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Defender Security Co. v. First Mercury Insurance Co.

United States District Court, S.D. Indiana, Indianapolis Division

March 14, 2014

DEFENDER SECURITY COMPANY, Plaintiff,
v.
FIRST MERCURY INSURANCE COMPANY, Defendant.

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS

SARAH EVANS BARKER, District Judge.

This cause is now before the Court on Defendant's Motion to Dismiss, filed on March 6, 2013, pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiff, Defender Security Company ("Defender") filed this action against Defendant, First Mercury Insurance Company ("First Mercury"), asserting claims for breach of contract and breach of the duty of good faith. Defender's Complaint alleges that it is entitled to a defense and indemnity from First Mercury in connection with a class action lawsuit filed against it in the Central District of California by lead plaintiff Kami Brown ("the Brown Complaint"), alleging various violations of the California Penal Code.

First Mercury seeks to have Defender's Complaint dismissed arguing that the Complaint fails to state a legally cognizable cause of action because the allegations contained in the Brown Complaint do not fall within the insurance policy issued to Defender by First Mercury. For the reasons detailed below, we GRANT Defendant's Motion to Dismiss.

Factual Background

The Underlying Lawsuit

On July 25, 2012, Ms. Brown filed a class action complaint in California state court alleging that in May 2012 she had telephonic communications with certain employees, agents, and/or representatives of Defender that were recorded without her consent. That action has been removed from state court and now pends in the United States District Court for the Central District of California. The Brown Complaint asserts that Defender's "acts and practice violated [California] Penal Code § 632, which prohibits the recording of confidential communications made by telephone without the consent of all parties to the communication, and Penal Code § 632.7, which prohibits the recording of any communications made from a cellular or cordless telephone without the consent of all parties to the communication." Def.'s Ex. A (Brown Compl. ¶ 2).

The Brown Complaint further alleges as follows: On May 3, 2012, Ms. Brown called the toll free telephone number for Protect Your Home printed on an advertisement for a promotional offer for ADT Security Services disseminated by Defender. During the call with Defender, Ms. Brown "shared personal information, " including her full name and zip code, but was neither informed that the call would be recorded nor did she give her consent for such a recording. Id. ¶ 13. The Brown Complaint further alleges that in a subsequent call to Defender, Ms. Brown shared her name, address, date of birth, and social security number, and once again was neither informed that the call was being recorded nor gave permission for such a recording. Id. ¶ 14. According to the Brown Complaint, Defender used "Call Recording Technology" that enabled it "to record all of its telephonic telephone conversations with consumers, and allowed them to store these recordings for various business purposes." Id. ¶17. Defender's "employees, agents, and representatives were directed, trained, and instructed to, and did record inbound and outbound conversations with consumers, without the knowledge or consent of consumers." Id. ¶ 18. Finally, the Brown Complaint alleges that all class members were subjected to similar conduct because Defender "systematically recorded all inbound and/or outbound telephone conversations without warning all parties to these confidential communications that the conversations were recorded...." Id. ¶ 27.

Defender's Insurance Policy

First Mercury issued to Defender a commercial general liability policy, Number FMMI020041-3, effective July 1, 2011 to July 1, 2012 ("the Policy"). The Policy provides coverage for, inter alia, "Personal and Advertising Injury." The Policy provides in relevant part as follows:

COVERAGE B: PERSONAL AND ADVERTISING INJURY LIABILITY
1. Insuring Agreement
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "personal injury" or "advertising injury" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "personal injury" or "advertising injury" to which this insurance does not apply....
b. This insurance applies to:
(1) "Personal injury" caused by an offense arising out of your business, excluding advertising, publishing, broadcasting or ...

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