Sawyer v. West Bend Mutual Insurance

CURLEY, EJ.

¶ 1. West Bend Mutual Insurance Company (West Bend) appeals the grant of summary judgment to Isaac Sawyer, doing business as A-l Security Locksmiths (A-l Security), on the issue of whether the insurance policy West Bend issued to defendant Atlas Heating and Sheet Metal Works, Inc. (Atlas) provides coverage under its "personal and advertising injury" provision for privacy violations stemming from an unsolicited "junk" fax, as alleged in Sawyer’s complaint against Atlas.¹ West Bend argues the policy should not be construed to cover damages from Atlas's unsolicited fax because: (1) the policy solely covers individual privacy rights, and plaintiff A-l Security is a business; (2) the complaint does not allege facts describing a privacy violation covered by the policy's "personal and advertising injury" provision; and (3) there has been no "publication" of the fax as required by the policy. In the alternative, West Bend argues that even if there is coverage, it is excluded under the policy's "Knowing Violation of Rights of Another" exclusion. For reasons we discuss below, we affirm.

BACKGROUND

¶ 2. On or around December 9, 2005, Atlas sent an unsolicited "junk" fax advertisement to Sawyer's business, A-l Security. The advertisement was printed by A-l Security's fax machine, using its paper and its toner. Sawyer had not given Atlas express invitation or permission to fax advertisements, nor did Sawyer have a business relationship with Atlas.

¶ 3. Consequently, Sawyer initiated a class action against Atlas, alleging that Atlas violated the federal Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227,² by sending the "junk" fax to his place of business as well as to thousands of others. Specifically, Sawyer claimed that Atlas was responsible for damages to his physical property because the junk fax consumed paper, toner, and caused general wear and tear to the fax machine. Sawyer also alleged that Atlas was responsible for damages for personal and advertising injury because the receipt of the unsolicited junk fax violated his right to privacy. The class action, originally filed in Milwaukee County Circuit Court, was removed to the Eastern District of Wisconsin based on federal question jurisdiction, and has been stayed pending resolution of the insurance coverage issue addressed in this court.

¶ 4. Sawyer also sued West Bend, Atlas's insurer. The West Bend policy, which was in effect when Atlas faxed the unsolicited advertisement, included general liability coverage for damages incurred by Atlas due to: (1) "property damage" caused by an "occurrence" and (2) "personal and advertising injury." The "personal and advertising injury" coverage contained a provision excluding coverage if the personal and advertising injury was "caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict 'personal and advertising injury.'"

¶ 5. As pertinent to this appeal, Sawyer brought an action for declaratory judgment against Atlas and West Bend in the Milwaukee County Circuit Court to determine whether West Bend had a duty to defend and/or indemnify Atlas. The trial court determined that West Bend did not have a duty to defend or indemnify Atlas under the "property damage" provision of the policy, but it did have a duty to defend Atlas under the "personal and advertising injury" provision of the policy.

¶ 6. The "Personal and Advertising Injury Liability" provision of the policy provided, in pertinent part: "We will pay those sums that the insured becomes legally obligated to pay as damages because of 'personal and advertising injury' to which this insurance applies." The policy defined "personal and advertising injuiy" in pertinent part as: "injury, including consequential 'bodily injury,' arising out of one or more of the following offenses: ... [o]ral or written publication, in any manner, of material that violates a person's right of privacy."

¶ 7. The "knowing violation of rights of another" exclusion provided, in pertinent part, that the insurance did not apply to: " '[pjersonal and advertising injury' caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict 'personal and advertising injury' "

¶ 8. The trial court concluded that the plaintiff in the case was Sawyer as an individual and that his individual right to privacy was violated. The trial court also concluded that the language of the policy was ambiguous and consequently needed to be construed in favor of the insured. Specifically, the trial court deduced that the word "privacy" should include the right to seclusion. Additionally, the trial court concluded that the faxed advertisement was a "publication." Finally, the court held that the "knowing violation of rights of another" exclusion did not apply here because the allegations in the complaint provided for the possibility that Atlas may not have had the requisite knowledge that it was violating Sawyer's right of privacy; in other words, Atlas may have negligently, and not intentionally, violated Sawyer's right of privacy. West Bend now appeals.

ANALYSIS

Standard of Review

¶ 9. Summary judgment is appropriate when determining insurance policy coverage. Home Ins. Co. v. Phillips, 175 Wis. 2d 104, 109, 499 N.W.2d 193 (Ct. App. 1993). We review a grant of summary judgment independently, applying the standards set forth in Wis. Stat. § 802.08(2) (2009-10),³ in the same manner as the trial court. See Danbeck v. American Family Mut. Ins. Co., 2001 WI 91, ¶ 9, 245 Wis. 2d 186, 629 N.W.2d 150. Summary judgment is appropriate if the material facts are undisputed and "the moving party is entitled to judgment as a matter of law." § 802.08(2). Additionally, "[t]he interpretation of an insurance contract is a question of law subject to de novo review." Danbeck, 245 Wis. 2d 186, ¶ 10 (emphasis added). Here, the only issue is whether West Bend has a duty to defend Atlas against Sawyer's federal suit. Because there are no material facts in dispute, we are presented with a question of law, which we review de novo. See Radke v. Fireman's Fund Ins. Co., 217 Wis. 2d 39, 42-43, 577 N.W.2d 366 (Ct. App. 1998).

¶ 10. Key to our determination is the rule that an insurer has a duty to defend as long as coverage is arguable or fairly debatable. Southeast Wis. Prof'l Baseball Park Dist. v. Mitsubishi Heavy Indus. Am., Inc., 2007 WI App 185, ¶ 41, 304 Wis. 2d 637, 738 N.W.2d 87. Whether an insurer has a duty to defend the insured is determined by the complaint without looking to extrinsic evidence. Grube v. Daun, 173 Wis. 2d 30, 72, 496 N.W.2d 106 (Ct. App. 1992). Wisconsin applies the four-corners rule, which provides that the insurer must defend its insured when the facts alleged in the four corners of the complaint, if proven, would constitute a covered claim. See Estate of Sustache v. American Family Mut. Ins. Co., 2008 WI 87, ¶ 27, 311 Wis. 2d 548, 751 N.W.2d 845. The duty to defend depends solely on the nature of the claim, regardless of the claim's merits, and any doubts are resolved in favor of the insured. Elliott v. Donahue, 169 Wis. 2d 310, 321, 485 N.W.2d 403 (1992).

¶ 11. General principles of contract construction control insurance contract interpretation. Maas by Grant v. Ziegler, 172 Wis. 2d 70, 79, 492 N.W.2d 621 (1992). Because the primary goal is to determine and carry out the intent of the parties, the language of the policy is interpreted how "a reasonable person in the position of the insured would have understood the words to mean." See Sprangers v. Greatway Ins. Co., 182 Wis. 2d 521, 536, 514 N.W.2d 1 (1994). Words are given their common and ordinary meaning. Folkman v. Quamme, 2003 WI 116, ¶ 17, 264 Wis. 2d 617, 665 N.W.2d 857. If the policy language is plain and unambiguous, it is enforced as written. Danbeck, 245 Wis. 2d 186, ¶ 10. However, if the policy language is susceptible to more than one reasonable meaning, it is considered ambiguous and construed in favor of coverage. Id.

(1) West Bend's policy covers damages from Atlas's unsolicited fax.

¶ 12. On appeal, West Bend provides three reasons why the policy should not be construed to cover damages from Atlas's unsolicited fax: (1) the policy covers only individual privacy rights, and the plaintiff in this case, A-l Security, is a business; (2) the complaint does not allege facts describing a privacy violation covered by the policy's "personal and advertising injury" provision; and (3) there has been no "publication" of the fax as required by the policy. We discuss each argument in turn.

(a) The policy covers Sawyer individually and doing business as A-l Security.

¶ 13. West Bend first argues that, because the policy language at issue refers to a publication that violates a person's right to privacy, it does not cover damages suffered by Sawyer, who is listed on the complaint as doing business as "A-l Security Locksmiths." West Bend argues that because a separate clause in the policy — the clause that provides coverage for personal and advertising injury involving slander and libel — explicitly includes coverage when a "person or organization" is injured, the clause at issue can only be construed to apply to individuals, not businesses. See Bulen v. West Bend Mut. Inc. Co., 125 Wis. 2d 259, 263, 371 N.W.2d 392 (Ct. App. 1985) (we will not read policies to render words superfluous).

¶ 14. We disagree based on the facts alleged in the complaint. See Estate of Sustache, 311 Wis. 2d 548, ¶¶ 20, 27. Sawyer, as an individual and on behalf of other individuals, brought this action against West Bend, and therefore, there is coverage. Although the blast fax was sent to Sawyer's place of business, A-l Security, and used its fax machine, toner, and paper, Sawyer received the fax and brought the class action suit against West Bend "on behalf of himself and all other persons similarly situated." Sawyer is listed as the plaintiff in the complaint, and it is he — as a natural person — who is seeking relief for the TCPA violation.

¶ 15. Moreover, we do not agree with West Bend that A-l Security is not a "person" as contemplated by the policy. As noted, words in an insurance policy are given their common and ordinary meaning to determine whether they are ambiguous, Folkman, 264 Wis. 2d 617, ¶ 17, and if a word in an insurance contract is susceptible to more than one reasonable meaning, it is considered ambiguous and should be construed in favor of coverage, Danbeck, 245 Wis. 2d 186, ¶ 10. The policy does not define the word "person," so we must give it its common and ordinary meaning. See Folkman, 264 Wis. 2d 617, ¶ 17. And, as Sawyer correctly notes, "person" is defined as a business in many contexts. For example, Webster's New International Dictionary of the English Language 1686 (3d ed. 1993) includes in its definition of "person" "a human being, a body of persons, or a corporation, partnership, or other legal entity that is recognized by law as the subject of rights and duties," and Black's Law Dictionary 1178 (8th ed. 2004) includes in its definition of "person" "an entity, (such as a corporation) that is recognized by law as having the rights and duties of a human being." Additionally, Wis. Stat. § 990.01(26) and 1 U.S.C. § 1 both include corporate entities in their definitions of "person." Therefore, given its common and ordinary meaning, the word "person" applies to A-l Security.

¶ 16. Furthermore, we do not agree with West Bend that the use of both "person" and "organization" in the clause that provides coverage for personal and advertising injury involving slander and libel means that defining "person" to include businesses in the section at issue would render using the word "organization" superfluous. See Bulen, 125 Wis. 2d at 263. As noted, the policy does not define "person," and it does not define "organization." The common definitions of both words, however, include businesses. For example, as noted above, Webster's, Black's, the Wisconsin Statutes, and the United States Code all include businesses as "persons." Similarly, Webster's includes in its definition of "organization" "a state or manner of being organized... as a business, political party, military unit. . . including the established relationships of personnel through lines of authority and responsibility with delegated and assigned duties." See Webster's New International Dictionary of the English Language 1590. Black's includes in its definition of "organization" "a body of persons (such as a union or corporation) formed for a common purpose." See Black's Law Dictionary 1133. Therefore, one could argue that the use of "person" and "organization" in the same clause of West Bend's policy is ambiguous because both words could refer to a business. See Danbeck, 245 Wis. 2d 186, ¶ 10; Folkman, 264 Wis. 2d 617, ¶ 17. We must consequently reject West Bend's argument and construe the policy in favor of coverage. See id.

(b) The complaint alleges a violation of privacy under the policy.

¶ 17. West Bend next argues that the complaint does not allege a privacy violation under the policy's "personal and advertising injury" provision. According to West Bend, the complaint alleges that the unsolicited fax interfered with A-l Security's right to be left alone; in other words, the fax violated the business's right to seclusion. West Bend argues that the policy does not provide coverage for such a violation because neither the right to or violation of seclusion nor the word "seclusion" is found in the policy. West Bend further argues that nothing in the content of the fax violated A-l Security's right to privacy. According to West Bend, the mere sending of the fax, which arguably did violate A-l Security's right to seclusion under the TCPA, is unrelated to the content of the advertisement.

¶ 18. In support of its arguments, West Bend relies heavily on Auto-Owners Insurance Co. v. Websolv Computing, Inc., 580 F.3d 543, 551 (7th Cir. 2009), which held that a policy provision similar to the one at issue here did not provide coverage for an alleged privacy violation because it only covered violations of the right to secrecy, as opposed to the alleged right of seclusion. Websolv recognized that the "right of privacy" was, as in the case before us, not defined by the policy, and that it could have multiple meanings, such as those involving either secrecy interests or those involving seclusion interests. See id. at 549. Nevertheless, it concluded that the use of the word "publication" in the policy narrowed the scope of covered privacy rights to only secrecy rights because one can violate another's right to be left alone without publicizing anything. See id. at 550-51. The Websolv court further explained that, when looking at the other subsections within the definition of advertising injury, the provisions focused on the harm arising from the content of the advertisement rather than the mere receipt of the advertisement. Id. at 551. We disagree with these views.

¶ 19. First, we disagree with Websolv's operating premise that publication is implicated only where the relevant concern is a secret which is published simply because "one can violate another's right to seclusion without publicizing anything." See id. at 550. This proposition supposes that the act of publication is completely divorced from the manner in which the information is communicated. See id. at 550-51. But this is nonsensical in the context of the provision at issue here, which provides coverage for injuries arising out of "oral or written publication, in any manner, of material that violates a person's right of privacy." In this context, "publication" is used as a verb; it is the manner by which the violative material is transmitted. Furthermore, "publication" is not defined in West Bend's policy. To discern "what a reasonable person in the position of the insured would have understood the words to mean," Sprangers, 182 Wis. 2d at 536, words are given their common and ordinary meaning, Folkman, 264 Wis. 2d 617, ¶ 17. Webster's New International Dictionary of the English Language 1836 includes in its definition of "publication" "communication (as of news or information) to the public," and Black's Law Dictionary 1264 includes in its definition of "publication" "[generally, the act of declaring or announcing to the public" and "[t]he offering or distribution of copies of a work to the public." This supports our view — publicizing does in fact refer to an act. See also Cynosure, Inc. v. St. Paul Fire and Marine Ins. Co., 645 F.3d 1, 4 (1st Cir. 2011) (explaining that " 'publishing'" can "refer to revealing information or merely to the act itself of conveying material considered apart from its content") (citation omitted).

¶ 20. Second, we disagree with Websolv's conclusion that the provision at issue covers only secrecy interests because "[t]he other. . . provisions of the advertising-injury definition focus on harm arising from the content of an advertisement rather than harm arising from mere receipt of an advertisement." See id., 580 F.3d at 551. The definition of "personal and advertising injury" includes seven separate and distinct scenarios, ranging from false arrest to copyright infringement. Even if one of these scenarios did implicate solely a secrecy interest, it would defy the principles of contract construction to require that they all did so.

¶ 21. Instead, our view is more consistent with Valley Forge Insurance Co. v. Swiderski Electronics, Inc., 860 N.E.2d 307 (Ill. 2006), in which the Illinois Supreme Court held that the word "publication" in a similar policy provision does not narrow the scope of "privacy rights" to only those related to secrecy. Id. at 317-18. As we do in Wisconsin, the Valley Forge court looked to the words' dictionary definitions to determine their "plain, ordinary, and popular meanings." See id. at 316-17; see also, e.g., Folkman, 264 Wis. 2d 617, ¶ 17; Sprangers, 182 Wis. 2d at 536. Valley Forge explained that Black's Law Dictionary and Webster's Third New International Dictionary both confirm that the "right of privacy" includes both seclusion and secrecy interests, and held that the policy language therefore can reasonably be understood to refer to violations of a person's right to seclusion. Valley Forge, 860 N.E.2d at 317. The court held that the "material" violated this right because the advertisements were sent without permission. Id. Furthermore, the Valley Forge court refused, as we do today, to read additional provisions into the policy: See id. at 317-18 (emphasis omitted). We find the court's reasoning especially persuasive because the principles followed in Valley Forge are consistent with those we follow in Wisconsin. See id.; see also, e.g., Folkman, 264 Wis. 2d 617, ¶ 17; Sprangers, 182 Wis. 2d at 536.

To adopt the insurers' proposed interpretation of it— i.e., that it is only applicable where the content of the published material reveals private information about a person that violates the person's right of privacy— would essentially require us to rewrite the phrase "material that violates a person's right of privacy" to read "material the content of which violates a person other than the recipient's right of privacy." This we will not do.

¶ 22. In sum, we conclude that by faxing advertisements to Sawyer and the alleged class of recipients, Atlas's advertisement transmitted printed material and communicated information to the public; therefore, it was a "publication." The "material" at issue is an unsolicited fax advertisement, which is expressly prohibited by the TCPA. See 47 U.S.C. § 227(b)(1)(C) (referring to unsolicited advertisements). That material, by virtue of its prohibited nature, violated Sawyer's right to be left alone — i.e., his right to seclusion. While the Dissent claims that "it stretches the concept of privacy beyond the breaking point to even suggest that the single facsimile Sawyer received was the type of 'material'.. . that 'would be highly offensive to a reasonable person,'" see Dissent, ¶ 8 (citing the Restatement (Second) of Torts § 652B), we disagree, and conclude that the unsolicited advertisement was highly offensive, again, as evinced by the fact that it is expressly prohibited by the TCPA. Moreover, we are not persuaded by the Dissent's contention that Congress intended for us to construe unsolicited telephone calls, but not unsolicited fax advertisements, as invasions of privacy. This is because, regarding both unsolicited telephone calls and fax solicitations: (1) the substance of what is prohibited is the same — unwanted solicitations; and (2) the nature of the right being disregarded is the same — the receiver's right to be left alone. See, e.g., 47 U.S.C. § 227(b)(1)(B) & § 227(b)(2)(B) (prohibiting unsolicited telephone calls, including calls involving unsolicited advertisements); § 227(b)(1)(C) (prohibiting unsolicited fax advertisements). For these same reasons, we are not persuaded by the Dissent's corollary argument that a telephone call constitutes a "greater annoyance," and therefore implicates the receiver's right to privacy, while an unsolicited fax advertisement, which also makes use of telephone technology, does not do so. We agree with Sawyer that Atlas's unsolicited fax did in fact violate his right to be left alone and conclude that the policy does provide coverage.

(c) The unsolicited blast fax constitutes a "publication" under the policy.

¶ 23. West Bend also argues that the fax at issue was not a "publication" under the policy; however, for the reasons explained above, we conclude that the fax was in fact a publication. We further note that while West Bend contends in its brief that the word "publication" should be equated with the word "publicity," and therefore should reasonably be interpreted to mean communication to the public at large, see Pachowitz v. LeDoux, 2003 WI App 120, ¶ 18, 265 Wis. 2d 631, 666 N.W.2d 88, in Pachowitz, the word was used in the context of a cause of action for an invasion of privacy under Wis. Stat. § 895.50, see Pachowitz, 265 Wis. 2d 631, ¶ 18 (" 'Publicity,' for purposes of § 895.50, has been defined to mean that 'the matter is made public, by communicating it to the public at large, or to so many persons that the matter must be regarded as substantially certain to become one of public knowledge.'") (citation omitted). Because the complaint does not allege the tort of invasion of privacy, this interpretation is not reasonable, and we must reject this argument.

(2) The "knowing violation of rights of another" exclusion does not apply.

¶ 24. In the alternative, West Bend argues in its brief that even if there is coverage under the personal and advertising injury provision, it is excluded under the policy's "Knowing Violation of Rights of Another" exclusion. According to West Bend, because the act of sending a fax is purposeful, Atlas must have intended that A-l Security receive the advertisement via fax. The complaint does not allege that Atlas accidentally sent the fax; rather, it must have known it was sending the fax in violation of the law and intended that it be received. See Putnam v. Time Warner Cable of Se. Wis., Ltd. P'ship, 2002 WI 108, ¶ 13 n.4, 225 Wis. 2d 447, 649 N.W.2d 626 ("The mistake of law doctrine states that every person is presumed to know the law and cannot claim ignorance of the law as a defense.").

¶ 25. We disagree. Even if Atlas "knowingly" violated Sawyer's rights under the TCPA, the complaint allows for the possibility that Atlas was negligent in causing a "personal and advertising injury" under the policy. The complaint alleges that Atlas "knew or should have known" that it was not given express invitation or permission to fax an advertisement to Sawyer and other class members and that it did not have an established relationship with Sawyer and the other class members. Because the complaint allows for a scenario in which Atlas was negligent in knowing that the act would inflict "personal and advertising injury," coverage is fairly debatable, and we conclude that the exclusion does not apply. See American Family Mut. Ins. Co. v. American Girl, Inc., 2004 WI 2, ¶ 24, 268 Wis. 2d 16, 673 N.W.2d 65 (exclusions construed narrowly against the insurer).

By the Court. — Judgment affirmed.

1 The court heard argument on this case on May 8, 2012.

2 47 U.S.C. § 227(b)(1) prohibits sending unsolicited advertisements using a facsimile machine. It provides, in pertinent part:

It shall be unlawful for any person within the United States...

(C) to use any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement, unless—

(i) the unsolicited advertisement is from a sender with an established business relationship with the recipient;

(ii) the sender obtained the number of the telephone facsimile machine through—

(I) the voluntary communication of such number, within the context of such established business relationship, from the recipient of the unsolicited advertisement, or

(II) a directory, advertisement, or site on the Internet to which the recipient voluntarily agreed to make available its facsimile number for public distribution, except that this clause shall not apply in the case of an unsolicited advertisement that is sent based on an established business relationship with the recipient that was in existence before July 9, 2005, if the sender possessed the facsimile machine number of the recipient before such date of enactment; and

(iii) the unsolicited advertisement contains a notice meeting the requirements under paragraph (2)(D), except that the exception under clauses (i) and (ii) shall not apply with respect to an unsolicited advertisement sent to a telephone facsimile machine by a sender to whom a request has been made not to send future unsolicited advertisements to such telephone facsimile machine that complies with the requirements under paragraph (2)(E); or

(D) to use an automatic telephone dialing system in such a way that two or more telephone lines of a multi-line business are engaged simultaneously.

3 All references to the Wisconsin Statutes are to the 2009-10 version unless otherwise noted.