From the Desk of Kyle Riley: This case sets forth what policy exclusion language allows a denial of coverage for an insured based upon unlawful acts committed by a third-party on behalf of the insured.
Claims Pointer: A policy exclusion barring coverage for injuries arising directly or indirectly out of “any” excluded action or omission unambiguously includes acts committed by parties other than the insured.
Oregon Mutual Insurance v. Rain City Pizza, LLC, et. al, in the Court of Appeals of the State of Washington, Division I, No. 67471-4-I, — P3d —-, (January 14, 2013) (unpublished).
Kevin Sonneborn (“Sonneborn”) owned several companies that operated 21 Papa John’s pizza stores in Seattle and the Peninsula areas of Washington State. Oregon Mutual Insurance Company (“Oregon Mutual”) insured Sonneborn and these entities. Rain City Pizza, LLC was one of Sonneborn’s companies. In March and April of 2010 Sonneborn gave a third-party marketing company, On Time 4 U, LLC (“On Time”) a list of names and telephone numbers for pizza customers from the 21 pizza restaurants that his companies owned. On Time used these call lists to send text messages to customers on behalf of Sonneborn’s companies as advertising for the 21 Papa John’s pizza stores. In May 2010 a class action lawsuit was filed against Sonneborn alleging violations of federal and state laws related to the unlawful transmission of text messages to advertise pizza products. A separate action for declaratory relief was thereafter brought by Oregon Mutual alleging that it had no duty to defend Sonneborn and his companies as its insureds because coverage was barred by the policy’s exclusion for claims arising out of the distribution of information in violation of any statute. The trial court denied Oregon Mutual’s claim on summary judgment finding that the policy exclusion did not apply because it only covered injuries “arising directly or indirectly out of any act or omission that violates or is alleged to violate” the relevant statutes. Because the acts or omissions were actually performed by On Time, a third party not insured by Oregon Mutual, the trial court held the policy exclusion did not apply. Oregon Mutual appealed.
The court of appeals disagreed. Recognizing that insurance policies were liberally construed in favor of coverage and exclusions were strictly construed against the insurer, the court of appeals found that the policy exclusion’s language was unambiguous in that it clearly applied to “any” act or omission, not just the acts or omissions of Oregon Mutual’s insureds. Additionally, the court of appeals found that the exclusion’s language covering injuries “arising directly or indirectly out of an act or omission” contemplated a situation in which an insured may be responsible for an act or omission committed by another, such as negligent supervision or vicarious liability. Since the complaint alleged that Oregon Mutual’s insureds were responsible for injuries caused by the text messages because they negligently allowed them to be sent and/or were vicariously liable for the text’s transmission, the claims fell under the exclusion to Oregon Mutual’s policy.
NOTE: This opinion has not been published. It is provided to demonstrate how the court approaches the issues involved in the case. It cannot be cited as authority to a court of law.
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