Terra Nova Ins. Co. v. Fray-Witzer

869 N.E.2d 565

449 Mass. 406

TERRA NOVA INSURANCE COMPANY v. Evan FRAY-WITZER & another¹; Royal & SunAlliance USA, third-party defendant.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued April 5, 2007.

Decided July 10, 2007.

John T. Zogby, Milford, for Metropolitan Antiques, LLC.

Matthew P. McCue, Framingham (Edward A. Broderick, Brookline, with him) for Evan Fray-Witzer.

John P. Graceffa, Boston (Fay M. Chen with him) for the plaintiff.

Michael F. Aylward, Boston, for Royal & SunAlliance USA.

The following submitted briefs for amici curiae:

Laura A. Foggan & John C. Yang, of the District of Columbia, Kim V. Marrkand, & Philip J. Catanzano for Complex Insurance Claims Litigation Association.

Brian J. Wanca, Rolling Meadows, IL, Steven A. Smith, & Phillip A. Bock, Chicago, IL, for CE Design Ltd.

Joseph R. Compoli, Jr., & James R. Goodluck, Cleveland, OH, for Telemarketing, Spam & Junk Fax Litigation Group of the Association of Trial Lawyers of America.

Charles E. Spevacek & William M. Hart, Minneapolis, MN, & Arthur J. McColgan, II, Chicago, IL, for St. Paul Fire & Marine Insurance Company & others.

Present: MARSHALL, C.J., GREANEY, IRELAND, SPINA, COWIN, & CORDY, JJ.

SPINA, J.

The principal issue we are asked to decide is whether unsolicited facsimile advertisements sent to Massachusetts residents by a New Jersey company, allegedly in violation of the Telephone Consumer Protection Act, 47 U.S.C. § 227 (2000) (TCPA), caused covered injuries under the terms of two general liability insurance policies.² Although we conclude that the facsimile transmissions at issue were not "accidents," for the purposes of insurance coverage, we hold that these advertisements violated their recipients' right of privacy, such that insurance coverage is triggered.

1. Background. Metropolitan Antiques, LLC (Metropolitan), is a New Jersey auctioneer services company. After receiving an advertisement, Metropolitan contacted Abdul Syed of Village Fax in Tustin, California, to inquire about facsimile telemarketing as a strategy to expand its business in New England. On Syed's referral, Metropolitan purchased a database containing, inter alia, approximately 60,000 Massachusetts facsimile numbers from Fax Marketing, a Florida company. The list of numbers targeted professionals, including doctors, accountants, and attorneys, whom Metropolitan believed would be interested in its services. The database information was transmitted directly to Syed, who began using the numbers to send unsolicited facsimile advertisements on behalf of Metropolitan in the fall of 2001. Syed continued to send such facsimile broadcasts on Metropolitan's behalf every three to four months through March, 2003. He estimates that over this period approximately 360,000 total facsimile advertisements were sent to Massachusetts numbers. Among the recipients of these advertisements were Evan Fray-Witzer and the class of litigants he represents.

In 2003, Fray-Witzer filed a class action complaint in Superior Court against Metropolitan, alleging violations of the TCPA and G.L. c. 93A, and seeking injunctive relief. In 2004, Fray-Witzer filed an amended complaint, adding a new class representative. He also alleged that Metropolitan was negligently responsible for the unsolicited facsimile transmissions and claimed injuries related to the unwanted use of toner, paper, and his facsimile line. Fray-Witzer's class action claim is pending.

During the relevant period, Metropolitan had two different insurance carriers. Between February 9, 2001, and February 9, 2002, Metropolitan was insured under a commercial general liability policy from Royal & SunAlliance USA (Royal). From February 9, 2002, through February 9, 2003, Metropolitan was insured under a commercial general liability policy from Terra Nova Insurance Company (Terra Nova). Both policies contained identical liability coverage for "bodily injury and property damage liability" (Coverage A). Coverage A required the insurer, with some exceptions, to indemnify the insured for amounts it became legally obligated to pay for bodily injury or property damages and gave the insurer the right and duty to defend the insured in an action seeking such damages. In order to be covered, the bodily injury or property damage had to be caused by an "occurrence," which was defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." The policies likewise contained an exclusion for "bodily injury" or "property damage" expected or intended from the standpoint of the insured.

Both policies also provided coverage for "personal and advertising injury liability" (Coverage B), although the two policies differed in some minor respects. Terra Nova's Coverage B section contained separate definitions for advertising injury³ and personal injury.⁴ The relevant Coverage B section in Royal's policy combined personal and advertising injury into a single definition.⁵ Both policies defined the relevant permutation of injury as "[o]ral or written publication of material that violates a person's right of privacy."

In addition, the Royal Coverage B section contained an exclusion for personal or advertising injury if the insured had knowledge that the act would cause such injury or if the injury arose out of a criminal act.⁶ Likewise, the Terra Nova Coverage B section contained a provision intending to exclude wilful violations of a penal statute.⁷ Last, the Terra Nova policy alone contained language excluding punitive and exemplary damages.⁸

Terra Nova initiated the present action against Fray-Witzer and Metropolitan on August 4, 2003, seeking a judgment declaring its obligation to indemnify and defend Metropolitan under its insurance policy. Fray-Witzer subsequently filed a third-party complaint against Royal, requesting a declaration of coverage under Metropolitan's policy. A judge in the Superior Court granted summary judgment in favor of both insurers, concluding that they did not have a duty to defend or indemnify Metropolitan for the injuries alleged in the underlying class action. We granted Fray-Witzer's application for direct appellate review and now reverse the judgment. On appeal, Royal and Terra Nova have filed a joint brief. Metropolitan has adopted the statement of the issue, the statement of the cases and facts, and the argument set forth in Fray-Witzer's brief, while submitting further argument in its own brief. We may refer to the former parties as the insurers and the latter as the class action parties.

2. Standard of review. The applicable standard of review requires us to determine "whether, viewing the evidence in the light most favorable to the nonmoving party, all material facts have been established and the moving party is entitled to a judgment as a matter of law." Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117, 120, 571 N.E.2d 357 (1991). See Mass. R. Civ. P. 56(c), as amended, 436 Mass. 1404 (2002). In so doing, we take all reasonable inferences in favor of the nonmoving party. Simplex Techs., Inc. v. Liberty Mut. Ins. Co., 429 Mass. 196, 197, 706 N.E.2d 1135 (1999). In this case, there are no material facts in dispute.

3. Choice of law. The judge applied the law of New Jersey to this dispute, because Metropolitan is a New Jersey company and the Terra Nova policy was issued there. Such an approach is in accordance with the "various choice-influencing considerations" found appropriate in Bushkin Assocs. v. Raytheon Co., 393 Mass. 622, 631-632, 473 N.E.2d 662 (1985). Moreover, the insurers and class action parties agree that there is no relevant difference between New Jersey and Massachusetts law and have both employed New Jersey law in their arguments. In keeping with the judge's appropriate choice of law, we will look to the jurisprudence of New Jersey in interpreting the insurance policy in this case.

4. Coverage A. In order to fall within Coverage A of either insurer, the property damage claimed by Fray-Witzer must be caused by an "occurrence," which is defined in both policies as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Thus, the question of law created is whether injuries arising from the unsolicited facsimile advertisements, sent on Metropolitan's behalf, were caused by accidents.

The insurers claim that Metropolitan intended to send the facsimile advertisements, and must reasonably have expected the consequence of causing paper, toner, and facsimile machine time to be used. For that reason, the insurers contend that the property damage complained of was not caused by an accident. In response, the class action parties argue that while Metropolitan may have intended to transmit the advertisements, there was no intent to violate the TCPA. In Fray-Witzer's amended complaint, he alleged that Metropolitan's actions were negligent and not intentional, thus allowing for coverage as "accidental." Further, the class action parties argue that the correct inquiry is not whether the injuring act was intentional, for there is little doubt that Metropolitan intended to send the facsimiles in this case, but rather whether the injury complained of was intentional. Although Metropolitan intended to send facsimiles, the class action parties allege that it was misled by Syed into sending the type of facsimiles that violated the TCPA. Thus, they argue, the injuries incurred, i.e., the receipt of unsolicited facsimile advertisements and the resultant damages, were caused by negligent accidents. We disagree.

In Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165, 607 A.2d 1255 (1992), the New Jersey Supreme Court considered similar policy language in the context of an infliction of emotional distress claim. The court engaged in a thoughtful public policy analysis before reviewing cases in both New Jersey and foreign courts. Id. at 180-183, 607 A.2d 1255. The court held that "the...