Date: 10-23-2008

Case Style: Michael Penzer, as assignee of Southeast Wireless, Inc. v. Transportation Insurance Company v. Southeast Wireless, Inc., Nextel South Corp.

Case Number: 7-13827

Judge: Per Curiam

Court: United States Court of Appeals for the Eleventh Circuit on appeal from the Southern District of Florida, Miami-Dade County

Plaintiff's Attorney:

Defendant's Attorney:

Description: This appeal involves an insurance coverage dispute. Appellant Michael Penzer (“Penzer”) is the assignee of Southeast Wireless, Inc. (“Southeast”). Appellee Transportation Insurance Company (“Transportation”) issued to Southeast a commercial liability policy that included coverage for “advertising injury.” Penzer and Southeast entered into a class action settlement1 of claims that Southeast violated the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227 (2000), based on unsolicited facsimile transmissions it sent to Penzer and others.2 The district court found the policy language unambiguous and that “advertising injury” coverage as defined in the policy “exists only when the content of the material published violates a person’s right to privacy.” Penzer v. Transp. Ins. Co., 509 F. Supp. 2d 1278, 1286 (S.D. Fla. 2007). In other words, it held unwanted intrusions, such as violations of the TCPA, are not covered advertising injuries. We certify the issue to the Florida Supreme Court.

I. BACKGROUND

On September 22, 2004, Penzer, as assignee of Southeast, filed a complaint against Transportation seeking a declaratory judgment as to Transportation’s duty to defend and indemnify Southeast under the insurance policy at issue. Under Southeast’s insurance policy, Transportation had the duty to indemnify and defend claims that fell under an “advertising injury” provision covering an “injury arising out of . . . [o]ral or written publication of material that violates a person’s right of privacy.” (Record Excerpts Tab 1 (Ex. C), Business Liability Coverage Form (“Policy”) at 10.) Penzer alleged that the claims against Southeast were covered by this provision because the transmission of an unsolicited facsimile advertisement constituted the publication of written material. Transportation filed a counterclaim seeking a declaration that Southeast was not covered under the provision, because it was unambiguous and did not encompass Penzer’s claims, or in the alternative, because coverage was not required due to several policy exclusions.

The district court granted a stay of proceedings pending the disposition of the appeal in Hooters of Augusta, Inc. v. American Global Insurance Co., a case involving coverage under the same policy provision for an identical TCPA violation. In a non-precedential decision, and applying Georgia law, we held that the insurer was obligated to defend and indemnify its insured against TCPA claims. Hooters, 157 Fed. App’x 201, 210 (11th Cir. 2005). Following the decision, the district court lifted the stay, and both Penzer and Transportation filed cross-motions for partial summary judgment on the issue of coverage under the policy. The district court granted summary judgment in favor of Transportation, finding Hooters unpersuasive and instead finding that the holding of State Farm Fire & Casualty Co. v. Compupay, Inc., 654 So. 2d 944 (Fla. Dist. Ct. App. 1995), set forth the applicable Florida law. Penzer, 509 F. Supp. 2d at 1284–86. Specifically, the district court determined that the phrase “‘oral or written publication of material that violates a person’s right of privacy’ is unambiguous, and that advertising injury coverage under this provision exists only when the content of the material published violates a person’s right to privacy.” Id. at 1286 (emphasis added). Penzer timely appealed.

II. DISCUSSION

A. General Florida Insurance Law Principles

The parties agree that Florida law governs this case, but the Supreme Court of Florida has not construed the particular policy language at issue. Generally, under Florida law, “in construing insurance policies, courts should read each policy as a whole, endeavoring to give every provision its full meaning and operative effect.” Auto-Owners Ins. Co. v. Anderson, 756 So. 2d 29, 34 (Fla. 2000); see also Fla. Stat § 627.419(1) (“Every insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy.”). Policy terms are given their plain and ordinary meaning and read in light of the skill and experience of ordinary people. Bethel v. Sec. Nat’l Ins. Co., 949 So. 2d 219, 222 (Fla. Dist. Ct. App. 2006); see also Vencor Hosps., Inc. v. Blue Cross Blue Shield of R.I., 284 F.3d 1174, 1180–81 (11th Cir. 2002).

Undefined terms and complex terms requiring analysis are “not automatically rendered ambiguous,” Swire Pac. Holdings, Inc. v. Zurich Ins. Co., 845 So. 2d 161, 165 (Fla. 2003), however, “[i]f the relevant policy language is susceptible to more than one reasonable interpretation, one providing coverage and the [other] limiting coverage, the insurance policy is considered ambiguous.” Auto-Owners, 756 So. 2d at 34. Ambiguities are construed against the insurer. State Farm Fire & Cas. Ins. Co. v. CTV Dev. Corp., 720 So. 2d 1072, 1076 (Fla. 1998).

B. The Relevant Policy Language

The policy defines “advertising injury” as follows:

[I]njury 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.

(Policy at 10 (emphasis added).) The terms “publication,” “material,” and “right of privacy” are not defined by the policy.

There are two relevant exclusions in the policy for “advertising injury.” The first excludes coverage for “advertising injury” “[a]rising out of the willful violation of a penal statute or ordinance committed by or with the consent of the insured.” (Id. at 5.) The second excludes coverage for “advertising injury” “arising out of . . . [b]reach of contract, other than misappropriation of advertising ideas under an implied contract.” (Id. at 6.)

C. The Parties’ Positions on Coverage

Penzer argues that broad dissemination of facsimile advertisements is consistent with the commonly understood definitions of “publication” and “material,” two terms used in the policy, and that sending unsolicited facsimile advertisements violates a person’s “right of privacy” as it is commonly understood, because privacy includes not just a secrecy or content component but also the right to be left alone. Penzer maintains that because “right of privacy” has at least two meanings, the provision must be construed liberally in favor of coverage.

Transportation argues that the policy terms cannot be considered in isolation and that when the provision is read as a whole and in the context of the other offenses mentioned, it provides for coverage only of content-based privacy violations.

D. The District Court’s Resolution of the Coverage Issue

The district court determined that the policy was unambiguous and agreed with Transportation’s position that the content of the published material itself must violate the right to privacy, finding persuasive the analysis conducted in American States Insurance Co. v. Capital Associates of Jackson County, Inc., 392 F.3d 939, 940–43 (7th Cir. 2004),3 in denying coverage for TCPA claims under the same policy language. Penzer, 509 F. Supp. 2d at 1286–87. The district court relied on American States’s determination that the two principal meanings of privacy are secrecy and seclusion, and that “[t]he structure of the policy strongly implies that coverage is limited to secrecy interests” because “[i]n a secrecy situation, publication matters . . . [whereas] [i]n a seclusion situation, publication is irrelevant.” Id. (quoting Am. States, 392 F.3d at 941–43). Additionally, the district court found that the fact that the other offenses covered under the “advertising injury” provision were content-based (“defamation, misappropriation of advertising ideas or style of doing business, infringement of copyright”), provided further evidence that the disputed provision should also be read similarly. Id. at 1287–88.4

Although Resource Bankshares Corp. v. St. Paul Mercury Insurance Co., 407 F.3d 631, 641–42 (4th Cir. 2005), found the four “advertising injury” offenses to “share the common thread” of being content-based, other courts have come to the opposite conclusion regarding the identical provision. See, e.g., Valley Forge, 860 N.E.2d at 318 (finding TCPA claim coverage and stating that such coverage “does not, in any way, prevent the policies’ alternative definitions of ‘advertising injury’ from being given effect or thwart their respective purposes”).

The district court’s holding that only content-based invasions of privacy, and not TCPA-based seclusion violations, are covered is also placed in doubt by the wide divergence in case law5 interpreting “right of privacy” as used in this and similar provisions. See, e.g., Terra Nova, 869 N.E.2d at 573 (“It is fair to say that even the most sophisticated and informed insurance consumer would be confused as to the boundaries of advertising injury coverage in light of the deep difference of opinion symbolized in these cases.”).

The district court found our non-precedential opinion in Hooters unpersuasive because it applied Georgia, not Florida, law. Penzer, 509 F. Supp. 2d at 1284–86. General principles of Florida and Georgia law, however, are similar in this area. See Hooters, 157 Fed. App’x at 205 (finding that under Georgia law a “reviewing court must consider the ordinary and legal meaning of the words” used in the policy, construing ambiguous terms “in favor of the insured to provide maximum coverage”).

Additionally, the district court noted that Transportation’s main argument, that the policy only covers an intrusion into seclusion that communicates private information, was not addressed in Hooters. Penzer, 509 F. Supp. 2d at 1284. The Hooters court did note, however, that the tighter wording of the policies involved in various cases denying coverage for TCPA claims seemed to have been a significant factor in the courts’ decisions, that is “publication” of such material matter, and that because no publication had been alleged, the allegations of offensive touching were not covered. Penzer, 509 F. Supp. 2d at 1284–85 (citing Compupay, 654 So. 2d at 948–49).

Compupay does not appear to be directly on point, as it involved whether there was a duty to defend sexual harassment claims under a policy provision providing coverage for “the publication or utterance of a libel or slander or of other defamatory or disparaging material, or a publication or utterance in violation of an individual’s right of privacy.” Compupay, 654 So. 2d at 946 n.2. As the allegations at issue in Compupay involved only the physical invasion of the complainant’s person, there were no “allegations of publication which would bring the claim within this provision.” Id. at 949 (emphasis added). As the case involved a different type of conduct, the court had no occasion to consider whether the publication of unsolicited material into a recipient’s private domain violates that person’s right to privacy based on interests in seclusion.

E. Exclusions

Transportation also argues that policy exclusions prevent coverage here. Provisions excluding or limiting the liability of the insurer are construed even more strictly against the insurer than those provisions that allow coverage, Auto- Owners, 756 So. 2d at 34, and “the burden of proof rests on the insurance company to demonstrate that the coverage was inapplicable,” U.S. Concrete Pipe Co. v. Bould, 437 So. 2d 1061, 1065 (Fla. 1983). If exclusions are reasonably susceptible to more than one meaning, they are considered ambiguous and are to be construed in favor of the insured. Swire Pac. Holdings, 845 So. 2d at 165.

The relevant exclusions in the policy exclude coverage for “advertising injur[ies]” “[a]rising out of the willful violation of a penal statute or ordinance committed by or with the consent of the insured,” and “arising out of . . . [b]reach of contract, other than misappropriation of advertising ideas under an implied contract.” (Policy at 5–6.) Transportation argues that Florida public policy also prohibits coverage for intentional misconduct and punitive damages, both of which it alleges are at issue here. None of these exclusions or defenses were addressed by the district court, in view of its decision that no coverage was available under the “advertising injury” provision, but they may provide alternative grounds for affirming the district court’s entry of summary judgment and final judgment in favor of Transportation on the issue of coverage. See Bonanni Ship Supply, Inc. v. United States, 959 F.2d 1558, 1561 (11th Cir. 1992) (“[T]his court may affirm the district court where the judgment entered is correct on any legal ground regardless of the grounds addressed, adopted or rejected by the district court.”). Transportation, however, has not met its burden to prove that coverage is inapplicable under any of the policy exclusions or other defenses.

Transportation first alleges that coverage is excluded because Penzer’s claims actually arose from Southeast’s willful violation of a penal statute, namely, Fla. Stat. § 365.1657. The exclusion e 7 asily and logically can be read as limited to the statute giving rise to liability, thus Transportation’s broader reading does not control. Transportation most likely does not argue this exclusion arose from the TCPA, the statute giving rise to liability here, because most courts have found that the TCPA is not a penal statute. See, e.g., Melrose Hotel, 432 F. Supp. 2d at 509 n.10; Hooters of Augusta, Inc. v. Am. Global Ins. Co., 272 F. Supp. 2d 1365, 1375–76 (S.D. Ga. 2003); W. Rim, 269 F. Supp. 2d at 848–49; Terra Nova, 869 N.E.2d at 574–75.

Transportation also alleges that the breach of contract exclusion applies because Southeast breached a contract with Nextel by failing to get Nextel’s approval before sending the facsimile advertisements and by sending facsimiles containing Nextel’s trademark, as prohibited by their “Authorized Representative Agreement.” Penzer maintains that the breach in question must have occurred between Southeast and the party claiming injury, i.e. Penzer, and that because there was no contractual relationship between the parties, no breach has occurred.

The language of the breach of contract exclusion does not clearly indicate who the applicable contracting parties must be for the exclusion to apply, but Penzer’s reading is reasonable and, in fact, the most obvious one. Because Transportation has not demonstrated that its broad reading of the exclusion is the only reasonable one and because exclusions must be strictly construed against the insurer, this exclusion does not prevent coverage.

Florida’s public policy against insuring one’s own intentional misconduct also does not apply here. This public p 8 olicy exclusion is not applicable under Florida law “[w]here liability is not predicated on intent.” Travelers Indem., 889 So. 2d at 794. Numerous courts have determined that the TCPA does not require intent, except when awarding treble damages. See, e.g., Universal Underwriters, 401 F.3d at 882 (“[I]ntent is not a prerequisite to liability under the [TCPA].”); Park Univ. Enters., Inc. v. Am. Cas. Co. of Reading, PA, 314 F. Supp. 2d 1094, 1103 (D. Kan. 2004) (“The TCPA is essentially a strict liability statute” where liability can be found for erroneous unsolicited faxes). Thus, this public policy exclusion does not apply.

Finally, Florida’s public policy prohibiting insuring against punitive damage liability does not apply. The TCPA provides for $500 statutory damages and for treble damages for willful or knowing conduct, 47 U.S.C. § 227(b)(3), which is an indication that the statutory damages were not designed to be punitive damages. Indeed, other courts have found that the TCPA’s statutory damages are not punitive. See, e.g., Universal Underwriters, 401 F.3d at 881 (“[I]t is clear that the fixed amount [of the TCPA] serves more than purely punitive or deterrent goals” and instead, provides “an incentive for private parties to enforce the Act”); Terra Nova, 869 N.E.2d at 576 (TCPA statutory damages are not punitive but rather are intended to “liquidate uncertain actual damages and to encourage victims to bring suit”) (citation and quotations omitted). But see Kaplan v. Democrat & Chronicle, 698 N.Y.S.2d 799, 800–01 (N.Y. App. Div. 1999) (TCPA damages are punitive as actual damages need not be proven to recover). Further, punitive damages under Florida law “must be based on behavior which indicates a wanton disregard for the rights of others.” U.S. Concrete, 437 So. 2d at 1064. Neither the policy exclusions nor Florida public policy lead to denial of coverage. Accordingly, an unsettled issue of Florida law as to insurance policy coverage controls the disposition of this case. A pure legal question of the interpretation of widely used language in commercial liability insurance is at issue.

“Where there is doubt in the interpretation of state law, a federal court may certify the question to the state supreme court to avoid making unnecessary Erie guesses and to offer the state court the opportunity to interpret or change existing law.”

Tobin v. Mich. Mut. Ins. Co., 398 F.3d 1267, 1274 (11th Cir. 2005). There appear to be no controlling Florida Supreme Court law and no intermediate appellate court decisions on point. Thus, we certify the issue to the Florida Supreme Court.

III. CERTIFICATION TO THE FLORIDA SUPREME COURT CERTIFICATION FROM THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT TO THE SUPREME COURT OF FLORIDA, PURSUANT TO ARTICLE V, SECTION 3(B)(6) OF THE FLORIDA CONSTITUTION.

TO THE SUPREME COURT OF FLORIDA AND ITS HONORABLE JUSTICES:

We certify the following question to the Supreme Court of Florida for determination under Florida law:

DOES A COMMERCIAL LIABILITY POLICY WHICH PROVIDES COVERAGE FOR “ADVERTISING INJURY,” DEFINED AS “INJURY ARISING OUT OF . . . ORAL OR WRITTEN PUBLICATION OF MATERIAL THAT VIOLATES A PERSON’S RIGHT OF PRIVACY,” SUCH AS THE POLICY DESCRIBED HERE, PROVIDE COVERAGE FOR DAMAGES FOR VIOLATION OF A LAW PROHIBITING USING ANY TELEPHONE FACSIMILE MACHINE TO SEND UNSOLICITED ADVERTISEMENT TO A TELEPHONE FACSIMILE MACHINE WHEN NO PRIVATE INFORMATION IS REVEALED IN THE FACSIMILE?

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http://www.ca11.uscourts.gov/opinions/ops/200713827.pdf

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