damages because of “bodily injury”, “property damage” or “personal and advertising

injury” to which this insurance applies. We will have the right and duty to defend the

insured against any “suit” seeking those damages. However, we will have no duty to

defend the insured against any “suit” seeking damages for “bodily injury”, “property

damage” or “personal and advertising injury” to which this insurance does not apply,,

B. EXCLUSIONS

1. Applicable to Business Liability Coverage

This insurance does not apply to:

a. Expected Or Intended Injury

(1) Bodily injury” or “property damage’ expected or intended from the

standpoint of the insured. This exclusion does not apply to “bodily injury” or

‘“property damage” resulting from the use of reasonable force to protect

persons or property; or

(2) “Personal and advertising injury” arising out of an offense committed by.

at the direction of or with the consent or acquiescence ofthe insured with the

expectation of inflicting “personal and advertising injury”.

p. “Personal and Advertising Injury”:

(2) Arising out of oral, written or electronic publication of material, whose

first publication took place before the beginning of the policy period;

(ii) Arising out ofthe violation of a person’s right of privacy created by any

state or federal act. However, this exclusion does not apply to liability br

damages that the insured would have in the absence of such state or federal

act;

G. LIABILITY AND MEDICAL EXPENSES DEFINITIONS

14. “Occurrence” means an accident, including continuous or repeated exposure to

substantially the same general harmful conditions,

15. “Personal and advertising injury” means injury ... arising out of one or more of

the following offenses:.

e. Oral, written or electronic publication of material that violates a person’s

right of privacy;

.3

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1 8. ‘Propertv damage means:

a. Physical injury to tangible property, including all resulting loss of’ use

that property. All such loss of use shall be deemed to occur at the time oithe

physical injury that caused it; or

b. Loss of use oftangible property that is not physical lv injured. All such loss

of use shall be deemed to occur at the time of “occurrence” that caused it.

In addition to the exclusions listed above, effective October 13, 2006, the Hartford Policies

also contained the following specific exclusion (“the TCPA exclusion”) from coverage for “bodily

injury,” “property damage,” and “personal injury liability”:

13. EXCLUSIONS

1. Applicable to Business Liability Coverage

This insurance does not apply to:

t. Violations of Statutes that Govern E-mails, Fax, Phone Calls or Other Methods of

Sending Material or Information

“Bodily injury” or “property damage”. or “personal and advertising injury” arising

directly or indirectly out of any action or omission that violates or is alleged to

violate:

(1) The Telephone Consumer Protection Act (TCPA). including any

amendment of or addition to such law;

(2) The CAN-SPAM Act of 2003, including any amendment of or addition

to such law; or

(3) Any statute, ordinance or regulation, other than the TCPA or

CAN-SPAM Act of 2003. that prohibits or limits the sending. transmitting.

communicating or distribution of material or information.

C. Declaratory Relief

On December 13, 2010, Hartford filed adeclaratoryjudgment action in this Court. (ECF No.

1). In the Complaint, Hartford claims that it is not required to provide a defense to Meecorp and that

Meecorp is not entitled to be indemnified by Hartford with regard to the claims being asserted in the

E&G Matter,

On January 14. 2011, Meecorp filed an answer and counterclaim in response to Hartford’s

complaint. (ECF No. 6). Meecorp also seeks a declaratory judgemeni. declaring that [lartIrd has a

duty to defend and indemnifS Meecorp in connection with the E&G Matter.

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Both parties have since filed for summary judgment, and those motions are now before the

Court.

jj STANDARD OF REVIEW

Summary judgment is granted only if all probative materials of record. vie\ed with all

inferences in favor of the nonmoving party, demonstrate that there is no genuine issue of material

fact and that the movant is entitled to judgment as a matter of law. Sg F. R. Civ. P. 56(c):

Celotex Corp. v. Catrett, 477 U.S. 317, 330 (1986). The moving party bears the burden ofshowing

that there is no genuine issue offact, jçj The burden has two distinct components: an initial burden

of production. which shifts to the non moving party ifsatisfied by the moving party: and an ultimate

burden of persuasion. which always remains on the moving party.” The nonmoving part “may

not rest upon the mere allegations or denials ofhis pleading” to satisfy this burden, hut must produce

sufficient evidence to support a jury verdict in his favor. FED. R. Civ. P. 56(e); gg io

Matsushita Elec. Indus. Co. v. Zenith Radio Corp.. 475 U.S. 574. 586 (1986). In determining

whether there are any issues of material fact, the Court must resolve all doubts as to the existence

of a material fact against the moving party and draw all reasonable inferences - including issues of

credibility - in favor ofthe nonmoving party.” Newsome v. Admin. Office ofthe Courts of the State

olN.J.. 103 F. Supp.2d 807. 815 (D.N.J. 2000), afrd. 51 Fed. App’x 76 (3d Cir. 2002) (citing Watts

v. Univ. of DeL, 622 F.2d 47, 50 (D.N.J. 1980)).

ilL DISCUSSION

A. Statutory Damages Sought in the E&G Action

Hartford’s first argument applies only to E&G’s TCPA claims. In the Second Amended

Complaint. E&G sttseeks statutory damages of $500.00 thr each alleged violation ofthe TCPA.

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The damages provision of the TCPA provides for recovery of “actual monetary loss from such a

violation, or... up to $500 in damages for each such violation, whichever is greater.” 47 U.S.C. §

227(b)(3)(B).

The parties agree that while this Court will apply New Jersey law to its interpretation of the

Hartford Policies, it must look to Missouri law for characterization of Meecorps purported liability

and the remedies sought. Both New Jersey and Missouri law distinguish between compensatory

damages that are insurable, and penalties or punitive damages that are not insurable. Farmland

Industries, Inc. v. Republic Ins. Co., 941 S.W.2d 505,510—11 (Mo. banc 1997) (Under Missouri law,

unless otherwise bargained for, the term “damages” does not include fines and penalties); see also

Collier v. Roth, 468 S.W. 2d 57, 60 (Mo.Ct. App. 1971); Johnson & Johnson v. Aetna Cas. & Sur.

.,

667 A.2d 1087. 1091 (N.J. 1995) C’New Jersey sides with those jurisdictions which proscribe

coverage for punitive damage liability because such result offends public policy and frustrates the

purpose of punitive damage awards.”) A penal statute is a law which inflicts a forfeiture of money

oi goods by way of penalty for breach ol its provisions State cx tel MNan1eL v Stobie, 92 S W

191. 212 (Mo. bane 1906).

The Missouri Court of Appeals recently found that damages sought under the TCPA are

“both remedial - when an individual seeks recovery for actual monetary loss - and penal - when an

individual seeks the statutory damages of $500.00 for each violation.” )ien v. Siddic 1i.371 SW.

3d 93, 97 (Mo. Ct. App. 2012).Thus, when a plaintiff ‘opts to recover statutory damages, those

damages were penal in nature, and as penalties, did not constitute ‘damages’ under the terms of the

policy.” j4.

New Jersey Courts have not yet ruled on whether the TCPA is a penal statute. “A penal

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statute is one which imposes punishment for an offense against the [S]tate as compared o a wrong

against an individual Abbott r Drs Ridgik Steinberg & Assocs P A 609 F Sup 121 6 1 2 8

(D.N.J.1985), citing Ryan v. Motor Credit Co., 130 N.J.Eq. 531. 23 A.2d 607 (942). The

Massachusetts Supreme Court, applying New Jersey law, held that the TCPA is “a remedial statute

intended to address misdeeds suffered by individuals, rather than one that punishes public wrongs.”

Terra Nova Ins. Co. v. Fray-Witzer, 869 N.E. 2d 565, 575 (Mass. 2007). The Court continued:

Congress spoke clearly on the animating purpose of the TCPAs facsimile advertising

provisions, noting that a restriction was needed to prevent advertisers from unfairly

shifting the cost of their advertisements to consumers while simultaneously preventing

the use of their facsimile machine for legitimate purposes. ge H.R.Rep. No. 102—317.

102d Cong., 1st Sess., at 10 (1991),2 The aggrieved facsimile recipient is provided with a

private right of action allowing for an injunction and recovery of actual monetary loss, or

$500 in statutory damages for each such violation, whichever is greater. 47 U.S.C. §

227(b)(3). In addition, the statute provides for treble damages if a judge finds that the

defendant wilfully or knowingly violated its terms, j

Id. The Court concluded that while ‘it is true, of course, that the statutory damages amount

allows for damages that could be somewhat greater than the actual harm suffered, depending on

the circumstances of the violation.., this aspect alone, however, does not transform the TCPA into

a penal statute.” çj. Additionally, finding that the TCPA is a penal statute. as the Missouri Court

did in Olsen. would be in conflict with the New Jersey policy to interpret insurance policies

liberally in favor of the insured. j; see also Hunt v. Hospital Serv. Plan of N.J., 162 A.2d 561

7’Facsimile machines are designed to accept, process, and print all messages which arrive

over their dedicated lines. The [facsimile] advertiser takes advantage of this basic design by

sending advertisements to available [facsimile] numbers, knowing that it will he received and

printed by the recipient’s machine. This type of telemarketing is problematic for two reasons,

First, it shifts some of the costs of advertising from the sender to the recipient. Second. it

occupies the recipient’s facsimile machine so that it is unavailable for legitimate business

messages while processing and printing the junk [facsimile].” H.R.Rep. No. 102—31 7, 1 02d

Cong., 1st Sess., at 10 (1991).

7

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(N.J. 1960).

Thus while Hartford urges this Court to rule as the Olsen Court did, this Court does not

agree that the TCPA is a penal statute, and instead aligns with the Terra Nova Court. finding that

the TCPA is a remedial statute, and damages sought pursuant to it are insurable.

B. Coverage for the E&G Action Under The Hartford Policies

Before analyzing the Hartford Policies in question, the Court will set forth the basic

principles of insurance contract interpretation. Under New Jersey law, the [ijnterpretation and

construction of a contract is a matter of law for the court.” Kaur v. Assured Lending Corp.. 965

2d 203, 207 (N J Super Ct App Div 2009) (quotmg Spung Cieek I biding Co v

Shinnihon U.S.A. Co.. 943 A.2d 882 (N.J. Super. Ct. App. Div). cert. denied. )51 A.2d 1038

(N J 2008) see also Kieffer Best Buy 14 A 2d 737, 742-43 (N J 2011) Courts should

enlorce unambiguous terms in an insurance policy. Karnpfv. Franklin Life Ins. Co.. 161 A. 2d

717, 72() (N.J. 1960). Additionally, the policy should be interpreted in accordance with its plain

and ordinary meaning. Longobardi v. Chubb Ins. Co. of N.J., 582 A. 2d 1257, 1260 (N.J. 1990).

Absent any ambiguity, policy terms are to be afforded their plain language meaning. Zacarias v.

Allstate Ins. Co., 775 A.2d 1262, 1264 (N.J. 2001).

An insurer has a duty to defend an insured when the allegations contained in a complaint

lall within thL coxerage of a liability insuiance policy Voorhees v Pieluied Mut 607 \ 2d

1255 (N.J.1992); SL Industries v. American Motorists, 607 A.2d 1266 (N.J. 1992): see also Sears

Roebuck & Co. v. NatI Union Fire Ins. Co., 774 A. 2d 526, 538 (N.J. Super. Ct. App. Div.

2001). In determining whether a duty’ to defend exists, the court must compare the allegations

in the underlying complaint against the language of the insurance policy. Voorhees, 607 A.2d at

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1 259 (“The duty to defend comes into being when the complaint states a claim constituting a

risk insurcd against”) Flomerfelt v Cardiello 997 A 2d 991, 998 (N J 2010) (to dcteirninc

whether a duty to defend exists, “the complaint should be laid alongside the policy.”) see also

Danek v. Hommer, 100 A, 2d 198, 202-03 (N.J. Super. Ct. App. Div. 1953), affd o.b. 105 A.2d

677 (N, J.1954).

The Hartford Policies provides coverage for those sums that Meecorp becomes legally

obligated to pay as damages because of “bodily injury” or “property damage” that occurs during

the policy period and is caused by an ‘occurrence” and for personal and advertising injury”

caused by one or more enumerated offenses committed during the policy period, subject to all the

terms fo the policy.

1 Whether F&G s Injuries are Coveied Undei thc Haitford Policies

In its Second Amended Complaint, E&G alleges that Meecorp’s action of sending the

alleged unsolicited fax caused damage to its facsimile machine, toner and paper and resulted in

loss of use of the same, alleging violation of the TCPA, conversion, violation of the MCTA and

negligence. (See Second Am. Compi. Counts 1,2,3, and 5). E&G also alleges that the sending of

the fax violated its privacy right of seclusion. (,. at Count 4).

a. ‘Property damage”

The Hartford Policies provides coverage for those sums that Meecorp becomes legally

obligated to pay as damages because of “property damage” that occurs during the policy period

and is caused by an “occurrence.” Property damage is defined as “physical injury to tangible

property, including all resulting loss of use of that property.”

Meecorp argues that E&G’s property claims, including those asserted as part of its TCPA

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claim, are covered “property damage” claims. (Meecorp Reply Br. 3, .lune 25, 2012, ECF No,

49) In Meirose Hotel Co v St Paul Fire and Marine Ins Co 432 F Supp 2d 488 508-509

(ED. Pa. 2006), ff:d 503 F. 3d 339 (3d Cii’. 2007), the Court concluded that “using one’s fax

machine, paper and toner without permission qualifies as property damage under the Policy.”’

See also Columbia Cas Co v Hiar Holdings L L C , No O7SL-CC00520 2011 WL 4073314 at

*5 (Cir. Ct. Mo. May 18, 2011) (“The allegation that HIAR caused a junk fax advertisement 10

be sent in violation of the TCPA necessarily meant that HIAR caused damage through the

‘expensive paper used’ and through making the plaintiffs’ ‘fax machines] unable to process

actual business communications.’ Therefore, the Petition alleged ‘property damage.” (internal

citations omitted)).

While the Court in Meirose Hotel found that the faxes fell within the policy definition of

“property damage,” the Court further found that the “property damage” did not result from an

“event” (called an “occurrence” under the Hartford Policies) as the complaint was “seeking

damages solely for intentional conduct.” Melrose Hotel, 432 F. Supp. 2d at 509. There, the

allegations in the TCPA complaint did not characterize as an accidental occurrence because the

insured “knew that its actions would cause the very harm the TCPA aims to prevent.” id. at 5 10.

3The “Policy” in Melrose Hotel defined ‘property damage” with almost exact language as

the language at issue:

The Policy states: We’ll pay amounts any protected person is legally required to pay as

damages for covered bodily injury or property damage that: happens while this agreement

is in effect: and is caused by an event.

The Policy defines ‘property’ damage’ as: physical damage to tangible property of others.

including all resulting loss of use of that property; or loss of tangible property otothers

that isn’t physically damaged.

The Policy defines an ‘event’ as: an accident, including continuous or repeated exposure

to substantially the same general harmful conditions.

Melrose Hotel, 432 F. Supp. 2d at 491-492.

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The Court further held that the complaint was excluded under an exclusion (similar to the

exclusion in the Hartford Policies) precluding coverage for expected or intended property

damage.

This Court agrees with the Melrose Hotel Court in concluding that the damages alleged

by E&G in regards to the fax machines constitute “property damage” as defined in the policy.

With regard to whether or not the property damage was caused by an occurrence, Meecorp and

Hartford vehemently disagree.

Meecorp argues that property damage claims of E&G are based on an occurrence and

therefore covered. In support. Meecorp cites to Penn Nat. Ins. Co. v. Group C Communications.

Inc., No. L—134--09, 2011 WL 3241491, at *9 (N.J. Super. Ct. App. Div. Aug. 1.2011) certif,

denied, 209 N.J. 96 (2011) (quoting Voorhees v. Preferred Mut, Ins, Co., 607 A.2d 1255, 1264

(1992):

The prevalent rule in New Jersey is that the accidental nature of an occurrence is

determined by analyzing whether the alleged wrongdoer intended or expected to cause

injury. If not. then the resulting injury is accidental even if the act that caused the injury

was intentional.

Meecorps Managing Director. Michael Edrei. stated that the fax at issue was sent to a rccipien

on a list maintained by Meecorp of individuals and business who had previously expressed an

interest in receiving the information contained in the fax, including E&G. (Cert. of Michael

Edrei ¶ 3-5, ECF NO. 47-1, June 18, 2012). Meecorp alleges that it was “Meecorp’s good faith

belief, based on their prior dealings with the recipients, including E&G, that those who were

receiving the fax were willing to receive same,” and that Meecorp “did not intend to send any

unsolicited faxes.” (Id. 4-6).

ii

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Hartford argues that Meecorp’s “good faith belief’ is not sufficient to overcome the fact

that the Plaintiffs in the E&G action explicitly allege that Meecorp knowingly sent out

unsolicited blast faxes.

In Penn Nat., the Defendant purchased a list of possible attendees to a trade show and

then hired a third party to send fax advertisements to those on the list. Penn Nat, 2011 WL

324H9 I at *1, The co-president of Defendant Corporation testified that he believed he had

“permission to fax the document to each company listed.” j,çj. at * 1 0. The Court concluded that

Plaintiffs “receipt of the fax may have been an ‘occurrence’ rather than an intentional wrong:”

and if it was sent in good faith, it was accidental, not intentional and thus an “occurrence” under

the policy. içj,. See also Myron Corp. v. Atlantic Mutual Ins. Corp.. No. BER-L-5539-06, 2007

WL 432623 (N.J. Super. Cl. Law Div. Jan. 22, 2007) (“The accidental nature of an occurrence is

determined by analyzing whether the alleged wrongdoer (the insured) intended or expected to

cause an injury. If not, then the resulting injury is accidental, even if the act that caused the injury

was intentional.”)

Here. E&G allege that Meecorp sent them a fax that was unsolicited, causing them

damage. This Court agrees with Meecorp’s distinguishing the cases cited b Hartford to support

their argument that the thxes were intended, as those cases involved matters where the court had

concluded that the sender ofthe faxes had knowingly sent the unsolicited fax. gg Terra Nova,

869 N.E.2d at 570 (“Metropolitan knew full well that its facsimile advertisements would reach

Massachusetts customers’ facsimile machines as unsolicited. . .Metropolitan knew that these

facsimile numbers represented new customers to which it had no previous connection.”).

Additionally, there has been no decision in the Missouri Court in the E&G Matter as to whether

12

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Meecorp did in fact intend to send the fax to E&G or if the fax was unsolicited. There exists a

question of fact as to whether the property damage incurred by Meecorp’s act of sending the fux

was accidental, and thus an “occurrence,” or intended to cause injury and out of coverage.

b. “Advertising injuries”

The Hartford Policies defines “advertising injury” to include an injury “arising out or

“oral, written or electronic publication of material that violates a persons right to privacy.”

Meecorp also argues that E&G’s claims for violation of its privacy right of seclusion as set forth

in l&G’s TCPA claim and its common law claim are covered “advertising injuries” under

HartforcFs policies. (Meecorp Reply Br. 4. June 25, 2012, ECF No. 49).

Two Courts applying New Jersey law to the relevant policy language have concluded that

the advertising injury provision does encompass the violation of a person’s right to privacy, both

in common law claims and in TCPA violations. In Terra Nova, the policy contained the identical

definition of “personal and advertising injury” as the one at bar, and the court found that the

alleged violations of the right to privacy, “in the form of statutory infractions under the TCPA.

constitute covered injuries under the insurers’ policies.” Terra Nova, 869 N.E. 2d at 574. In

Myron Corp. v. Atlantic Mutual Ins. Co., No. BER-L-5539-06, 2007 WL 432623, at *5 (N.J.

Super. Ct. Law Div. Jan. 22, 2007), the Court held

It is apparent that a right of privacy embraces an interest in seclusion as fully as it

includes an interest in the secrecy of personal information. Accordingly. Atlantic’s policy

languagc that ielates to a xiolation of a peisons s nght of pii ac\ can icasonthh hc.

understood and be expected to refer to conduct that violates a person’s seclusion,

Unsolicited fax transmissions. . . fall within this category.

Likewise, here, the unsolicited fax and injury alleged by E&G falls within the “advertising

injury.”

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Hartford relies on St. Paul Fire & Marine Ins, Co. v. Brother Int’l E’orp, 319 Fed Appx.

121, 126-127 (3d Cir. 2009) to support the argument that its policies do not cover claims for the

violation of’ the privacy right of seclusion. However, this case is easily distinguishable. The

policy in St. Paul defined “advertising injury” as “making known to any person or organization

covered material that violates a person’s right to privacy.” St. Paul, 319 Fed Appx. at 125.

Hartford’s policy defines “advertising injury,” in relevant part, as “oral or written publication of

material that violates a person’s right to privacy,” The Court in St. Paul emphasized that “the

phrase making known suggests a focus on secrecy not present in policies which define

advertising injury offense to include ‘oral or written publication of material that violates a

persons’ right to privacy.’ jj at 124g. The policy language is not the same in the case at bar, and

thus the St. Paul holding does not affect this Court’s conclusion on whether or not the alleged

violations constitute an “advertising injury.”

2. The “TCPA Exclusion

Hartford argues that the TCPA Exclusion incorporated into the Hartford Policies,

effective October 13, 2006 “unambiguously bars coverage for claims ‘arising directly or

indirectly out of any action or omission that violates or is alleged to violate’ the TCPA.” (Ph’s

Surnm. J. 14). In its Reply Brief, Meecorp states that “the exclusion does not apply to claims

that occurred prior to October 13, 2006,” and also argues that the “TCPA Exclusion only applies

4The Court in St. Paul specifically distinguished Myron and Terra Nova “because the

advertising injury provision in Myron and Terra Nova are worded differently than the advertising

injury provision in the instant case. Compare Myron... defining injury, in part as oral or written

publication, in any manner, of material that violated a person’s right to privacy and Terra Nova

defining advertising injury, in part, as oral and written publication of material that violates a

person’s right to privacy. Thus, Myron and Terra Nova do not undermine our analysis in

anyway.” St. Paul, 319 Fed, Appx. at 125.

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to claims asserted under the TCPA and other related statutes, and therefore does not apply to the

common law claims asserted by E&G. (DeE’s Reply. June 18. 2012. ECF No. 47). This assertion

is not supported by New Jersey law. New Jersey courts have consistently construed the phrase

“arising out of’ broadly in both insuring provisions and exclusions to mean “originating from,”

“growing out otç” “connected with,” having origins in” “flowing from,” “incident to” or having a

“substantial nexus” with the activity for which coverage is provided. American Motorists Ins.

Co. v. L-C-A Sales Co., 713 A. 2d 1007, 1010 (N.J. 1998); Records v. Aetna Life & Cas. Ins..

683 A. 2d 834, 837 (N.J. Super. Ct. App. Div. 1996); Allstate Ins. Co. v. Moraca, 581 A. 2d

510. 514 n.l, (N.J. Super. Ct. App. Div. 1990); Westchester Fire Ins. Co. v. Continental Ins. Co..

312A 2d664 669 (NJ Super Ct App Div 1973),affdob 319A 2d732çNJ 1974) certil

denied, 151 N.J. 463 (1997).

Flartlhrd argues that as the TCPA exclusion is applicable to both the “personal and

advertising injury” coverage and the “property damage” coverage, it bars coverage for all claims

that occurred on or after October 13, 2006. This Court agrees. All claims asserted by E&G arise

“directly or indirectly’ from actions alleged to violate the TCPA; the only facts alleged by F&G

are that Meecorp injured them with the alleged unsolicited fax. Thus, Hartford is not responsible

ibr coverage for any claims that occurred on or after October 13, 2006.

3 The Right 01 Pnvac Cieated by an Act exclusion

The Hartford Policies bar coverage for “personal or advertising injury” “[ajrising out of

the violation of a person’s right to privacy created by any state or federal act. However, this

exclusion does not apply to liability for damages that the insured would have in the absence of

such state or fcdral act.”

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Hartford argues that as the TCPA is a federal statute that created a right of privacy, there

is no coverage under the Policy for the TCPA claims in the Second Amended Complaint.

Meecorp argues that the exclusion doesn’t apply for two reasons: first. that the plain language of

the policy states that it does not apply to common law claims, and as the exclusion only applies

to “advertising injuries,” the “property damage” claims stemming from the TCPA claims renders

the exclusion inapplicable.

As the Second Amended Complaint alleged damages to toner, paper and loss of use of the

fax machine, the fCPA claims are claims for “property damage Melros Hotel 432 F Supp 2d

at 508-509. Additionally, “Meecorp’s potential liability for damages resulting from the common

law claims of E&G. including its common law claim for invasion of privacy exist in the absence

of the TCPA and any other statutes,” (Def.’s Qpp’n 23, June 18, 2012, ECF No. 47). Thus we

agree with Meecorp that this exclusion does not bar the TCPA claims.

4. “The Expected or Intended” Exclusion

The “expected or intended” exclusion bars coverage where the insured is alleged to have

acted intentionally and expected or intended the resulting injury. Voorhees, 607 A.2d at 1264;

Industries, 607 A.2d at 1276. The analysis for this exclusion parallels the analysis undertaken

above in determining whether the damage resulted from an “occurrence” within the meaning of

both policies.

The statements of Mr. Edrei when viewed in the light of the Voorhees and Penn Nat. tests

requiring an inquiry into the actor’s subjective intent to cause injury suggest that E&G’s receipt

of the fax may have been an “occurrence” rather than an intentional wrong. Furthermore, if

Meecorp “had a good faith belief that the fax was not unwelcome, then the exclusion would not

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be applicable.” Penn. Nat. 2011 WL 3241491 at *10 (citing Terra Nova 869 N.E. 2d at 571.) The

facts alleged by Meecorp, as set forth in Erdei’s certification and Meecorp’s motion papers, when

viewed in the light most favorable to Meecorp, raise a genuine issue of material fact as to

whether the property damage alleged in the underlying complaint was “expected or intended”

under the policies. “The operative question is the intent to injure rather than to act.” thus if

Meecorp’s good faith belief was that their act was not unsolicited, they did not have the requisite

intent to injure. Voorhees, 607 A. 2d at 1264. The question of whether Meecorp acted with good

faith, and ifthat good faith was justified is a question of fact and thus whether coverage is barred

by the “expected or intended” exclusion is not an appropriate one to dispense with at summary

judgment.

B. Attorney’s Fees

Meecorp also argues that pursuant to R. 4:42-9(a)(6), attorney’s fees may he awarded “in

thvor of a successful claimant” “in an action upon a liability or indemnity police of insurance.”

11 I?ule 4:42—9(a)(6) states that ‘[i]n an action upon liability or indemnity policy of insurance.”

counsel fees and costs may be awarded “in favor of a successful claimant,” “Even if an insurer

files a declaratory judgment action in good faith to contest its obligation to cover a claim, it must

pay the insureds legal fees if it loses,” Myron Corp. v. Ati. Mut. Ins. Corp., 407 N.J.Super. 302.

3 1 0 (App.Div.2009), affd. 203 N.J. 537 (2010). Whether Meecorp is entitled to seek counsel

fees under Ru/c 4:42—9(a)(6) must await determination of whether it is entitled to coverage, and

is not appropriate for determination at this time.

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IV CONCLUSION

For the foregoing reasons, Defendanfs Motion for Summary Judgment is granted in

part, denied in part and Plaintiff’s Motion for Su m ry udgment is denied.

NAUG.D

Dated: 1. 2012

cc: lion. Mark Falk, U.S.M.J.

Counsel of Record

File

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