DISH Network Corporation et al v. Arch Specialty Insurance Company et al, No. 1:2009cv00447 - Document 190 (D. Colo. 2013)
Court Description: Memorandum Order and Opinion on Remand by Judge John L. Kane on 10/22/13.(jjhsl, )
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DISH Network Corporation et al v. Arch Specialty Insurance Company et al Doc. 190 UNITED STATES DISTRICT COURT DISTRICT OF COLORADO Judge John L. Kane Civil Action No. 09 cv 00447 JLK DISH NETWORK CORPORATION, and DISH NETWORK LLC, Plaintiffs, v. ARCH SPECIALTY INSURANCE COMPANY, ARROWOOD INDEMNITY COMPANY, TRAVELERS INDEMNITY COMPANY OF ILLINOIS, XL INSURANCE AMERICA, INC., and NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendants. MEMORANDUM ORDER AND OP)N)ON ON REMAND Kane, J. This insurance coverage dispute is before me on remand from the Tenth Circuit Court of Appeals reversal of my earlier opinion granting summary judgment in favor of Defendants. Defendants again move for summary judgment and Plaintiffs cross move for the same. At issue is whether the Defendants, each a primary or excess insurer, owe the Plaintiffs, D)S( Network Corporation Dish Corp. and D)S( Network L.L.C. Dish LLC , collectively D)S(, a duty to defend or indemnify claims made against D)S( moves for summary judgment against Arrowood and Travelers, the primary insurers only. All Defendant )nsurers move for summary judgment against D)S(. )n an effort to avoid clumsy language, ) treat D)S( as singular for purposes of grammatical construction. The Defendants are collectively referred to as Defendants, Defendant )nsurers, or Dockets.Justia.com them in an action styled Ronald A. Katz Technology Licensing, L.P. v. EchoStar N.D. Cal. the Katz Action or the RAKTL Action . Communications Corp. and EchoStar Satellite L.L.C., Case No. C WDB )n my original summary judgment ruling ) held that D)S( s injuries in the Katz Action were not advertising injuries such that coverage would lie per the advertising injury coverage provisions in the applicable insurance policies issued by the Defendants. The Tenth Circuit Court of Appeals reversed that holding, providing in pertinent part: As regards the duty to defend, we hold that the RAKTL complaint may arguably fall within the polic[ies] at issue, because it potentially alleged advertising injury arising from Dish s misappropriation of its advertising ideas, which Dish committed in the course of advertising its goods, products, or services. DISH Network F. d , th Cir. quotation and citation omitted . The Tenth Circuit reversed the case, Corp. v. Arch Specialty Ins. Co., directing me to consider three issues that the Excess Umbrella )nsurers had raised both on appeal and previously at the district court level. Specifically, these issues are: a whether the intellectual policy exclusion in Arch s policy precludes coverage; b whether the sole causation requirement in National )nsurers, where all Defendants are implicated, and as Excess )nsurers or Umbrella )nsurers or Primary )nsurers as needed where a distinction between the two types of insurance is required. Because the remanded issues were irrelevant to the advertising injury duty to defend analysis, they were neither discussed nor decided in the first opinion, and the Tenth Circuit explicitly express[ed] no view on the merits of these matters, mentioning them only by way of directing that they be considered on remand. Union s policy precludes coverage; and c whether any of the Excess )nsurers have a duty to defend in the absence of a showing that D)S('s primary policy coverage has been exhausted. Id. at . )n the course of the instant summary judgment filings, D)S( concedes that Arch s intellectual property exclusion bars any duty to defend Arch might have regarding the Katz Action. Docs. and . Accordingly, issue a is resolved and summary judgment is GRANTED instanter as to Arch. As before, however, issues b and c require first a decision that a duty to defend would exist otherwise. Relying on the Court of Appeals phrase beginning: As regards the duty to defend, we hold that the RAKTL complaint may arguably fall within the polic[ies] at issue. . ., D)S( Network, F. d at quotation omitted , D)S( posits that the Tenth Circuit has already decided that the claims asserted against D)S( Network in the underlying Katz Action fall potentially within the coverage of the primary insurers commercial general liability CGL policies. Doc. at p. . From the fact that ) let )nsurers raise new defenses, however, it is clear the duty to defend issue was not definitively closed forever and always by the Tenth Circuit opinion. The first incarnation of this case involved determining whether the complained of action in the underlying litigation, specifically patent infringement of telephone technology, constituted advertising injury such that Defendants various advertising injury exclusions would apply and preclude Defendants having a duty to defend. Although the Tenth Circuit did indeed settle that patent infringement for technologies capable of serving as conduits for advertising could constitute advertising injury, the case as presently postured does not seek to parse what is or is not an advertising injury. Rather, the instant summary judgment motions foremost query what import to assign the term broadcast in an insurance policy, Defendants each now invoking various Business Exclusions to negate coverage for all advertising injuries suffered by insureds involved in the business of broadcasting. Although a district court is bound to follow the mandate, and the mandate controls all matters within its scope,…a district court on remand is free to pass upon any issue which was not expressly or impliedly disposed of on appeal. Procter & Gamble Co. v. Haugen, F. d , ; Aguinaga v. United Food & Commercial Workers Int’l Union, F.Supp. , D. Kan. th Cir. The issue presented by the Union was not resolved by the Tenth Circuit in the prior appeal, and the court does no violence to the mandate rule by considering the issue herein. Accordingly, because the Business Exclusion argument was never before the Tenth Circuit, it is appropriate for consideration on remand. As detailed below, ) find the business in which D)S( is engaged to fall squarely within the meaning of broadcasting, such that coverage for defending the Katz Action is unavailable under the policies issued to it by Defendant )nsurers. Nonetheless, per the Tenth Circuit s express directions, ) shall also discuss National Union s sole causation requirement and Excess )nsurers argument that they had no duty to defend absent D)S( s conclusive demonstration that primary coverage had been exhausted. )n addition, ) will briefly treat various other legal arguments that were similarly left open on remand, including National Union s so called Satellite Exclusion Endorsement argument. Summary Judgment Standard and Rules of Insurance Contract Interpretation4 ) repeat the catechism that summary judgment is appropriate where there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. a . (ere, the material facts are not in dispute and the resolutions of all the summary judgment motions hinge upon questions of law, specifically questions of insurance contract interpretation. That said, where legal conclusions require me to draw inferences from the factual record, ) review the record in a light most favorable to the non moving party. Novell, Inc. v. Fed. Ins. Co., 141 F.3d 983, 985 (10th Cir. 1998). The jurisdiction, choice of law, and venue discussions set forth in my original opinion are here incorporated by reference. The meaning of each term in an insurance contract is to be determined as a matter of Colorado law, with any ambiguity resolved in favor of D)S(, as the insured. See Pompa v. Am. Family Mut. Ins. Co., Cir. F. d , th . Mere disagreement between the parties about the meaning of a term, however, does not create ambiguity. Union Rural Elec. Ass'n v. Public P. d , Colo. . One may not read an ambiguity into a term where none exists in order then to resolve the resulting ambiguity Utils. Comm'n, against the insurer. Martinez v. Hawkeye–Sec. Ins. Co., Colo. P. d , [C]ourts will not force an ambiguity in order to resolve it against an insurer. . Also, the mere fact that a term may be susceptible to multiple interpretations, or that it may have different dictionary definitions in different contexts, does not alone create an ambiguity. See id.; see also Allstate P. d , Colo. App. . To the contrary, and as a matter of basic semantics, a term is only ambiguous when it is reasonably Ins. Co. v. Juniel, susceptible to multiple interpretations in the context in which it is used. P. d at . To ascertain whether a certain provision is ambiguous, the Juniel, instrument's language must be examined and construed in harmony with the plain and generally accepted meaning of the words employed, and reference must be made to all the provisions of the agreement. Radiology Professional Corp. v. Trinidad Area Health Ass'n, Colo. , , P. d , citing Christmas v. Cooley, Colo. , . Not only should strained constructions be avoided in favor of common constructions, but technical and legal definitions should also be avoided. )n other words, the plain meaning of the words should be employed in a lay manner consistent with what would be understood by a person of ordinary intelligence. Safeco P. d , Colo. App. . To determine whether an insurer has a duty to defend the insured, Ins. Co. of Am. v. Robertson, Colorado courts follow the four corners rule or complaint rule, under which the courts compare the allegations of the underlying complaint with the applicable policy terms. DISH Network, F. d at . Where the underlying complaint alleges any facts or claims that might possibly be covered under the policy terms, the insurer must tender a defense. Cyprus P. d , Colo. .The Colorado Supreme Court has explained that the four corners or complaint Amax Minerals Co. v. Lexington Ins. Co., rule s purpose is to protect the insured s legitimate expectation of a defense. Cotter Corp. v. Am. Empire Surplus Lines Ins. Co., Colo. Colo. quoting Hecla Mining Co. v. N.H. Ins. Co., P. d P. d , , . While the four corners or complaint rule generally bars the admissibility of evidence extrinsic to the underlying complaint and the relevant insuring agreements in coverage determinations, a widely recognized exception to this rule allows a court to consider such evidence where it is unrelated to the merits of the underlying litigation and plainly take[s] the case outside the policy coverage. Pompa, F. d at internal quotation marks omitted . While the Colorado state courts have not as yet expressly adopted this exception, the Tenth Circuit has determined that, in light of the authoritative support for this rule and supporting dicta, the Colorado Supreme Court likely would adopt the exception. Id. Overall, to the extent possible, courts should give effect to the reasonable expectations of the insured. DISH Network, citations omitted . Doc. F. d at Statement of Facts6 This Court s Memorandum Opinion and Order on summary judgment set forth the relevant facts of the underlying patent suit and the policies issued by the Defendants. C)TE Slip Op. at pp. . Those facts remain undisputed. The following additional facts are relevant to the present motions: . The Travelers and Arrowood policies contain the following exclusion with respect to advertising injury coverage: COVERAGE B. PERSONAL AND ADVERT)S)NG )NJURY L)AB)L)TY While there is no authoritative state law on point, the Pompa court s prediction of the Colorado Supreme Court s holding is binding here. See Wankier v. Crown Equip. Corp., F. d , th Cir. [W]hen a panel of this Court has rendered a decision interpreting state law, that interpretation is binding on district courts in this circuit, and on subsequent panels of this Court, unless an intervening decision of the state s highest court has resolved the issue. The majority of the facts are undisputed by the parties. Those few that are not are proven conclusively by the exhibits such that no dispute is genuine. … . Exclusions. This insurance does not apply to: …b. Advertising injury arising out of: . . . An offense committed by an insured whose business is advertising, broadcasting, publishing or telecasting. Travelers Policy, Ex. D to Doc. Policy, Ex. E to Doc. at DN at pp. . , .; Arrowood s . The National Union policy contains the following exclusion with respect to advertising injury coverage: V. Exclusions This insurance does not apply to: … L Advertising )njury arising out of: … An offense committed by an )nsured whose business is advertising, broadcasting, publishing or telecasting. National Union s Policy, Ex. A to Doc. at NU . . The Arch Policy also contains an exclusion concerning advertising injury: This insurance does not apply to, and [Arch] ha[s] no obligation to investigate, settle or defend, or pay the cost of defending, any claim or suit for: Personal and advertising injury ... [c]omitted by an insured whose business is [a]dvertising, broadcasting, publishing, or telecasting; [or a]n )nternet search, access, content or service provider. Ex. B to Doc. at ¶ .a a , c . . The Annual Report of EchoStar Communications Corporation the predecessor to D)S( for the year ended S.E.C. form / / contains an K/A Exhibit D hereto states, inter alia, that D)S( …provides a direct broadcast satellite subscription television service. . . . Id. at p. emphasis added . . The Articles of )ncorporation of EchoStar Satellite Corporation which became D)S( describe its business operations in relevant part as follows: … To engage in the business of satellite communications, including but not limited to Direct transmission and receiving stations and any Broadcast Satellite communications: to . . . operate 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. Articles of )ncorporation, Exhibit D to Doc. added . at p. emphasis . D)S( s website refers to what it does as broadcasting. For example, the milestones page of its website refers to making its first broadcast to customers in March broadcasting capacity in emphasis added . . Doc. and to doubling its at p. & Doc. at p. . )n a recent lawsuit in which D)S( was a Plaintiff, D)S( states the following in its Complaint: … . D)S( Network is a multi channel video provider that delivers video, audio, and data services via a direct broadcast satellite system to more than million subscribers. . D)S( Network uses high powered satellites to broadcast, among other things, movies, sports and general entertainment services to consumers . . . Complaint, Case No. CV , United States District Court for the Central District of California, Western Div., Dish Network, LLC et al vs. Terrazas, Exhibit D to Doc. . Beginning at least with its May , at p. emphasis added . Risk Management Solutions proposal, D)S( s insurance broker, The Lockton Companies, advised D)S( of the availability of Broadcasters Errors & Omissions Coverage, which coverage the broker said would benefit [D)S(] in the event of a claim. Ex. E to Doc. EchoStar Risk Management Solutions, at DN , . . Lockton s )nsurance Program Proposal for EchoStar Communications Corporation, dated July , , listed Personal )njury and Advertising )njury Coverage for [a]ny offense if the insured is in the business of advertising, broadcasting, or telecasting as one of several MAJOR EXCLUS)ONS in EchoStar s commercial general liability coverage. Ex. E to Doc. EchoStar )nsurance Program Proposal / / / / . , , at DN . The same document listed Broadcasters Errors and Omissions coverage as one of a number of )tems to Discuss with EchoStar. Id. at DN . . Lockton s )nsurance Proposal, dated July , , similarly described EchoStar Communications Corporation s advertising, broadcasting, or telecasting exclusion as being a MAJOR EXCLUS)ON[] and an )TEM TO D)SCUSS[]. Ex. E )nsurance Proposal for EchoStar / / , . / / to Doc. , at DN , . On October , , Lockton provided Jennifer Palasz, D)S( s Treasury Manager and Director of Treasury and Risk, with a similar )nsurance Summary, dated October , , also explicitly listing broadcasting and telecasting coverage as a MAJOR EXCLUS)ON. Ex. E to Doc. , / / Letter and )nsurance Summary for EchoStar Communications Corporation, at DN The Business Exclusion for Broadcasting Precludes Coverage Discussion . The policies issued by Travelers and Arrowood use standard primary CGL coverage forms promulgated by the )nsurance Service Office, )nc., or )SO. These coverage forms reflect that though commercial insureds generally can obtain advertising injury coverage for their business operations, insurers generally do not afford such coverage to insureds in the business of advertising, broadcasting, publishing or telecasting. As set forth above, the pertinent provision reads: . This insurance does not apply to: …b. Advertising injury arising out of: . . An offense committed by an insured whose business is advertising, broadcasting, publishing or telecasting. Travelers policy, Ex. D to Doc. to Doc. at DN . at pp. , .; Arrowood s Policy, Ex. E The )nsurers assert that because D)S( is a direct satellite broadcaster, it is primarily in the business of broadcasting , and therefore not covered for advertising injuries. D)S( argues that the satellite television programming it provides should not be considered broadcasting because it is a subscription service not available to the indiscriminate public or the public generally. D)S( defends this position by cherry picking dictionary definitions of broadcast that include a public component and relying on narrow, technical definitions contained in the Federal Communications Act of . with transmission. National Ass'n for Better Broad. (NABB) v. FCC, F. d D)S( s arguments fail for several reasons. , First, the common understanding of broadcasting is synonymous D.C.Cir. . There is no question that D)S( transmits, via broadcast satellites, television programming to its subscribers. One never hears a conversation around the water cooler in which a person states that he could not possibly have watched a broadcast because he only watches cable television or has a satellite television subscription. Courts also routinely employ the verb broadcast to describe what a for pay television provider No )nsurer s policy defines the terms broadcasting or telecasting. Accordingly, as explained infra at p. , ) apply general contract principles and avoid strained and technical interpretations to accord the terms in question their plain and ordinary meanings. See Kane v. Royal Ins. Co. of Am., P. d , Colo. ; Safeco Ins. Co. of Am. v. Robertson, P. d , Colo. App. in determining meaning of provision denying coverage for liability involving boats with over or more total horsepower, court looked to what horsepower the boat was represented to have, not the specialty industry custom of measuring output at the propeller For example, D)S( cites to Webster s Third New )nternational Dictionary broadcast means to be made public by means of radio or television. to offer that does and the noun broadcaster to describe what the for pay television provider is. See Huckabee v. Time Warner Entm't Co., Tex. S.W. d , repeatedly stating that premium television channel (BO broadcast the film at issue in defamation suit and that (BO is a broadcaster ; Orth O Vision, Inc. v. Home Box Office (HBO), S.D.N.Y. F.Supp. , concluding that (BO is a broadcaster by reasoning that even though (BO transmissions are not freely available to the general public, they are broadcasts because they are capable of reaching any member of the general public willing to pay a fee, similar to conventional broadcast fare, and intended to appeal to a mass audience . Nothing in the case law or the common usage of the term broadcasting requires that every member of the public actually see what is broadcast or have access to the broadcast for free before the broadcast will be considered directed toward the public at large. )t is enough for the broadcast or telecast to be readily available to the public at large, and certainly D)S( strives for universal access. Accordingly, ) hold that the plain meaning of broadcasting includes the business of providing satellite television programming, in which D)S( is primarily engaged. )n its Form K filed with the SEC, D)S( reported that its goal was maximizing future revenue by selling D)S( Network programming to the largest possible subscriber base and rapidly increasing the size of that subscriber base. Ex. E to Doc. at p. . As D)S( s subscription television service business accounted for between and percent of its overall revenue throughout the period of policy coverage at issue, see Ex. E to Doc. , D)S( K at DN , it is indisputable that D)S( is primarily engaged in broadcasting. ) furthermore reject D)S( s argument that because a federal court upheld a statutory interpretation of the term broadcasting that takes subscription television providers outside of the FCC s regulatory purview, the plain, ordinary meaning of the term broadcasting cannot apply to subscription television providers. The fact that subscription television is classified as a non broadcast service for purposes of the Federal Communications Act says nothing about the plain, ordinary meaning of the term broadcasting in general. Colorado law dictates that terms be interpreted according to the understanding of the average purchaser of insurance, and it is irrelevant that broadcasting has a statutory definition in a regulatory scheme that excludes satellite television providers. ) hold that the average purchaser of insurance would consider D)S( engaged primarily in the business of broadcasting. Second, D)S( s own characterization of its subscription business is that of and involving broadcasting. D)S(, inter alia, represents its business as providing a direct broadcast satellite subscription television service. D)S( s website refers to its first transmission of television programming to customers in March of as being its first broadcast to customers and describes its purchase of a satellite broadcasting joint venture as doubling its broadcasting capacity. For D)S( to hold itself out to the public and the courts as a broadcaster but then deny the same to avoid its insurers broadcasting exclusion, smacks of hypocrisy and not common sense or understanding. Third, D)S( s attempt to draw a distinction between subscription and non subscription television fails because it makes no sense in the context of the Business Exclusion. The reason for an insurance policy to include an exclusion for insureds in the businesses of advertising, broadcasting, publishing or telecasting is to limit the insurer s exposure to mass media type injuries. The extent of that risk is a function of how many people have access to the media, not whether they pay for it. Both PBS and D)S( are mass media businesses, and whether it is PBS broadcasting a slanderous statement or D)S( broadcasting a slanderous statement, each entity presents a risky enterprise for purposes of advertising coverage. This context also gives reason to reject D)S( s reliance on its dictionary definitions. ) concede that the dictionary definitions D)S( proffers include a public dissemination requirement in their composition of the meaning of broadcasting. But as the )nsurers equally submit many dictionary definitions Shaun McParland Baldwin et al. explain the risk and the rationale for the exclusion in Commercial General Liability Coverages An Overview, PL)/Lit , : The insureds in [the advertising, broadcasting, publishing or telecasting] line of business should procure media, broacasters or publishers liability policies to cover their enhanced risk in the media related marketplace…This addition recognizes that these types of insureds also present a heightened risk of “person and advertising injury,” which should be addressed by separate insurance products. emphasis added. D)S( has over nine million subscribers. See Doc. at p. . )ndeed, D)S( customers who subscribe to a local channels package can receive PBS transmissions over their D)S( satellite. that do not include that component , ) do not here find dictionaries particularly helpful. Dictionary definitions can certainly provide interpretative guidance for a term, and ) freely admit to have turned to them in the past, but it is important to remember that the dictionary definitions provide just that, guidance. Dictionary definitions are acontextual, whereas the meaning of sentences depends critically on context, including all sorts of background understandings. United States v. Costello, th Cir. . F. d , defend or indemnify its insured, David Pompa, for claims arising out of an Pompa is illustrative. That case involved an insurer that refused to altercation in which another man was killed. Pompa pleaded guilty to criminally negligent homicide in relation to that death, and the insurer invoked an exclusion barring claims arising from criminal acts for which the insured was convicted. F. d at . Pompa filed an action for breach of contract and bad faith in Colorado state court, which the insurer removed to this District. Id. )n resisting the insurer s motion for summary judgment, Pompa maintained that the word convicted was ambiguous because it was susceptible to two definitions: )t could refer to a conviction obtained through trial or to a conviction obtained by plea. Id. at . Notwithstanding that Pompa and the insurer each cited various editions of For example, )nsurers cite The American (eritage Dictionary of the English Language, New College Ed., (oughton Mifflin Co. as defining broadcast as intr. To broadcast by television… tr. To broadcast a program by television. Black s Law Dictionary for conflicting definitions of the same word, the district court declined to find any ambiguity in the term convicted as it was used in context within the policy exclusion, granting summary judgment to the insurer. Id. at . )n affirming, the Tenth Circuit observed that [a] word may take on a variety of meanings in different contexts, but that the mere existence of multiple definitions does not render a term ambiguous if its meaning is otherwise clear in the context in which it is used within an insurance policy. Id. at . Quoting the Wisconsin Supreme Court in Sprangers v. Greatway The mere fact that a word has more than one dictionary meaning, or that the parties disagree about the meaning, does not necessarily make the word ambiguous if the court concludes that only one meaning applies in the context and comports with the parties objectively reasonable expectations. . . . Thus it is inappropriate to create ambiguity by simply finding two different dictionary definitions . . . Dictionary definitions can shed only partial light on the reasonable understanding of an insured with regard to words in the context of a particular insurance policy. Insurance Co., the Pompa court observed: Pompa, F. d at quoting Sprangers, N.W. d , Wis. Rather than finding an ambiguity based on the conflicting dictionary definitions offered by the parties, the Tenth Circuit looked to the policy . purpose for the exclusion at issue to bar coverage for criminal acts – in determining that the word convicted remained unambiguous. According to the Pompa court, there was no policy reason for limiting the exclusion to acts for which a trial had been had, or for it not to apply to acts for which a guilty plea had been tendered. Id. at . Therefore, the Court concluded that the term was unambiguous and was not reasonably susceptible to Pompa s preferred interpretation that being convicted required a trial and verdict. Id. To the extent that D)S( maintains that the word broadcasting is susceptible to an interpretation that would distinguish traditional television transmission from subscription or satellite based television transmission, ) reject that interpretation because the distinction is not supported by the underlying risk. Additionally, ) note )nsurers advance documentation of their broker s advice, which explicitly warned D)S( that it would not be covered for many injuries because of the Broadcasting Exclusion. D)S( argues that this extrinsic evidence is inappropriate for consideration because of Colorado s four corners or complaint rule. That rule, however, is about where courts should look to ascertain the facts potentially giving rise to a duty to defend; it is not about how to define the terms of a policy, which remains a question of law appropriate for determination on summary judgment. The broker s advice is admissible under an exception to the four corners rule. The Tenth Circuit has explicitly held that an exception would be recognized where it would rule and not undercut the purposes underlying the be supported by sufficient authority. Pompa, F. d at ; F. d at . Extrinsic evidence constituting an indisputable fact that is not an element of either the cause of action or a defense in the AIMCO, underlying litigation is admissible. Pompa, F. d at . (ere, as no party disputes the veracity of the broker s statements, there is no reason to doubt that they constitute sufficient authority. Also, neither the elements of the charges brought in the underlying patent infringement complaint nor D)S( s defenses have anything to do with whether D)S( is in the business of broadcasting. Finally, application of the rule to exclude the broker s advice would defeat the Colorado Supreme Court s very object in creating the rule. As D)S( itself highlights in its briefing, the rule exists to protect[] the insured s legitimate expectation of a defense. Cotter, quoting Hecla, P. d at P. d at . (ow can D)S( assert it had a legitimate expectation of a defense when it was literally instructed not to expect a defense? All together, these facts make the broker s advice admissible. )ndeed, the Tenth Circuit in this very dispute has cited approvingly to Pompa and stated that a Colorado court might well consider the substance of the extrinsic evidence that is the content of the Katz Action patent claims not at issue in the underlying suit. DISH Network, F. d at . Admitting the broker s advice is merely following the Tenth Circuit s suggestion with respect to a different category of evidence that was not before the Tenth Circuit. The evidence shows that D)S( was informed unequivocally that the )nsurers believed the Broadcasting Exclusion applicable. )f D)S( disagreed, it was then that it should have raised the issue. D)S( could have purchased additional coverage, but it chose not to. D)S( should not get the benefits of a product it did not purchase. Courts may neither add provisions to extend coverage beyond that contracted for, nor delete them to limit coverage. P. d at D)S( s favor. Cyprus, . (ere, ) would be adding coverage were ) to rule in )t also bears repeating that an insurance policy is a contract, and is generally subject to the standard rules of contract interpretation. Cyprus, P. d at . Accordingly, one may properly consider extrinsic evidence in determining whether an ambiguity exists. Level 3 Communications, LLC v. F. d th Cir. . As such, even were ) not to hold that the plain meaning of broadcasting unambiguously refers to what Liebert Corp., business D)S( is engaged, ) would consider the broker s advice to conclude that the parties expected the Business Exclusion to apply, which consideration would not violate the four corners rule as described above. The Business Exclusion for Telecasting Precludes Coverage Even were D)S( s business to be construed as ambiguous or something other than broadcasting, it continues to be excluded from Advertising )njury coverage under the Business Exclusion as an insured whose business is . . . telecasting. The incorporation of the term telecasting – in addition to the broader and partially overlapping term broadcasting –reflects the insurer s ceaseless quest to draft language definite enough to satisfy the pro insured tilt of the law. The term telecasting is included to make clear that businesses involving the transmission of television programming as opposed to only radio broadcasting, for example to viewers are excluded from advertising injury coverage. D)S( fails to account for the inclusion of this specific additional term within the Business Exclusion, attempting instead to persuade that it is subsumed within the “broadcasting” portion of the exclusion. DISH defines “telecasting” only by reference to broadcasting, specifically maintaining that it means no more than “to broadcast by television.” Doc. 169 at p.19. Equating the two terms to this extent, however, would nullify the inclusion of “telecasting” as an additional term, effectively reading it out of the Business Exclusion. This interpretative approach is inconsistent with the basic rule of contract construction that each term in the policy should be read to have independent meaning. See Progressive Specialty Ins. Co. v. Hartford Underwriters Ins. Co., 148 P.3d 470, 474 (Colo. App. 2006) (“We also read the provisions of the policy as a whole and construe it so that all provisions are harmonious and none is rendered meaningless.”) Thus, to the extent the Insurers offer a competing interpretation of these terms that gives each independent meaning, it must be adopted and DISH’s redundant interpretation must be rejected. National Union and XL s Duties as Secondary )nsurers Unlike Arrowood and Travelers, National Union and XL do not insure D)S( under a primary CGL policy. )nstead, National Union and XL serve as D)S( s umbrella insurers. An umbrella insurance policy is a distinct type of policy in which an insurer has a duty to defend where the applicable limits of insurance of the underlying policies have been exhausted by payments of claims to which the umbrella policy applies; or damages are sought that are covered by the umbrella policy but not covered by any other underlying insurance. See Apodaca v. Allstate Ins. Co., P. d , Colo. The Katz Action satisfies neither scenario under either National Union s or XL s policy. . As to the limit exhaustion requirement, D)S( concedes that the CGL insurance policies issued by Travelers and Arrowood have not been exhausted by payments of claims to which the National Union and XL policies apply. Doc. at p. . As to the other coverage requirement, National Union and XL have no duty to defend because their policies, like those of the primary insurers, contain exclusions for advertising injuries where the insurer is engaged in the business of broadcasting. National Union s policy contains the exclusion explicitly and XL s policy contains the exclusion by reference. That is, regardless of whether the applicable limits of the underlying policies have been exhausted, the National Union and XL Policies themselves do not cover defense costs for the injuries alleged in the underlying litigation. Furthermore, National Union s policy contains a sole causation requirement, discussed immediately below, that negates coverage. Lastly, and though ultimately irrelevant to this matter s disposition, National Union s Satellite Exclusion and XL s as warranted provision also fails to provide coverage. The Katz Action Complaint Fails to Meet National union s Sole Causation Requirement The relevant policy language regarding National Union s Sole Causation requirement is as follows: your advertising activities as a result of one or more of A. Advertising Injury means injury arising solely out of the following offenses: slanders or libels a person or organization or 1. Oral or written publication of material that disparages a person's or organization's goods, products or services; violates a person's right of privacy; 2. Oral or written publication of material that doing business; or 3. Misappropriation of advertising ideas or style of * * * 4. )nfringement of copyright, title or slogan. * * * H. Occurrence means: committed in the course of advertising your 3. As respects Advertising Injury, an offense goods, products and services that results in from the same or related injurious material or act Advertising Injury. All damages that arise shall be considered as arising out of one repetition thereof, the number and kind of media Occurrence, regardless of the frequency or used and the number of claimants. * * * This insurance does not apply to ... . An offense committed by an )nsured whose L. Advertising )njury arising out of. .. business is advertising, broadcasting, publishing, or telecasting ... Commercial Umbrella Policy Form NU / . at NU , NU , and As indicated above, National Union s policy language states that its Advertising )njury coverage is available only for underlying litigation "arising solely out of' the Dish parties' advertising activities as the result of an enumerated Advertising )njury offense. Commercial Umbrella Policy Form / at NU and NU . The complaint filed in the Katz Action does not allege injury "arising solely out of the Dish parties' advertising activities, however; rather, the injuries include all of D)S( s use of the underlying technology which use encompasses, for example, the transactions of pay per view movies and performing customer service functions and D)S( itself concedes that the allegedly infringing telephone systems do not solely involve advertising activities by acknowledging these other activities that have nothing to do with promoting products for sale to the public. Memorandum in Opposition to Defendants' Motions for Summary Judgment, Doc. / / at . Although D)S( acknowledges National Union s sole causation requirement and concedes its Katz Action complaint alleges injuries outside of advertising, it nonetheless argues that the sole causation requirement conflicts with the requirement in the definition of Occurrence that provides that the offense must be committed in the course of advertising the named insured's goods, products, or services. D)S( is mistaken. As explained above, a policy is not ambiguous merely because a party develops an unreasonable or strained interpretation of the language. Pub. P. d , Colo. . Contrary to the Dish parties' assertion, National Union's policy provisions are in harmony Servo Co. of Colo. v. Wallis & Cos., with one another. The arising "solely out of advertising activities" requirement contained in the definition of Advertising )njury modifies the injury. To constitute Advertising )njury, as the National Union Umbrella Policy defines that term, the injury must arise solely out of a named insured's advertising activities. NUSMJ, Doc. / / at NU . )n contrast, the "committed in the course of advertising" requirement in the definition of Occurrence modifies the offense. To constitute an Occurrence for purposes of Advertising )njury coverage, the offense must be committed in the course of advertising the named insured's goods, products and services. Id. at NU . Together, the provisions complement each other and ensure that National Union's Advertising )njury coverage is not expanded to encompass exposures only tangentially related to advertising. Because the policy's terms can be harmonized, there is no ambiguity. Wota v. Blue Cross & Blue Shield of Colo., P. d , Colo. Policy provisions should be read to avoid ambiguities if possible, and the language should not be tortured to create ambiguities. internal citations omitted . Accordingly, because the complained of activity does not arise solely out of advertising activity and because ) find the sole causation requirement does not conflict with the definition of Occurrence, National Union has no duty to defend. National Union s Satellite Exclusion Does Not Apply The National Union Umbrella Policy also contains a Satellite Exclusion endorsement, which provides as follows: This insurance does not apply to Bodily )njury, Property Damage, Personal )njury or Advertising )njury arising out of the ownership, operation or use of any satellite. Commercial Umbrella Policy Form / at NU . National Union argues that as D)S( owns, operates and uses satellites, it has no duty to defend the advertising injuries D)S( complains of. ) disagree. Although my disagreement does not change the outcome for National Union—the inapplicability of this exclusion does not return coverage when ) have determined that the Business Exclusion applies—) note the argument almost as a curiosity. D)S( points out that upholding the Satellite Exclusion in the manner urged by National Union would render coverage illegally illusory by way of a hypothetical showing the absurdity of National Union s argument: Under National Union s interpretation, the Satellite Exclusion would be applicable to a bodily injury due to a slip and fall on D)S( Network s premises simply because D)S( Network is in the subscription satellite television business. Doc. at p. . ), too, can envision no scenario in which the exclusion would not apply under National Union s logic. Perhaps neither can National Union, for its Reply did not offer a theory discarding the exception as illusory. Colorado law will not enforce insurance policies that violate public policy by providing illusory coverage and neither will ). See Pompa, P. d , Colo. F. d at ; O'Connor v. coverage is illusory where, insurer receives premiums when realistically it is not incurring any Proprietors Insurance Co., risk of liability . Fortunately for National Union, however, it has another, legally sound exclusion that removes its duty to defend, the Business Exclusion discussed herein. The XL Policy Does Not Supply Coverage The XL Policy has two distinct coverage parts. The XL Policy provides both excess Coverage A and umbrella Coverage B coverage. Coverage A provides excess coverage for injuries already covered by the underlying policies, in this case the Arrowood policy if it were found to apply , and any other available primary insurance. Coverage A of the XL Policy follows form to the Arrowood policy, unless the terms, conditions and exclusions of the XL Policy provide otherwise. By way of contrast, Coverage B operates to provide drop down primary coverage for injuries not covered by the underlying policy the Arrowood policy or any other insurance. Unlike Coverage A, Coverage B does not incorporate the exclusions contained in the underlying policies, and is excess to a self insured retention. (owever, by endorsement, the XL Policy does follow form to the underlying Arrowood Policy with respect to advertising injury . Accordingly, if there is no advertising injury coverage under the Arrowood Policy, there is no coverage under XL s Coverage B. As explained above, ) hold that the Primary )nsurers, Arrowood included, did not improperly withhold coverage. Therefore, there is no coverage under XL s Coverage B. For purposes of discussing the unique as warranted policy language found in Coverage A of the XL Policy, however, ) assume arguendo that it was wrong for Defendant Arrowood to deny coverage. The pertinent XL Policy provision reads: With respect to any loss covered by the terms and conditions of this policy, but not covered as warranted by underlying insurance, we will pay on your behalf for loss the underlying policies listed on Schedule A, or any other caused by an occurrence which is in excess of the retained limit for liability imposed on you by law or assumed by you under contract for bodily injury , personal injury , property damage or advertising injury. This insurance applies only to bodily injury , personal Doc. injury , property damage or advertising injury which occurs during the policy period. , Ex. C . emphasis added . The addition of as warranted as a modifier to not covered obliges XL to drop down and provide coverage for occurrences even when its underlying insurer wrongfully denies coverage. F. d , Arrowood is the listed underlying insurer to the XL Policy. Hocker v. New Hampshire Ins. Co., th Cir. . Because, however, the XL Policy has another provision that expressly excludes coverage for [a]ny defense, investigation, settlement or legal expense covered by underlying insurance, XL Policy, Ex. C to Doc. p. , Exclusion O. [Ex. C ] , to the extent the claim is covered by underlying primary insurance, the XL Policy cannot be implicated as it carves out insuring any defense covered by underlying insurance. Thus, the XL Policy is not required to drop down and provide primary coverage even if Arrowood s denial of coverage was wrongful, which, of course, ) have already determined it not to have been. )nsurers Did Not Act in Bad Faith As D)S( s breach of contract claims against )nsurers fail, so too must its bad faith claims. The issue of coverage is a central predicate to any claim of bad faith breach of the insurance contract. Cary v. United of Omaha Life Ins. Colo. Co., P. d , Colo. App. , rev’d other grounds ; Jarnagin v. Banker's Life and Cas. Co., P. d , P. d , Colo. App. judicial determination of no coverage renders attendant bad faith claim either moot or without merit as a matter of law ; Weitz Co., LLC v. Mid P. d , Colo. App. finding of no duty to defend properly sustained summary judgment on bad faith claim . D)S( will Century Ins. Co., not be awarded any general and consequential damages. Simply put, D)S( provides television programming to a vast population Conclusion and is therefore a broadcaster . D)S( implicitly agrees through its history of calling itself a broadcaster. )t now deems it expedient to plump up its definition by reminding the Court and in some instances, adding altogether that it is a direct satellite broadcaster , but it is a self proclaimed broadcaster nonetheless. Accordingly, the )nsurers Business Exclusions negate any duty to defend D)S( s advertising injuries. Explicitly, ) find that the only And, for that matter, a telecaster, see supra at p. . reasonable interpretation of the Business Exclusion is that it applies to direct satellite broadcasters, that the allegations set forth in the underlying Katz Action complaint are solely and entirely within the Business Exclusion, and that therefore the )nsurers have met their heavy burden of proving that the underlying claim cannot fall within the policy coverage. See Compass Ins. Co. v. P. d , Colo. . As there is no duty to defend for any insurer, there is likewise no duty to indemnify. No )nsurer acted in City of Littleton, bad faith and D)S( is not entitled to any damages. The Summary Judgment motions of Arch, Arrowood, Traveler s, National Union, and XL, are GRANTED. The Partial Summary Judgment motion of D)S( is DEN)ED. DATED: October , BY T(E COURT: s/John L. Kane John L. Kane, U.S. Senior District Judge
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