Cincinnati Insurance Company v. All Plumbing, Inc.

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 9, 2015 Decided February 5, 2016

No. 14-7140

CINCINNATI INSURANCE COMPANY,
APPELLANT/CROSS-APPELLEE

v.

ALL PLUMBING, INC. SERVICE, PARTS, INSTALLATION, ET AL.,
APPELLEES/CROSS-APPELLANTS

Consolidated with 14-7151

Appeals from the United States District Court
for the District of Columbia
(No. 1:12-cv-00851)

Laura Anne Foggan argued the cause for appellant/cross-
appellee Cincinnati Insurance Company. With her on the briefs
was Thomas S. Garrett.

David M. Oppenheim argued the cause for appellee/cross-
appellant FDS Restaurant, Inc. With him on the briefs were
Jeffrey A. Berman and Stephen H. Ring.

Before: ROGERS, TATEL and WILKINS, Circuit Judges.
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Opinion for the Court by Circuit Judge ROGERS.

ROGERS, Circuit Judge: The Cincinnati Insurance Company
(“Cincinnati”) filed a complaint for a declaratory judgment that
it owes no duty to defend or indemnify claims brought against
its insured, All Plumbing, Inc. and its president (together, “All
Plumbing”), for sending unsolicited faxed advertisements
alleged to be in violation of the Telephone Consumer Protection
Act (“TCPA”), 47 U.S.C. § 227. The district court ruled that
Cincinnati could not assert any of its defenses to coverage under
the primary liability provision of the policy because it had failed
to reserve its rights but could assert such defenses under the
excess liability provision. The district court did not address the
asserted defenses under that provision, however. Cincinnati
appeals, and FDS Restaurant, Inc., which is suing All Plumbing
for violating the TCPA, cross-appeals.

The court dismisses the appeals for lack of a final decision
as to all requested relief. See 28 U.S.C. § 1291. The decision
granting summary judgment to FDS did not resolve all of
Cincinnati’s rights and liabilities under the excess liability
provision of the policy, and that omission became more apparent
when the district court clarified that some coverage defenses
may be available under that provision. Absent a certification by
the district court pursuant to Federal Rule of Civil Procedure
54(b) that the rights and liabilities under the primary liability
provision of the policy are final and that there is “no just reason
for delay,” this court lacks jurisdiction. Because there is not a
final decision as to any party, the court need not address whether
the absence of entry of a judgment against All Plumbing, which
defaulted, also defeats finality.
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I.

Cincinnati issued a commercial insurance policy to All
Plumbing that provides for primary liability coverage and, in the
event that coverage is exhausted, excess liability coverage. The
primary liability provision covers “bodily injury” and “property
damage” subject to a $1,000 deductible under Part A, and
“personal and advertising injury” under Part B. The excess
liability provision follows the terms and conditions of the
primary liability provision. The policy covers claims arising
from March 3, 2006 to March 3, 2007.

Two class actions were filed against All Plumbing in the
D.C. Superior Court for allegedly sending over 10,000
unsolicited faxes to businesses located in Washington, D.C. and
Northern Virginia, in violation of the TCPA. The TCPA
prohibits sending unsolicited advertisements by fax machine,
except in limited circumstances, see 47 U.S.C. § 227(b)(1)(C),
and recipients are entitled to $ 500 in statutory damages for each
violation, an amount that may be trebled if the violation was
willful or knowing, see id. § 227(b)(3). The first TCPA lawsuit
was filed by Love the Beer, Inc., on September 14, 2010. By
letter of December 2, 2011, Cincinnati notified All Plumbing
that, subject to a full and complete reservation of rights, it would
defend the lawsuit. The letter explained why the policy might
not cover TCPA claims. The second lawsuit, virtually identical
to the first, was filed by FDS on December 2, 2011. The same
attorney represented the named plaintiffs in both class actions.
On December 22, Love the Beer moved to dismiss its class
claims. Cincinnati began defending the FDS action on All
Plumbing’s behalf, but did not notify All Plumbing of its
reservation of rights. Instead, Cincinnati informed FDS that
there may not be coverage for its claims against All Plumbing.
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On May 21, 2012, Cincinnati filed a complaint in the
federal district court for a declaratory judgment that it owes no
duty to defend All Plumbing from the TCPA claims brought by
FDS or to indemnify those claims should FDS prevail in the
underlying lawsuit. FDS was named in the complaint.
Cincinnati asserted, in part, that the excess liability provision
does not cover the TCPA claims because they do not arise from
an “occurrence” and also are not “personal and advertising
injury.” It also asserted that the claims come within policy
exclusions, including the “expected or intended” exclusion, the
“knowing violation of the rights of another” exclusion, and the
“underlying insurance” exclusion. Finally, it asserted that the
insured had substantially and materially breached the policy’s
notice provisions. See Compl. ¶¶ 32–39.

No party responded to the complaint, prompting the district
court to enter a default against FDS and All Plumbing. Upon
vacatur of the default at FDS’s request, FDS filed a
counterclaim for a declaratory judgment that its claims against
All Plumbing are covered under both the primary and excess
liability provisions of the policy. Cincinnati and FDS filed
motions for summary judgment, with both contesting whether
TCPA claims are “property damage” or “personal or advertising
injury” under the policy. Alternatively, Cincinnati argued that
All Plumbing’s failure to provide it with notice of the FDS
lawsuit bars coverage under the policy, and FDS argued that
Cincinnati had waived any defenses to coverage.

The district court granted summary judgment to FDS on the
ground that Cincinnati had not renewed its reservation of rights
in the FDS action. See Cincinnati Ins. Co. v. All Plumbing, Inc.
(Cincinnati I), 983 F. Supp. 2d 162, 165–69 (D.D.C. 2013).
Cincinnati moved for reconsideration, in part arguing that its
reservation of rights in the Love the Beer case should also apply
to the FDS action. It also sought clarification that even if a
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failure to reserve its rights precluded asserting coverage
defenses under the primary liability provision, it should still be
permitted to invoke that provision’s deductible under Part A and
assert any coverage defenses under the excess liability
provision, because any duty to defend under that provision does
not arise until the limits of the primary liability provision are
exhausted. The district court denied reconsideration but
clarified that Cincinnati is not precluded from asserting either
the $1,000 deductible or any coverage defenses under the excess
liability provision. Cincinnati Ins. Co. v. All Plumbing, Inc.
(Cincinnati II), 64 F. Supp. 3d 69, 75–81 (D.D.C. 2014). The
district court also denied Cincinnati’s request for a status
conference and clarification regarding the finality of the district
court’s decisions, ruling that its decisions granting summary
judgment and clarification were final and appealable.

Cincinnati filed a notice of appeal, and FDS filed a cross-
appeal. Thereafter, Cincinnati moved to dismiss the appeals for
lack of appellate jurisdiction because the district court left
unresolved some relief sought in its declaratory judgment
complaint.

II.

This court has jurisdiction over “final decisions” of the
district court. 28 U.S.C. § 1291. A decision is final only if it
“ends the litigation on the merits and leaves nothing for the
court to do but execute the judgment.” Van Cauwenberghe v.
Biard, 486 U.S. 517, 521–22 (1988) (quoting Caitlin v. United
States, 324 U.S. 229, 233 (1945)); see also Blue v. D.C. Pub.
Sch., 764 F.3d 11, 15 (D.C. Cir. 2014); United States v. Philip
Morris USA Inc., 686 F.3d 839, 845–46 (D.C. Cir. 2012). This
approach avoids piecemeal appellate review and also “protects
the district court’s independence, prevents multiple, costly, and
harassing appeals, and advances efficient judicial
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administration.” Blue, 764 F.3d at 15; accord Robinson-Reeder
v. Am. Council on Educ., 571 F.3d 1333, 1336–37 (D.C. Cir.
2009). Federal Rule of Civil Procedure 54(b) provides,
however, that where a case involves multiple claims or multiple
parties,

the [district] court may direct entry of a final judgment
as to one or more, but fewer than all, claims or parties
only if the court expressly determines that there is no
just reason for delay. Otherwise, any order or other
decision, however designated, that adjudicates fewer
than all the claims or the rights and liabilities of fewer
than all the parties does not end the action as to any of
the claims or parties and may be revised at any time
before the entry of a judgment adjudicating all the
claims and all the parties’ rights and liabilities.

See also Blue, 764 F.3d at 15; Robinson-Reeder, 571 F.3d at
1337; Turtle v. Inst. for Res. Mgmt., 475 F.2d 925, 925–26 (D.C.
Cir. 1973). Because the district court did not invoke Rule 54(b),
its decisions granting summary judgment and granting
clarification are final only if they adjudicated all of the rights
and liabilities at issue in the declaratory judgment action.

Throughout the declaratory judgment proceedings
Cincinnati has argued that neither the primary nor excess
liability provisions could be read to cover the TCPA claims in
the FDS lawsuit. See Compl. ¶¶ 25–39; Cincinnati’s Br. in
Supp. Summ. J. 19–36. For example, Cincinnati argued that the
TCPA claims are not covered because they do not arise from
“personal and advertising injury” as that phrase is defined in the
policy. The district court initially granted summary judgment to
FDS, upon concluding it had no reason to address such
arguments, because Cincinnati’s failure to “properly reserve its
rights . . . precludes Cincinnati Insurance from asserting any
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defenses to coverage of the FDS action.” Cincinnati I, 983
F. Supp. 2d at 169. It later clarified, however, that this decision
applied only to the primary liability provision of the policy. See
Cincinnati II, 64 F. Supp. 3d at 80–81. The district court’s
decisions preclude Cincinnati from claiming that the primary
liability provision does not cover the TCPA claims in the FDS
lawsuit. See Cincinnati I, 983 F. Supp. 2d at 165. But neither
decision resolves fully Cincinnati’s asserted defenses under the
excess liability provision. The district court ruled that
Cincinnati may assert coverage defenses under this provision,
see Cincinnati II, 64 F. Supp. 3d at 80–81, without addressing
the merits of the defenses that Cincinnati asserted in its
complaint and thus without deciding whether Cincinnati can
disclaim coverage of the TCPA claims under the excess liability
provision. Failing to address those issues in Cincinnati’s
complaint renders the district court’s decisions akin to grants of
partial summary judgment, to FDS and to Cincinnati, that
resolve only the threshold issue of the defenses Cincinnati
waived by failing to reserve its rights, and such interlocutory
decisions are not final under 28 U.S.C. § 1291. See Liberty Mut.
Ins. Co. v. Wetzel, 424 U.S. 737, 744 (1976); Judicial Watch,
Inc. v. U.S. Dep’t of Commerce, 470 F.3d 363, 371 (D.C. Cir.
2006); cf. Alaska v. Fed. Energy Regulatory Comm’n, 980 F.2d
761, 763–64 (D.C. Cir. 1992).

FDS offers, assuming that there are unresolved issues
relating to coverage under the excess liability provision, that this
court has jurisdiction because it may never be necessary to
resolve the undecided issues. FDS first suggests that any
argument under the excess liability provision is irrelevant
because Cincinnati also waived any policy limit that might
provide a cap on its total liability under the primary liability
provision. If coverage under the primary liability provision is
unlimited, then there would be no need to tap into coverage
under the excess liability provision or resolve the scope of that
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coverage, effectively rendering the district court’s decisions
final. But reading the district court’s decisions in this way,
merely because Cincinnati never asked the district court to
clarify that it had not waived policy limits under the primary
liability provision, defies reason. In granting summary
judgment, the district court neither stated nor implied that
Cincinnati waived its policy limits. See Cincinnati I, 983
F. Supp. 2d at 167. Instead, the district court focused on
whether Cincinnati was precluded from disclaiming coverage
altogether, not on the total amount Cincinnati must pay if the
TCPA claims are covered by the policy. Under FDS’s reading,
the district court would have rejected, sub silentio, the well-
recognized distinction between asserting policy limits and
asserting defenses to liability. See COUCH ON INSURANCE
§ 202:74 (3d ed. 2013); Faber v. Roelofs, 250 N.W.2d 817, 825
(Minn. 1977). FDS never argued in the district court that
Cincinnati’s failure to reserve its rights also precluded it from
invoking its policy limits. Moreover, FDS’s reading would
render advisory the district court’s decision clarifying its
summary judgment decision and require this court to overlook
authority cited by the district court recognizing that an insurer’s
failure to reserve its rights does not mean the policy is without
limit on the coverage it provides. See Cincinnati II, 64
F. Supp. 3d at 79–81. Had the district court understood its
decision granting summary judgment to preclude Cincinnati
from relying on its policy limits, there would have been no need
for it to clarify whether defenses are available under the excess
liability provision.

Second, FDS suggests, no more persuasively, that this court
has jurisdiction because the district court has finally resolved the
only question necessary for the underlying TCPA litigation to
proceed, namely, whether Cincinnati must defend the lawsuit.
The question of how much Cincinnati will ultimately have to
pay remains conceptually distinct. See Salus Corp. v. Cont’l
 9

Cas. Co., 478 A.2d 1067, 1069–70 (D.C. 1984). Further, FDS
suggests that deciding more, including whether the TCPA
claims are covered under the excess liability provision, would
not only have been unnecessary but premature. If the parties
settle their Superior Court class action litigation for less than the
primary liability provision policy limits, then deciding issues
relating to the excess liability provision would become
unnecessary. Even without such a settlement, resolving some of
the issues posed by Cincinnati’s request for declaratory
judgment might prove easier after the class action litigation is
completed, particularly as “the duty to indemnify, i.e., ultimate
liability, depends upon the true facts” and not the allegations in
FDS’s complaint, see Salus, 478 A.2d at 1069–70. The district
court did not indicate that these were the reasons it declined to
address fully the relief sought by Cincinnati regarding the excess
liability provision. So long as “other relief remains to be
resolved,” a district court decision is not final under 28 U.S.C.
§ 1291. See Liberty Mut., 424 U.S. at 744.

Moreover, had the parties considered the district court’s
determinations about the primary liability provision to be final
and wanted review by this court, they might have asked the
district court to invoke Rule 54(b), see Blue, 764 F.3d at 19;
Robinson-Reeder, 571 F.3d at 1340, and justified that request by
explaining their concerns about prematurely reviewing the
remaining issues related to the excess liability. Based on these
same concerns, they might have asked the district court to delay
resolving the excess liability issues until FDS’s TCPA litigation
is completed. In response, the district court might have
exercised its discretion to “stay a declaratory judgment action
during the pendency of [a] parallel state court proceeding[],”
Wilton v. Seven Falls Co., 515 U.S. 277, 279, 288–90 (1995),
which would be immediately appealable, see id. at 280–81
(citing Moses H. Cone Mem’l Hosp. v. Mercury Const. Corp.,
460 U.S. 1, 10 (1983)). Because they made no such requests of
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the district court, and the district court has not finally resolved
Cincinnati’s rights and liabilities under the excess liability
provision, this court lacks jurisdiction to consider either
Cincinnati’s appeal or FDS’s cross-appeal.

The court, thus, has no occasion to address whether it lacks
jurisdiction because the district court may have left unresolved
questions of whether the primary liability provision’s deductible
applies on a per claim, per claimant or per occurrence basis.
Nor need the court resolve whether the absence of the entry of
judgment in favor of All Plumbing separately defeats finality.
Although All Plumbing’s interests are aligned with FDS for the
purposes of Cincinnati’s declaratory judgment action such that
the need for a consistent judgment across defendants would
require All Plumbing to share in FDS’s victory in the initial
summary judgment decision, see Carter v. District of Columbia,
795 F.2d 116, 137–38 (D.C. Cir. 1986), there is no final
judgment with respect to any party, including FDS.

Accordingly, in view of Cincinnati’s unresolved rights and
liabilities under the excess liability provision, there is no final
decision under 28 U.S.C. § 1291, and the appeal and cross-
appeal are dismissed for lack of jurisdiction.