Opinion ID: 2755041
Heading Depth: 3
Heading Rank: 2

Heading: The umbrella insurers

Text: Defendants Arch, National Union and XL are Dish’s umbrella insurers. On remand, Dish conceded that Arch “had satisfied the requisites for applying [the] intellectual property exclusion” in its policy “and consented to the entry of summary judgment in Arch’s favor.” Aplt. Br. at 49. As for National Union and XL, the district court concluded that neither of them had a duty to defend Dish in the RAKTL action and thus granted summary judgment in their favor. In doing so, the district court noted that it was undisputed “that the CGL insurance policies issued by Travelers and Arrowood have not been exhausted by payments of claims to which the National Union and XL policies apply.” Id. In addition, the district court concluded that “National Union and XL have no duty to defend because their policies, like those of the primary insurers, contain exclusions for 33 advertising injuries where the insurer is engaged in the business of ‘broadcasting.’” Id. “Furthermore,” the district court concluded, “National Union’s policy contains a ‘sole’ causation requirement . . . that negates coverage.” Id. at 2508. And lastly, the district court concluded that “National Union’s Satellite Exclusion and XL’s ‘as warranted’ provision also fail[ed] to provide coverage.” Id. In its appeal, Dish takes issue with these conclusions. a) XL’s “as warranted” provision Dish argues that “the district court failed to apply the specific ‘as warranted’ language of the XL Policy correctly.” Aplt. Br. at 51. In order to understand Dish’s arguments on this point, it is necessary to review several provisions of the XL Policy. To begin with, the XL Policy contains two separate coverage provisions: (1) “Coverage A,” which provides coverage for “those sums that the ‘Insured’ becomes legally obligated to pay as damages arising out of an ‘occurrence’ which are in excess of the underlying insurance stated in Schedule A of th[e] [XL] policy”; and (2) “Coverage B,” which provides coverage “[w]ith respect to any loss covered by the terms and conditions of this policy, but not covered as warranted by the underlying policies listed on Schedule A, or any other underlying insurance.” App. at 2048 (emphasis added). “The ‘not covered[] as warranted’ language of [this policy] establishes that [XL] must drop down for occurrences that are, in fact, covered by the underlying insurance policy 34 despite the wrongful denial of coverage by” the primary insurers. Hocker v. New Hampshire Ins. Co., 922 F.2d 1476, 1482 (10th Cir. 1991) (interpreting identical policy language). With respect to the duty to defend, the XL Policy states that “[w]e will defend any ‘suit’ seeking damages covered by this policy” “but not covered by any other insurance or underlying insurance.” App. at 2048. Lastly, the XL Policy includes a number of specific exclusions, including what the parties refer to as “Exclusion O,” which states as follows: “This insurance does not apply to . . . [a]ny defense, investigation, settlement or legal expense covered by underlying insurance.” Id. at 2055-57. The district court concluded that, in light of Exclusion O, “the XL Policy is not required to drop down and provide primary coverage even if Arrowood’s denial of coverage was wrongful.” Id. at 2515. Dish now argues on appeal that “[t]he district court’s application of the ‘as warranted’ provision and Exclusion O renders them meaningless and contradictory.” Aplt. Br. at 52 (internal quotation marks omitted). In support, Dish asserts that “[t]he district court . . . reads the [Exclusion O] defense provision as relieving XL of responsibility for any defense covered by underlying insurance even if the underlying insurer wrongfully denies coverage.” Id. “Thus,” Dish argues, “contrary to even the district court’s reading of the ‘as warranted’ provision, XL will never be obliged to drop down and defend when the underlying insurer wrongfully denies coverage.” Id. We need not decide whether the district court erred in interpreting 35 Exclusion O because we conclude that XL has no obligation under either of the coverage provisions of its policy to defend Dish in connection with the RAKTL action. More specifically, there is no excess coverage or related duty to defend under the “Coverage A” provision of the XL policy because, in light of the business exclusions we have already discussed, the underlying insurers have no obligation to indemnify or defend Dish in the RAKTL action. As for the “Coverage B” provision of the XL policy, its “not covered as warranted” language clearly refers to situations where the underlying policies on Schedule A were supposed to provide coverage, but the underlying insurers wrongfully denied coverage and thus did not actually pay to defend or indemnify the insured. Because the underlying insurers in this case have no obligation to indemnify or defend Dish in the RAKTL action, XL has no obligation to provide drop-down coverage to Dish. b) The National Union “sole causation” requirement The “Coverage” provision of the National Union Policy states, in pertinent part, that “[w]e will pay on behalf of the Insured those sums in excess of the Retained Limit that the Insured becomes legally obligated to pay by reason of liability imposed by law . . . because of . . . Advertising Injury that . . . is caused by an Occurrence.” App. at 1167 (emphasis in original). The National Union Policy defines “Advertising Injury,” in pertinent part, as “injury arising solely out of your advertising activities.” Id. at 1169. The National Union Policy also 36 defines “Occurrence,” in pertinent part, in the following manner: “As respects Advertising Injury, an offense committed in the course of advertising your goods, products and services that results in Advertising Injury.” Id. at 1171 (emphasis in original). The district court concluded that “[t]he complaint filed in the [RAKTL] Action d[id] not allege injury ‘arising solely out of’ the Dish parties’ advertising activities.” Id. at 2510. Rather, the district court concluded, the RAKTL action alleged “injuries outside of advertising,” including Dish’s pay-per-view ordering and its performance of customer service functions. Id. The district court also rejected Dish’s assertion “that the sole causation requirement conflicts with the requirement in the definition of Occurrence [in the National Union Policy] that provides that the offense must be committed in the course of advertising the named insured’s goods, products, or services.” Id. at 2510-11. On appeal, Dish argues that “[t]he District Court erred by finding that conflicting causation provisions,” i.e., the definitions of “Advertising Injury” and “Occurrence,” “within the National Union policy could be harmonized and construed in favor of the insurer, when Colorado law requires conflicting provisions ‘to be construed against the insurer and in favor of coverage to the insured.’” Aplt. Br. at 52 (quoting Simon v. Shelter Gen. Ins. Co., 842 P.2d 236, 239 (Colo. 1992)). More specifically, Dish argues that “the district court misapplied the law and misread the National Union Policy when it held that the 37 ‘occurrence’ definition modifies the offense, not the injury.” Id. at 54. We disagree. In order for coverage to exist under the National Union Policy, there must be liability imposed on Dish “because of Advertising Injury . . . caused by an Occurrence.” App. at 1167. As noted, an “Occurrence” means “an offense committed” by Dish “in the course of advertising [its] goods, products and services that results in Advertising Injury.” Id. at 1171. In turn, “Advertising Injury” means an “injury arising solely out of your advertising activities.” Id. at 1169. Construed together, “Dish must have committed an offense in the course of advertising that caused RAKTL injury,” and “[t]hat offense, in turn, must be the sole cause of RAKTL’s injury.” Aplee. Br. at 65. This interpretation, which allows all of the provisions of the National Union Policy to be read in harmony and in accordance with their plain language, must prevail over Dish’s attempt to create a conflict. See generally Farmers Ins. Exchange v. Anderson, 260 P.3d 68, 83 (Colo. App. 2010) (“In determining whether there is an ambiguity in a policy provision, we evaluate the policy as a whole and construe the language in harmony with the plain meaning of the words employed.”).