Liberty Mutual Fire Insurance Company v. General Information Services, Inc. et al
Filing
67
MEMORANDUM OPINION. Signed by District Judge Robert E. Payne on 5/20/14. (jtho, )
IN THE UNITED
STATES DISTRICT COURT
EASTERN DISTRICT
OF VIRGINIA
Richmond Virginia
LIBERTY
MUTUAL
FIRE
INSURANCE COMPANY,
Plaintiff/
Counterclaim Defendant,
Civil
v.
GENERAL
Action
No.
3:13cv375
INFORMATION
SERVICES,
INC.
et al.,
Defendants/
Counterclaim Plaintiffs
MEMORANDUM OPINION
This matter is before the Court following a bench trial.
the
reasons set
forth below,
judgment will be
Liberty Mutual Insurance Company
For
entered in favor of
("Liberty Mutual")
declaring that
it has no insurance obligations.
PROCEDURAL BACKGROUND
Liberty Mutual filed this diversity action seeking declaratory
relief
against
General
Backgroundchecks.com,
subsidiary of
policies
Henderson
GIS
here
v.
is not
GIS,
at
Information
Inc.
("BGC")
and both
issue.
are
BGC1
defendant
Inc.
("GIS")
(collectively "BGC").
insured
also
Backgroundchecks.com,
named as a
Services,
is
Civil
under
the
the
named
Action
and
BGC is
Liberty
No.
in the Henderson Suit.
E-
a
Mutual
defendant
in
3:13cv29,
an
action
brought
1681 et seq.
In
under
the
Fair
Credit
Reporting
Act,
15
U.S.C.
§
(the "Henderson Suit").
its
First
Amended
Complaint
{"FAC"),
Liberty
Mutual
requests a declaration "that Liberty Mutual has no duty to defend
Defendants
under
alternative,
by
the
Policies
for
the
Henderson
Suit,
or
in
the
that any duty to defend by Liberty Mutual is limited
terms,
Policies"
the
that
exclusions,
are
identified
(FAC,
subsequently.
counterclaim
conditions,
Docket
that
Mutual's FAC.
is
There,
in
and
the
FAC
31,
at
No.
essentially
the
limitations
and
will
21.)2
mirror
be
of
addressed
BGC
image
the
filed
of
a
Liberty
BGC alleges that Liberty Mutual breached "its
duty to defend BGC with respect to the Henderson Suit," and seeks
specific performance,
declaration
terms
and
"that
damages,
Liberty
provisions
Defendants'
interests
of
in
and other relief.
Mutual
the
is
BGC also seeks a
legally
obligated
Mutual
Policies
Liberty
connection
with
the
under
the
to
defend
Henderson
Suit."
2 In Paragraph 82(g) of its FAC, Liberty Mutual asserted that it
might also rely on unspecified "additional terms, conditions,
limitations
and
exclusions."
Thereafter,
Liberty
Mutual
stipulated that it would not rely on any unspecified policy
provisions unless further amendments of the complaint in the
Henderson
by
the
Suit
Second
raised new
Amended
insurance
Class
issues
Complaint
that
in
the
were
not
raised
Henderson
Suit
(Docket No. 35 in Civil Action No. 3:13cv29).
(Stip.
II, 1
(Docket No. 60).)
By the time of trial, no further amendments
had been made in the Henderson Suit.
provisions
now
at
issue
other
than
Hence, there are no policy
those
herein
addressed.
Also, all claims relating to the two umbrella excess liability
policies issued to BGC by Liberty Mutual have been withdrawn by
the parties.
(Stip. I, A; Stip. II, 9.)
(Second Amended Counterclaims of General Information Services,
and E-Backgroundchecks.com,
The
The
action was
parties
60),
filed
tried by
an
and agreed on
parties
Inc.,
Docket No.
the Court
Omnibus
Set
of
fourteen exhibits.
presented
no
additional
42,
at 17-18.)
sitting without
Stipulations
At
Inc,
a
jury.
(Docket
No.
the bench trial,
the
evidence,
but
argued
their
respective legal positions based on their briefs and the Omnibus
Set
of
Stipulations
(Exhibits
1-16,
("Stip."),
with
Exhibits
together with
3 and
fourteen
4 withdrawn).
exhibits
The
Omnibus
Stipulations and the Exhibits constitute the record.
This
(GCL)
action
policies:
implicates
one
for
for 2008-2009 (Ex. 2).3
policies are the same.
the
two
general
period
commercial
2007-2008
(Ex.
liability
1)
and one
For the purposes of today's case, the
Thus,
the parties have stipulated that:
For
the
purpose
of
determining
whether
Liberty
Mutual
has
a
duty
to
defend
Defendants against the Henderson Suit, it is
sufficient
to
determine
whether,
upon
consideration
of
the
allegations
of
the
[Henderson SACC], Liberty Mutual has a duty
to defend under the CGL policy for the
period 2008-2009.
If the Court rules that a
duty to defend exists pursuant to the 20082009 CGL policy, then a judgment shall be
entered that Liberty Mutual also has a duty
to defend under the 2007-2008 CGL policy.
Conversely, if the Court rules that there is
no duty to defend under
policy,
then a judgment
3 Originally,
as well.
neither
the 2008-2009 CGL
shall be entered
the litigation also involved two umbrella policies
The parties have withdrawn that issue,
further examined nor decided.
3
and it will be
that Liberty Mutual also has no duty
defend under the 2007-2008 CGL policy.
(Stip.
to
II, 4.)
BACKGROUND
The request for declaratory relief filed by Liberty Mutual
and BGC's counterclaim arise from their differing views of what
is
alleged
in
the
Henderson
Suit
and
how
those
provide
allegations
affect Liberty Mutual's
obligation to
a defense
to
BCG
in the Henderson Suit.
It thus is necessary to understand what
is alleged in the Henderson Suit.
The operative complaint in the Henderson Suit is the Second
Amended Class Complaint
SACC asserts
and an
three
("Henderson SACC")(Ex.
claims:
individual claim
two class
(Count
III)
claims
that
is
7). The Henderson
(Counts
I
and
asserted on
II)
behalf
of several individual plaintiffs.
In Count I,
the Henderson SACC alleges that BGC violated 15
U.S.C. § 1681k(a)(1) because BGC "did not provide Plaintiffs and
other similarly situated consumers timely and lawful notice that
it was furnishing an employment purposed consumer report at the
time
it
di
Henderson
because,
so."
SACC
when
(Ex.
alleges
the
7,
5
that
4
&
Count
BGC violated
plaintiffs
requested
provided to prospective employers and "a
made
to
[BGC]
for
their
I).
reports,"
BGC
15
the
In
Count
U.S.C.
reports
list of all
did
not
§
II,
the
1681g(a)
that
BGC
inquiries
"disclose
the
(Ex. 7, % 5 & Count II).
inquiries for reports."
In Count III
of the Henderson SACC, it is alleged that BGC violated 15 U.S.C.
§
1681e(b)
by
failing
procedures
to
assure
preparation
of
consumer
to
establish
maximum
prospective employers of
or
follow
possible
reports
that
reasonable
accuracy
BGC
furnished
individual plaintiffs
(Thomas,
in
the
to
the
Johnson
and Edwards).
BGC contends that Liberty Mutual is obligated to defend BGC
as
to
all
claims
in
the
Henderson
Suit.
Liberty
that it has no duty to defend the individual claims
because
the
conduct
on
which
those
claims
is
based
Mutual
says
(Count III)
occurred
in
2011 and 2012, more than two years after the applicable Liberty
Mutual policy expired.
As to the class
claims
(Counts' I and
II), Liberty Mutual contends that, because of the nature of the
alleged injuries to the class,
the policy,
by its terms,
does
not provide coverage.4
DISCUSSION
I.
Legal Standard
The parties agree that the
the
"the
analysis of
law of South Carolina controls
all policy issues.
Under
South Carolina
law,
obligation of a liability insurance company to defend and
indemnify
is determined
by
the
allegations
in
the
complaint."
4 Alternatively, says Liberty Mutual, there are policy exclusions
that foreclose coverage for the class claims.
5
Collins
Holding
S.E.2d
897,
Corp.
v.
(S.C.
2008).
899
Wausau
Underwriters
"If
the
Ins.
facts
Co.,
alleged
666
in
the
complaint fail to bring a claim within the policy's coverage,
the insurer has
no duty to defend."
Id.
The insured must show
that the underlying complaint creates a "reasonable possibility"
of
coverage
Inc.
v.
under
the
Cincinnati
"Questions
of
insurance
Ins.
coverage
Co.,
and
policy.
265
the
Gordon-Gallup
S.E.2d
duty
38,
...
40
to
Realtors
(S.C.
1980).
defend
a
claim
brought against its insured are determined by the allegations of
the third party's complaint." Isle of
Palms Pest Control Co.
Monticello
319
aff'd,
Ins.
Co.,
459
468 S.E.2d 304
S.E.2d
318,
(S.C. 1996).
(S.C.
Ct.
App.
v.
1994),
If the alleged acts create "a
possibility of coverage under an insurance policy, the insurer
is obligated
insured
to
show
that
insurance contract."
185
F.
omitted).
Id.
to defend."
Supp.
2d
"The
a
claim
"The burden
falls
Sunex Int'l,
614,
617
insurer
Id.
complaint
includes
covered
inclusion
of
some
Inc.
v.
the
is on the
coverage
Travelers
burden
of
of
Indem.
2001)(internal
the
exclusions to coverage."
both
within
(D.S.C.
bears
of proof
non-covered
establishing
non-covered
claims
does
Co.,
citation
(internal citation omitted).
and
an
If a
claims,
not
abrogate
"the
an
insurer's duty to defend when a complaint raises claims covered
by the policy."
319.
Isle
of
Palms
"Under South Carolina
law,
Pest Control Co.,
insurance
459 S.E.2d at
policies
are
subject
to
the
general
rules
citation omitted).
of
contract
construction."
parties
agree,
allegations
that,
II.
in
(internal
These principles guide the resolution of the
request for declaratory judgment and the
the
Id.
the
the
analytical
Henderson
according to BGC,
counterclaim.
process
SACC
with
is
the
to
And,
compare
policy
as
the
provisions
animate the duty to defend.
The Liberty Mutual Policies
BGC s claim for a defense under the Liberty Mutual Policies
is
based
on
the
coverage
advertising injury."
advertising
provided
(Ex.
injury"
is
therein
2, at 10,
defined
to
for
Coverage B) .
mean
"injury
"personal
and
"Personal and
...
to
the
feelings and the reputation of a natural person . . . caused by
an offense arising out of your business . . . ." (Ex.
item
2a.)
enumerated
It
conduct,
material that
13,
have
also
including
slanders or
item 2b(4).)
been
includes
"oral
arising
or
out
written
libels a person
of
at 12,
certain
publication
. . . ."
(Ex. 2,
of
at
The policies expressly require the offenses to
"committed
policy period."
injury
2,
in
the
coverage
territory'
during
the
(Ex. 2, at 10, item lb.)
III. The SACC Allegations and the Policy Language
Because
BCG's
coverage
Counts I and II depends on
the
individual
plaintiffs
theory
the
in
for
nature of
Count
7
III,
the
class
the
damages
it
is
claims
helpful
in
sought by
first
to
assess
the
individual
plaintiffs
assure
allegations
in
claims
Count
in
allege
that
in
plaintiffs "actual damages,
to
reputation,
Henderson
III.
BGC's
accuracy
maximum
damage
the
acknowledges
to
the
follow
consumer
embarrassment,
that
respecting
the
individual
procedures
reports
caused
to
the
including . . . loss of employment,
emotional and mental distress."
rightly
There,
failure
the
SACC
humiliation
(Ex. 7, SI 86).
the
kind
individual plaintiffs in Count III
of
and
other
Liberty Mutual
injury
claimed
fits within the
by
the
scope of the
"personal and advertising" provision of its policy.
However,
according
to
Liberty
Mutual,
the
policy
nonetheless does not afford coverage because the conduct that is
alleged
to
have
caused
those
injuries
years after the policy expired.
Nonetheless,
claims
because
within
the
SACC
the
period
alleges
plaintiffs
says BGC,
are
In BGC's view,
class
the
typical
than
two
there is coverage for the individual
claims
injuries
of
more
BGC admits that to be so.
encompassed by
that
occurred
the
are
the
alleged
to
have
policy
and
the
sustained
injuries
by
the
suffered by
occurred
Henderson
individual
the
class.
the fact that the Henderson SACC pleads that the
individual injuries are typical of the injuries suffered by the
class
also
means
(Counts I and II).
that
there
is
coverage
for
the
class
claims
The principal problem with
counts
the
(Counts I and II)
same
kinds
of
do
not
injuries
plaintiffs in Count III.
BGC's
theory is that the class
allege that the class suffered
as
claimed
by
the
individual
A comparison of the allegations about
the injuries proves the point.
In
Count
damages,
III,
including
reputation,
that
.
.
loss
plaintiffs
of
fall
injury."
within
and
11
to
and
II
is those
terms
coverage
from $100.00
to
it
"personal
of
the
the plaintiffs do not seek actual damages.
claim "statutory damages
damage
And,
I and
"actual
emotional
other
86. )5
the
In Counts
seek
employment,
humiliation
(Henderson SACC,
clearly
and advertising
SACC,
.
individual
embarrassment,
mental distress."
damages
the
Henderson
Rather,
they
$1,000.00 pursuant to
15 U.S.C. § 1681n(a) (1) (A) , plus punitive damages pursuant to 15
U.S.C.
§
1681n(a)(2),
to § 1681n."
Thus,
that
the
for
(Henderson SACC,
attorney
% 69
fees
(Count I);
and
costs
pursuant
H 83 (Count II)).
a comparison of the types of damages sought reflects
class
include
actual
damages
and
damages are.
within
and
the
damages
damages
goes
to
asserted
whereas
some
in
Count
length
to
Counts
III
I
and
II
do
clearly seeks
explain
what
those
not
actual
actual
Statutory and punitive damages are not encompassed
coverage
term
"personal
5 In paragraph 88,
it is said
plaintiffs
seek
"actual
damages
punitive damages,
and
advertising
that the
three individual
and/or
statutory
damages,
costs and attorney's fees."
9
injury."
Indeed, BGC does not even argue that damages of that description
fit within the coverage terminology.
In fact,
that is why BGC
finds it necessary to rely on the notion that there is coverage
because,
according to
BGC,
in Counts
I and
II,
the
plaintiffs
say that the injuries sustained by the individual plaintiffs are
typical of those sustained by the class.
BGC bases
the
that
so-called
world
view
"typicality"
of
coverage
paragraphs
on
in
the
the
class
(Henderson SACC, SI 62 (Count I); II 75 (Count II)).6
rests on the
reads:
class
first
sentence of
"Plaintiffs'
member."
5)(emphasis
"claims,"
claims
(Defendants'
added).
not
to
the
are
damages
Pretrial
or
of
claims
BGC's theory
typicality paragraphs which
typical
However,
language
that
of
Brief
the
of
(Docket No.
text
injuries.
claims
clearly
Thus,
49),
refers
BGC's
each
at
to
threshold
premise is wrong.
Moreover, the next sentence in the typicality
paragraphs reads:
"Plaintiffs seek only statutory and punitive
damages."
Taken as a whole, the allegations of the "typicality"
paragraphs cannot reasonably be read to assert, on behalf of the
classes
{in
Counts
I
and
II),
the
actual
damages
that
are
asserted on behalf of the individual plaintiffs in Count III and
that
constitute
"personal
and
a
basis
advertising
for
coverage
injury."
within
Thus,
the
the
policy
text
of
term
the
6 Fed. R. Civ. P. 23(a)(3) requires that "the claims or defense
of the representative parties [must be] typical of the claims or
defenses
of the class."
10
"typicality" paragraphs
in
the
Henderson
SACC
simply does
not
support BGC's coverage theory.
BGC's
definition
the
next
in
line
one
so-called
of
attack
subclass
"1681k
rests
Count
in
on
I
Accuracy
the
of
text
the
Sub-Class."
of
the
class
Henderson
SACC:
That
definition
reads:
All natural persons residing in Virginia,
North Carolina, South Carolina, Maryland or
West Virginia (a.) who were the subject of a
report sold by Defendant to a third party,
(b.) that was furnished for an employment
purpose,
(c.) that contained at least one
public record of a criminal conviction or
civil
lien,
bankruptcy
or
civil
arrest,
judgment (c.) [sic] within five years next
preceding the
filing of this action and
during its pendency, (d) [sic] when a manual
review
of
the
record
would
reveal
that
the
identity associated with the public record
does not match the identity of the class
member about whom the report was furnished
(e.) [sic] to whom Defendant did not place
in the United States mail postage pre-paid,
the
day
it
furnished the
report,
a
on
written notice that it was furnishing the
subject report and containing the name of
the person that was to receive the report.
Excluded from the class definition are any
employees, officers, directors of Defendant,
any attorney appearing in this case, and any
judge assigned to hear this action.
Henderson SACC,
According
seeking damages
form
the
therefore,
basis
SI 59
to
BGC,
for
of
(Count I) .
this
the
the
same
text
kind
individual
means
of
that
report
claim
in
the
subclass
inaccuracies
Count
III
and
is
that
that,
this subclass is also seeking the same kind of actual
11
damages sought by the individual plaintiffs in Count III.
That
theory fails at the outset because the 1681k Accuracy Sub-Class
bases
its
maximum
liability
possible
claim
on
accuracy
§
1681k,
provision,
plaintiffs base their claim in Count
not
on
on
§
which
III.
1681e(b),
the
the
individual
Moreover,
the class
definition read as a whole makes it clear that the predicate for
liability in Count I is the failure of BGC to provide the class
with
the
notice
allegations
of
required
Count
I,
by
§
1681k.
wherein
lies
Finally,
the
1681k
the
damage
Accuracy
Sub-
Class, quite clearly seek only statutory and punitive damages.
For
the
allegations
and
the
Count
foregoing
of
class
I
do
the
"typicality"
definition
not
determination,
reasons,
of
animate
contention
paragraphs
the
the
BGC's
duty
I and
II
Sub-Class
in
defend.
to
Counts
the
Accuracy
1681k
in
that
Given
that
it is unnecessary to address the exclusions.
CONCLUSION
For
under
the
Defendant
defend
reasons
Liberty
Liberty
Defendants
Services,
Suit.
the
Inc.
or
set
forth
Mutual
Mutual
and
herein,
Policies,
Fire
the
Plaintiff
Insurance
Counterclaim
Company
Plaintiffs
E-Backgroundchecks.com,
For the same reasons,
Court
declares
and
Counterclaim
has
General
Inc.
in
that,
no
duty
to
Information
the
Henderson
the Court also declares that Plaintiff
12
and
Counterclaim
Defendant
Liberty
Mutual
Fire
Insurance
Company
did not breach the Liberty Mutual Policies.
Judgment
shall
be
entered
in
favor
of
Plaintiff
and
Counterclaim Defendant Liberty Mutual Fire Insurance Company and
against
Defendants
Information
and
Services,
Liberty
Mutual's
JUDGMENT
(Docket No.
OF
GENERAL
Inc.
FIRST
31)
is
and
Plaintiffs
General
E-Backgroundchecks.com,
AMENDED
COMPLAINT
FOR
Inc.
on
DECLARATORY
and on the SECOND AMENDED COUNTERCLAIMS
INFORMATION
BACKGROUNDCHECKS.COM,
It
Counterclaim
INC.
SERVICES,
(Docket No.
INC.
AND
42).
so ORDERED.
/s/
fe<>
Robert E. Payne
Senior United States District Judge
Richmond, Virginia
Date: May 1-0 , 2014
13
E-
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