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Hartford Casualty Insurance v. Swapp Law, PLLC

United States District Court, D. Utah

December 17, 2018

HARTFORD CASUALTY INSURANCE Plaintiff,
v.
SWAPP LAW, PLLC and JAMES CRAIG SWAPP, Defendants.

          MEMORANDUM DECISION AND ORDER GRANTING PLAINTIFF'S MOTION FOR JUDGMENT ON THE PLEADINGS

          Jill N. Parrish United States District Court Judge

         District Plaintiff Hartford Casualty Insurance Company (“Hartford”) moves for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c). Hartford argues that it has no duty to defend or indemnify Swapp Law, PLLC and James Craig Swapp (collectively “Swapp Law”) in connection with the civil action Wilcox, et. al. v. Swapp Law PLLC, et al., No. 2:17-cv-275 (E.D. Wash. 2017) (the “Underlying Action”). The court heard oral argument on the motion on December 5, 2018 and took the matter under advisement. The court now GRANTS the motion.

         BACKGROUND

         Hartford is an insurance company organized under the laws of Indiana with its principal place of business in Connecticut. Since 2013, Hartford has provided business liability insurance to Swapp Law, a Utah limited liability company, under policy number 34 SBA PF678 S.C. (“the Policy”) that was renewed annually.[1] The Policy covers claims brought against Swapp Law arising from bodily injury, property damage, and personal and advertising injury, subject to specified exclusions.

         At issue in this suit is whether Hartford must defend and indemnify Swapp Law from personal and advertising injury claims brought against Swapp Law in the United States District Court for the Eastern District of Washington in the Underlying Action for alleged violations of a federal statute, the Driver's Privacy Protection Act, 18 U.S.C. § 2721 et seq. (“DPPA”). The class action plaintiffs in the Underlying Action allege that between September 2013 and May 2016, Swapp Law “purchased more than 10, 000 accident reports from the Washington State Patrol” that were used “to mail numerous letters and glossy pamphlets advertising [Swapp Law's] services to motorists” in violation of the DPPA. Mot. J. Pleadings at 6-7. The DPPA violations are the sole cause of action brought by the class action plaintiffs.

         Hartford argues that the claims in the Underlying Action are not covered by the Policy because they fall under two separate exclusions. The first excludes coverage for claims arising solely from federal or state statute (the “Statutory Exclusion”). The second excludes coverage for claims arising from materials distributed in violation of a statute (the “Distribution Exclusion”). Hartford seeks a declaratory judgment that it is neither required to defend nor indemnify Swapp Law. Swapp Law asks the court to decide whether there is a duty to defend but requests the court defer ruling on the duty to indemnify.

         ANALYSIS

         A. Legal Standard

         “After the pleadings are closed . . . a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). The court evaluates a Fed.R.Civ.P. 12(c) motion using the same standard as a Fed.R.Civ.P. 12(b) motion. Colony Ins. Co. v. Burke, 698 F.3d 1222, 1228 (10th Cir. 2012) (citing Park Univ. Enters. v. Am. Cas. Co., 442 F.3d 1239, 1244 (10th Cir. 2006)). The court must “accept all facts pleaded by the non-moving party as true and grant all reasonable inferences from the pleadings in favor of the same.” Id. (internal quotation marks omitted). “A motion for judgment on the pleadings should not be granted unless the moving party has clearly established that no material issue of fact remains to be resolved and the party is entitled to judgment as a matter of law.” Id. (internal quotation marks omitted).

         In deciding a motion for judgment on the pleadings, the court may consider documents that are attached to the complaint or that are referred to in the complaint if the authenticity of the documents is not in question and the “documents are central to the plaintiff's claim.” BV Jordanelle, L.L.C. v. Old Republic Nat'l Title Ins. Co., 830 F.3d 1195, 1201 n.3 (10th Cir. 2016). In this case, the court will consider the complaint in the Underlying Action and the Policy itself. These documents are central to the case, their authenticity is not contested, and the documents were either attached or referenced in the complaint.

         The burden is on Swapp Law, as the insured, to establish coverage, “even when the insurer commences a declaratory action to resolve the question.” Cincinnati Ins. Co. v. AMSCO Windows, 921 F.Supp.2d 1226, 1233 (D. Utah 2013), supplemented, 2013 WL 12141330 (D. Utah 2013), and aff'd, 593 Fed.Appx. 802 (10th Cir. 2014). Only when Swapp Law “meet[s] [its] burden of establishing that the loss falls within the scope of the policies' coverage provisions does the burden shift to [Hartford, the insurer, ] to prove that the claim is not covered because of an exclusion.” Id. (citing LDS Hosp., Div. of Intermountain Health Care v. Capitol Life Ins. Co., 765 P.2d 857, 859 (Utah 1988)). If Hartford satisfies its burden of establishing an exclusion, the burden shifts back to Swapp Law to establish the applicability of an exception to the exclusion. “Because the insured bears the burden of establishing coverage under an insurance policy, it makes sense that the insured must also prove that the exception affords coverage after an exclusion is triggered.” See St. Paul Fire & Marine Ins. Co. v. Warwick Dyeing Corp., 26 F.3d 1195, 1200 (1st Cir. 1994).[2]

         B. Duty to Defend

         Under Utah Law, [3] the duty to defend and the duty to indemnify are contractual and “hinge[] on the particular contractual terms of the insurance policy defining the scope of the duty to defend and the duty to indemnify.” Fire Ins. Exch. v. Estate of Therkelsen, 27 P.3d 555, 561, 559 (Utah 2001). Under the plain language of the Policy, Hartford's duty to defend turns on whether Hartford is potentially liable for a damage award against Swapp Law. “We will have the right and duty to defend the insured against any ‘suit' seeking [covered] damages. However, we will have no duty to defend the insured against any ‘suit' seeking damages for . . . ‘personal and advertising injury' to which this insurance does not apply.” See Policy, Business Liability Form § A (1)(a).

         To determine whether Hartford is potentially liable for the claimed damages, the court applies the “eight corners” rule and compares the language found in the four corners of the Policy to the allegations made in the four corners of the underlying complaint. Basic Research, LLC v. Admiral Ins. Co., 297 P.3d 578, 580 (Utah 2013) (citing Equine Assisted Growth & Learning Ass'n v. Carolina Cas. Ins. Co., 266 P.3d 733 (Utah 2011)).[4] “When those allegations, if proved, could result in liability under the policy, then the insurer has a duty to defend.” Sharon Steel Corp. v. Aetna Cas. & Sur. Co., 931 P.2d 127, 133 (Utah 1997) (citing Deseret Fed. Sav. & Loan Assoc. v. United States Fidelity & Guar. Co., 714 P.2d 1143, 1146-47 (Utah 1986)). But “[w]here the allegations [in the complaint], if proved, show ‘there is no potential liability [under the policy], there is no duty to defend.'” Basic Research, 297 P.3d at 580 (Utah 2013) (quoting Deseret Fed. Sav. & Loan, 714 P.2d at 1147).

         Hartford argues that it has no potential liability for any damages in the Underlying Action because the class action plaintiffs in the Underlying Action only allege violations of the DPPA. According to Hartford, those claims are excluded from coverage under the Policy by two exclusions: the Statutory Exclusion and the Distribution Exclusion. The court agrees with Hartford that there is no duty to defend because the damages claimed in the Underlying Action are excluded under the Statutory Exclusion. Because the duty to defend is broader than the duty to indemnify, Hartford also has no duty to indemnify Swapp Law for its alleged violations of the DPPA. In light of the court's holding that the Statutory Exclusion applies, the court need not and does not consider the applicability of the Distribution Exclusion.

         1. The ...


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