Court Should Honor Parties' Reasonable Stipulation That Iowa Law Governs Their Dispute
AUTO-OWNERS INSURANCE CO. v. WEBSOLV COMPUTING (September 1, 2009)
Websolv sent an unsolicited fax to the dental office of Guy Bibbs. The fax was an advertisement for a healthcare seminar. Bibbs sued Websolv in state court. Websolv tendered its defense to Auto-Owners Insurance Co. Auto-Owners filed an action in federal court seeking a declaratory judgment that it had no duty to defend. Although the parties stipulated to the application of Iowa law, the court applied Illinois law and granted Websolv’s motion for summary judgment. Auto-Owners appeals.
In their opinion, Chief Judge Easterbrook and Judges Cudahy and Sykes reversed and remanded. The Court first addressed the choice-of-law issue. The Court concluded that the district court should have honored the parties' stipulation that Iowa law controls. When the parties agree on which state's law should govern and that choice is reasonable, the court should apply that law. The lower court was incorrect in its belief that it was required to apply the law of the forum. The court is only required to apply the choice-of-law rules of the forum -- in order to determine which forum’s law is the correct substantive law. Here, under Illinois' choice-of-law rules, Iowa law would apply. The Court turned to the merits, applying Iowa law. The claim in the case is that Websolv violated the Telephone Consumer Protection Act (“TCPA”) by sending the unsolicited fax. Websolv claims the suit is covered either under the policy's advertising injury section or its property damage section. The Court rejected both theories. The advertising injury section requires the company to defend its insureds for suits alleging injury from the publication of material that "violates a person's right of privacy." Recognizing that a right of privacy could refer either to matters of secrecy or matters of seclusion, the Court concluded that an Iowa court would apply the policy’s coverage only in the secrecy context. The rights protected by the TCPA, on the other hand, are privacy rights arising in the seclusion context. The Court relied, in part, on the use of the word "publication" in the policy. Publication is more relevant in the secrecy context than the seclusion context. With respect to the property damage theories, the Court noted that the only alleged property damage was the use of ink and paper from the fax machine. The Court held that this damage fell within the exclusion in the policy for "expected or intended" consequences. Websolv certainly expected its fax transmission to result in the use of ink and paper on the recipient’s end.
Sandra Castronovo died the day after her car was struck by a truck driven by Kenneth Lively. At the time of the accident, Lively was employed by and driving a truck owned by Doug Lavery, Ltd. He was hauling a trailer owned by GE Capital Corp. and leased to Greif Brothers Corp., who loaned it to Lavery. Lavery and Lively were named insureds under a $1 million policy issued by Owners Insurance. Travelers Property Casualty Company issued a $2 million policy to Greif. National Union issued a $25 million umbrella policy to Grief which covered permissive users of vehicles owned by Grief. The National Union policy provided excess coverage to the Travelers policy and provided primary coverage for covered risks that were not covered at all by any other insurance. Sandra’s husband John sued Lively, Lavery, GE and Greif. Owners provided a defense to Lively and Lavery but eventually tendered its $1 million policy limit to the court. Travelers defended GE and Greif under the Greif policy. Travelers refused to defend Lavery and made no decision with respect to Lively. In early 2005, Greif and Travelers both spoke with National Union about the case. And National Union continued to follow the developments. In September the court approved a consent judgment against Lively and Lavery in the amount of $6 million. They assigned their rights of coverage to Castronovo in return for a covenant not to execute on their personal assets. National Union learned of the consent judgment only after it was entered. In October, Travelers determined that Lively and Lavery were both insureds and paid their $2 million policy limit to Castronovo. Castronovo sued National Union to recover the approximate $3 million balance. The court granted summary judgment to National Union, holding that Lively and Lavery breached the policy by not notifying National Union of the consent judgment. Castronovo appeals.
Several home owners in the same subdivision began to notice water damage in their new homes. Litigation ensued against the general contractor, Sheehan Construction Co. Although the problem was traced to one of Sheehan's subcontractors, Sheehan settled the litigation for nearly $3 million. Sheehan is ensured by Westfield Insurance Co. under a general liability policy. Sheehan brought an action against Westfield for indemnity. The district court granted judgment to Westfield. Sheehan appeals.
James Stilwell was an entrepreneur and property owner in central Illinois. Stilwell found himself at times in need of cash, however. He devised a scheme whereby he would write a check on his account at Tuscola National Bank (“TNB”) and present it to First State Bank of Monticello (“FSB”) in return for a bank money order. Stilwell frequently had no money in his account at TNB. Even though cashing a check for a noncustomer was against FSB’s policy, it sold him almost $2 million in money orders over the course of several months. When questioned by bank representatives, Stilwell made up stories to cover his scheme. Finally, TNB froze his account, leaving FSB with $307,000 in worthless checks. Stilwell agreed to repay FSB, but died before he did. FSB filed a claim with its insurer, Ohio Casualty Insurance Company (“Ohio Casualty”). Ohio Casualty denied the claim on two grounds: that the loss was not covered under the policy and that it was an excluded loss because it was caused by a FSB employee. FSB filed suit to recover. The district court granted summary judgment to FSB. FSB requested prejudgment interest in a Rule 59(e) motion. The court declined. Both Ohio Casualty and FSB appeal.