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Phoenix Insurance Co. v. Heska Corp.

United States District Court, D. Colorado

July 26, 2017

THE PHOENIX INSURANCE COMPANY, a Connecticut corporation, Plaintiff,
HESKA CORPORATION, a Delaware corporation; and SHAUN FAULEY, a natural person, Defendants.


          Marcia S. Krieger United States District Court

         THIS MATTER comes before the Court on Plaintiff Phoenix Insurance Company's Amended Motion for Affirmative Partial Summary Judgment (# 57) and Defendant Heska Corporation's Motion to Certify Questions to the Colorado Supreme Court (# 63). For the following reasons, the motion to certify is denied and the motion for partial summary judgment is granted.

         I. BACKGROUND[1]

         Shaun Fauley, named as a defendant in this case but never served, filed a lawsuit against Defendant Heska Corporation in the Northern District of Illinois (the Underlying Litigation). See Compl., Frauley v. Heska Corp., No. 15-CV-2171 (Mar. 12, 2015), available at Doc. 5-1. He seeks to recover under the Telephone Consumer Protection Act (the Act) on a class-action basis for an unsolicited fax he alleges he received in May 2013. Id. ¶ 2. Mr. Fauley seeks the greater of his “actual monetary loss” or $500 for each violation of the Act, id. at 13, and seeks treble recovery for a willful or knowing violation of the Act, id. ¶ 5. With regard to his monetary loss, Mr. Fauley alleges the fax caused a loss of paper, toner, and time, and used phone lines. Id. ¶ 36.

         Plaintiff Phoenix Insurance Co. was Heska's provider for commercial liability insurance at all times relevant to the Underlying Litigation. To that end, from 2010 to 2014, Phoenix issued four successive policies (the Policies), each lasting one year.[2] The Policies each included a provision undertaking a “right and duty to defend the insured against any suit seeking” damages for “bodily injury” or “property damage, ” provided the damages were “caused by an occurrence that takes place in the coverage territory.” 2010 Policy, Doc. 57-1 at 102.[3] Under the Policies, “Property Damage” means “[p]hysical damage to tangible property of others” or “[l]oss of use of tangible property of others that is not physically damaged.” Id. at 151. And “occurrence” is “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Id. at 115.

         Each of the Policies contained exclusions, removing coverage from “‘[b]odily injury' or ‘property damage' expected or intended from the standpoint of the insured.” Id. at 103. The 2010 and 2011 Policies excluded any of the foregoing injuries or damage “arising out of unsolicited communications by or on behalf of any insured, ” defining “unsolicited communications” as “any form of communication, including but not limited to facsimile, . . . in which the recipient has not specifically requested the communication. Unsolicited communications also include [communications] made in violation of the [Act].” Id. at 139. The 2012 and 2013 Policies addressed unsolicited communications with substantially similar but slightly different language, excluding the foregoing injuries or damage “arising out of any actual or alleged violation of any law that restricts or prohibits the sending, transmitting or distributing of ‘unsolicited communication, '” defined as “any communication, in any form, that the recipient of such communication did not specifically request to receive.” 2012 Policy, Doc. 57-3 at 143.

         Phoenix denied coverage for the Underlying Litigation in a letter to Heska. Letter of May 8, 2015, Doc. 58-3 at 8-9. After communication with Heska that is not in the record, Phoenix agreed to participate in the Underlying Litigation under an express reservation of “all of its rights, contractual, quasi-contractual and/or otherwise, to the extent permitted by Colorado law, . . . to seek reimbursement or recoupment of all defense fees and costs paid in connection with any and all non-covered claims.” Letter of Oct. 16, 2015, Doc. 58-4 at 2. Phoenix also reserved the right “to decline coverage and withdraw from the defense.” Id.

         Phoenix filed this suit in November 2015, seeking declaratory judgment on the Policies. Phoenix contends that any number of the foregoing provisions operates to remove the Underlying Litigation from coverage. In August 2016, the Court bifurcated Phoenix's claim into two claims: “whether it has a contractual obligation to defend Heska in the underlying action and whether it[ ]has a contractual obligation to indemnify Heska for its liability, if any, determined in the underlying action.” Doc. 48. The Court also stayed discovery as to the duty-to-indemnify claim pending determination of the duty-to-defend claim. Phoenix moved for summary judgment, as amended, on September 9, 2016, Doc. 57, and Heska moved to certify questions to the Colorado Supreme Court on October 30, 2016, Doc. 63.


         As an initial matter, Heska asks this Court to certify a number of questions to the Colorado Supreme Court:

1. Whether [Phoenix] has a duty to defend Heska in the Underlying Litigation.
2. Whether this action is an anticipatory declaratory judgment action . . . .
3. Whether, in an anticipatory declaratory judgment action, the insurer under a liability insurance policy owes a duty to defend a lawsuit against the insured unless the insurer can prove the allegations in the complaint against the insured fall solely and entirely within an exclusion to the insurance policy.
4. Whether, for purposes of determining the duty to defend . . ., the allegations in the complaint against the insured must be construed ...

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