Opinion ID: 1203288
Heading Depth: 2
Heading Rank: 2

Heading: Does the Insurance Policy Cover Gortho's Claims?

Text: Our next question is whether, under Iowa law, the terms of the CGL policy require Auto-Owners to defend Websolv against Gortho's claims. Gortho's primary claim against Websolv is that it violated the TCPA by faxing an unsolicited, one-page advertisement to Gortho. The TCPA prohibits the use of any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement. 47 U.S.C. § 227(b)(1)(C). It also permits persons or entities to sue in state court for violations of the TCPA and to recover between $500 and $1,500 in damages for each violation. Id. Websolv argues that Auto-Owners is required to defend it from Gortho's claims under two separate provisions in the policythe advertising injury provision and the property damage provision.
The insurance policy specifically requires Auto-Owners to defend against suits alleging `advertising injury' caused by an offense committed in the course of advertising [the insured's] goods, products or services. The contract then defines advertising injury as follows: Advertising injury means injury arising out of one or more of the following offenses: a. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services; b. Oral or written publication of material that violates a person's right of privacy; c. Misappropriation of advertising ideas or style of doing business; or d. Infringement of copyright, title or slogan. Websolv contends that the language in subsection (b) triggers Auto-Owners' duty to defend the TCPA claim. In response Auto-Owners claims that the right of privacy referred to in subsection (b) only covers secrecy-based privacy interests rather than seclusion-based privacy interests and that a TCPA suit asserts an invasion of a seclusion-based interest. While Iowa has no caselaw precisely on point, [3] we conclude that it would more likely accept the interpretation that Auto-Owners advances. The insurance policy does not define the right of privacy, and that phrase can have multiple meanings and refer to a variety of rights. The Restatement (Second) of Torts identifies four ways in which one's right of privacy can be invaded: (1) unreasonable intrusion upon another's seclusion; (2) appropriation of another's name or likeness; (3) unreasonable publicity given to another's private life; and (4) publicity that places another in a false light. § 652A(2). We have previously organized these rights into two broad categoriesrights involving secrecy interests and rights involving seclusion interests. Am. States Ins. Co. v. Capital Assocs. of Jackson County, Inc., 392 F.3d 939, 941 (7th Cir.2004) (The two principal meanings [of privacy] are secrecy and seclusion, each of which has multiple shadings.). Secrecy interests involve the right to keep certain information confidential; seclusion interests involve the right to be left alone. For example, [a] person who wants to conceal a criminal conviction, bankruptcy, or love affair from friends or business relations asserts a claim to privacy in the sense of secrecy. A person who wants to stop solicitors from ringing his doorbell and peddling vacuum cleaners at 9 p.m. asserts a claim to privacy in the sense of seclusion. Id. The underlying suit here only involves seclusion interests. Gortho does not contend that Websolv's fax advertisement revealed secret or proprietary information about it; rather, it alleges that the unsolicited fax intruded on its right to be left alone. [4] Therefore, the question in this case is whether the advertising injury coverage in the CGL policy requires Auto-Owners to defend Websolv in a suit claiming an infringement of Gortho's seclusion interests. As we have noted, Iowa has no precedent on this exact question. [5] Instead, the parties offer only general principles of insurance-contract interpretation culled from Iowa cases, which are too generic to be of much help. However, this is not the first time that we have been asked to interpret this particular policy language without the benefit of a state high-court decision on point. In American States Insurance Co. v. Capital Associates, we were faced with this same advertising injury question under Illinois law. 392 F.3d 939. At the time, Illinois had no relevant decisions interpreting this sort of provision, and we had to predict how the Illinois Supreme Court would decide the question. We concluded that the advertising-injury provision did not cover claims arising under the TCPA for two reasons. First, we noted that businesses generally do not enjoy a common-law right to seclusion, making it unlikely that the right to privacy provision in a corporate insurance policy was meant to cover seclusion interests. Id. at 942. Second, we reasoned that the use of the word publication in the provision made it more probable that the provision only covered claims involving secrecy interests. As we noted, [i]n a secrecy situation, publication matters; otherwise secrecy is maintained. In a seclusion situation, publication is irrelevant. Id. We concluded that the insurer had no duty to defend against seclusion-type claims under Illinois law. Id. at 943. Two years later, the Illinois Supreme Court had the opportunity to decide the issue. It disagreed with our analysis in American States and held instead that under Illinois law advertising-injury policy provisions cover TCPA claims. Valley Forge Ins. Co. v. Swiderski Elecs., Inc., 223 Ill.2d 352, 307 Ill.Dec. 653, 860 N.E.2d 307 (2006). Specifically, the court disagreed that the word publication narrowed the scope of privacy rights to only those related to secrecy. The court interpreted publication to mean nothing more than communication. Id. at 316-17. By faxing advertisements to the proposed class of fax recipients as alleged in [the] complaint, Swiderski published the advertisements... in the general sense of communicating information to the public.... Id. at 317. The Illinois Supreme Court disavowed our conclusion to the contrary, stating that our interpretation of the provision was inconsistent with Illinois' policy of giving undefined contract terms their plain and ordinary meanings. Id. at 322-23. We are now faced with this question a second time, but under Iowa law rather than Illinois law. We stand by our analysis in American States, even though Illinois has since adopted a different approach. We conclude that Iowa is more likely to adopt our interpretation rather than the one adopted by the Illinois Supreme Court. It is true that Iowa, like Illinois, gives undefined words in an insurance contract their ordinary meaning. A.Y. McDonald Indus., Inc. v. Ins. Co. of N. Am., 475 N.W.2d 607, 618 (Iowa 1991). However, Iowa also refers to closely related or associated policy language to illuminate the meaning of insurance-coverage provisions. Kibbee v. State Farm Fire & Cas. Co., 525 N.W.2d 866, 869 (Iowa 1994). We continue to read the policy's use of the word publication in the advertising-injury definition to narrow the scope of the privacy rights referred to in the same clause. The provision provides coverage for oral or written publication of material that violates a person's right of privacy. The most natural reading of this language is that it covers claims arising when the insured publicizes some secret or personal informationnot claims arising when the insured disrupts another's seclusion. Publication is implicated only where the relevant concern is secrecy; one can violate another's right to seclusion without publicizing anything. See, e.g., Doe v. Mills, 212 Mich.App. 73, 536 N.W.2d 824, 832 (1995) (An action for intrusion upon seclusion focuses on the manner in which information is obtained, not its publication; it is considered analogous to a trespass.) (emphasis added); RESTATEMENT (SECOND) OF TORTS § 652B cmt. b (1977) (The intrusion itself makes the defendant subject to liability, even though there is no publication....). One who knocks repeatedly on another's door late at night or takes photographs of another from across the street may violate the person's seclusion rights even though no publication has occurred. We think it stretches the advertising-injury language too far to interpret publication to include the type of activity at issue in this case. The TCPA protects seclusion interests irrespective of publication, but the publication language in subsection (b) of the policy's definition of advertising injury strongly suggests that this coverage only applies to alleged invasions of secrecy interests. The other subsections of the definition of advertising injury also support this interpretation. The other three provisions of the advertising-injury definition focus on harm arising from the content of an advertisement rather than harm arising from mere receipt of an advertisement. The surrounding provisions cover advertising-injury claims for libel, slander, misappropriation, and copyright infringement all of which require the examination of the content of the offending advertisement. [6] It is therefore reasonable to infer that subsection (b) also concerns harm emanating from the content of an advertisement; that is, it is reasonable to read subsection (b) to refer only to violations of secrecy interests. Here, Gortho is not complaining about the content of the fax; rather, it complains that the very fact the fax was sent violated the corporation's right to be left alone under the TCPA. Accordingly, we conclude that the advertising-injury provision does not cover claims brought under the TCPA.
Under the CGL policy, Auto-Owners also has a duty to defend its insured against claims arising from property damage, defined as physical injury to tangible property. However, the policy specifically excludes property damage that is expected or intended from the stand-point of the insured. Websolv argues that Gortho's claim is a claim for property damage because the unsolicited fax advertisement used ink and paper from Gortho's fax machine. While it is true that the one-page fax advertisement consumed a small amount of ink and one sheet of paper from Gortho's machine, this consequence was both expected and intended by Websolv. Because the policy expressly excludes damage that is expected or intended by the insured, Auto-Owners has no duty to defend Websolv under this provision. See Resource Bankshares Corp. v. St. Paul Mercury Ins. Co., 407 F.3d 631, 639 (4th Cir.2005) (It is obvious to anyone familiar with a modern office that receipt is a `natural or probable consequence' of sending a fax, and receipt alone [results in] ... depletion of the recipient's time, toner and paper....); Am. States Ins. Co., 392 F.3d at 943 ([J]unk faxes use up the recipients' ink and paper, but senders anticipate that consequence.). Websolv attempts to evade this fairly obvious conclusion by arguing that the policy's separation of insureds provision requires us to evaluate the property damage from the perspective of the company separately from the perspective of the employee who actually sent the fax. In other words, Websolv contends that while the fax-sending employee may have intended to use up Gortho's toner and paper, Websolv itself intended no such thing, and therefore it did not expect or intend the resulting property damage. The primary problem with this argument is that Gortho's complaint in the underlying case alleges that Websolv sent the fax and that Pabrai (the individual defendant in the case) merely authorized and approved it. Accordingly, the separation of insureds provision does not help Websolv. For the foregoing reasons, we REVERSE the decision of the district court and REMAND with instructions to enter summary judgment in favor of Auto-Owners.