In this case, brought in the Delaware Superior Court’s Complex Commercial Litigation Division, the Court considered whether RSUI Indemnity Co. (“RSUI”) owed insurance coverage obligations to Sempris, LLC (“Sempris”). RSUI issued a Director and Officer Liability Policy (the “Policy”) to Sempris effective March 1, 2013 through March 1, 2014. The parties’ dispute stems from an underlying lawsuit, Toney v. Quality Res., Inc. (the “Toney Lawsuit”),[1] a putative class action in which the plaintiff alleged two claims under the Telephone Consumer Protection Act (“TCPA”). RSUI denied that it owed Sempris an obligation under the Policy’s Insuring Agreement and filed this action on October 8, 2013 seeking a declaratory judgment stating the same. On February 28, 2014, RSUI moved for summary judgment on its declaratory judgment claim. On the same day, Sempris moved for partial summary judgment seeking a declaration that RSUI did indeed owe Sempris a coverage obligation.
The Insuring Agreement provided for coverage where “a Claim for a Wrongful Act is first made against the Insured Organization during the Policy Period.” Under Section V., paragraph B.3 of the Insuring Agreement, any claims arising out of similar facts, circumstances, or transactions would be deemed first made when the earliest of such similar claims was first made:
All Claims based on, arising out of, directly or indirectly resulting from, in consequence of, or in any way involving the same or related facts, circumstances, situations, transactions or events, or the same or related series of circumstances, transactions or events, shall be deemed to be a single Claim for all purposes under this policy . . . and shall be deemed first made when the earliest of such Claims is first made . . . .
In addition, the Insuring Agreement explicitly excluded coverage for any “Loss arising out of or in connection with any Claim . . . arising out of, based upon or attributable to, directly or indirectly relating to” Dioquino v. Sempris, LLC;[2] Daniell v. Sempris, LLC;[3] Valencia v. Sempris, LLC;[4] and Herman v. Sempris, LLC (the “Prior Lawsuits”).[5] RSUI denied Sempris coverage based on its assessment that the Toney Lawsuit was related to the Prior Lawsuits.
The Court first considered whether the Toney Lawsuit fell within the Insuring Agreement. RSUI argued that the Toney Lawsuit fell outside the definition of the Insuring Agreement because it was related to the Prior Lawsuits, and therefore under Section V., paragraph B.3, was an action first made prior to the Policy Period. Even though the Court acknowledged that the “arising out of” language employed by the Insuring Agreement is a broadly construed contract term, it nonetheless distinguished the Toney Lawsuit from the Prior Lawsuits on factual grounds. In the Toney Lawsuit, the plaintiff alleged that, after placing an online order for Stompeez children’s slippers, she received several calls on her cell phone from Quality Resources, a third-party telemarketer. The telemarketer verified Ms. Toney’s online order and then attempted to sell her Sempris’ Budge Savers goods and services. Ms. Toney was never charged for the Budget Savers program, but her cell phone number was listed on the national Do Not Call Registry, a violation of the TCPA.
In the Dioquino Lawsuit, the plaintiff placed a telephone call to order a book sold by Wealth Systems, LLC, a Sempris partner. Following the call, the plaintiff was charged for Sempris’ Value Plus Membership Program. Plaintiff alleged fraud, negligence, unfair competitions, and violation of the Electronic Funds Transfer Act. In the Daniell Lawsuit, plaintiff alleged fraud, deceptive business practices, breach of contract, and unjust enrichment after she provided her billing information during an online order and was subsequently charged for a Sempris Membership Program without her consent. In the Valencia Lawsuit, the plaintiff made a call to order a product after viewing an infomercial and, without having to reauthorize a charge to his credit card, was then charged for a three-month of membership in a Sempris Membership program. The plaintiff alleged violations of consumer protection laws as well as fraud by omission, breach of contract, and unjust enrichment. Finally, in the Herman Lawsuit, the plaintiff also placed a call to order a product he viewed on an infomercial. During the call, he opted for a risk-free trial in a Sempris Membership Program, which he almost immediately cancelled. Nonetheless, the plaintiff was charged for two-months in the program, and he alleged inter alia, fraud by omission and unjust enrichment.
The Court determined that Toney was not related to the Prior Lawsuits, reasoning that the Toney Lawsuit was distinguishable from the Prior Lawsuits on factual grounds. Namely, Toney involved an inbound call to the plaintiff’s cell phone, whereas the Prior Lawsuits involved outbound calls to Sempris partner or affiliates. For that reason, none of the facts alleged in the Prior Lawsuits would give rise to a claim under the TCPA. Although RSUI relied on United Westlabs, Inc. v. Greenwich Insurance Co., 2011 WL 2623932 (Del. Super. Ct. June 13, 2011), the Court determined Westlabs was distinguishable because in Westlabs, the subject claims were “fundamentally identical.” In contrast, the facts in Toney Lawsuit and the Prior Lawsuits were not analogous. Unlike the plaintiffs in the Prior Lawsuits, Ms. Toney was never enrolled in a Sempris program. Because the Toney Lawsuit was factually distinct from the Prior Lawsuits, neither the Insuring Agreement’s Prior Notice Exclusion, nor the Insuring Agreement’s “Exclusion-Specific” Endorsement operated to bar coverage.
Next, the Court determined that the Unfair Trade Practices Exclusion also did not operate to bar coverage. This exclusion barred coverage “For actual or alleged violation of any law . . . with respect to any of the following activities: . . . unfair trade practices or tortuous interference in another’s business or contractual relationships.” The exclusion, however, was limited, the Court found, to “another’s business or contractual relationships,” which was not triggered by the Toney Lawsuit. And lastly, the Court found that the Professional Services Exclusion did not bar coverage because there was no suggestion in the Toney complaint that Sempris provided professional services for a fee. In all, the Court determined that Sempris met its burden to prove that the Toney Lawsuit was unrelated to the Prior Lawsuits, and therefore granted Sempris’ Motion for Partial Summary Judgment. RSUI’s Motion for Summary Judgment was denied.
[1] Case No. 1:13-cv-42 (N.D. Ill.).
[2] Case No. 11-CV-05556-SJO-MRW (C.D. Cal.).
[3] Case No. 12-CH-44123 (Cook Cty. Ill.).
[4] Case No. 12-CV-2985 (S.D. Cal.).
[5] Case No. 13-CV-0020 (W.D. Mich.).
