Interline Brands, Inc. v. Chartis Specialty Insurance Company

Case: 13-10025 Date Filed: 04/15/2014 Page: 1 of 9
[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 13-10025
________________________
D.C. Docket No. 3:11-cv-00731-HLA-JRK
INTERLINE BRANDS, INC.,
a Delaware corporation,
INTERLINE BRANDS, INC.,
a New Jersey corporation,
Plaintiffs - Counter
Defendants - Appellants,
versus
CHARTIS SPECIALTY INSURANCE COMPANY,
f.k.a. American International Specialty Lines
Insurance Company,
Defendant - Counter
Claimant - Appellee.
________________________
Appeal from the United States District Court
for the Middle District of Florida
________________________
(April 15, 2014)
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Before TJOFLAT, COX, and ALARCÓN, * Circuit Judges.
PER CURIAM:
In this insurance dispute, the Plaintiff-Appellant, Interline Brands
(“Interline”), suffers from a case of buyer’s remorse. Interline purchased a series
of commercial general liability policies from the Defendant-Appellee, Chartis
Specialty Insurance Company (“Chartis”). The policies Interline purchased
contain an exclusion for violations of any statute that addresses transmitting any
material or information (the “Exclusion”). During the policy period, Interline was
sued for violating the Telephone Consumer Protection Act (the “Act”), 47 U.S.C. §
227, et seq. Chartis denied coverage based on the Exclusion. Refusing to accept
Chartis’s position that the policy did not cover violations of the Act, Interline filed
suit. Interline contended that the Exclusion is void because it is ambiguous and
against public policy. The district court disagreed, and granted Chartis’s motion
for judgment on the pleadings. We affirm.
I. Facts and Procedural History
Interline is a corporation that distributes and markets products. Chartis (then
known as American International Specialty Lines Insurance Company) issued
Interline a series of commercial general liability policies. Each of the policies
*
Honorable Arthur L. Alarcón, United States Senior Circuit Judge for the Ninth Circuit,
sitting by designation.
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provided coverage for bodily injury and property damage liability, personal and
advertising injury liability, medical payments, and pollution legal liability. The
personal and advertising injury liability coverage provided that Chartis would
indemnify and defend Interline against suits seeking damages for personal or
advertising injury. But, the coverage included an exclusion for “violation of
statutes in connection with sending, transmitting or communicating any material or
information.” (R. 1-1 at 14.) The Exclusion states that:
“Personal and advertising injury arising out of or resulting from,
caused directly or indirectly, in whole or in part by, any act that
violates any statute, ordinance or regulation of any federal, state or
local government, including any amendment of or addition to such
laws, that includes, addresses or applies to the sending, transmitting or
communicating of any material or information, by any means
whatsoever.” (R. 1-1 at 14.)
During the policy period, Interline was sued for sending unwanted “junk”
faxes in violation of the Act. Interline gave Chartis notice of the suit and requested
defense and indemnity under the policy. Chartis denied coverage, stating that the
suit fell within the Exclusion in Interline’s policy.
As a result of these events, Interline filed suit against Chartis alleging breach
of contract. Interline alleges in the complaint that the Exclusion is unenforceable
because it is overbroad and ambiguous. Interline filed a motion for judgment on
the pleadings, contending that the Exclusion was unenforceable and that Chartis
must provide a defense and indemnification. Chartis filed a cross-motion for
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judgment on the pleadings, contending that the Exclusion was valid. The district
court granted Chartis’s motion, holding that Chartis had no duty to defend or
indemnify Interline because the Exclusion controlled. Interline appeals.
II. Issue on Appeal
Did the district court err by granting Chartis judgment on the pleadings?
III. Standard of Review
We review a judgment on the pleadings de novo. Cunningham v. Dist.
Attorney’s Office for Escambia Cnty., 592 F.3d 1237, 1255 (11th Cir. 2010).
“Judgment on the pleadings is proper when no issues of material fact exist, and the
moving party is entitled to judgment as a matter of law based on the substance of
the pleadings and any judicially noticed facts.” Id. (quotation omitted). “We
accept all the facts in the complaint as true and view them in the light most
favorable to the nonmoving party.” Id.
IV. Discussion
Because this is a diversity suit, we apply the law of the forum state, Florida.
Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S. Ct. 1020, 1021–22
(1941). Under Florida law, a clear and unambiguous policy provision “should be
enforced according to its terms whether it is a basic policy provision or an
exclusionary provision.” Taurus Holdings, Inc. v. U.S. Fidelity and Guar. Co., 913
So. 2d 528, 532 (Fla. 2005) (quotation omitted). Interline contends that the
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Exclusion is void because it is ambiguous and against public policy. We address
each contention in turn.
A. The Exclusion is not void due to ambiguity.
Interline contends that the Exclusion is so ambiguous that it is void.1 Chartis
responds that the Exclusion is not ambiguous, and—even if it is—the Exclusion
would not be void under Florida law.
Under Florida law, a provision is ambiguous if, after resort to the ordinary
rules of construction, “the relevant policy language is susceptible to more than one
reasonable interpretation, one providing coverage and the other limiting coverage.”
Taurus Holdings, 913 So. 2d at 532 (quotation omitted). A provision “is not
ambiguous merely because it requires analysis to interpret it.” Gen. Star Indem.
Co. v. W. Fla. Vill. Inn, Inc., 874 So. 2d 26, 31 (Fla. 2d DCA 2004). The remedy
is to construe an ambiguous provision against the insurer and in favor of coverage.
Taurus Holdings, 913 So. 2d at 532. But, “courts may not rewrite contracts, add
meaning that is not present, or otherwise reach results contrary to the intentions of
the parties.” Id. (quotation omitted).
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According to Interline, the Exclusion’s ambiguity renders it void “because there are
potentially tens of thousands of interpretations requiring unguided guesswork concerning what
Chartis meant by including this Exclusion, most of which would not apply to [the Act], finding
an interpretation which provides coverage would require the same guesswork as discerning what
might be excluded. Thus, the exclusion should not be enforced at all.” (Appellant’s Br. at 10.)
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Interline contends that the Exclusion is ambiguous for two reasons: most
reasonable interpretations would not include the Act and the Exclusion is
overbroad.
First, Interline contends that the Exclusion is ambiguous because most
interpretations of it would not apply to the Act. Interline does not provide any
analysis for this contention or give an example of an interpretation that would not
apply to the Act. After carefully examining the Exclusion’s language, we hold it is
not ambiguous. The Exclusion’s plain language states “[t]his insurance does not
apply to . . . any act that violates any statute . . . that includes, addresses or applies
to the sending, transmitting or communicating of any material or information, by
any means whatsoever.” (R. 1-1 at 14). Any reasonable interpretation of this
language excludes coverage for violations of the Act.
Second, Interline seems to contend that the Exclusion is ambiguous because
it uses broad terminology to define its scope instead of clearly setting forth which
particular laws it applies to. We disagree. No Florida rule states that a contract is
ambiguous simply because it could have been more specific.
Regardless, we are not convinced that a list of particular laws would be an
improvement. Interline estimates that this exclusion relates to “hundreds of
thousands of laws, ordinances and codes,” although there is no such information in
the record. (Appellant’s Br. at 11.) A list of hundreds of thousands of laws would
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be painstakingly difficult to analyze and would likely provide the insured with less,
not more, meaningful notice. And, it would be difficult for a specific list to
account for laws that are amended, renamed, or enacted after the policy is signed.
To be sure, the language of the Exclusion is broad and excludes coverage for
violations of many laws. But, a broadly written provision is not the same as an
ambiguous one.
Even assuming—for the sake of argument—that the Exclusion is
ambiguous, we reject Interline’s contention that it would be void. Under Florida
law, the remedy for an ambiguous provision is to resolve the ambiguity “against
the insurer and in favor of coverage.” Taurus Holdings, 913 So. 2d at 532. But, in
this case there is no construction that would provide coverage for violations of the
Act. Instead of following this approach, Interline argues that an ambiguous
contract should be void like a vague criminal law is void. But, Interline provides
no support or rationale for this novel approach, and it is not Florida law.
Accordingly, the statute is not void due to ambiguity.
B. The Exclusion is not void for being against public policy.
Interline next contends that the Exclusion is against public policy and void
because it leads to an absurd result. According to Interline, the Exclusion’s broad
scope reduces the coverage Chartis sold to Interline to a “façade” and altogether
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eliminates coverage under the policy. Chartis responds that this Exclusion is
normal and that the policy provides significant coverage.
Under Florida law, “if one interpretation looking to the other provisions of
the contract and to its general object and scope would lead to an absurd conclusion,
such interpretation must be abandoned, and that adopted which will be more
consistent with reason and probability.” Inter-Ocean Cas. Co. v. Hunt, 189 So.
240, 243 (Fla. 1939). As more recently explained, “when limitations or exclusions
completely contradict the insuring provisions, insurance coverage becomes
illusory.” Purrelli v. State Farm Fire & Cas. Co., 698 So. 2d 618, 620 (Fla. 2d
DCA 1997).
Interline overstates the extent to which the Exclusion limits coverage. Even
with the broad Exclusion, the policy still contains extensive coverage. The policy
provides a wide range of coverage for bodily injury and property damage liability,
personal and advertising injury liability, medical payments, and pollution legal
liability. The Exclusion only applies to the personal and advertising injury
coverage. Furthermore, the Exclusion only excludes from coverage violations of a
statute, ordinance, or regulation (i.e. not common law) and only in relation to
“sending, transmitting or communicating of any material or information.” While
this is a significant Exclusion (especially in light of Interline’s business), it does
not render the policy absurd or completely contradict the insuring provisions.
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Furthermore, exclusions are not necessarily harmful. Exclusions—like this
one—allow creation of a policy that provides the insured the coverage it needs at a
price it can afford. Without such exclusions, coverage would undoubtedly be more
expensive. A company primarily needs insurance for risks it may be ill equipped
to anticipate or prevent (e.g. property damage). Without an exclusion, a company
would also have to pay for coverage of risks it can easily anticipate and avoid (e.g.
violations of laws related to its business). And, coverage for violations of law
creates a moral hazard that could substantially increase insurance costs, especially
when the coverage is closely related to the company’s business.
Accordingly, the Exclusion is sensible and not void for being against public
policy.
V. Conclusion
The district court correctly determined that the Exclusion is not ambiguous.
Neither is the Exclusion against public policy. Accordingly, we affirm the district
court’s order.
AFFIRMED.
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