Regent Insurance Company et al v. Integrated Pain Management, S.C. et al.

Filing 81

MEMORANDUM AND ORDER...IT IS HEREBY ORDERED that Plaintiffs Regent Insurance Company's and General Casualty Insurance Company's Motion for Summary Judgment (ECF No. 65 ) is GRANTED. Signed by District Judge Ronnie L. White on 10/27/2016. (NEB)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
)
REGENT INSURANCE CO. and GENERAL )
CASUALTY INSURANCE COMPANY,
)
)
Plaintiffs,
)
)
v.
)
)
INTEGRATED PAIN MANAGEMENT, S.C. )
)
and MICHAEL C. ZIMMER, D.C., P.C.,
)
Defendants.
)

No. 4:14-CV-1759 RLW

MEMORANDUM AND ORDER
This matter is before the court on Plaintiffs Regent Insurance Company' s and General
Casualty Insurance Company' s Motion for Summary Judgment (ECF No. 65). This matter is
fully briefed and ready for disposition.

BACKGROUND
The Court has previously gone through the background of this case in a previous Order.

See ECF No. 77. Dr. Tian Xia, d/b/a Integrated Pain Management ("IPM") is a Defendant in a
class action lawsuit, Michael C. Zimmer, D. C., P. C., individually and on behalf of all others

similarly situated v. Integrated Pain Management, SC , 4:14-cv-1121 ("Underlying Lawsuit").
Subsequently, the Zimmer Suit was amended to add Dr. Tian Zia, individually, and the entities
Tian Medical, Inc. and Tian Medical, LLC as party defendants. In the Underlying Lawsuit,
Zimmer seeks damages from IPM for IPM sending unsolicited telefaxes, allegedly in violation of
the Telephone Consumer Protection Act, 47 U.S.C. §227 ("TCPA") and common law
conversion. See Underlying Lawsuit, Second Amended Complaint, ECF No. 33 (hereinafter
"Underlying Complaint").

On October 17, 2014, Regent Insurance Company ("Regent") and General Casualty
Insurance Company ("General Casualty") (collectively, the "Insurers") filed this declaratory
judgment action seeking a declaration that they have no duty to defend or indemnify IPM against
the Underlying Lawsuit.
The plaintiff in the Underlying Lawsuit, Zimmer alleges in Count I, that IPM sent
unsolicited marketing facsimiles in violation of the Telephone Consumer Protection Act
("TCP A"), and, in Count III, that IPM committed conversion by sending such facsimiles.
Zimmer proposed a class period consisting of the four years before the filing of the Underlying
Lawsuit on April 30, 2015.

Zimmer alleged two specific instances wherein he received

unsolicited facsimile advertisements from IPM: July 11 , 2012 and September 24, 2012. Regent
insured IPM under a policy providing Commercial General Liability Coverage for the period
from November 18, 2010 to November 18, 2011 , Policy No. CGI 0889547 ("Regent CGL
Policy").

General Casualty Insurance Company insured IPM under a policy providing

Commercial Umbrella Coverage for the period from November 18, 2010 to November 18, 2011 ,
Policy CCU 0889546 ("General Casualty Umbrella Policy").
The Regent CGL Policy, in Form CGOO 01 12 07, provides, in relevant part:
COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY
1. Insuring Agreement

a. We will pay those sums the insured becomes legally obligated to pay as damages
because of "bodily injury" or "property damage" to which this insurance applies.
We will have the right and duty to defend the insured against any "suit" seeking
those damages .. ..
b. This insurance applies to "bodily injury" and "property damage" only if:

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(1) The "bodily injury" or "property damage" is caused by an "occurrence" that

takes places in the "coverage territory";
(2) The "bodily injury" or "property damage" occurs during the policy period;

***
COVERAGE B PERSONAL AND ADVERTISING INJURY LIABILITY
1. Insuring Agreement

a. 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. We will have the right and duty to defend the insured against any "suit"
seeking those damages ... .
b. This insurance applies to "personal and advertising injury" caused by an offense
arising out of your business but only if the offense was committed in the
"coverage territory" during the policy period.
The General Casualty Umbrella Policy, in Form CU 01 12 07 provides, in part, as
follows:
COVERAGE A-BODILY INJURY AND PROPERTY DAMAGE LIABILITY
' 1. Insuring Agreement

a. We will pay on behalf of the insured the "ultimate net loss" in excess of the
retained limit because of "bodily injury" or "property damage" to which this
insurance applies. We will have the right and duty to defend the insured against
any "suit" seeking damages for such "bodily injury" or "property damage" when
the "underlying insurance" have been exhausted . . .. However, we will have no

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duty to defend the insured against any "suit" seeking damages for "bodily injury"
or "property damage" to which this insurance does not apply ....
b. This insurance applies to "bodily injury" and "property damage" only if:
(1) The "bodily injury" or "property damage" is caused by an "occurrence" that
takes place in the "coverage territory";
(2) The "bodily injury" or "property damage" occurs during the policy period; ....

***
COVERAGE B-PERSONAL AND ADVERTISING INJURY LIABILITY
1. Insuring Agreement

a. We will pay on behalf of the insured the "ultimate net loss" in excess of the
retained limit because of "personal and advertising injury" to which the insurance
applies. We will have the right and duty to defend the insured against any "suit"
seeking damages for such "personal and advertising injury" when the "underlying
insurance" have been exhausted. . . . 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 ....
b. The insurance applies to "personal and advertising injury" caused by an offense
arising out of your business but only if the offense was in the "coverage territory"
during the policy period.
The Regent CGL Policy, in Form CG 00 68 05 09, contains the following endorsement:

RECORDING AND DISTRIBUTION OF MATERIAL OR
INFORMATION IN VIOLATION OF LAW EXCLUSION
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE PART
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A. Exclusion q. of Paragraph 2. Exclusions of Section I-Coverage A-Bodily Injury

And Property Damage Liability is replaced by the following:
2. Exclusions
This Insurance does not apply to:

q. Recording And Distribution of Material Or Information In Violation of Law
"Bodily injury" or "property damage" arising directly or indirectly out of any action
or omission that violates or is alleged to violate:
(1) The Telephone Consumer Protection Act (TCPA), including any amendment of
addition to such law; ...
B. Exclusion p. of Paragraph 2. Exclusions of Section I-Coverage B-Personal and

Advertising Injury Liability is replaced by the following :
2. Exclusions
This insurance does not apply to :

p. Recording And Distribution of Material Or Information In Violation of Law
"Personal and advertising injury" arising directly or indirectly out of any action or
omission that violates or is alleged to violate:
(1) The Telephone Consumer Protection Act (TCPA), including any amendment of
addition to such law; . ..
The General Casualty Umbrella Policy, in Form CU 00 04 05 09, contains the following
endorsement:

RECORDING AND DISTRIBUTION OF MATERIAL OR
INFORMATION IN VIOLATION OF LAW EXCLUSION
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABLITY COVERAGE PART
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A. Exclusion u. of Paragraph 2. Exclusions of Section I-Coverage A-Bodily Injury
and Property Damage Liability is replaced by the following:
Exclusions

2.

This insurance does not apply to:
u.
Law

Recording And Distribution Of Material Or Information In Violation Of

"Bodily injury" or "property damage" arising directly or indirectly out of any action or
omission that violates or is alleged to violate:
(1) The Telephone Consumer Protection Act (TCPA), including any amendment of or
addition to such law; ...
B. Exclusion a.(17) of Paragraph 2. Exclusions of Section I-Coverage B-Personal
and Advertising Injury Liability is replaced by the following:
2. Exclusions

This insurance does not apply to:
a. "Personal and advertising injury" :
(17) Recording And Distribution of Material Or Information In Violation Of
Law
Arising directly or indirectly out of any action or omission that violates or is
alleged to violate:
(a) The Telephone Consumer Protection Act (TCPA), including any amendment
of or addition to such law; ...
I.

MOTION FOR SUMMARY JUDGMENT

A. Standard of Review

The Court may grant a motion for summary judgment if "the pleadings, depositions,
answers to interrogatories, and admissions on file , together with the affidavits, if any, show that

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there is no genuine issue as to any material fact and that the moving party is entitled to judgment
as a matter of law." Fed. R. Civ. P. 56(c); Celotex Corp. v. Citrate, 477 U.S. 317, 322 (1986);
Torgerson v. City of Rochester, 643 F.3d 1031 , 1042 (8th Cir. 2011). The substantive law
determines which facts are critical and which are irrelevant. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). Only disputes over facts that might affect the outcome will properly
preclude summary judgment. Id. Summary judgment is not proper if the evidence is such that a
reasonable jury could return a verdict for the nonmoving party. Id.
A moving party always bears the burden of informing the Court of the basis of its motion.
Celotex Corp., 477 U.S. at 323. Once the moving party discharges this burden, the nonmoving
party must set forth specific facts demonstrating that there is a dispute as to a genuine issue of
material fact, not the "mere existence of some alleged factual dispute." Fed. R. Civ. P. 56(e);
Anderson, 477 U.S. at 248. The nonmoving party may not rest upon mere allegations or denials
of his pleading. Id.
In passing on a motion for summary judgment, the Court must view the facts in the light
most favorable to the nonmoving party, and all justifiable inferences are to be drawn in his favor.
Celotex Corp., 477 U.S. at 331.

The Court' s function is not to weigh the evidence but to

determine whether there is a genuine issue for trial. Anderson, 477 U.S. at 249. "'Credibility
determinations, the weighing of the evidence, and the drawing of legitimate inferences from the
facts are jury functions, not those of a judge. "' Torgerson , 643 F.3d at 1042 (quoting Reeves v.
Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000)).
B. Regent Insurance Company and General Casualty Insurance Company's
Motion for Summary Judgment
1. Controlling Law

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As an initial matter, the parties disagree regarding whether Illinois law controls this
dispute. See ECF No. 71 at 3-4. However, IPM previously admitted that Illinois law controls.
See ECF No. 56 at 1 (noting that the relevant inquiry is how Illinois Supreme Court would

decide this dispute); ECF No. 59 at 1 (affirming the consensus that Illinois law controls). In any
event, the Court holds that Illinois law applies under a choice of law analysis. Federal courts
sitting in diversity in Missouri apply the Missouri choice-of-law rules.

Allianz Ins. Co. of

Canada v. Sanftleben, 454 F.3d 853 , 855 (8th Cir. 2006) (citing DCS Sanitation Mgmt. , Inc. v.
Castillo, 435 F.3d 892, 895 (8th Cir.2006) (noting that in diversity cases federal courts apply the

forum state's choice-of-law rules)) . Missouri courts apply "the most significant relationship test
as set forth in Restatement (Second) of Conflict of Laws Section 188 when resolving choice of
law issues." Sturgeon v. Allied Professionals Ins. Co., 344 S.W.3d 205, 211 (Mo. Ct. App. 2011)
(citing Sheehan v. Northwestern Mut. Life Ins. Co. , 44 S.W.3d 389, 396 (Mo. Ct. App. 2000);
Emerson Elec. Co. v. Crawford & Co. , 963 S.W.2d 268, 273-74 (Mo. Ct. App. 1997)).

Here, both the Regent CGL Policy and the General Casualty Umbrella Policy insured
IPM, which has a principal place of business in Lombard, Illinois. Both policies were procured,
negotiated, and delivered to IPM in Illinois, through its agent R-H Insurance Group, which is
also located Illinois. "[I]n an action between parties to an insurance contract, the principal
location of the insured risk is given greater weight than any other single contact in determining
the state of applicable law." Sturgeon, 344 S.W.3d at 211. Additionally, this Court has already
held that Illinois governs this agreement and judicial estoppel applies to that determination.
(ECF No. 77 at 10). As a result, the Court holds that Illinois law should govern this case.
Having decided this initial question, the Court turns to the substance of the Insured's motion.
2. Coverage Period

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The Insurers claim that the allegations in the Underlying Lawsuit do not fall within the
Policies' coverage period.

The Policies issued by Regent and General Casualty provided

coverage for the policy period of November 18, 2010 to November 18, 2011. The Underlying
Lawsuit alleges that IPM sent unsolicited facsimile advertisements on or about July 11, 2012,
and September 24, 2012. The Insurers note that, under occurrence-based liability policies such
as the Regent and General Casualty policies, coverage is triggered for alleged damages occurring
during the policy period. (ECF No. 66 at 6 (citing Travelers Ins. Co. v. Eljer Mfg., Inc., 197 Ill.
2d 278, 314, 757 N.E.2d 481, 503 (2001) (coverage triggered at such time that a claimant suffers
injury). Thus, when "the undisputed evidence shows that an occurrence did not fall within the
period of time for which insurance coverage is provided, the insurer is not under a duty to either
defend or indemnify." Fremont Comp. Ins. Co. v. Ace-Chicago Great Dane Corp., 304 Ill. App.
3d 734, 744, 710 N.E.2d 132, 139 (1999). The Insurers claim that because the faxes were sent on
July 11 , 2012 and September 24, 2012, and were outside the applicable policy period, their
policies afford no coverage for any alleged damages resulting from those faxes, or any other
faxes sent outside of the policies' coverage period.
Defendant Michael C. Zimmer D.C., P.C. 1 contends that the Underlying Complaint
implicated the policy coverage period. (ECF No. 72 at 11). Defendant states that, although the
Underlying Complaint references only two specific instances of unwanted faxes-both in
2012-the Underlying Complaint makes clear that Count I seeks certification of a class
encompassing four years prior to the filing of the Underlying Lawsuit and Count II seeks
certification of a class encompassing five years prior to the filing of the Underlying Lawsuit.
Defendant claims that these allegations include the coverage period for the Insurers' policy.
1

Plaintiffs' insured Defendant Integrated Pain Management, did not file an opposition to
Plaintiffs' Motion for Summary Judgment. See ECF No. 75 at 2, n.l.
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(ECF No. 72 at 10-12 (citing fllinois Tool Works Inc. v. Travelers Cas. & Sur. Co., 2015 IL App
(1st) 132350, ~ 10, 26 N.E.3d 421, 425 (Ill. Ct. App. 2015); Nationwide Mut. Ins. Co. v. Harris
Med. Associates, LLC, 973 F. Supp. 2d 1045, 1056 (E.D. Mo. 2013)).
The Court holds that the allegations in the Underlying Complaint are sufficient to fall
within the relevant time period covered under the Insurers' policies. Although the only specific
facsimiles identified in the Underlying Complaint fall outside the policy period, the class
allegations in the Underlying Complaint are broader than those two instances. The Underlying
Litigation was filed on April 30, 2014, so if a class is certified as proposed, then Defendant could
potentially be liable for other unsolicited faxes sent on or after April 30, 2010 (for Count I) or
after April 30, 2009 (for Count II), which would be within the policy period. Nationwide Mut.
Ins. Co. v. Harris Med. Associates, LLC, 973 F. Supp. 2d at 1056. As a result, the Insurers have
not established they are entitled to judgment as a matter of law based upon the alleged acts
occurring after coverage ended.

3. Exclusion
The Insurers also assert that the policies contain a TCP A exclusion which bars coverage
for the Underlying Lawsuit, regardless of when the alleged actions occurred. Both the Regent
CGL Policy and the General Casualty Umbrella Policy contain TCP A endorsements that
expressly bar coverage for damages for "bodily injury," "property damage," or "personal and
advertising injury" "arising directly or indirectly out of any action or omission that violates or is
allege to violate" the TCP A. The Insurers claim that Count I of the Underlying Lawsuit alleges a
direct violation of the TCP A and Count II of the Underlying Lawsuit alleges a claim for
conversion that arises from the same acts that are alleged to violate the TCP A. Therefore, the
Insurers claim that the Policies' TCPA exclusions bar coverage from the Underlying Lawsuit,

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regardless of whether the relevant faxes were sent within the Policies' coverage period. (ECF
No. 66 at 6). The Insurers rely on G.M Sign, Inc. v. State Farm Fire & Cas. Co., 2014 IL App
(2d) 130593,

if

38, 18 N.E.3d 70, 80. (ECF No. 66 at 7-8). The plaintiff in that case alleged

violation of the TCPA and common-law conversion, among other counts. The insurance policy
included a TCP A exclusion similar to the exclusions in this case. The Illinois Court of Appeals
held that "State Farm had no duty to defend or to indemnify ... in the underlying suit. It follows
that State Farm is not estopped from raising policy defenses, because its denial of coverage was
not wrongful." Id. at 80 ; see also Illinois Cas. Co. v. W Dundee China Palace Rest., Inc., 49
N.E.3d 420, 427 (Ill. App. Ct. 2016)(affirming denial of coverage based upon TCPA exclusion).
The Insurers also claim that the Underlying Lawsuit contains no claims that arise from
the sending of faxes that are not alleged to violate the TCP A.

(ECF No. 66 at 8). The

Underlying Complaint contains an allegation that IPM " [o]n information and belief .. . sent other
facsimile transmission that were unsolicited, even if not of material advertising the commercial
availability of property, goods, or services, or to persons with established business relationship,
to many other persons throughout the alleged class period." In their pleadings, Defendants claim
that the conversion claim arises, at least in part, from unsolicited faxes that do not violate the
TCP A because they are not advertisements. (Underlying Complaint,

ifl 8).

The Insurers assert

that this argument is without merit because both Count I and Count II of the Underlying
Complaint both stem from actions that are alleged to violate the TCP A. The Insurers rely on
Illinois law in G.M Sign, Inc. v. State Farm Fire & Cas. Co., 18 N.E.3d 70, 83 (Ill. App. 2014)
and Addison Automatics, Inc. v. Hartford Cas. Ins. Co., No. 13-CV-1922, 2015 WL 1543216, at
*8 (N.D. Ill. Mar. 31, 2015) to support this position. (ECF No. 66 at 9-11). The Addison court
noted that the underlying complaint's TCP A claim incorporated the same allegations at the

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conversion claim and, as such, "the injury and damage alleged in the conversion claim arises
directly or indirectly out of an "action ... that is alleged to violate" the TCP A. " Addison, 2015
WL 1543216, at *8 . The Insurers point out that the Policies' TCPA exclusions in this case, as in
Addison, specifically include any action that "violates or is alleged to violate" the TCP A. (ECF
No. 66 at 10).
In response, Defendant argues that the policy exclusions should be construed narrowly
and do not bar the underlying conversion claim. Defendant asserts that the conversion claim is
"independently sufficient in the absence of the TCPA and seeks independent damages." (ECF
No. 72 at 4). Therefore, Defendant maintains that the conversion claim does not "arise out of'
any TCPA violation. (ECF No. 72 at 4). Defendant notes that a conversion claim based on an
unwanted fax does not depend on whether the message was an advertisement or whether there
was an established business relationship between the sender and the recipient. (ECF No. 72 at
6).

Defendant argues that "[t]he conversion claim thus is based on one fact common to the

TCPA claim-that IPM sent a fax to a class member- but beyond that is premised on different
facts. " (ECF No. 72 at 6). Defendant contends that the conversion claim does not rely on the
TCPA as the source of rights under the conversion claim and seeks separate damages. (ECF No.
72 at 6). Defendant, however, admits the Illinois appellate court decisions support a contrary
determination.

(ECF No. 72 at 6, n.l).

Defendant's only argument in opposition to these

opinions is that Missouri, not Illinois law, applies.
The Court determines whether the claims fall within the TCP A exclusion. This Court has
already determined that, contrary to Defendant' s argument, Illinois applies. Therefore, the Court
holds that the Illinois case law requires the Court to find that the underlying claims are subject to
the TCPA exclusion in the subject policies. Cont'l-Midwest Corp. v. Hotel Sherman, Inc., 13 Ill.

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App. 2d 188, 195-96, 141 N.E.2d 400, 404 (Ill. App. Ct. 1957) (federal court should follow
lower state court's decision as precedent); see Nationwide Mut. Ins. Co. v. Harris Med.

Associates, LLC, 973 F. Supp. 2d 1045, 1054 (E.D. Mo. 2013) (noting the different analysis
under Illinois law where "GM Sign held that a similar exclusion barred coverage for a conversion
claim because the acts alleged to constitute a TCP A violation were identical to those alleged to
constitute a conversion claim, and the court concluded the common law tort therefore arose
directly out of an act that was alleged to violate the TCP A"). The parties in other Illinois
appellate cases similarly alleged the TCP A exclusion applied only to TCP A claims. In Illinois

Casualty Co. v. West Dundee China Palace Restaurant, the appellant filed a declaratory
judgment action, seeking coverage for claims under the TCP A, for conversion and under the
Illinois Consumer Fraud and Deceptive Business Practices Act. The appellant argued the TCP A
exclusion did not apply "because the underlying complaint allows for the potential that it
involves faxes that do not violate the TCPA and because the exclusion in [the insurer's] policy is
limited to liability arising out of the TCPA itself." Illinois Casualty Co. v. West Dundee China

Palace Restaurant, Reply brief of Appellant Wellington Homes, Inc. ECF No. 59-9, p. 6. The
appellant also argued that "the other similar faxes were not necessarily sent at the same time as
the one receive by [the plaintiff]; were not necessarily sent to persons without an established
business relationship with Defendants; and were not necessarily 'advertisements' of the purpose
of the TCPA." Id. , p. 3. The West Dundee court disagreed with this argument and found that the
underlying complaint did not trigger a duty to defend.

The West Dundee court noted that

"[c]ommon to all three counts are allegations that West Dundee sent the unsolicited faxes
without the express permission or invitation of the underlying plaintiffs." Illinois Cas. Co. v. W

Dundee China Palace Rest., Inc., 2015 IL App (2d) 150016,

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if 19, 49 N.E.3d 420, 426. The

Court noted that "although count II is labeled 'conversion' and count III is labeled ' Illinois
Consumer Fraud and Deceptive Business Practices Act,' the conduct alleged in those counts
constitutes nothing more than a rephrasing of the conduct alleged in count I[.]" Illinois Cas. Co.

v. W Dundee China Palace Rest. , Inc., 2015 IL App (2d) 150016,

if 20, 49 N.E.3d 420, 426.

The Illinois appellate court held that the complaint did not trigger the duty to defend where the
"allegations in the remaining two counts of the underlying complaint completely fail to state
facts that either actually or potentially bring the case within, or potentially within, the policy's
coverage." Illinois Cas. Co. v. W Dundee China Palace Rest., Inc. , 2015 IL App (2d) 150016, if
19, 49 N.E.3d 420, 425; see also CE Design Ltd. v. Cont'l Cas. Co., 2016 IL App (2d) 150530-U,

if 40-48); G.M Sign, Inc. v. State Farm Fire

& Cas. Co., 2014 IL App (2d) 130593,

if 38, 18

N.E.3d 70, 80; Addison Automatics, Inc. v. Hartford Cas. Ins. Co., No. 13-CV-1922, 2015 WL
1543216, at *8 (N.D. Ill. Mar. 31 , 2015) ("The injury and damage alleged in the conversion
claim thus fall within the plain language of the exclusionary provisions.").
Based upon this persuasive and overwhelming Illinois case law, the Court holds that the
Illinois Supreme Court would hold that the application of the TCP A exclusion would exclude all
of the claims in the Underlying Lawsuit. The Court holds that the Insurers ' duty to defend has
not been triggered by the allegations in the Underlying Complaint, which merely restate the
TCPA claims. Therefore, the Court grants the Regent' s and General Casualty' s Motions for
Summary Judgment.

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Accordingly,
IT IS HEREBY ORDERED that Plaintiffs Regent Insurance Company' s and General

Casualty Insurance Company's Motion for Summary Judgment (ECF No. 65) is GRANTED.

Dated this 27th day of October, 2016.

R~·~
UNITED STATES DISTRICT JUDGE

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