Travelers Property Casualty Company of America v. Dish Network, LLC

Filing 38

OPINION (See Written Opinion): For the reasons stated, DISH Network's Cross-Motion for Partial Summary Judgment (d/e 24 ) is GRANTED. Travelers has a duty to defend DISH Network's interests in the Underlying Lawsuit. Furthermore, Trave lers' Motion for Summary Judgment (d/e 20 ) is DENIED, as is Travelers' request for an order dismissing DISH Network's Counterclaims with prejudice. Finally, DISH Network's Motion to Stay (d/e 33 ) is accordingly DENIED AS MOOT. IT IS SO ORDERED. Entered by Judge Sue E. Myerscough on 3/24/2014. (VM, ilcd)

E-FILED

Monday, 24 March, 2014 10:54:23 AM
Clerk, U.S. District Court, ILCD

UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
TRAVELERS PROPERTY
CASUALTY COMPANY OF
AMERICA, f/k/a THE TRAVELERS
INDEMNITY COMPANY OF
ILLINOIS,
Plaintiff,
v.
DISH NETWORK, LLC,
Defendant.

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12-03098

OPINION
SUE E. MYERSCOUGH, U.S. District Judge:
This cause is before the Court on the Motion for Summary
Judgment (d/e 20) filed by Plaintiff Travelers Property Casualty
Company of America, f/k/a The Travelers Indemnity Company of Illinois
(“Travelers”). Travelers seeks an order declaring that Travelers has no
duty to defend DISH Network, LLC, (“DISH Network”) under the
Travelers Policy, granting Travelers’ Summary Judgment Motion, and
dismissing with prejudice DISH Network’s Counterclaims.

Defendant DISH Network has filed a Cross-Motion for Partial
Summary Judgment (d/e 24) in which DISH Network seeks an order
granting the Cross-Motion and declaring that Travelers has a duty to
defend DISH Network’s interests in the Underlying Lawsuit captioned as
United States of America and the States of California, Illinois, North
Carolina, and Ohio v. DISH Network L.L.C., Case No. 3:09-03073 (C.D.
Ill.) (“Underlying Lawsuit”).
DISH Network’s Cross-Motion for Partial Summary Judgment is
GRANTED. Travelers has a duty to defend DISH Network’s interests in
the Underlying Lawsuit. Furthermore, Travelers’ Motion for Summary
Judgment is DENIED, as is Travelers’ request for an order dismissing
DISH Network’s Counterclaims with prejudice.

Additionally, DISH

Network’s Motion to Stay (d/e 33) is DENIED AS MOOT.
I.

JURISDICTION AND VENUE
DISH Network is a Colorado Limited Liability Company with its

principal place of business in Englewood, Colorado.

Travelers is an

insurance company incorporated in Connecticut with its principal place
of business in Hartford, Connecticut.

The amount in controversy

Page 2 of 51

exceeds $75,000. Based on these facts, subject-matter jurisdiction exists
pursuant to the Court’s diversity jurisdiction. 28 U.S.C. § 1332.
Venue is proper in the Central District of Illinois, Springfield
Division, because the Underlying Lawsuit that gives rise to this action
was instituted against DISH Network in this Court. 28 U.S.C. § 1391.
II.

LEGAL STANDARD
Summary judgment is proper if the movant shows that no genuine

dispute exists as to any material fact and that the movant is entitled to
judgment as a matter of law. Fed. R. Civ. P. 56(a). The movant bears
the initial responsibility of informing the court of the basis for the
motion and identifying the evidence that demonstrates the absence of a
genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317,
323 (1986). No genuine issue of material fact exists if no reasonable jury
could find in favor of the nonmoving party. Brewer v. Bd. of Trs. of the
Univ. of Ill., 479 F.3d 908, 915 (7th Cir. 2007).

When ruling on a

motion for summary judgment, the court must consider the facts in the
light most favorable to the nonmoving party, drawing all reasonable

Page 3 of 51

inferences in the nonmoving party's favor. Woodruff v. Mason, 542 F.3d
545, 550 (7th Cir. 2008).
III. BACKGROUND
DISH Network is a Colorado Limited Liability Company, with its
principal place of business in Englewood, Colorado.

Travelers is an

insurance company incorporated in the state of Connecticut with its
principal place of business is Hartford, Connecticut.
DISH Network was originally incorporated as EchoStar Satellite
Corporation. EchoStar Satellite Corporation was then converted into a
limited liability company, EchoStar Satellite LLC.

EchoStar Satellite

LLC was subsequently renamed DISH Network LLC. DISH Network
provides direct-to-the-home satellite television products and services.
Travelers sold a commercial general liability policy to DISH
Network’s predecessor, EchoStar Communications Corporation, for the
period August 1, 2003, to August 1, 2004. On May 11, 2012, Travelers
filed a One-Count Amended Complaint seeking an order that declares
Travelers has no duty to defend DISH Network’s interests in the

Page 4 of 51

Underlying Lawsuit pursuant to the Travelers Policy. See Am. Compl.,
d/e 8.
DISH Network filed an Answer to the Amended Complaint on
June 14, 2012.

See Answer, d/e 13.

In the Answer, DISH Network

raises three Counterclaims. In Count I, DISH Network seeks an order
declaring Travelers has a duty to defend DISH Network’s interests in the
Underlying Lawsuit. In Count II, DISH Network alleges that Travelers
breached the insurance contract. In Count III, DISH Network alleges a
bad faith failure to defend. See id.
A.

The United States, California, Illinois, North Carolina, and Ohio
Filed a Second Amended Complaint Against DISH Network in the
Underlying Lawsuit on March 12, 2013
The Second Amended Complaint (“Underlying Complaint”) in the

Underlying Lawsuit that names DISH Network as the defendant was
filed on March 12, 2013, in the United States District Court for the
Central District of Illinois, Springfield Division. United States & the
States of Cal., Ill., N.C., & Ohio v. DISH Network, L.L.C., Case No.
3:09-cv-03073, d/e 257.

The Underlying Complaint generally alleges

that DISH Network, either directly or indirectly, injured consumers in

Page 5 of 51

the United States by making unsolicited telemarketing phone calls
proscribed by state and federal laws, including the Telemarketing Sales
Rule, the Telephone Consumer Protection Act (TCPA), and California,
Illinois, North Carolina, and Ohio law. The plaintiffs in the Underlying
Lawsuit seek injunctive relief and money damages.
B.

The Commercial General Liability Policy Contains Provisions for
Bodily Injury, Property Damage, Personal Injury, or Advertising
Injury Liability Coverage
Travelers issued the Commercial General Liability Policy at issue,

policy

number

TC2J-GLSA-419J7603-TIL-03,

to

EchoStar

Communications Corporation for the period August 1, 2003, through
August 1, 2004. The Travelers Policy provides that Travelers will pay for
damages arising out of bodily injury or property damage caused by the
insured and not expected or intended by the insured:
Coverage A.
provides:
1.

Bodily Injury and Property Damage Liability

Insuring Agreement.
a.

We will pay those sums that the insured becomes
legally obligated to pay as damages because of
“bodily injury” or “property damage” to which the
insurance applies. We will have the right and duty
to defend any “suit” seeking those damages.
Page 6 of 51

***
2.

Exclusions.
This insurance does not apply to:
a. Expected or Intended Injury
“Bodily Injury” or “property damage” expected or
intended from the standpoint of the insured.

D/e 25, Ex. 7 at 22 (emphasis added).
The Travelers Policy also provides that Travelers will pay for
damages arising out of personal injury or advertising injury caused by the
insured:
Coverage B.
provides:
1.

Personal and Advertising Injury Liability

Insuring Agreement.
a.

We will pay those sums that the insured becomes
legally obligated to pay as damages because of
“personal injury” or “advertising injury” to which
this insurance applies. We will have the right and
duty to defend any “suit” seeking those damages.

D/e 25, Ex. 7 at 25.
However, the Travelers Policy excludes coverage for personal injury
if the injury is a result of advertising done by or for the insured:

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b.

This insurance applies to:
(1)

“Personal injury” caused by an offense
arising out of your business, excluding
advertising, publishing, broadcasting or
telecasting done by or for you . . . .

Id. (emphasis added).
DISH Network argues that, under the Travelers Policy, Definitions
1.b (Advertising Injury), 3 (Bodily Injury), 13.e (Personal Injury), and
15.b (Property Damage) trigger Travelers’ duty to defend DISH
Network’s interests in the Underlying Lawsuit:
1.

“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 organization’s goods,
products, or services;

b.

Oral or written publication of material that
violates a person’s right of privacy;

c.

Misappropriation of advertising ideas or style of
doing business; or

d.

Infringement of copyright, title, or slogan.
***

3.

“Bodily Injury” means bodily injury, sickness or disease
sustained by a person, including death . . . .
Page 8 of 51

***
13.

“Personal Injury” means injury, other than “bodily
injury,” arising out of one or more of the following
offenses:
a.

False arrest, detention or imprisonment;

b.

Malicious prosecution;

c.

The wrongful eviction from, wrongful entry into,
or invasion of the right of private occupancy of a
room, dwelling or premises that a person occupies
by or on behalf of its owner, landlord, or lessor;

d.

Oral or written publication of material that
slanders or libels a person or organization or
disparages a person’s or organization’s goods,
products, or services;

e.

Oral or written publication of material that
violates a person’s right of privacy.
***

15.

“Property Damage” means:
a.

Physical injury to tangible property, including all
resulting loss of use of that property. All such loss
of use shall be deemed to occur at the time of the
physical injury that caused it; or

b.

Loss of use of tangible property that is not
physically injured. All such loss of use shall be
deemed to occur at the time of the “occurrence”
that caused it.

Page 9 of 51

D/e 25, Ex. 7 at 30–32 (emphasis added).
Furthermore,

on

February

16,

2004,

Travelers

issued

an

endorsement for the purpose of amending the Bodily Injury Definition to
include coverage for mental anguish caused by the insured:
With respect to all operations, “bodily injury” in the
DEFINITIONS section of this insurance is amended to
include mental anguish.
D/e 25, Ex. 10 at 48. This endorsement was effective from August 1,
2003. Id. at 43.
The Travelers Policy also contains an exclusion to Advertising
Injury Liability Coverage for advertising injuries arising out of an offense
committed by an insured engaged in the businesses of broadcasting
and/or telecasting:
This insurance does not apply to . . . [a]dvertising injury
arising out of . . . an offense committed by an insured whose
business is advertising, broadcasting, publishing, or
telecasting.
D/e 25, Ex. 7 at 25. Travelers asserts that this exclusion precludes any
potential for Advertising Injury Liability Coverage because DISH
Network engages in the businesses of broadcasting and telecasting.

Page 10 of 51

C.

DISH Network Contests Travelers’ Assertion that the Exclusion to
Advertising Injury Coverage for Insureds Engaged in the Businesses
of Broadcasting and/or Telecasting Applies in this Case
The parties have submitted corporate documents describing the

business operations of DISH Network’s predecessor EchoStar Satellite
Corporation on the issue of whether DISH Network engages in the
businesses of broadcasting and/or telecasting. Travelers asserts that the
corporate documents establish that DISH Network has continued
EchoStar’s primary business objectives, which include broadcasting and
telecasting television programming to consumers.
The Articles of Incorporation of EchoStar Satellite Corporation, a
Colorado Corporation, describe the company’s goals and business
operations:
The powers vested in the corporation shall be all those powers
which are not or hereafter may be granted by the Colorado
Corporation Act under which this Corporation is organized,
including, but not limited to the following:
(1) To engage in the business of satellite communications,
including but not limited to Direct Broadcast Satellite
communications: to operate transmission and receiving
stations and any connection between any such stations, and
to transmit signals, and all matter and things of any kind,
nature, and description whatsoever that may be transmitted.

Page 11 of 51

D/e 25, Ex. 2 at 2.
Further, EchoStar’s Annual Report for the year ending 12/31/03
and filed with the state of Colorado also describes the company’s services
and goals:
Echostar Communications Corporation, through its Dish
Network, is a leading provider of satellite delivered digital
television to customers across the United States. Dish
services include hundreds of video, audio and data channels,
interactive television channels, digital video recording, high
definition television, international programming, professional
installation and 24-hour customer service.
We started offering subscription television services on the
Dish Network in March 1996. As of December 31, 2003, the
Dish Network had approximately 9.425 million subscribers.
We currently have nine in-orbit satellites which enable us to
offer over 1,000 video and audio channels to consumers
across the United States. Since we use many of these
channels for local programming, no particular consumer could
subscribe to all channels, but all are available using small
consumer dishes. We believe that Dish Network offers
programming packages that have a better “price-to-value”
relationship than packages currently offered by most other
subscription television providers.
***

The DISH Network . . . provides a direct broadcast satellite
subscription television service . . . .

D/e 25, Ex. 5 at 9.

Page 12 of 51

In addition to these corporate records, Travelers has attached to its
Motion for Summary Judgment documents provided to EchoStar by
EchoStar’s insurance broker, Lockton Companies, dated May 3, 2001,
July 26, 2001, and July 16, 2002.

Lockton Companies’ documents

notify EchoStar of the option to purchase Broadcaster’s Errors and
Omissions Coverage among other coverage options. See d/e 21, Ex. 10 at
6, Ex. 11 at 5–6, & Ex. 12 at 4.

Travelers asserts that the broker’s

proposals to DISH Network’s predecessor, EchoStar, put DISH Network
on notice that the Travelers Policy never covered advertising injuries
caused by an insured whose businesses are broadcasting and/or
telecasting.
The parties have fully briefed the Cross-Motions, and the Court
heard argument on the Cross-Motions on June 3, 2013.
IV. ANALYSIS
In support of DISH Network’s Cross-Motion for Partial Summary
Judgment, DISH Network argues that, under Colorado law, Travelers is
prematurely seeking an order declaring Travelers has no duty to defend
DISH Network’s interests in the Underlying Lawsuit. DISH Network

Page 13 of 51

then argues that, even if this action were ripe for decision, under Illinois
insurance policy interpretation principles, Travelers has a duty to defend
the Underlying Lawsuit pursuant to the Travelers Policy’s Advertising
Injury, Personal Injury, Property Damage, and Bodily Injury Liability
Coverage.

DISH Network also contends that the exclusion to

Advertising Injury Liability Coverage for entities engaged in the
businesses of broadcasting and/or telecasting does not apply and that the
damages and injunctive relief sought by the United States and state
plaintiffs in the Underlying Lawsuit are covered by Travelers’ policy.
Travelers, to the contrary, asserts that this declaratory action is not
premature and that Travelers, under Colorado insurance policy
interpretation principles, has no duty to defend DISH Network’s
interests in the Underlying Lawsuit.

Travelers also argues that the

exclusion to Advertising Injury Liability Coverage for insureds engaged in
the businesses of broadcasting and/or telecasting applies and the damages
and injunctive relief sought in the Underlying Lawsuit are not covered
under Travelers’ insurance policy as a matter of Colorado public policy.

Page 14 of 51

A.

The Court Must Apply Illinois Law if Illinois Law is the Same as
Colorado Law on a Given Issue
The Travelers Policy does not contain a choice-of-law clause.

Where an insurance policy contains no choice-of-law clause and a federal
court sits in diversity, as is the case here, the court must apply the choiceof-law rules of the jurisdiction in which the court sits. In this case, the
jurisdiction is Illinois. Mass. Bay Ins. Co. v. Vic Koenig Leasing Co., 136
F.3d 1116, 1122 (7th Cir. 1998) (applying Illinois choice-of-law rules
because federal court had diversity jurisdiction and was in Illinois).
In Illinois, a choice-of-law analysis is required only if the potentially
applicable laws yield different results on a given issue. In re Air Crash
Disaster Near Chi., 644 F.2d 594, 605 (7th Cir. 1981);  Townsend v.
Sears, Roebuck & Co., 879 N.E.2d 893, 899 (Ill. 2007). If application
of Illinois and another state’s law to a given issue yields the same result,
then courts will apply Illinois law. Dearborn Ins. Co. v. Int’l Surplus
Lines Ins. Co., 719 N.E.2d 1092, 1096 (Ill. 1999).

In this case,

Colorado law will therefore apply only to those issues on which Colorado
law and Illinois law would yield different results.

Where Illinois and

Colorado law yield the same result, this Court will apply Illinois law.
Page 15 of 51

The Court must make this determination for each issue in the instant
case. Int’l Adm’rs, Inc. v. Life Ins. Co. of N. Am., 753 F.2d 1373, 1375
n.4 (7th Cir. 1985).
B.

Travelers Has Not Instituted this Declaratory Action Prematurely
Because Deciding Whether Travelers Has a Duty to Defend the
Underlying Lawsuit Will Not Compromise DISH Network’s
Defense of the Underlying Lawsuit
Illinois and Colorado law are substantially similar regarding when a

party may file an action that seeks a declaratory judgment on the
insurer’s duty to defend. Specifically, under Illinois and Colorado law, a
party may file a declaratory judgment action before the underlying
litigation has concluded if an actual controversy exists; a declaratory
judgment will fully and finally resolve the uncertainty and controversy as
to all parties with a substantial interest in the matter that could be
affected by the judgment; and the anticipatory declaratory judgment
action is independent of and separable from the underlying action.
Constitution Assocs. v. N.H. Ins. Co., 930 P.2d 556, 561 (Colo. 1996)
(holding that a judgment against the insured in the underlying case is not
an absolute prerequisite to filing a declaratory judgment action to
determine coverage.); Bituminous Cas. Corp. v. Fulkerson, 571 N.E.2d
Page 16 of 51

256, 260–61 (Ill. App. 1991) (holding that grant of insurer’s summary
judgment motion in declaratory action on duty to defend was
inappropriate where the trial court granted the motion after deciding
issues that were germane to the underlying case). Additionally, when
ruling on a declaratory action regarding the duty to defend, Illinois and
Colorado courts only compare the pertinent policy language and
underlying complaint to avoid addressing issues that are germane to the
underlying lawsuit. See, e.g., Am. States Ins. Co. v. Koloms, 687 N.E.2d
72, 75 (Ill. 1997); Hecla Mining Co. v. N.H. Ins. Co., 811 P.2d 1083,
1089 (Colo. 1991).
In this case, ruling on Travelers’ declaratory action is appropriate
because the only issue is whether any of the allegations in the Underlying
Complaint potentially fall within any coverage provision of the Travelers
Policy. See Lyerla v. AMCO Ins. Co., 536 F.3d 684, 688 (7th Cir. 2008)
(citing Gen. Agents Ins. Co. of Am., Inc. v. Midwest Sporting Goods Co.,
828 N.E.2d 1092, 1098 (Ill. 2005)) (“An insurer is obligated to defend
its insured if the underlying complaint contains allegations that
potentially fall within the scope of coverage.”). Deciding this issue will

Page 17 of 51

fully resolve whether Travelers has a duty to defend and will in no way
address the central issue in the Underlying Lawsuit which is whether
DISH Network made telemarketing phone calls in violation of state and
federal law.
C.

The Court Will Apply Illinois Law When Interpreting the Travelers
Policy Because Illinois and Colorado Laws Do Not Conflict
Having determined that the action is not premature, the Court

must now decide what law applies when interpreting the Travelers Policy.
Travelers argues that Colorado law applies because Illinois and Colorado
courts employ different policy interpretation principles. In support of
this argument, Travelers asserts that Colorado courts, unlike Illinois
courts, look at closely related or associated policy language to illuminate
the meaning of insurance coverage provisions. See d/e 21 at 18 (citing
Noyes Supervision, Inc. v. Canadian Indem., 487 F. Supp. 433, 437 (D.
Colo. 1980) (citing Martinez v. People, 137 P.2d 690 (Colo. 1943)).
This interpretation principle set forth by Travelers is referred to as
ejusdem generis, which means “of the same kind.”
Dictionary 535 (7th ed.).

Page 18 of 51

Black’s Law

Contrary to Travelers assertion, however, Illinois courts also employ
the principle of ejusdem generis to interpret insurance contracts. See,
e.g., Gullett v. St. Paul Fire & Marine Ins. Co., 446 F.2d 1100, 1103
(7th Cir. 1971); Bituminous Cas. Corp. v. Chi., Rock Island & Pac. R.R.
Co., 289 N.E.2d 464, 466 (Ill. App. 1972) (applying principle of ejusdem
generis in declaratory judgment action brought by insurer against insured
in order to determine coverage under a comprehensive general liability
insurance policy).
Moreover, in both Illinois and Colorado, the construction of
insurance policies is a question of law. See, e.g., Am. States Ins. Co., 687
N.E.2d at 75; Cyprus Amax Minerals Co. v. Lexington Ins. Co., 74 P.3d
294, 299 (Colo. 2003). In construing an insurance policy, both states
find that courts must ascertain and give effect to the intentions of the
parties as expressed in their agreement. See, e.g., Hobbs v. Hartford Ins.
Co. of the Midwest, 823 N.E.2d 561, 564 (Ill. 2005); Allen v. Pacheco,
71 P.3d 375, 378 (Colo. 2003). If the terms of the policy are clear and
unambiguous, then Illinois and Colorado courts give the terms their plain
and ordinary meaning. See, e.g., Nicor, Inc. v. Associated Elec. & Gas

Page 19 of 51

Ins. Servs. Ltd., 860 N.E.2d 280, 287 (Ill. 2006); Compass Ins. Co. v.
City of Littleton, 984 P.2d 606, 613 (Colo. 1999). Conversely, if the
terms of the policy are susceptible to more than one meaning, then
Illinois and Colorado courts consider the terms ambiguous and construe
the policy strictly against the insurer who drafted the policy. See, e.g.,
Rich v. Principal Life Ins. Co., 875 N.E.2d 1082, 1090 (Ill. 2007);
Parrish Chiropractic Ctrs., P.C. v. Progressive Cas. Ins. Co., 874 P.2d
1049, 1056 (Colo. 1994). Courts in Illinois and Colorado construe the
policy as a whole, taking into account the type of insurance purchased,
the nature of the risks involved, and the overall purpose of the contract.
See, e.g., Rich, 875 N.E.2d at 1090; Cyprus Amax Minerals Co., 74 P.3d
at 299. Further, in a declaratory action, courts in Illinois and Colorado
will find a duty to defend even if only one theory alleged in the
underlying complaint is potentially within the policy’s coverage. U.S.
Fid. & Guar. Co. v. Wilkin Insulation Co., 578 N.E.2d 926, 930 (Ill.
1991); Hecla Mining Co., 811 P.2d at 1089.
Therefore, Illinois and Colorado courts use similar insurance policy
interpretation methods and principles. Accordingly, the Court will apply

Page 20 of 51

Illinois law to determine whether Travelers has a duty to defend the
Underlying Lawsuit pursuant to the Travelers Policy’s Advertising Injury,
Personal Injury, Property Damage, or Bodily Injury Liability Coverage.
1.

The Unsolicited Communications Claims in the Underlying
Lawsuit Potentially Fall Within the Travelers Policy’s
Advertising Injury Liability Coverage

DISH Network first argues that Travelers has a duty to defend
pursuant to the Advertising Injury Definition in the Travelers Policy that
provides coverage for advertising injuries arising out of the “[o]ral or
written publication of material that violates a person’s right of privacy.”
D/e 25, Ex. 7 at 30. DISH Network asserts that the right of privacy
contemplated by this definition includes an individual’s right to be free
from the dissemination of private content about the individual and the
individual’s right to remain undisturbed. The latter privacy interest, the
right to remain undisturbed, is the privacy interest at issue in the
Underlying Lawsuit in which the United States and state plaintiffs allege
that DISH Network made unsolicited telemarketing phone calls in
violation of state and federal law.

Page 21 of 51

In response, Travelers asserts that the right to privacy contemplated
by the Advertising Injury Definition does not include the right to remain
undisturbed that is at issue in the Underlying Lawsuit.

According to

Travelers, the right to privacy in the Advertising Injury Definition only
pertains to an individual’s right to be free from the dissemination of
private content about that individual.
The Illinois Supreme Court has held that in the context of an
advertising injury arising out of the “[o]ral or written publication of
material that violates a person’s right of privacy,” the person’s right of
privacy encompasses not only an individual’s right to be free from the
dissemination of private content about that individual, but also an
individual’s privacy interest to be left alone. Valley Forge Ins. Co. v.
Swiderski, 860 N.E.2d 307, 316–17 (Ill. 2006).

In Swiderski, Ernie

Rizzo filed a three-count complaint in McHenry County, Illinois Circuit
Court against Swiderski Electronics, Inc. Id. at 310. According to the
complaint,

Swiderski

sent

Rizzo

and

other

individuals

a

fax

advertisement with information on the sale, rental, and service of various
types of electronic equipment. Id. The complaint alleged that, by faxing

Page 22 of 51

copies of the advertisement without first obtaining the recipients’
permission to do so, Swiderski violated the Telephone Consumer
Protection Act, unlawfully converted the fax machine toner and paper of
those who received the faxes, and violated Section 2 of the Illinois
Consumer Fraud and Deceptive Business Practices Act. Id.
Swiderski tendered the defense of the lawsuit to Swiderski’s
primary insurer, Valley Forge Insurance Company, and Swiderski’s excess
insurer, Continental Casualty Corporation. Id. Under the Valley Forge
Policy, Valley Forge had a duty to defend Swiderski against any suit
seeking damages caused by personal and advertising injury. Id. at 310–
11.

Personal and advertising injury included, among other injuries,

injuries arising out of the “[o]ral or written publication, in any manner,
of material that violates a person’s right of privacy.” Id. at 311. Like the
Valley Forge Policy, the Continental Casualty Corporation covered
advertising injury arising out of the “[o]ral, written, televised or
videotaped publication of material that violates a person’s right of
privacy.” Id.

Page 23 of 51

Valley Forge and Continental informed Rizzo that the claims in the
underlying complaint were not covered by the policies and sought a
declaration that they had no duty to defend or indemnify Swiderski. Id.
at 311–12. Subsequently, the insurers filed a petition for leave to appeal
with the Illinois Supreme Court, which the court allowed.

Swiderski,

860 N.E.2d at 313.
On appeal to the Illinois Supreme Court, the insurers argued that
the advertising injury definitions in the policies, which covered liability
resulting from an insured’s written publication of material that violates a
person’s right of privacy, was applicable only where the content of the
published material reveals private information about a person that
violates the person’s right of privacy.

Id.

According to the insurers,

however, the basis of the Telephone Consumer Protection Act liability
alleged in Rizzo’s complaint was the mere sending of an unsolicited fax
containing no private information. Id.
After hearing the parties’ arguments, the Illinois Supreme Court
addressed the advertising injury definitions at issue and rejected the
insurers’ reasoning. Specifically, the court construed the meaning of the

Page 24 of 51

operative terms “publication,” “material,” and “right of privacy” by
consulting the dictionary. Id. at 316. In doing so, the court explained
that the definitions confirm that the right of privacy encompassed by the
advertising injury definitions includes an individual’s privacy interest to
be left alone and the interest to be free from the unwanted distribution of
private information about that individual. Id. at 317–18.
In the present case, the Advertising Injury Definition at issue—i.e.,
any advertising injury arising out of the “[o]ral or written publication of
material that violates a person’s right of privacy”—contains the terms
“publication,” “material,” and “right of privacy.” The Illinois Supreme
Court’s analysis of these terms in Swiderski reveals that, under Illinois
insurance

policy

interpretation

principles,

the

Advertising

Injury

Definition in this case applies to advertising injuries arising out of the
insured’s violation of an individual’s right to be left alone and right to be
free from the dissemination of private content about that individual. See
id. at 318 (“Th[e] definitions [of publication, material, and right of
privacy] confirm that right of privacy connotes both an interest in
seclusion and an interest in the secrecy of personal information.”).

Page 25 of 51

Travelers is wrong to assert that the Advertising Injury Definition at issue
implicates only an individual’s interest to be free from the unwanted
dissemination of material the content of which violates that person’s
right of privacy. Under Illinois law, the right of privacy also includes the
right to be left alone.

Accordingly, the claims in the Underlying

Complaint that allege DISH Network directly or indirectly violated
federal and state law by making unsolicited telemarketing phone calls
that infringed on consumers’ right to be left alone potentially fall within
the Advertising Injury Liability Coverage of the Travelers Policy.
2.

The Exclusion to Advertising Injury Coverage for Insureds
Engaged in the Businesses of Broadcasting and/or Telecasting
Does Not Preclude Finding a Duty to Defend

Travelers contends, however, that the exclusion to coverage for an
advertising injury arising out of an offense committed by an insured
engaged in the businesses of broadcasting and/or telecasting (the
“broadcasting exclusion”) applies in this case and precludes any potential
for Advertising Injury Liability Coverage. See d/e 25, Ex. 7 at 25 (“This
insurance does not apply to . . . [a]dvertising injury arising out of . . .
[a]n offense committed by an insured whose business is advertising,

Page 26 of 51

broadcasting, publishing, or telecasting.”). In support of this argument,
Travelers has attached documents to its Memorandum in Support of its
Motion for Summary Judgment (d/e 21) that Travelers contends contain
evidence demonstrating DISH Network is engaged in the businesses of
broadcasting and/or telecasting.

DISH Network argues, however, that

the Court may only look at the Underlying Complaint and the Travelers
Policy to determine whether the exclusion to Advertising Injury Liability
Coverage applies.
Regarding exclusions in an insurance policy, both Illinois and
Colorado require the insurer to establish that the exclusion applies. See,
e.g., U.S. Fid. & Guar. Co., 578 N.E.2d at 930–33; Hecla Mining Co.,
811 P.2d at 1090.

In Illinois, however, when a court considering a

declaratory judgment action must resolve factual questions relevant to an
insurer’s duty to defend its insured in another unresolved suit, the court
may examine the underlying complaint, the relevant policy provisions,
and extrinsic evidence. See, e.g., Fremont Comp. Ins. Co. v. Ace-Chi.
Great Dane Corp., 710 N.E.2d 132, 138–39 (Ill. App. 1999) (“Although
it is true that an insurer’s duty to defend flows in the first instance from

Page 27 of 51

the allegations of the underlying complaint, this ‘general rule’ does not
support the proposition that a court, in a declaratory judgment
proceeding where an insurer’s duty to defend is at issue, may never look
beyond the allegations of the underlying complaint. . . . [I]f a court in a
declaratory judgment action is permitted to make such factual
determinations prior to the resolution of the underlying litigation, the
court may consider extrinsic evidence bearing on the question of coverage
and is not restricted only to a consideration of the allegations of the
complaint in the underlying litigation and the terms of the insured’s
policy.”).

On the other hand, the Colorado Supreme Court has not

determined whether Colorado courts will, in addition to comparing the
underlying complaint and the insurance policy provisions at issue, look at
evidence outside of those documents when deciding if an exclusionary
provision applies. See Pompa v. Am. Family Mut. Ins. Co., 520 F.3d
1139, 1147 (10th Cir. 2008) (“Although the Colorado Supreme Court
has not recognized any exceptions to the complaint rule, other courts
have.”). Because there is no conflict between Illinois and Colorado law at
present, the Court will apply Illinois law and will consider the Underlying

Page 28 of 51

Complaint, the policy terms at issue, and extrinsic evidence when
deciding whether DISH Network is engaged in the businesses of
broadcasting

and/or

telecasting

and,

accordingly,

whether

the

broadcasting exclusion applies.
In the Underlying Complaint, DISH Network is described as a
telemarketer and seller of satellite television programming to consumers.
See Case No. 09-3073, 2d Am. Compl., d/e 257 at ¶ 23 (DISH Network
is a “‘telemarketer’ engaged in ‘telemarketing,’” and “a ‘seller’ [because
DISH

Network]

provides

satellite

television

programming

to

consumers.”). Even when considering the descriptive allegations of the
Underlying Lawsuit in the light most favorable to Travelers, these
allegations alone do not establish that DISH Network engages in the
businesses of broadcasting and/or telecasting. Furthermore, the Travelers
Policy does not define the terms broadcasting and telecasting. Therefore,
the Court must turn to extrinsic evidence.
In the absence of a definition in the policy, Illinois and Colorado
courts use dictionaries to ascertain the meaning of policy terms and give
effect to the intentions of the parties as expressed by the words in the

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policy. See, e.g., Swiderski, 860 N.E.2d at 314, 316; Thompson v. Md.
Cas. Co., 84 P.3d 496, 502–03 (Colo. 2004). If the words used in the
insurance policy are reasonably susceptible to more than one meaning,
then they are considered ambiguous and will be construed strictly against
the insurer who drafted the policy. See, e.g., Swiderski, 860 N.E.2d at
316; Hecla Mining Co., 811 P.2d at 1090–91.
In Webster’s Third New International Dictionary, the term
“telecasting” is defined as “to broadcast by television.” Webster’s Third
New International Dictionary 2349 (Philip Babcock Gove et al. eds.,
1986).

This definition shows that the act of telecasting necessarily

involves the act of broadcasting.

Therefore DISH Network cannot

engage in telecasting unless DISH Network is also engaged in
broadcasting. Accordingly, the issue here is whether only one reasonable
meaning of the term broadcasting exists, and, if so, whether DISH
Network engages in the business of broadcasting.
Webster’s Third New International Dictionary defines the term
“broadcasting” as “to send out from a transmitting station (a radio or
television program) for an unlimited number of receivers” or “to send out

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radio or television signals.” Id. at 280. Thus, even Webster’s Third New
International Dictionary alone appears ambiguous; though DISH
Network surely “send[s] out . . . television signals” when engaged in its
business

of

providing

direct

broadcast

satellite

programming

to

consumers, it just as surely sends out these signals for its subscribers
only, not “for an unlimited number of receivers.”
Webster’s has also issued a dictionary more specific to the world of
telecommunications. In Webster’s New World Telecom Dictionary, the
term broadcast television is defined as “[t]elevision programming sent
over the air to all receivers.” Webster’s New World Telecom Dictionary
69 (Ray Horak ed., 2008). The broadcast television definition states,
“See also narrowcast.”

Id.

The Telecom Dictionary in turn defines

“narrowcast” as “[r]eferring to the transmission from one device to a
limited number of other devices on a network. Cable television (CATV),
direct broadcast satellite (DBS), and satellite radio use narrowcast
transmission, as only subscribers to various channels, especially premium
channels, are able to receive those transmissions.” Id. at 330. Thus, the

Page 31 of 51

Telecom Dictionary also appears to provide ambiguous definitions of
“broadcasting,” either for “all receivers” or for “only subscribers.”
Reviewing these dictionary definitions, then, it appears that
“broadcasting,” and therefore “telecasting,” can mean any instance of
sending out television signals, which DISH Network surely does.
“Broadcasting,” and therefore “telecasting,” can also mean the narrower
act of making television and radio programming available on a
subscription basis to a finite number of consumers. This is the type of
broadcasting

and

“broadcasting,”

and

telecasting
therefore

done

by

DISH

“telecasting,”

can

Network.
also

mean

But
the

dissemination of television and radio programming to the public at large.
DISH Network does not engage in this type of broadcasting and
telecasting.
Travelers seeks to evade the ambiguity of the terms by reference to
DISH Network’s own corporate documents, which Travelers contends
demonstrate that DISH Network is engaged in “broadcasting” or
“telecasting.” See Pl.’s Mem. Supp. Mot. Summ. J., d/e 21, Ex. 2 & Ex. 4
(the Articles of Incorporation and 2003 Annual Report of DISH

Page 32 of 51

Network’s

corporate

predecessor

EchoStar).

The

Articles

of

Incorporation describe EchoStar’s business operations as the transmission
of satellite communications: EchoStar engages in
the business of satellite communications, including but not
limited to Direct Broadcast Satellite communications: to . . .
operate transmission and receiving stations and any
connection between any such stations, and to transmit
signals, and all matter and things of any kind, nature, and
description whatsoever that may be transmitted.
D/e 21, Ex. 2 at 1. EchoStar’s 2003 Annual Report states that DISH
Network provides digital television to consumers via a direct broadcast
satellite subscription service: DISH Network
is a leading provider of satellite delivered digital television to
customers across the United States . . . [and] provides a direct
broadcast satellite subscription television service . . . .
D/e 21, Ex. 4 at 4.

Travelers asserts that these references to DISH

Network’s direct broadcast satellite subscription television service
support Travelers’ argument that DISH Network engages in the
businesses of broadcasting and/or telecasting.
Further, Travelers relies on documents from the insurance broker
for DISH Network’s predecessor, EchoStar, informing EchoStar that it
could purchase Broadcaster’s Errors and Omissions Coverage. See d/e 21,
Page 33 of 51

Ex. 10 at 6, Ex. 11 at 5–6, & Ex. 12 at 4 (“Dish’s broker, in a series of
proposals, pointed out the ‘broadcasting’ exclusion and advised Dish that
‘Broadcaster’s Errors and Omissions Coverage’ was available to cover
broadcaster risks.”). Travelers asserts that these proposals by the broker
demonstrate that DISH Network knew the Travelers Policy never
covered advertising injuries committed by an insured engaged in the
businesses of broadcasting and/or telecasting.
None of these documents, however, establish that DISH Network
is engaged in broadcasting or telecasting, or that the broadcasting
exclusion of its insurance policy applies. Rather, EchoStar’s Articles of
Incorporation and 2003 Annual Report show only that DISH Network
sells subscription satellite programing packages to a finite number of
consumers in the marketplace. As discussed, this type of broadcasting
and telecasting differs from the dissemination of television programming
to the public at large.

Admittedly, the insurance broker knew that

Broadcaster’s Errors and Omissions coverage was available; EchoStar’s
insurance broker thought the coverage might be appropriate for
EchoStar; and EchoStar declined to purchase the coverage. But EchoStar

Page 34 of 51

may not have purchased the additional coverage because EchoStar
believed that the broadcasting exclusion did not apply since its direct
satellite broadcast subscription service was not disseminated to the public
at large. Accordingly, these documents alone do not establish that DISH
Network is engaged in broadcasting or telecasting, or that the
broadcasting exclusion to Advertising Injury Liability Coverage applies.
To be sure, this Court’s findings stand in contrast to a recent
decision out of the United States District Court for the District of
Colorado. In that decision, the district court applied Colorado law and
considered the underlying complaint, the exclusionary terms at issue, and
extrinsic evidence. After considering this evidence, that court found that
an exclusion identical to the exclusion to advertising injury liability
coverage in the instant case applied, and therefore precluded coverage.
See Dish Network Corp. v. Arch Specialty Ins. Co., No. 09-cv-0047,
2013 WL 5735028, at *5–*8 (D. Colo. 2013) (finding that the exclusion
for advertising injury liability coverage applied because DISH Network
plainly engages in the businesses of broadcasting and telecasting).

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Obviously, the Colorado District Court did not find that the terms
broadcasting and telecasting were susceptible of two reasonable
meanings.

This conclusion, however, contradicts the fact that two

reasonable meanings of the terms broadcasting and telecasting are
provided in Webster’s New World Telecom Dictionary.

This Court

respectfully disagrees with the Colorado District Court’s decision. The
terms broadcasting and telecasting are ambiguous such that the exclusion
must be construed against Travelers, and Travelers therefore has a duty
to defend DISH Network’s interests in the Underlying Lawsuit because
the potential for coverage exists under the Travelers Policy’s Advertising
Injury Liability Coverage.
3.

Travelers Has a Duty to Defend DISH Network’s Interests in
the Underlying Lawsuit Pursuant to the Travelers Policy’s
Personal Injury Liability Coverage

DISH Network also argues that Travelers has a duty to defend
DISH Network’s interests in the Underlying Lawsuit pursuant to the
Personal Injury Liability Coverage of the Travelers Policy, not just the
Policy’s Advertising Injury Liability Coverage. DISH Network contends
that a duty to defend arises under the Travelers Policy’s Personal Injury

Page 36 of 51

Definition for personal injuries caused by the insured and arising out of
the insured’s “[o]ral or written publication of material that violates a
person’s right of privacy.” D/e 25, Ex. 7 at 31.
As stated, Illinois law applies to the interpretation of the Travelers
Policy because Illinois and Colorado use similar insurance policy
interpretation methods. On that note, the Illinois Supreme Court has
already interpreted the language at issue, namely, the “[o]ral or written
publication of material that violates a person’s right of privacy,” albeit in
the context of advertising injury liability coverage rather than the context
of personal injury liability coverage as here. The Illinois Supreme Court
found that the terms publication, material, and right to privacy implicate
injuries resulting from the invasion of an individual’s right to be left
alone and injuries arising out of the dissemination of private content
about the individual. Swiderski, 860 N.E.2d at 318.
Here, the Second Amended Complaint in the Underlying Lawsuit
alleges that DISH Network directly or indirectly made telemarketing
phone calls that violated individuals’ right to be left alone. Therefore,
the potential for coverage exists under the Personal Injury Liability

Page 37 of 51

Coverage of the Travelers Policy, and Travelers must defend DISH
Network in the Underlying Lawsuit.
Travelers has not suggested that the Illinois Supreme Court might
interpret the language under the Personal Injury Definition at issue
differently than that court interpreted the same language under an
advertising injury definition. Instead, Travelers contends that Personal
Injury Liability Coverage does not apply because the alleged privacy
violation occurred in the insured’s advertisement, and that such a
violation is excluded from coverage under the policy:
This insurance applies to . . . “Personal injury” caused by an
offense arising out of your business, excluding advertising,
publishing, broadcasting or telecasting done by or for
you . . . .
D/e 25, Ex. 7 at 25 (emphasis added).
When deciding if an insurer has a duty to defend, however, the
question is whether any potential for coverage exists. See Lyerla, 536
F.3d at 688.

The facts here may ultimately demonstrate that DISH

Network did not in fact advertise, but rather merely solicited consumers
in one-on-one phone calls. And, as Travelers has argued in a separate
action before the Tenth Circuit, one-on-one solicitation differs from
Page 38 of 51

advertising. See d/e 27, Ex. 1 at 42 (Joint Br. of Defs.–Appellees at 29,
DISH Network Corp. v. Arch Specialty Ins. Co., 659 F.3d 1010 (10th
Cir. 2011) (No. 10-1445), 2011 WL 1535434, at *29 (“[O]ne-on-one
solicitation of a few customers is not advertising and does not implicate
advertising injury coverage.”)).1

Furthermore, as discussed above, the

issue of whether DISH Network is engaged in broadcasting or telecasting
under the terms of the policy is ambiguous, and this ambiguity must be
construed against Travelers as the insurer.
Whether the alleged telemarketing phone calls in the Underlying
Lawsuit constitute one-on-one solicitations or advertising is a question
yet to be decided in the Underlying Lawsuit. Therefore, the advertising
exclusion to Personal Injury Liability Coverage may not apply, and the
potential for coverage exists under the Travelers Policy’s Personal Injury

1

Tellingly, before the Tenth Circuit in DISH Network Corp. v. Arch
Specialty Insurance Co., Travelers asserted that DISH’s one-on-one
solicitations were not advertising because it sought to avoid its duty to
defend DISH under a policy providing coverage for “advertising injury,”
which included the patent infringement claims alleged in the underlying
case. 659 F.3d at 1013, 1019. Today, Travelers asserts that DISH’s
one-on-one solicitations were advertising because it seeks to avoid its
duty to defend DISH on a policy exempting “advertising injury” from
coverage.
Page 39 of 51

Liability Coverage. Accordingly, Travelers has a duty to defend DISH
Network’s interests in the Underlying Lawsuit.
4.

The Potential for Property Damage Liability Coverage Exists

DISH Network further argues that Travelers has a duty to defend
under the Travelers Policy’s Property Damage Liability Coverage, noting
that the Property Damage Definition includes loss of use of tangible
property that is not physically injured. See d/e 25, Ex. 7 at 32 (Property
Damage is defined to include “[l]oss of use of tangible property that is
not physically injured.”). DISH Network argues that the tying-up of a
consumer’s telephone line falls within this definition of Property
Damage.
The Underlying Complaint alleges that DISH Network directly or
indirectly made telemarketing phone calls to consumers in violation of
state and federal law, specifically the Telephone Consumer Protection
Act (TCPA). The natural consequence of such calls is that the consumers
receiving them were unable to receive any other telephone calls for some
time period. Tying up a consumer’s telephone line arguably falls within
the Travelers Policy’s Property Damage Definition that includes the loss

Page 40 of 51

of the use of tangible property that is not physically injured. Moreover,
Illinois courts have upheld insurers’ duty to defend their insureds in suits
alleging violations of the TCPA and seeking statutory damages. See, e.g.,
Pekin Ins. Co. v. XData Solutions, Inc., 958 N.E.2d 397, 403–04 (Ill.
App. Ct. 2011) (finding insurer’s duty to defend, pursuant to a “property
damage” clause, in underlying suit alleging both violations of the TCPA
and common-law conversion claims); see also Park Univ. Enters., Inc. v.
Am. Cas. Co. of Reading, 442 F.3d 1239, 1244–47 (10th Cir. 2006)
(finding insurer’s duty to defend, pursuant to a “property damage” clause
including “[l]oss of use of tangible property that is not physically
injured,” in underlying suit alleging violations of the TCPA alone).
Travelers contends, however, that no potential for Property
Damage Liability Coverage exists because the claims in the Underlying
Complaint do not allege a covered “Occurrence” and are otherwise
excluded by the “expected or intended injury” exclusion applicable to
Property Damage Liability Coverage:
This insurance does not apply to . . . “Bodily Injury” or
“property damage” expected or intended from the standpoint
of the insured.

Page 41 of 51

Id. at 22. Under the Travelers Policy, an “Occurrence” is defined as “an
accident, including continuous or repeated exposure to substantially the
same general harmful conditions.” Id. at 31. If the alleged injuries were
expected or intended from DISH Network’s standpoint, no accident, and
therefore no “Occurrence,” happened that would be covered under the
Travelers Policy’s Property Damage Liability Coverage.
As stated, Illinois insurance policy interpretation principles apply
when construing terms of the Travelers Policy because Illinois and
Colorado courts employ similar interpretation principles. Illinois courts
have held that, when determining whether an occurrence is an accident,
the inquiry is whether the injury is expected or intended by the insured,
not whether the acts were performed intentionally. Lyons v. State Farm
Fire & Cas. Co., 811 N.E.2d 718, 723 (Ill. App. 2004) (“The focus of the
inquiry in determining whether an occurrence is an accident is whether
the injury is expected or intended by the insured, not whether the acts
were performed intentionally.”). Furthermore, under Illinois law, if the
intent of the alleged wrongdoer remains a key issue in the underlying
lawsuit, Illinois courts will not prematurely decide in a declaratory action

Page 42 of 51

that the alleged wrongdoer intended a consequence. See, e.g., State Farm
Fire & Cas. Co. v. Shelton, 531 N.E.2d 913, 819 (Ill. App. 1988); see
also Ins. Corp. of Hanover v. Shelborne Assocs., 905 N.E.2d 976, 984–
85 (Ill. App. 2009) (finding that insurer had duty to defend lawsuit
under commercial general liability policy’s property damage coverage
based on underlying lawsuit that alleged improper fax communications
and declining to find that the defendant in the underlying lawsuit
intended the fax transmissions to cause property damage because the
intent of that defendant was at issue in the underlying case).
In the Underlying Complaint, the state plaintiffs allege that DISH
Network willfully and knowingly violated the Telephone Consumer
Protection Act. See Case No. 09-3073, 2d Am. Compl., d/e 257 at ¶¶ 73,
77. In the prayer for relief, however, the state plaintiffs ask that the
Court assess damages of $500 dollars for each violation of the TCPA if
the Court finds that DISH Network’s alleged violations of the Telephone
Consumer Protection Act were not willful and knowing. Id. at 25 ¶ 4
(The state plaintiffs pray for “damages of $1,500 for each violation of the
TCPA found by the Court to have been committed by Defendant

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willfully and knowingly; if the Court finds Defendant has engaged in
violations of the TCPA which are not willful and knowing, then assessing
against Defendant damages of $500 for each violation of the TCPA, as
provided by 47 U.S.C. § 227.”).

Based on this language in the

Underlying Complaint, a question remains as to whether DISH Network
directly and indirectly made telemarketing phone calls believing the calls
were authorized. Determining DISH Network’s intent is therefore not
appropriate at this stage, because intent is at issue in the Underlying
Lawsuit.

Therefore, Travelers has a duty to defend based on the

potential for coverage under the Travelers Policy’s Property Damage
Liability Coverage.
5.

The Potential for Bodily Injury Liability Coverage Exists

The Travelers Policy also provides for Bodily Injury Liability
Coverage for bodily injury, sickness, or disease caused by DISH Network.
See d/e 25, Ex. 7 at 30 (Bodily Injury is defined as “bodily injury,
sickness or disease sustained by a person” as a result of DISH Network’s
conduct). DISH Network notes that on February 16, 2004, the Bodily
Injury Definition was amended to include coverage for “mental anguish.”

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See d/e 25, Ex. 10 at 48 (“With respect to all operations, ‘bodily injury’
in the DEFINITIONS section of this insurance is amended to include
mental anguish.”).
Black’s Law Dictionary’s definition of “mental anguish” refers the
reader to the definition for “emotional distress.” Emotional distress is
defined in Black’s as a negative mental reaction caused by another’s
conduct.

Black’s Law Dictionary 542 (7th ed.) (Emotional distress is

defined as “[a] highly unpleasant mental reaction (such as anguish, grief,
fright, humiliation, or fury,) that results from another person’s
conduct . . . .”).

DISH Network argues that consumers may have

experienced mental anguish as a result of the telemarketing phone calls
allegedly made by DISH Network.
In the Underlying Lawsuit, the Second Amended Complaint alleges
that consumers have and will continue to suffer injury as a result of
DISH Network’s conduct. See Case No. 09-3073, 2d Am. Compl., d/e
257 at ¶ 97.

Based on these allegations, the facts in the Underlying

Lawsuit may ultimately show that consumers experienced highly
unpleasant mental reactions because of the telemarketing phone calls.

Page 45 of 51

This conclusion is based on a liberal reading of the underlying
allegations.

But at the declaratory judgment stage, a duty to defend

exists if allegations in the underlying complaint trigger any potential for
coverage.
Travelers responds that no potential for Bodily Injury Liability
Coverage exists because DISH Network expected or intended the harm.
However, whether DISH Network acted intentionally remains in dispute
in the Underlying Lawsuit, and, therefore, should not be decided at the
declaratory judgment stage. See, e.g., Ins. Corp. of Hanover, 905 N.E.2d
at 984–85. Accordingly, the claims in the Underlying Lawsuit may fall
within the Travelers Policy’s Bodily Injury Liability Coverage, and
Travelers has a duty to defend DISH Network’s interests in the
Underlying Lawsuit.
D.

The Plaintiffs in the Underlying Lawsuit Seek Relief that May Be
Covered Under the Travelers Policy
DISH Network finally argues in opposition to Travelers that,

pursuant to Illinois law, the relief sought in the Underlying Complaint is
insurable under the Travelers Policy.

DISH Network contends that

Illinois law applies because Illinois and Colorado law are similar on this
Page 46 of 51

issue. DISH Network also notes that the Illinois Supreme Court has
found that damages sought pursuant to the Telephone Consumer
Protection Act are insurable. See Standard Mut. Ins. Co. v. Lay, 989
N.E.2d 591, 601 (Ill. 2013) (reversing appellate court holding that
Telephone Consumer Protection Act’s prescribed damages of $500 per
violation are uninsurable).
Travelers argues, however, that Colorado law applies because,
unlike the Illinois Supreme Court, the Colorado Supreme Court would
hold that damages under the Telephone Consumer Protection Act are
uninsurable as a matter of Colorado public policy. In support of this
argument, Travelers notes that, in Kruse v. McKenna, the Colorado
Supreme Court held that damages sought pursuant to the Telephone
Consumer Protection Act are penal in nature. 178 P.3d 1198, 1201–02
(Colo. 2008) (finding that the Telephone Consumer Protection Act has
created a new and distinct cause of action that permits $500 in
liquidated damages per violative fax transmission and, that, based on
these damages amounts, claims under the Telephone Consumer
Protection Act are claims for a penalty).

Travelers contends that the

Page 47 of 51

penal nature of Telephone Consumer Protection Act damages renders
such damages uninsurable as a matter of Colorado public policy.
Assuming, arguendo, that Colorado law applies, the damages sought
in the Underlying Lawsuit may still be insurable. Specifically, Colorado
courts have held that damages are uninsurable if such damages are a
result of the insured’s intentional and wrongful acts. See Am. Family
Mut. Ins. Co. v. Johnson, 816 P.2d 952, 957 (Colo. 1991) (“[P]urpose of
the exclusion of intentional injuries from coverage is to prevent extending
to the insured a license to commit harmful, wanton, or malicious acts.”).
But intentional conduct was never addressed by the Colorado Supreme
Court in Kruse. Instead, in Kruse, the Colorado Supreme Court focused
solely on whether a party has standing to sue pursuant to the Telephone
Consumer Protection Act based on the assignment of a Telephone
Consumer Protection Act claim. See Kruse, 178 P.3d at 1202 (“Because
McKenna purports to assert by assignment an unassignable claim for a
penalty, we find that McKenna lacks standing.”).

The Colorado

Supreme Court answered this question in the negative based on the penal
nature of Telephone Consumer Protection Act damages.

Page 48 of 51

Since the

Colorado Supreme Court never addressed the intent or wrongful acts of
the parties in Kruse, that case is not precedential on whether Telephone
Consumer Protection Act damages are insurable as a matter of Colorado
public policy.
Moreover, pursuant to the TCPA, the state plaintiffs in the
Underlying Lawsuit may recover actual monetary loss or $500 per
violation without showing willful or knowing conduct on DISH
Network’s behalf. 47 U.S.C. § 227(g)(1). Because the state plaintiffs
may prevail on their Telephone Consumer Protection Act claims without
demonstrating that DISH Network acted intentionally, damages
obtained in the Underlying Lawsuit may not be of a type that are
generally uninsurable as a matter of Colorado public policy. See Am.
Family Mut. Ins. Co., 816 P.2d at 957.
Additionally, even if Telephone Consumer Protection Act money
damages are uninsurable as a matter of Colorado public policy, the
plaintiffs in the Underlying Lawsuit also seek injunctive relief against
DISH Network. See Case No. 09-3073, 2d Am. Compl., d/e 257 at 24–
27. Travelers contends that the vast majority of courts have concluded

Page 49 of 51

that, apart from pollution claims, the cost of compliance with an
injunction is not regarded as a sum payable as damages under a liability
insurance policy. However, beyond stating that a majority of courts hold
this way, Travelers has neither developed this argument nor shown why
the Illinois or Colorado Supreme Courts would find that the costs of
complying with an injunction are not sums payable as damages under the
Travelers Policy.
V. CONCLUSION
For the reasons stated, DISH Network’s Cross-Motion for Partial
Summary Judgment (d/e 24) is GRANTED.
defend

DISH

Network’s

interests

in

Travelers has a duty to

the

Underlying

Lawsuit.

Furthermore, Travelers’ Motion for Summary Judgment (d/e 20) is
DENIED, as is Travelers’ request for an order dismissing DISH
Network’s Counterclaims with prejudice.

Finally, DISH Network’s

Motion to Stay (d/e 33) is accordingly DENIED AS MOOT.
IT IS SO ORDERED.
ENTER: March 24, 2014
FOR THE COURT:

s/ Sue E. Myerscough
SUE E. MYERSCOUGH
Page 50 of 51

UNITED STATES DISTRICT JUDGE

Page 51 of 51