Court Opinion

ID: 167826
Source: CourtListenerOpinion
Date Created: 2010-08-14 10:04:21+00
Date Added: 2024-06-11T17:24:54.609359
License: Public Domain

F I L E D
                                                               United States Court of Appeals
                                                                       Tenth Circuit
                   UNITED STATES CO URT O F APPEALS
                                                                      July 24, 2006
                          FO R TH E TENTH CIRCUIT                 Elisabeth A. Shumaker
                                                                      Clerk of Court

 R EA G A N NA TIO N A L
 A D V ERTISIN G , A N D REA G AN
 N A TIO N A L A D V ER TISIN G OF
 A U STIN , IN C., A N D REA G A N
 OUTDOOR ADVERTISIN G, IN C.,

             Plaintiffs - Appellants,
                                                       No. 05-4131
                                              (D.C. No. 2:03-CV-00967-PGC)
 v.
                                                         (D. Utah)
 HA RTFORD CA SUA LTY
 IN SU RAN CE C OM PA N Y ,

             Defendant - Appellee.

                          OR D ER AND JUDGM ENT *

Before T YM KOV IC H, Circuit Judge, M cW ILLIAM S, Senior Circuit Judge, and
E AG A N, District Judge. **

      Plaintiffs-Appellants Reagan National Advertising, Reagan National

Advertising of Austin, Inc., and Reagan Outdoor A dvertising, Inc. (collectively

      *
       This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
      **
       The Honorable Claire V. Eagan, United States District Judge for the
Northern District of Oklahoma, sitting by designation.
“Reagan”) appeal from an order of the district court denying Reagan’s M otion for

Partial Summary Judgment and granting the Cross-M otion for Summary Judgment

of defendant-appellee H artford Casualty Insurance Company (“Hartford”). On

appeal, Reagan argues that the district court erred in failing to conclude that

Hartford owes a duty to defend and indemnify Reagan for claims alleged in a

lawsuit captioned Harrill et al. v. Reagan National Advertising of Austin, Inc.,

C.A. No. A03CA-51H (W .D. Tex.). 1 The district court found that the insurance

policy upon which Reagan bases its claims for a declaratory judgment and breach

of contract against Hartford did not provide coverage. W e exercise jurisdiction

under 28 U.S.C. § 1291 and affirm.

                                     Background

      Reagan owns and maintains advertising billboards in various states.

Landowners and competitors of Reagan in the billboard advertising market around

Austin, Texas filed a class action lawsuit against Reagan on January 14, 2003.

They essentially alleged that Reagan attempted to monopolize the billboard

market in violation of Texas antitrust laws by abusing the regulatory regime for

billboard advertising in the Austin, Texas market. The original petition included

claims for antitrust violations as well as for tortious interference, tortious

interference w ith prospective business relations, interference w ith property rights,

      1
       The case was originally filed as No. GN300124, in the District Court of
Travis County, Texas, 201st Judicial District. Thereafter, it was removed to
federal court on diversity grounds.

                                          -2-
and breach of contract, but it did not specifically contain a claim for malicious

prosecution.

      Reagan attempted to tender the defense of the lawsuit to Hartford, relying

on language in the policy requiring Hartford to defend Reagan against any suit

seeking damages for “personal and advertising injury.” 2 The policy defines

“personal and advertising injury” as injury “arising out of” malicious prosecution,

among other things. Aplt. App. at 114. Hartford refused, based upon policy

language which excludes coverage for personal and advertising injury arising out

of a violation of any antitrust law. Aplt. App. at 105. After Reagan filed this

action, the remaining plaintiff in Harrill filed an amended petition which, in

relevant part, alleges violations of Texas antitrust law, malicious prosecution, and

tortious interference. Reagan renewed its demand for defense and

indemnification under the Hartford policy, but Hartford did not respond due to the

procedural posture of the litigation.

                                Standard of Review

      2
       Reagan also relied on “Coverage A” of the policy for claims alleging
bodily injury and property damage liability. The district court ruled that the
claims alleged in Harrill did not trigger a duty to defend under Coverage A, but
Reagan has not appealed that part of the district court’s ruling. In addition,
Reagan has not contested the district court’s ruling in favor of National Casualty
Insurance, d/b/a M edia Professional Insurance (“National”), which had agreed to
provide a partial defense to Reagan in Harrill under a reservation of rights.
Reagan’s claims against National were settled prior to this appeal. All of the
underlying claims in Harrill were settled in 2003.

                                         -3-
      W e review the district court’s order granting summary judgment de novo,

applying the same standards as the district court under Rule 56 of the Federal

Rules of Civil Procedure. E.g., Zamora v. Elite Logistics, Inc., 449 F.3d 1106,

1111 (10th Cir. 2006). Summary judgment is proper only if “there is no genuine

issue as to any material fact, and the moving party is entitled to judgment as a

matter of law.” Fed. R. Civ. P. 56(c). The moving party bears the burden of

showing that no genuine issue of material fact exists. Zamora, 449 F.3d at 1112

(citation omitted). W e resolve all factual disputes and draw all reasonable

inferences in favor of the non-moving party. Id. (citation omitted). If there is no

genuine issue of material fact, the court determines whether the substantive law

was correctly applied by the district court. Id. (citation omitted).

                                     Discussion

      Reagan argues that the district court erred because the policy provides

coverage against claims and for damages allegedly arising out of malicious

prosecution, and the ambiguity as to that term must be resolved in Reagan’s

favor. Reagan also contends that the antitrust exclusion does not relieve H artford

of its duty of defense because the allegations of malicious prosecution in Harrill

were capable of surviving even if the antitrust claims failed. Hartford argues that

the allegations in Harrill did not meet the elements for a malicious prosecution

claim and, even if they did, all of the claims, including the malicious prosecution

                                          -4-
claim, arise out of violations of Texas antitrust laws and are thus excluded under

the policy.

       The district court did not address whether the petitions in Harrill stated a

claim for malicious prosecution; it focused instead on the policy’s antitrust

exclusion. Reagan points out that the district court made no determination as to

whether Utah or Texas law applies to the case because the district court’s ruling

did not require it to examine Reagan’s argument that the term “malicious

prosecution” in the policy is ambiguous and, therefore, that Hartford was

obligated to defend the allegations of “sham litigation” and abuse of process in

Harrill. The district court stated that no conflict of law determination was

necessary because the parties had agreed that the outcome would be the same

regardless of whether Texas or Utah law applied. Reagan now argues that it

agreed to the similarity in Texas and Utah law on the issue of insurance policy

interpretation, but it did not agree that Utah and Texas law are the same as to

malicious prosecution. In any event, we find no reason to resolve the conflict of

law issue or to address whether the petitions alleged the required elements for

malicious prosecution because, under the undisputed facts of this case, the

antitrust exclusion applies.

      In both Texas and Utah, an insurer’s duty to defend is determined by

comparing the allegations of the underlying proceedings with the language of the

insurance policy. E.g., King v. Dallas Fire Ins. Co., 85 S.W .3d 185, 187 (Tex.

                                         -5-
2002); Fire Ins. Exch. v. Therkelsen, 27 P.3d 555, 560 (Utah 2001). 3 An insurer is

obligated to defend when the complaint allegations, if proved, could result in

liability under the policy. Nova Cas. Co. v. Able Constr., Inc., 983 P.2d 575, 578

(Utah 1999); see Heyden Newport Chem. Corp. v. Southern Gen. Ins. Co., 387

S.W .2d 22, 26 (Tex. 1965). The obligation is not absolute; it can be precluded

when the facts alleged in the petition are excluded from coverage. See Fidelity &

Guar. Ins. Underwriters, Inc. v. M cM anus, 633 S.W .2d 787, 788 (Tex. 1982); see

also Deseret Fed. Sav. & Loan Ass’n v. United States Fid. & Guar. Co., 714 P.2d

1143, 1146 (Utah 1986). Exclusion clauses, in general, are construed against the

insurer. See LDS Hosp. v. Capitol Life Ins. Co., 765 P.2d 857, 859 (Utah 1988);

cf. King, 85 S.W .3d at 187 (“we resolve all doubts regarding the duty to defend in

favor of the duty”).

      Insurers “may exclude from coverage certain losses by using language

which clearly and unmistakably communicates to the insured the specific

circumstances under which the expected coverage will not be provided.” Alf v.

State Farm Fire & Cas. Co., 850 P.2d 1272, 1275 (Utah 1993) (internal quotations

omitted); see Truck Ins. Exch. v. M usick, 902 S.W .2d 68, 70 (Tex. Ct. App.

1995). An insurance exclusion, like any contractual provision, is ambiguous

when it is susceptible to more than one reasonable interpretation. National Union

      3
        The duty to defend is broader than the duty to indemnify. Sharon Steel
Corp. v. Aetna Cas. & Surety Co., 931 P.2d 127, 133 (U tah 1997); Grimes Const.,
Inc. v. Great American Lloyds Ins. Co., 188 S.W .3d 805, 818 (Tex. App. 2006).

                                        -6-
Fire Ins. Co. v. Hudson Energy Co., 811 S.W .2d 552, 555 (Tex. 1991); cf. Utah

Farm Bureau v. Crook, 980 P.2d 686-87 (Utah 1999) (“A contract is ambiguous if

it is unclear, omits terms, has multiple meanings, or is not plain to a person of

ordinary intelligence and understanding.”(citing Alf, 850 P.2d at 1274-75)). Any

doubts as to ambiguity in an insurance policy are resolved against the insurer.

E.g., Alf, 850 P.2d at 1274; Urethane Intern. Products v. M id-Continent Cas. Co.,

187 S.W .3d 172, 176 (Tex. App. 2006) (citation omitted). However, “not every

difference in interpretation of a contract or an insurance policy amounts to an

ambiguity.” State Farm Fire and Cas. Co. v. Vaughan, 968 S.W .2d 931, 932

(Tex. 1998); see Alf, 850 P.2d at 1274-75.

      The antitrust exclusion in the Hartford policy unambiguously precludes

coverage for the malicious prosecution claims asserted against Reagan in the

Harrill. The policy states that the insurance does not apply to any “personal and

advertising injury [including malicious prosecution] arising out of a violation of

any anti-trust law.” As the district court found, all of the claims in H arrill “arise

out of” allegations of antitrust violations. Both the petition and the amended

petition in Harrill are replete with detailed allegations of Reagan’s “anti-

competitive actions” and “monopolistic conduct,” and indistinguishable facts

asserted in support of those allegations underlie every claim. Indeed, the common

law claims for relief in both petitions, including the malicious prosecution claim

in the amended petition, set forth no additional facts but are based on the “actions

                                           -7-
of Defendant Reagan set forth above” or “outlined above.” The amended petition,

in particular, describes the “sham litigation” pursued by Reagan as “simply an

abuse of the legal process for the sole purpose of maintaining Reagan’s monopoly

by increasing costs, causing delay, and unfairly harming landowners and Reagan’s

competitors.”

      The phrase “arising out of” is broadly construed.

      [T]he term “arising out of” is ordinarily understood to mean
      originating from, incident to, or in connection with the item in
      question. . . . As used in a liability insurance policy, the w ords,
      “arising out of” are very broad, general and comprehensive. They
      are commonly understood to mean originating from, growing out of,
      or flowing from, and require only that there be some causal
      relationship between the injury and the risk for which coverage is
      provided.

M eadow Valley Contractors, Inc. v. Transcontinental Ins. Co., 27 P.3d 594, 597

(Utah Ct. App. 2001) (internal quotations omitted); see American States Ins. Co.

v. Bailey, 133 F.3d 363, 370 (5th Cir. 1998) (deciding a Texas case); cf. General

Agents Ins. Co. v. Arredondo, 52 S.W .3d 762, 767 (Tex. App. 2001) (the phrase

“arise out of” requires only a causal connection). Here, the alleged malicious

prosecution was for alleged sham lawsuits to maintain a monopoly. Thus, the

requisite causal connection exists in this instance, where the malicious

prosecution claim originates from, grows out of, or flows from, the alleged

antitrust violations.

                                         -8-
      The court in Upsher-Smith Laboratories, Inc. v. Federal Ins. Co., 264 F.

Supp. 2d 843, 851 (D. M inn. 2002), relied upon the same broad construction of

the phrase “arising out of” to deny insurance coverage under an antitrust

exclusion where the plaintiffs, much like the plaintiffs in Harrill, had stated

common law causes of action as w ell. Faced with the same issue before this

court, the Upsher court stated that the alleged “common law causes of action flow

directly from the underlying antitrust allegations,” and rejected the plaintiffs’

argument that the antitrust exclusion in that case did not apply to exclude the

comm on law and non-antitrust statutory claims where “the factual basis for all of

the ‘separate common law and non-antitrust claims’ is the underlying antitrust

action[].” Id. at 850.

      W e are persuaded by the Upsher court’s rationale. W e are not persuaded

that the Harrill plaintiffs’ malicious prosecution, sham litigation, or abuse of

process claims were capable of standing alone, entirely separate from the antitrust

claims. To the extent these claims constituted a distinct cause of action in the

original petition, they were clearly “tag-along” or “add-on” causes of action

dependent on the antitrust activities. Stating a distinct claim for “malicious

prosecution” in the amended petition was obviously an afterthought. None of

these claims can be divorced from the antitrust claims because the underlying

                                          -9-
facts, if proven, were that Reagan filed sham litigation and abused the legal and

regulatory processes to maintain a monopoly. 4

      Reagan challenges the district court’s decision by arguing that an antitrust

violation must be found before the antitrust exclusion applies. Reagan argues that

the antitrust exclusion applies only to personal and advertising injury which arises

out of actual – not alleged – violations of antitrust law . 5 Since no violations were

found in Harrill, Reagan asserts, the exclusion is inapplicable and Hartford was

obligated to defend. In other words, Reagan contends, Hartford was not entitled

to rely on mere allegations of antitrust violations when it denied coverage.

      Accepting this argument would render the exclusion invalid, as H artford’s

obligation to defend w ould turn on a determination of liability. In other words,

      4
        Benjamin v. Amica M ut. Ins, Co., No. 20040974, 2006 W L 1868329 (Utah
July 7, 2006), submitted by Reagan as supplemental authority, is inapposite
because the policy exclusion at issue there differed significantly from the one at
issue here. In Benjamin, the policy excluded intentional torts, and the underlying
complaint alleged both intentional and unintentional torts based upon the same
underlying facts. The Utah Supreme Court found that the insurer could plead
alternatively and had a duty to defend the unintentional tort claims. Id. at *4.
Here, the policy excludes both the antitrust claims and any personal or advertising
injuries (defined in the policy to include malicious prosecution) arising out of
antitrust violations. As in Rosas v. Eyre, 82 P.3d 185, 191 (Utah C t. App. 2003),
we look to the facts alleged in the underlying complaint to determine the claim,
and, if the policy excludes that claim, the insurer is not obligated to defend.
      5
       Reagan asserts that the court cannot assume the allegations are true. W e
do not assume that the allegations are true for purposes of analyzing of H artford’s
duty to defend. W e have determined that the policy excludes coverage for the
claims asserted in the underlying litigation and, therefore, there are no allegations
which, if proven, give rise to potential liability under the policy.

                                         -10-
Hartford would be obligated to defend even the antitrust claims and, if violations

were ultimately found, its only recourse would be to seek restitution from the

insured for the costs of a defense it was never obligated to assume. W e will not

construe the contractual language of the insurance policy to create such an

anomaly.

      AFFIRM ED.

                                               Entered for the Court

                                               Claire V. Eagan
                                               District Judge

                                        -11-