Opinion ID: 2755041
Heading Depth: 3
Heading Rank: 1

Heading: The insured’s business exclusion

Text: The district court, in granting summary judgment in favor of the Insurers, concluded that the policies’ business exclusions for “broadcasting” and “telecasting” precluded coverage. On appeal, Dish challenges these related conclusions on a number of grounds. a) The relevant policy language All of the policies at issue provide coverage for “advertising injury.” At the same time, each of the policies contain or effectively incorporate exclusions to such coverage that hinge on the nature of the insured’s business. The Travelers and Arrowood CGL policies expressly apply to “‘Advertising injury’ caused by an offense committed in the course of advertising your goods, products or services,” and provide that Travelers “will pay those sums that the insured becomes legally obligated to pay as damages because of . . . ‘advertising injury.’” App. at 904, 1319. The “Advertising Injury Liability” sections of the two policies also include, however, several express exclusions. In particular, both policies state that “[t]his insurance does not apply to . . . ‘Advertising injury’ arising out of . . . [a]n offense committed by an insured whose business is advertising, broadcasting, publishing or telecasting.” Id. at 904, 1319-20. Neither policy expressly defines the terms “broadcasting” or “telecasting.” The Arch commercial umbrella policy states, in pertinent part, that “this insurance applies to ‘personal and advertising injury’ caused by an offense arising 19 out of your business.” Id. at 1965. The “Exclusions” section of the policy, in turn, states that “[t]his insurance does not apply to, and we have no obligation to investigate, settle or defend, or pay the costs of defending, any claim or ‘suit’ for . . . ‘Personal and advertising injury’ . . . [c]ommitted by an insured whose business is . . . [a]dvertising, broadcasting, publishing or telecasting.” Id. at 1965-66. The National Union commercial umbrella policy provides that National Union “will pay on behalf of the Insured those sums in excess of the Retained Limit that the Insured becomes legally obligated to pay by law or assumed by the Insured under an Insured Contract because of . . . Advertising Injury that takes place during the Policy Period and is caused by an Occurrence happening anywhere in the world.” Id. at 1167. The Exclusions section of the policy, however, states that “[t]his insurance does not apply to . . . Advertising Injury arising out of . . . [a]n offense committed by an Insured whose business is advertising, broadcasting, publishing or telecasting.” Id. at 1173-74. The National Union policy also includes an endorsement entitled “BROADCASTING, TELECASTING, ADVERTISING AND PUBLISHING EXCLUSION.” Id. at 1159. This endorsement states, in pertinent part: “This insurance does not apply to . . . Advertising Injury committed or alleged to have been committed in any advertising, advertisement, . . . broadcast, . . . or telecast in the conduct of the Insured’s advertising, broadcasting, re-broadcasting, televising, [or] re-televising 20 . . . activities.” Id. Finally, the XL commercial umbrella policy provides two types of coverage: excess coverage that expressly incorporates most of “[t]he coverage provisions of the scheduled underlying policies,” including those policies’ business exclusions, and so-called “drop down” coverage that applies in the event that a loss is covered by the terms of the underlying policies, but the underlying insurers fail to provide such coverage. Id. at 2048. b) The terms “broadcasting” and “telecasting” None of the policies at issue expressly define the terms “broadcasting” or “telecasting,” nor do they otherwise indicate that these terms were “intended to have some special meaning peculiar to the insurance industry.” Mid-Century Ins. Co. v. Robles, 271 P.3d 592, 596 (Colo. App. 2011). As a result, we, like the district court, are left with the task of “constru[ing] [these terms] in [their] commonly used sense.” Id.; see also Mountain States Mut. Cas. Co. v. Roinestad, 296 P.3d 1020, 1024 (Colo. 2013). As we discuss below, Dish raises several challenges to the district court’s construction of those terms. c) The district court’s construction of the terms The district court concluded that the term “broadcasting,” as used in the policies at issue, was “synonymous with ‘transmission,’” App. at 2497 (quoting Nat’l Ass’n for Better Broad. v. FCC, 849 F.2d 665, 669 (D.C. Cir. 1988)), and it in turn concluded that “[t]here [wa]s no question that D[ish] transmits, via 21 broadcast satellites, television programming to its subscribers,” id. The district court rejected Dish’s argument “that the satellite television programming it provides should not be considered ‘broadcasting’ because it is a subscription service not available to the ‘indiscriminate public’ or the ‘public generally.’” Id. In the district court’s view, “[n]othing in the case law or the common usage of the term ‘broadcasting’ requires that every member of the public actually see what is broadcast or have access to the broadcast for free before the broadcast will be considered directed to the ‘public at large.’” Id. at 2498. “It is enough,” the district court concluded, “for the broadcast or telecast to be readily available to the public at large, and certainly D[ish] strives for universal access.” Id. Although Dish argued that subscription television was classified as a nonbroadcast service for purposes of the Federal Communications Act, the district court concluded that this “fact . . . says nothing about the plain, ordinary meaning of the term ‘broadcasting’ in general.” Id. at 2499. More specifically, the district court concluded that “it is irrelevant that ‘broadcasting’ has a statutory definition in a regulatory scheme that excludes satellite television providers” because “the average purchaser of insurance would consider D[ish] engaged primarily in the business of broadcasting.” Id. Further, the district court concluded that Dish’s “attempt to draw a distinction between subscription and non-subscription television fails because it makes no sense in the context of the Business Exclusion” contained in the 22 policies at issue. Id. at 2500. In support, the district court offered the following explanation: The reason for an insurance policy to include an exclusion for insureds in the businesses of “advertising, broadcasting, publishing or telecasting” is to limit the insurer’s exposure to mass media-type injuries. The extent of that risk is a function of how many people have access to the media, not whether they pay for it. Both PBS and D[ish] are mass media businesses, and whether it is PBS broadcasting a slanderous statement or D[ish] broadcasting a slanderous statement, each entity presents a risky enterprise for purposes of advertising coverage. Id. (internal footnotes omitted). Moreover, “[t]o the extent that D[ish] maintain[ed] that the word ‘broadcasting’ is susceptible to an interpretation that would distinguish traditional television transmission from subscription- or satellite-based television transmission,” the district court “reject[ed] that interpretation because the distinction is not supported by the underlying risk.” Id. at 2503. The district court construed the term “telecasting” in similar fashion, effectively concluding that it “involv[ed] the transmission of television programming (as opposed to only radio broadcasting, for example) to viewers.” Id. at 2506. d) Dish’s proposed definition of the terms Dish argues that the district court erred in granting summary judgment in favor of the Insurers because the terms “broadcasting” and “telecasting” must be “defined reasonably with a public distribution requirement,” and “D[ish] does not 23 distribute its products and services to the public and, therefore, is not engaged in” broadcasting or telecasting. Aplt. Br. at 21. In support, Dish asserts that it “is a subscription service provider in the business of providing video and audio programming only to its paying subscribers.” Id. Dish notes that “[a]ll of [its] Annual Reports contain a . . . disclosure” stating Dish’s belief that, as a provider of subscription programming, it is “not subject to many of the regulatory obligations imposed upon broadcast licensees.” Id. at 22. “In addition,” Dish argues, “[t]he Communications Act of 1934 defines ‘broadcasting’ as the ‘dissemination of radio communications intended to be received by the public, directly or by the intermediary of relation stations.’” Id. at 22-23 (emphasis added in Dish’s brief) (quoting 47 U.S.C. § 153(7)). Dish in turn argues that, “[s]tarting with that definition, the FCC undertook in the mid-1980s to distinguish ‘broadcasting’ services from ‘non-broadcasting’ services” by stating that “‘a necessary condition for the classification of a service as broadcasting is that the licensee’s programming is available to all members of the public, without any special arrangements or equipment,’” and that, in contrast, “‘where a licensee embarks on a communications service in a manner which permits receipt of that service only by certain members of the public, that licensee is not broadcasting.’” Id. at 23 (emphasis added in Dish’s brief) (quoting Subscription Video Report and Order, 2 FCC Rcd. 1001, ¶ 27 (1987)). In light of these distinctions drawn by the FCC, Dish argues, “subscription service providers, such 24 as Direct Broadcast Satellite providers, [that] provide their services via a private contractual relationship with the subscribing audience and an encrypted signal to prevent unauthorized viewing . . . are classified as non-broadcast services.” Id. And, Dish asserts, in Nat’l Ass’n For Better Broad., the D.C. Circuit “affirmed the FCC’s determination that subscription video service providers, such as D[ish], are not in the business of ‘broadcasting.’” Aplt. Br. at 23-24 (citing 849 F.2d at 669). Dish also asserts that “[t]he distinction between a subscription service provider . . . and those involved in ‘broadcasting’ . . . is well known through government and industry.” Id. at 24. “For example,” Dish asserts, “the Standard Industrial Classification (SIC) System acknowledges the difference between D[ish]’s subscription services business and the businesses of ‘broadcasting.’” Id. (internal footnote omitted). As a result, Dish asserts, federal agencies that utilize the SIC, such as the Securities Exchange Commission, classify Dish as a “Cable and Other Pay Television Service[],” rather than as a “Radio Broadcasting Station[]” or a “Television Broadcasting Station[].” Id. at 24-25. Addressing Dish’s arguments in reverse order, we reject Dish’s assertion that the commonly understood definition of the term “broadcasting” can be gleaned from the SIC system. The SIC system was established by the federal government in the 1930s as a “structure for the collection, presentation, and analysis of the U.S. economy,” North Am. Indus. Classification Sys. at Bureau of 25 Labor Statistics, www.bls.gov/bls/naics.htm (last visited Nov. 13, 2014), and it utilizes industry classifications of varying breadth. 3 Dish presents no evidence or case law that would allow us to conclude that the classifications found within the SIC system are so well known or commonly employed that they can serve to define a term in a commercial general liability policy. Likewise, the statutory definition of “broadcasting” in the Communications Act of 1934 (Act), see 47 U.S.C. § 153(7), and the FCC’s 1987 “designation of subscription television and subscription direct broadcast satellite services as not being broadcasting within the meaning of the Act,” Nat’l Ass’n For Better Broad., 849 F.2d at 666, are of little value in this case. The Act defines “broadcasting” as “the dissemination of radio communications intended to be received by the public, directly or by the intermediary of relay stations.” 47 U.S.C. § 153(7). For more than 50 years, the FCC, which was afforded a broad grant of authority under the Act to regulate radio and television communications, applied this definition to subscription radio and television services. Nat’l Ass’n For Better Broad., 849 F.2d at 671 (Wald, J., dissenting). In 1987, however, the FCC changed course and adopted the position that pay television services did not qualify as 3 Not surprisingly, Dish focuses on the most narrow of those classifications and ignores the broader classifications, which, in pertinent part, place it, along with radio and television broadcasting stations, within “Major Group 48: Communications.” U. S. Dep’t of Labor, Occupational Safety & Health Admin., SIC Manual, available at https://www.osha.gov/pls/imis/sic_manual.html (last visited Nov. 13, 2014). 26 “broadcasting” under the Act. Id. The FCC’s change of position was challenged in court and the D.C. Circuit, in a 2-to-1 decision, affirmed. The panel majority in that case, in discussing the legislative history of the Act, noted as follows: Further review of the recorded debate and Senator Dill’s involvement in it makes it plain that the Senators did not purport to be using the term “broadcasting” in any technical sense . . . . It must be presumed that the Senators, like most of the rest of us, at times use “broadcasting” not in its statutorily defined sense, as [specifically defined in the Act], but as if it were synonymous with “transmission.” Id. at 669. In other words, despite affirming the FCC’s conclusion that pay television services did not qualify as “broadcasting” under the Act, the panel majority effectively conceded that the Act’s definition of “broadcasting” was “technical” and considerably more narrow than the commonly understood definition of that term. Id. Thus, the Act’s statutory definition of “broadcasting” and the FCC’s interpretation and application of that statutory definition carry little weight in a case such as this, where our focus is on the commonly understood definition of the term “broadcasting.” That leaves only Dish’s argument that the terms “broadcasting” and “telecasting” must be defined to require distribution of content to the public at large for free. To address that argument, we turn to dictionary definitions of these terms. See Mountain States, 296 P.3d at 1024. The term “broadcast,” as an adjective, is commonly defined as “cast or scattered in all directions . . . : widely diffused,” Websters Third New Int’l Dictionary 280 (1993), “made public by 27 means of radio or television,” id., and “[d]isseminated by means of radio or television,” Oxford English Dictionary Online (OED), http://www.oed.com/view/Entry/23507 (last visited Nov. 13, 2014). Similarly, the term “broadcast,” as a noun, is commonly defined as “a casting or scattering in all directions,” “the act of making widely known: the act of spreading abroad,” and “the act of sending out sound or images by radio or television transmission esp. for general reception.” Websters, supra at 280. Finally, the term “broadcast,” as a verb, is similarly defined as “to scatter or sow,” id., “to make widely known: disseminate or distribute widely or at random,” id., “to send out from a transmitting station (a radio or television program) for an unlimited number of receivers,” id., and “[t]o disseminate (a message, news, a musical or dramatic performance, or any audible or visible matter) from a radio or television transmitting station to the receiving sets of listeners and viewers,” OED, supra, http://www.oed.com/view/Entry/23508 (last visited Nov. 13, 2014). The common definition of the term “telecast” appears to overlap that of the term “broadcast.” In its noun form, the term “telecast” is commonly defined as “a broadcasting or a program broadcast by television.” Websters, supra at 2349. In its verb form, the term “telecast” is commonly defined as “to broadcast by television.” Id. Even assuming that the terms “broadcasting” and “telecasting” include a “public” component, nothing in any of these common definitions of the terms 28 exclude fee-for-service transmissions. And that makes sense when one considers that subscription television service “shares most characteristics of traditional broadcasting, including its primary one—i.e., transmissions are directed toward ‘as many people as can be interested in the particular program as distinguished from a point-to-point message service to specified individuals.’” Nat’l Ass’n For Better Broad., 849 F.2d at 677 (Wald, J., dissenting) (quoting Nat’l Ass’n of Broadcasters v. FCC, 740 F.2d 1190, 1201 (D.C. Cir. 1984)). Indeed, “[s]ubscription television providers,” such as Dish, “obviously do not care about the identities of the particular individuals to whom their communications are transmitted; their real goal is to obtain revenues from any and all possible viewers.” Id. at 678. “In that sense, they are just like newspaper publishers or movie producers—their products are aimed at the general public, so long as that public can pay.” Id.; cf. Suburban Cable TV Co. v. Com., 570 A.2d 601, 609 (Pa. Commw. Ct. 1990) (concluding, in a case concerning state tax exemptions, that cable television providers were engaged in “broadcasting” because their “transmissions, both through the air and by cable, . . . involve[d] the dissemination of communications to the public”). Thus, in sum, we reject Dish’s assertion that the terms “broadcasting” and “telecasting,” as employed in the policies at issue, must be defined to exclude feefor-service transmissions, such as those that Dish provides to its subscribers. To the contrary, we conclude that the commonly-understood definitions of the terms 29 “broadcasting” and “telecasting” undoubtedly encompass Dish’s transmissions. e) The district court’s consideration of Dish’s broker’s advice In granting summary judgment in favor of the Insurers on the basis of the policies’ business exclusions, the district court also took into account evidence regarding advice given to Dish by its insurance broker. When Dish was shopping for insurance coverage in 2001 and 2002, it was advised by its insurance broker, The Lockton Companies (Lockton), that “‘Personal Injury and Advertising Injury Coverage’ for ‘[a]ny offense if the insured is in the business of advertising, broadcasting, or telecasting’ [w]as one of several ‘MAJOR EXCLUSIONS’ in [its] commercial general liability coverage” and an item that warranted ‘DISCUSS[ION].’” App. at 2495. In short, Lockton “explicitly warned D[ish] that it would not be covered for many injuries because of the Broadcasting Exclusion.” Id. at 2503. The district court concluded, for three reasons, that this “broker’s advice” was “admissible under an exception to [Colorado’s] four corners rule.” 4 Id. First, the district court noted that “no party dispute[d] the veracity of the broker’s statements.” Id. at 2504. Second, the district court noted that “neither the elements of the charges brought in the underlying patent infringement complaint nor D[ish]’s defenses ha[d] anything to do with whether D[ish] [wa]s in the 4 As we noted in DISH I, “Colorado courts adhere to a ‘four corners rule’ or ‘complaint rule,’ under which the courts compare the allegations of the underlying complaint with the terms of the applicable policy.” 659 F.3d at 1015. 30 business of broadcasting.” Id. Lastly, the district court noted that “application of the rule to exclude the broker’s advice would defeat the Colorado Supreme Court’s very object in creating the rule,” id., i.e., to protect the insured’s legitimate expectation of a defense. Indeed, the district court questioned “[h]ow. . . D[ish] [could] assert it had a ‘legitimate’ expectation of a defense when it was literally instructed not to expect a defense?” Id. (emphasis in original). On appeal, Dish argues that the district court improperly drew inferences from Lockton’s statements, and, under applicable Colorado law, should not have considered the Lockton evidence at all in determining whether the Insurers had a duty to defend Dish in the underlying RAKTL suit. We find it unnecessary to reach either of these arguments. Even assuming that the district court should not have considered the statements made by Lockton to Dish, its interpretation of the terms “broadcasting” and “telecasting” otherwise rests on firm ground. f) The overlapping meanings of broadcasting and telecasting In the course of granting summary judgment in favor of the Insurers, the district court concluded that “[t]he term ‘telecasting’ [wa]s included [in the policies at issue] to make clear that businesses involving the transmission of television programming (as opposed to only radio broadcasting, for example) to viewers are excluded from advertising injury coverage.” App. at 2506. Dish challenges this point on appeal, arguing that the district court, “[b]y concluding that D[ish] is simultaneously engaged primarily in both ‘broadcasting’ and 31 ‘telecasting,’ . . . rendered the Insured’s Business Exclusion meaningless and contradictory.” Aplt. Br. at 41 (internal quotation marks omitted). In support, Dish argues that if “the ‘transmission of television programming’ is already excluded by inclusion of the term ‘broadcasting,’ . . . the inclusion of the term ‘telecasting’ [is] superfluous.” Id. In addition, Dish argues that it, “like all companies, can be engaged ‘primarily’ in only one business at any given time.” Id. Dish bases its arguments upon the rule of Colorado law that courts “must avoid reading an insurance policy so as to render some provisions superfluous.” Gen. Sec. Indem. Co. of Ariz. v. Mountain States Mut. Cas. Co., 205 P.3d 529, 537 (Colo. App. 2009). Dish, however, would have us apply the rule so as to prevent any overlapping terms whatsoever in an insurance policy. 5 Because we are not convinced that this was the intent of the Colorado courts in adopting the rule, we decline to adopt Dish’s position. Moreover, even assuming the terms “broadcasting” and “telecasting” have overlapping meanings, that does not render the business exclusion provisions of the policies superfluous. Rather, as the district court aptly noted, the record suggests that the Insurers, by using both of the terms at issue, were simply attempting “to make clear that businesses involving the transmission of television programming . . . to viewers [we]re 5 Under Dish’s position, for example, an automobile liability insurance policy could not use both the terms “vehicle” and “automobile” because they have overlapping meanings. 32 excluded from advertising injury coverage.” App. at 2506. We therefore conclude the district court did not err in determining that Dish was engaged “primarily” in both “broadcasting” and “telecasting,” given that these two terms have overlapping meanings. g) Conclusion For all of these reasons, we agree with the district court that Dish is engaged primarily in the business of “broadcasting” and “telecasting,” and that, consequently, coverage for advertising injuries is unavailable under the policies at issue.