Comprehensive Microfilm and Scanning Services, Inc. et al v. The Main Street America Group

Filing 21

MEMORANDUM and ORDER granting 17 Defendant's Motion for Summary Judgment ; Clerk of Court is directed to enter judgment and CLOSE this case.Signed by Honorable James M. Munley on 4/18/12 (sm, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
COMPREHENSIVE MICROFILM
AND SCANNING SERVICES, INC.;
and JAMES WASILEWSKI,
Plaintiffs

:
3:11cv498
:
:
(Judge Munley)
:
:
:
v.
:
:
THE MAIN STREET AMERICA
:
GROUP,
:
Defendant
:
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
MEMORANDUM
Before the court is the defendant’s motion for summary judgment
(Doc. 17). Having been fully briefed, the motion is ripe for disposition.
Background
This case arises from a dispute over insurance coverage in an
underlying lawsuit. On December 10, 2010, a suit was filed against
Comprehensive Microfilm and Scanning Services, Inc. and its sole owner
James Wasilewski (hereafter “plaintiffs”). (Doc. 19, Ex. 2, Underlying
Compl.). The plaintiffs1 in the underlying suit publish journals consisting
primarily of peer-reviewed articles authored by scholars, often based upon
original research. (Id. ¶ 19). A substantial part of their revenue is derived
from the publication of the copyrighted works and journals. (Id. ¶ 22). The
complaint alleged that Comprehensive Microfilm and Wasilewski derived
substantial revenue from unlawfully copying microfilm versions of these
journals for third parties. (Id. ¶ 28). At the request of one of its customers,
Princeton Micro Scan Corporation, Comprehensive Microfilm would make a
The plaintiffs in the underlying complaint are as follows: Elsevier,
Inc., Elsevier B.V., Elsevier Ltd., Mosby, Inc., John Wiley & Sons, Inc.,
Blackwell Publishing, Ltd., Wiley Periodicals, Inc., Wiley-Liss, Inc. and
American Chemical Society. (Doc. 19, Ex. 2, Underlying Compl.)
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master microfilm copy of a journal and create an additional microfilm copy
for an institution. (Id.) Comprehensive Microfilm would then distribute the
copies of the microfilm to Princeton Micro Scan or other third parties. (Id.)
The complaint asserts counts of copyright infringement, trademark
infringement, trademark counterfeiting and unfair competition. (Id. ¶ 1).
Plaintiffs purchased business owners liability insurance from
Defendant Main Street America Group (hereafter “defendant”) under policy
number BPV35907. (Doc. 17, Ex. 2, Def. Statem. of Mat. Fact in Supp. of
Mot. for Summ. J. ¶ 5). Plaintiffs were insured under the policy from April
1, 2004 to April 1, 2010. (Id.) In 2004, Plaintiff Wasilewski contacted Don
Crossin from Frank P. Crossin Agency, Inc. to prepare an insurance policy.
(Doc. 19, Pls. Statem. of Add. Genuine Facts in Dispute ¶¶ 5, 7). Crossin
went to plaintiffs’ business facility and observed plaintiffs’ operations and
processing. (Id. ¶ 7) Plaintiff Wasilewski placed the insurance policy with
Defendant Main Street America Group. (Id. ¶ 8). Crossin delivered the
policy to Plaintiff Wasilewski, but never went over it with him. (Id. ¶ 9).
Plaintiff Wasilewski never read the insurance policy, nor did he ever have
anyone else read it for him. (Id. ¶ 10).
Upon the initiation of the underlying lawsuit, Plaintiff Wasilewski
contacted defendant regarding his insurance coverage. (Id. ¶ 12). In a
letter dated January 14, 2011, Richard DiNicola, a Senior Litigation
Specialist, confirmed that defendant received a copy of the complaint filed
against plaintiffs. (Doc. 19, Ex. 5). The letter provided a brief description
of the underlying lawsuit and claims. (Id. at 1-2). It also contained
excerpts from plaintiffs’ insurance policy, which provided a description of
plaintiffs’ coverage, definitions of the terms used within the policy and
exclusions. (Id. at 2-4.) The letter explained,
[W]hile the allegations within the complaint meet the
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definition of “Advertising Injury,” coverage is not
afforded because the claim does not fall within the
insuring agreement, which states that the
“Advertising Injury” must be “caused by an offense
committed in the course of advertising your goods,
product or services.” The allegations in the
complaint were not caused by an “offense
committed in the course of advertising your goods,
product or services.”
Furthermore, all of the allegations in the complaint
pertain to alleged copyright and/or trademark
infringement and, therefore, are excluded under the
above-cited policy endorsement 64-5869 1100 –
Intellectual Property Liability Exclusion.

(Id. at 5).

In conclusion, for the above reasons, we must
respectfully advise that we are disclaiming coverage
to you, your company, and/or anyone else on your
behalf.

On February 15, 2011, plaintiffs filed suit against defendant in the
Luzerne County Court of Common Pleas seeking declaratory relief
regarding coverage and asserting a breach of contract claim. (Doc. 1,
Notice of Removal ¶¶ 32-40). On March 16, 2011, defendant removed the
action to this court based on diversity jurisdiction. See 28 U.S.C. § 1332.
At the close of discovery, defendant moved for summary judgment on
February 13, 2012. (Doc. 17). Having fully briefed the issues, the matter
is ripe for disposition.
Jurisdiction
The court has diversity jurisdiction over this action pursuant to 28
U.S.C. § 1332. Plaintiff Comprehensive Microfilm is a Pennsylvania
corporation. (Doc. 1, Notice of Removal ¶ 3). Plaintiff James Wasilewski
resides in and is a citizen of Pennsylvania. (Id.) Defendant Main Street is
a Florida corporation. (Id.) Because there is complete diversity of
citizenship between the parties and the amount in controversy exceeds
$75,000.00, the court has jurisdiction over the case. See 28 U.S.C. § 1332
(“district courts shall have original jurisdiction of all civil actions where the
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matter in controversy exceeds the sum or value of $75,000, exclusive of
interest and costs, and is between . . . citizens of different States[.]”); 28
U.S.C. § 1441 (“[A]ny civil action brought in a State court of which the
district courts of the United States have original jurisdiction, may be
removed by the defendant . . . to the district court of the United States for
the district and division embracing the place where such action is
pending.”).
As a federal court sitting in diversity, we must apply state law.
Chamberlain v. Giampapa, 210 F.3d 154, 158 (3d Cir. 2000) (citing Erie
R.R. v. Tompkins, 304 U.S. 64, 78 (1938)). In this case, the relevant state
is Pennsylvania. If the state supreme court has not yet addressed an issue
before us, we must predict how that court would rule if presented with that
issue. Nationwide Mut. Ins. Co. v. Buffetta, 230 F.3d 634, 637 (3d Cir.
2000). In so doing, we must examine the opinions of the lower state
courts, and we cannot disregard them unless we are convinced by other
persuasive data that the highest court would rule otherwise. Id.
Legal Standard
Summary judgment is proper “if the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the affidavits, if
any, show that there is no genuine issue as to any material fact and that
the moving party is entitled to judgment as a matter of law.” See Knabe v.
Boury Corp., 114 F.3d 407, 410 n.4 (3d Cir. 1997) (citing FED. R. CIV. P.
56(c)). “[T]his standard provides that the mere existence of some alleged
factual dispute between the parties will not defeat an otherwise properly
supported motion for summary judgment; the requirement is that there be
no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 247-48 (1986) (emphasis in original).
When considering a motion for summary judgment, the court must
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examine the facts in the light most favorable to the party opposing the
motion. Int’l Raw Materials, Ltd. v. Stauffer Chem. Co., 898 F.2d 946, 949
(3d Cir. 1990). The burden is on the moving party to demonstrate that the
evidence is such that a reasonable jury could not return a verdict for the
non-moving party. Anderson, 477 U.S. at 248. A fact is material if it might
affect the outcome of the suit under the governing law. Id. Where the
non-moving party will bear the burden of proof at trial, the party moving for
summary judgment may meet its burden by showing that the evidentiary
materials of record, if reduced to admissible evidence, would be insufficient
to carry the non-movant’s burden of proof at trial. Celotex Corp. v. Catrett,
477 U.S. 317, 322 (1986). Once the moving party satisfies its burden, the
burden shifts to the non-moving party, who must go beyond its pleadings,
and designate specific facts by the use of affidavits, depositions,
admissions, or answers to interrogatories showing that there is a genuine
issue for trial. Id. at 324.
Discussion
Defendant argues that it is entitled to summary judgment because
this case presents a purely legal question as to whether defendant must
defend and/or indemnify plaintiffs in the underlying lawsuit. Plaintiffs argue
that there are genuine issues of material fact and disputes of law, which
makes the granting of summary judgment improper. After a review of the
facts in this case, the court finds that there are no disputed material facts,
only a dispute as to whether defendant has a duty to defend or indemnify.
Accordingly, we find that summary judgment is appropriate.
Both parties agree that Pennsylvania law governs the disposition of
this case. It is the role of the court, rather than the jury, to interpret an
insurance contract. Madison Constr. Co. v. Harleysville Mut. Ins. Co., 735
A.2d 100, 106 (Pa. 1999) (citation omitted). “A policy must be read as a
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whole and its meaning construed according to its plain language.” Meyer
v. CUNA Mut. Ins. Soc., 648 F.3d 154, 163 (3d Cir. 2011) (citing Frog,
Switch & Mfg. Co., Inc. v. Travelers Ins. Co., 193 F.3d 742, 746 (3d Cir.
1999); Melrose Hotel Co. v. St. Paul Fire & Marine Ins. Co., 432 F. Supp.
2d 488, 495 (E.D. Pa. 2006)). If an insurance policy provision is
ambiguous, the provision is to be construed in favor of the insured and
against the insurer. Madison Constr. Co., 735 A.2d at 106 (quoting Gene
& Harvey Builders v. Pa. Mfrs. Ass'n., 517 A.2d 910, 913 (Pa. 1986)).
“Where, however, the language of the contract is clear and unambiguous,
a court is required to give effect to that language.” Id.
In determining whether the insurer has a duty to defend, the district
court compares the four corners of the insurance contract to the four
corners of the complaint. Am. & Foreign Ins. Co. v. Jerry’s Sport Ctr., Inc .,
2 A.3d 526, 541 (Pa. 2010); see Kvaerner Metals Div. of Kvaerner U.S.,
Inc. v. Commercial Union Ins. Co., 908 A.2d 888, 896 (Pa. 2006) (“We find
no reason to expand upon the well-reasoned and long-standing rule that an
insurer’s duty to defend is triggered, if at all, by the factual averments
contained in the complaint itself.”). The insured bears the initial burden of
demonstrating that an underlying claim is covered by the insurance policy.
Nationwide Mut. Ins. Co. v. Cosenza, 258 F.3d 197, 206 (3d Cir. 2001)
(citation omitted). “Where an insurer relies on a policy exclusion as the
basis for its denial of coverage and refusal to defend, the insurer has
asserted an affirmative defense and, accordingly, bears the burden of
proving such defense.” Canal Ins. Co. v. Underwriters at Lloyd's London,
435 F.3d 431, 435 (3d Cir. 2006) (quoting Madison Constr. Co., 735 A.2d
at 106). Exclusions are construed strictly against the insurer and in favor
of the insured. Cosenza, 258 F.3d at 206-07.
The duty to defend is separate from and broader than the duty to
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indemnify. Kvaerner, 908 A.2d at 896 n.7. Both duties are determined by
an examination of the underlying complaint. Id. A finding that there is no
duty to defend precludes the duty to indemnify. Id. The factual allegations
in the complaint are to be taken by the district court as true and liberally
construed in favor of the insured. Frog, Switch & Mfg. Co., Inc., 193 F.3d
at 746. If the allegations in the complaint are actually or potentially
covered by the policy, then the insurer has an obligation to defend the
insured. Am. & Foreign Ins. Co., 2 A.3d at 532.
In the instant case, defendant essentially asserts three arguments as
to why it does not have a duty to defend plaintiffs in the underlying lawsuit.
First, it argues that plaintiffs did not engage in an accidental or fortuitous
event, thus it did not constitute an “occurrence” to trigger protections of the
policy. Second, because the underlying lawsuit does not seek damages
for any “Advertising Injury,” the litigation is not covered by the policy. Third,
the intellectual property exclusion in the insurance policy precludes
coverage of the underlying lawsuit. We will address each of these
arguments, in turn.
1. Occurrence
Defendant argues that the underlying lawsuit is not covered because
the allegations do not constitute an “occurrence” under the insurance
policy. Plaintiffs do not specifically address the necessity of an
occurrence, however, they broadly argue that the initiation of the
underlying lawsuit is deserving of some coverage.
Plaintiffs’ insurance policy provides the definition of “occurrence” as
“an accident, including continuous or repeated exposure to substantially
the same general harmful conditions.” (Doc. 19, Ex. 3, Ins. Policy at 37).
The policy does not provide a definition of “accident.” Pennsylvania courts
emphasize the fortuity of events in determining whether there was an
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accident. State Farm Fire & Cas. Co. v. Estate of Mehlman, 589 F.3d 105,
111 (3d Cir. 2009). An accident under insurance law can be defined as
“[a]n unexpected or undesirable event,” or “something that occurs
unexpectedly or unintentionally.” Kvaerner, 908 A.2d at 897-98 (citing
Webster’s II New College Dictionary 6 (2001)).
The Third Circuit Court of Appeals has also addressed the meaning
of “accident” under Pennsylvania law:
An accident, simply stated, is merely an
unanticipated event; it is something which occurs
not as the result of natural routine but as the
culmination of forces working without design,
coordination or plan. And the more disorganized the
forces, the more confusedly they operate, the more
indiscriminately haphazard the clash and
intermingling, the more perfect is the resulting
accident.
Estate of Mehlman, 589 F.3d at 111 (quoting Brenneman v. St. Paul Fire &
Marine Ins. Co.,192 A.2d 745, 747 (1963)).
Intentional conduct, such as a willful and malicious assault, is not an
“occurrence” within the meaning of an insurance policy. Gene Rest., Inc.
v. Nationwide Ins. Co., 548 A.2d 246, 247 (Pa. 1988). Where the
underlying complaint only alleges intentional acts and no allegations of
negligence, courts have not treated an incident as an occurrence.
Nationwide Mut. Fire Ins. Co. v. Pipher, 140 F.3d 222, 225 (3d Cir. 1998).
However, negligent allegations trigger the insurer’s duty to defend. Id. at
228. The district court must look to the factual allegations to determine
whether there are allegations of intentional or negligent conduct. See
Travelers Prop. Cas. Co. of Am. v. Mericle, 3:09-CV-1747, 2010 WL
3505117, at *6 (M.D. Pa. Aug. 31, 2010) (citing Whole Enchilada, Inc. v.
Travelers Prop. Cas. Co. of Am., 581 F. Supp. 2d 677, 694 (W.D. Pa.
2008)). “It is the face of the complaint and not the truth of the facts alleged
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therein which determines whether there is a duty to defend.” Tuscarora
Wayne Mut. Ins. Co. v. Kadlubosky, 889 A.2d 557, 561 (Pa. Super. Ct.
2005).
In the instant case, we first turn to the language of the policy to
determine the scope of coverage. The instant policy provides:
A. Coverages
1. Business Liability
a. We will pay those sums that the
insured becomes legally obligated to pay as
damages, because of “bodily injury,” “property
damage,” “personal injury” or “advertising injury” to
which this insurance applies. We will have the right
and duty to defend the insured against any “suit”
seeking damages. However, we will have no duty
to defend the insured against any “suit” seeking
damages for “bodily injury,” “property damages,”
“personal injury,” or “advertising injury” to which this
insurance does not apply. We may at our discretion
investigate any “occurrence” and settle any claim or
“suit” that may result.
(Doc. 19, Ex. 3, Ins. Policy at 26). As we stated above, “occurrence” is
defined in the policy as “an accident, including continuous or repeated
exposure to substantially the same general harmful conditions.” (Id. at 37).
Under such a definition, there must have been an accident or degree of
fortuity in bringing about the underlying advertising injury.2
We next look at the allegations in the underlying complaint to
determine whether the claims fall within the scope of the coverage. See
Pipher, 140 F.3d at 225. It is alleged that plaintiffs unlawfully copied
microfilm versions of the journals for third parties. (Doc. 19, Ex. 2,
Underlying Compl. ¶ 28). It contains counts of copyright infringement,
contributory copyright infringement, trademark infringement, trademark

Defendant and plaintiffs only address “advertising injury.” Neither
party raises any argument in support of the other injuries or damages
covered under the policy.
2

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counterfeiting and common law unfair competition. The plaintiffs in the
underlying action assert that Plaintiff “Wasilewski has controlled
Comprehensive Microfilm and knowingly induced it to infringe upon
Plaintiffs’ copyrights,” “[Plaintiff] Wasileski has willfully contributed to the
infringement of Elsevier, Wiley and ACS Copyrights,” and plaintiffs “willfully
infringed the Elsevier, Wiley, and ACS Trademarks.” (Id. ¶¶ 39, 40, 49).
Plaintiffs allegedly committed these violations when a customer, Princeton
Micro Scan Corporation, requested that the plaintiffs make a master
microfilm copy of a journal and an additional microfilm copy to be sent to
an institution. (Id. ¶ 28).
Based on the terms of the insurance policy and the allegations in the
complaint, we find that defendant does not have a duty to defend plaintiffs
in the underlying action because there was no “occurrence.” The facts that
are asserted in the complaint do not describe a fortuitous event that was
unexpected, undesirable, or unintentional. To the contrary, the complaint
alleges intentional conduct. Plaintiffs allegedly knowingly and willfully
committed the underlying unlawful conduct in contracting to make microfilm
copies of the journals. There are no allegations of a culmination of
disorganized forces. See Estate of Mehlman, 589 F.3d at 111. The
complaint does not contain any allegations of negligence or describe that
events that took place as an “accident.” See Pipher, 140 F.3d at 228.
Based on the allegations in the complaint, plaintiffs are not covered under
the insurance policy due to the intentional and willful conduct, which does
not constitute an occurrence. See Gene Rest. Inc., 548 A.2d at 247.
Therefore, defendant did not have a duty to defend plaintiffs in the
underlying lawsuit. Absent a duty to defend, defendants do not have a
duty to indemnify. See Kvaerner, 908 A.2d at 896 n.7.
Furthermore, even if there was an occurrence, we still find that
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plaintiffs would not be covered under the policy due to the absence of an
advertising injury and the intellectual property exclusion. We will address
these two additional arguments raised by defendant.
2. “Advertising Injury”
Defendant contends that plaintiffs were not in the course of
advertising their goods, products, or services during the event that gave rise
to the underlying action, therefore their conduct does not amount to an
“advertising injury.” Plaintiffs argue that defendant acknowledged that the
allegations in the underlying complaint satisfied the definition of “advertising
injury” in the letter denying coverage, and therefore, the only issue that
remains is whether there is an applicable exclusion under the policy.
To determine whether there is a duty to defend or indemnify, we again
must compare language in the insurance policy to the language in the
underlying complaint. In pertinent part, the policy provides: 1. “Advertising
Injury” means injury arising out of one or more of the following offenses . . .
d. infringement of copyright, title or slogan. (Doc. 19, Ex. 3, Ins. Policy at
35). The policy also provides that the insurance applies to “‘Advertising
injury’ caused by an offense committed in the course of advertising your
goods, products or services.” (Id. at 26). In the underlying complaint, it is
alleged that plaintiffs contracted with Princeton Micro Scan to make
microfilm copies of journals and plaintiff would then distribute the copies to
Princeton Micro Scan and other third parties. (Doc. 19, Ex. 2, Underlying
Compl. ¶ 28).
We agree with defendant that the underlying action does not involve
an “advertising injury” and thus would not be covered under the insurance
policy. (Doc. 19, Ex. 5). Plaintiffs misinterpret defendant’s letter denying
coverage. Defendant provided that “while the allegations within the
complaint meet the definition of ‘Advertising Injury,’ coverage is not afforded
11

because the claim does not fall within the insuring agreement, which states
that the ‘Advertising Injury’ must be ‘caused by an offense committed in the
course of advertising your goods, product or services.’” (Id. at 5). This
explanation provides that the allegations in the complaint meet the definition
of advertising injury in a sense that the claims involve copyright
infringement, which is one of the offenses enumerated under the insurance
policy as an advertising injury. (Doc. 19, Ex. 3, Ins. Policy at 35). However,
the policy only provided coverage for advertising injuries that were “caused
by an offense committed in the course of advertising your goods, products
or services.” (Id. at 26). It is undisputed that plaintiffs were not engaged in
any advertising activities during the events that gave rise to the underlying
cause of action. Instead, plaintiffs were performing services for one of their
customers in making microfilm copies for distribution. They were not
attempting to market their product to attract customers, plaintiffs were
providing services to a customer.
Accordingly, we find that the underlying complaint, while involving
alleged copyright infringement, did not take place while advertising.
Therefore, it was not an advertising injury and the claims against plaintiffs
are not covered under that policy provision.
3. Intellectual Property Liability Exclusion
Defendant also asserts that a specific policy provision excludes the
underlying cause of action from coverage under the policy. The “Intellectual
Property Liability Exclusion” excludes from coverage:

(Id. at 44).

Any “suit” seeking damages (whether valid or
invalid) arising, in whole or in part, out of any
allegation of infringement or violation of copyright,
patent, trademark or other intellectual property law,
and “bodily injury,” “property damages,” “personal
injury” or “advertising injury” arising, in whole or in
part out of any infringement or violation of copyright,
patent trademark or other intellectual property law.
12

Plaintiffs concede that this exclusion applies to the copyright and
trademark claims, however, they argue that the exclusion does not apply to
common law unfair competition claim. They assert that it appears from the
underlying complaint that the unfair competition claim is the primary
allegation, the policy does not specifically exclude unfair competition and it
is deserving of some coverage under the policy. We disagree with plaintiffs
and find that the intellectual property provision excludes all of the claims
filed against plaintiffs.
As this court is to read the policy to give affect to the plain language
contained therein, the provision clearly provides that any suit initiated “in
whole or in part, out of any allegations of infringement or violation of
copyright, patent, trademark or other intellectual property law” will be
excluded. (Id.) As the underlying suit arises “in part” from copyright
infringement, we find that the entire suit is excluded from the coverage
under the policy. Therefore, defendant does not have a duty to defend
plaintiffs in the underlying suit based on this exclusion.
Conclusion
For the reasons state above, the defendant’s motion for summary
judgment will be granted. An appropriate order follows.

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IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
COMPREHENSIVE MICROFILM
AND SCANNING SERVICES, INC.;
and JAMES WASILEWSKI,
Plaintiffs

:
3:11cv498
:
:
(Judge Munley)
:
:
:
v.
:
:
THE MAIN STREET AMERICA
:
GROUP,
:
Defendant
:
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
ORDER
AND NOW, to wit, this 18th day of April 2012, upon consideration of
defendant’s motion for summary judgment (Doc. 17), it is hereby
ORDERED that the defendant’s motion is GRANTED. The Clerk of Court is
directed to enter judgment against the plaintiffs and for the defendant and
to CLOSE this case.
BY THE COURT:
s/ James M. Munley
JUDGE JAMES M. MUNLEY
United States District Court

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