Solers, Inc. v. Hartford Casualty Insurance

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
SOLERS, INCORPORATED, 
Plaintiff-Appellant,
v.
 No. 01-1862
HARTFORD CASUALTY INSURANCE
COMPANY,
Defendant-Appellee.

Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
Gerald Bruce Lee, District Judge.
(CA-00-1947-A)
Argued: February 26, 2002
Decided: June 12, 2002
Before MOTZ, KING, and GREGORY, Circuit Judges.
Affirmed by unpublished per curiam opinion.
COUNSEL
ARGUED: Daniel J. Tobin, KIRKPATRICK & LOCKHART,
L.L.P., Washington, D.C., for Appellant. Richard Wayne Driscoll,
ECCLESTON & WOLF, P.C., Washington, D.C., for Appellee. ON
BRIEF: Ronald W. Fuchs, ECCLESTON & WOLF, P.C., Washing-
ton, D.C., for Appellee.
2 SOLERS, INC. v. HARTFORD CASUALTY INSURANCE
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
After being sued in the state court of Virginia and settling that suit,
appellant Solers, Inc. (Solers) brought suit against appellee Hartford
Casualty Insurance Company (Hartford), claiming that Hartford was
obligated to defend and indemnify Solers under the "advertising
injury" provision of an insurance contract entered into between the
parties. On cross motions for summary judgment, the district court
granted summary judgment in favor of Hartford. For the reasons that
follow, we affirm.
I.
The pertinent facts in this case, as set forth more fully by the dis-
trict court, Solers, Inc. v. Hartford Casualty Ins. Co., 146 F. Supp.2d
785 (E.D.Va. 2001), are as follows: Solers is a software engineering
firm founded by David Kellogg and Joseph Smith. Before founding
Solers, Kellogg and Smith were employed by Decision Science
Applications, Inc. (DSA). After DSA was acquired by SM & A Cor-
poration (SM & A), Kellogg and Smith, displeased with new manage-
ment, left SM & A and formed Solers in November 1998.
Solers purchased an insurance policy from Hartford effective for a
one year period commencing on January 4, 1999 and ending January
4, 2000. In the policy, Hartford agreed to pay for any damages that
Solers might become legally obligated to pay for an "advertising injury"1
caused by an offense committed by Solers "in the course of advertis-
ing goods, products or services." (Policy, ¶ A.1.b(2)(b)).
1
The Business Liability Coverage section of the insurance policy states
in part: "We will pay those sums that the insured becomes legally obli-
gated to pay as damages because of ‘bodily injury’, ‘property damage,’
‘personal injury’ or ‘advertising injury’ to which the insurance applies."
(Policy ¶ A.1.a)
SOLERS, INC. v. HARTFORD CASUALTY INSURANCE 3
To launch its business, Solers submitted proposals to two federal
contractors, Charles Stark Draper Laboratory (Draper) and Boeing
Information Services, Inc. (Boeing).2 Prior to making the bid propos-
als, Solers had been in contact with both Draper and Boeing, and both
companies asked Solers to submit proposals. Solers submitted its bid
proposal to Draper on December 18, 1998, prior to the effective date
of its insurance policy. However, it submitted the bid to Boeing on
January 11, 1999, which falls within the policy period. SM & A,
believing that the proposals submitted by Solers were based on pro-
posals that Solers misappropriated from SM & A, brought suit in Vir-
ginia Circuit Court against Solers in February 1999 for: (1) breach of
common law fiduciary duty and duty of loyalty, (2) violation of Vir-
ginia Code §§ 18.2-499 and 18.2-500, (3) common law conspiracy,
(4) corporate raiding via intentional interference with contractual rela-
tions and business expectancies, and employment relationships, (5)
misappropriation of trade secrets, and (6) conversion.
During the pendency of the SM & A suit, Solers demanded that
Hartford defend and indemnify it pursuant to the "advertising injury"
coverage in the policy. Hartford refused, asserting that any injury
caused by Solers did not occur "in the course of advertising" and thus
did not qualify as an "advertising injury" under the policy. Solers
eventually settled the suit with SM & A and agreed to pay SM & A
for damages as well as for litigation and settlement expenses, fees and
costs of the lawsuit, which totaled $714,471.76.
After settling with SM & A, Solers brought a breach of contract
action against Hartford in the United States District Court for the
Eastern District of Virginia. Jurisdiction was based on diversity of cit-
izenship. See 28 U.S.C. § 1332(a). Hartford moved for summary
judgment. Solers opposed Hartford’s motion and filed a cross-motion
for summary judgment. The district court concluded that Hartford did
not have a duty to defend Solers because the bid proposals did not
2
The solicitation of business from federal government agencies is regu-
lated by federal law contained in the Federal Acquisition Regulations and
Defense Federal Acquisition Regulations Supplement, 48 C.F.R. §§ 1-
99, 200-99. These regulations require agencies and contractors to abide
by certain regulatory protocols in the solicitation and award of govern-
ment contracts.
4 SOLERS, INC. v. HARTFORD CASUALTY INSURANCE
constitute "advertising." Accordingly, the court granted Hartford’s
motion for summary judgment. This appeal followed.
II.
We review the grant of summary judgment de novo. JKC Holding
Co., LLC v. Washington Sports Ventures, Inc., 264 F.3d 459, 465 (4th
Cir. 2001). Summary judgment is appropriate when "the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with affidavits, if any, show that there is no genuine issue as
to any material fact and that the moving party is entitled to judgment
as a matter of law." Fed. R. Civ. P. 56(c). Here, the parties agree that
there are no material issues of fact in dispute.
III.
The crux of the dispute on appeal involves the definition of the
term "advertising." Hartford only had a duty to defend Solers if SM
& A’s amended complaint claimed an "advertising injury." The policy
listed four definitions for that term.3 However, under the policy, Hart-
ford’s duty to defend was triggered only if a complaint against Solers
alleged an "‘advertising injury’ caused by an offense committed in the
course of advertising goods, products or services." (Policy,
¶ A.1.b(2)(b)) (emphasis added). Thus, the threshold question in
determining coverage is whether Solers was engaged in advertising
when it allegedly committed offenses against SM & A. See Solers,
3
"Advertising injury" means injury 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 orga-
nization’s goods, products or services;
b. Oral or written publication of material that violates a per-
son’s rights of privacy;
c. Misappropriation of advertising ideas or styles of doing
business; or
d. Infringement of copyright, title or slogan.
(Policy ¶ G.1)
SOLERS, INC. v. HARTFORD CASUALTY INSURANCE 5
4
146 F. Supp.2d at 792. We agree with the district court that it was
not, though we do not adopt the district court’s definition of the term
"advertising."
The contract between Solers and Hartford was formed in Virginia
and both parties agree that it is governed by Virginia law. Unfortu-
nately, the contract does not define the term "advertising," nor has the
Supreme Court of Virginia defined the term. Solers contends that the
term "advertising" is ambiguous and thus should be broadly construed
in its favor to include the one-to-one bid proposals submitted here.
Solers points out that it provides services exclusively pursuant to gov-
ernment contract, and widespread public dissemination is not appro-
priate for its business. Solers asserts that its only advertising
mechanism is the submission of written business proposals, and
argues that the court must find the proposals constitute advertising
because to hold otherwise on the grounds that the proposals are not
directed at the public at large would be to hold that companies with
small, but well-defined markets cannot, as a matter of law, engage in
advertising. See Solers, 146 F. Supp.2d at 790-91.
Under Virginia law, when "policy language is ambiguous, it will
be construed strictly against the insurer." Lincoln Nat’l Life Ins. Co.
v. Commonwealth Corrugated Container Corp., 229 Va. 132, 136,
327 S.E.2d 98, 101 (1985). But, of course, in order for this rule to
help a party, the challenged term or phrase must be able to bear the
meaning that party seeks to put on it. We hold that the "ordinary and
accepted meaning" see Craig v. Dye, 259 Va. 533, 538, 526 S.E.2d
9, 12 (2000), of the term "advertising" will not bear the meaning
Solers seeks to give it. As the district court explained, generally, a lay
4
The district court correctly stated the three part test for determining
whether the policy covers the allegations made by SM & A, which
includes a determination into 1) whether the insured was engaged in
advertising, 2) whether the insured’s alleged conduct was one of the
offenses enumerated by the policy as giving rise to an advertising injury,
and 3) whether the injury arose from an offense committed during the
policy period and in the course of the advertising injury. Solers, 146 F.
Supp.2d at 792. We need not reach the second and third parts of this test
because we, like the district court, find that Solers was not engaged in
advertising here.
6 SOLERS, INC. v. HARTFORD CASUALTY INSURANCE
person would not read the term "advertising" as including an effort to
sell, through a competitive bidding process, a product that is "specifi-
cally tailored for a single customer to meet the needs of a specific
project—which is what occurred in this case." Solers, 146 F. Supp.2d
at 793. Solers’ bid proposals did not generally notify Draper and Boe-
ing of its products or services. Instead, they were specifically tailored
for Draper and Boeing, and they were made in response to requests
by Draper and Boeing. The bid proposals were offers to provide Boe-
ing and Draper with specific services, and they gave detailed plans of
how Solers would provide such services, and at what price.
Our inquiry into the plain meaning of "advertising" ends with our
determination that "advertising" and the solicitation of bids that
occurred here are mutually exclusive. The district court need not have
gone further, and we do not necessarily agree with the district court’s
narrow definition of the term "advertising" to mean "the widespread
promotion of goods or services to the public at large, or to the compa-
ny’s customer base." Solers, 146 F. Supp.2d at 786. Indeed, the term
"advertising" might not exclude activity, even directed towards one
customer, which involves the unsolicited dissemination of informa-
tion giving notice of the general nature of one’s business and the ser-
vices or products available for hire or sale. However, we decline to
reach that issue.
IV.
Because the plain meaning of "advertising" will not support the
submission of bid proposals that occurred here, we affirm the judg-
ment of the district court.
AFFIRMED