FILED
NOT FOR PUBLICATION
MAY 26 2017
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
AMERICAN ECONOMY INSURANCE No. 16-35059
COMPANY, ET AL.,
D.C. No. 1:14-cv-00009-SPW
Plaintiffs-counter-claim-
defendants-Appellees,
MEMORANDUM*
v.
HARTFORD FIRE INSURANCE
COMPANY,
Defendant-cross-defendant-
cross-claimant-Appellee,
v.
ASPEN WAY ENTERPRISES, INC.,
Defendant-cross-claimant-
Appellant,
v.
HARTFORD CASUALTY INSURANCE
COMPANY,
Cross-claim-plaintiff-
Appellee.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Appeal from the United States District Court
for the District of Montana
Susan P. Watters, District Judge, Presiding
Argued and Submitted May 16, 2017
Seattle, Washington
Before: GOULD and PAEZ, Circuit Judges, and LEMELLE,** Senior District
Judge.
Aspen Way Enterprises, Inc. (“Aspen Way”) appeals the orders of the
district court granting summary judgment and recoupment of defense costs to
American Economy Insurance Company, American States Insurance Company,
and General Insurance Company of America (collectively “Liberty Mutual”), as
well as Hartford Fire Insurance Company and Hartford Casualty Insurance
Company (collectively “Hartford”). This case arises out of two actions, the Byrd
action filed in the United States District Court for the Western District of
Pennsylvania and the Washington action filed in Spokane County Superior Court,
against Aaron’s Inc. and its franchisees, including Aspen Way. The plaintiffs in the
underlying actions alleged that Aaron’s Inc. franchisees used spy software to track
rented laptops by secretly taking photographs using the laptop webcam, capturing
keystrokes, and taking screenshots.
**
The Honorable Ivan L.R. Lemelle, Senior United States District Judge
for the Eastern District of Louisiana, sitting by designation.
2
The question here is whether Aspen Way’s insurers, Liberty Mutual and
Hartford, owed a duty to defend Aspen Way in those actions. Liberty Mutual’s and
Hartford’s policies provided coverage for allegations of “bodily injury” or
“personal and advertising injury,” meaning an injury arising out of the oral or
written publication “of material that violates a person’s right of privacy.” However,
coverage was excluded by both insurers when the injury arose directly or indirectly
out of any act or omission that allegedly violated any statute that prohibits or
otherwise governs the distribution or transmission of material. The insurers agreed
to defend Aspen Way in both actions pursuant to express reservations of the right
to seek reimbursement for expenses incurred if it was later determined that
coverage was excluded.
We have jurisdiction pursuant to 28 U.S.C. § 1291 and we affirm. We
review de novo a district court’s ruling on motions for summary judgment to
“determine, viewing the evidence in the light most favorable to the nonmoving
party and drawing all justifiable inferences in its favor, whether there are any
genuine issues of material fact and whether the moving party is entitled to
judgment as a matter of law.” Las Vegas Sands, LLC v. Nehme, 632 F.3d 526, 532
(9th Cir. 2011) (quoting Orr v. Bank of Am., NT & SA, 285 F.3d 764, 773 (9th Cir.
2002)).
3
Liberty Mutual’s coverage was triggered by the Byrd complaint, which
alleged that information collected by the software was transmitted to third parties.
However, coverage was not triggered by the Washington complaint, which failed
to specifically allege that Aspen Way published private material. Even if coverage
was triggered, the district court properly reformed the 2010 and 2011 Liberty
Mutual umbrella policy exclusions to preclude coverage where only the Electronic
Communications Privacy Act claim survived. See Mont. Code Ann. § 28-2-1611;
Steadele v. Colony Ins. Co., 260 P.3d 145, 149 (Mont. 2011) (noting that an
ambiguity exists only “where the insurance contract, taken as a whole, is
reasonably subject to two different interpretations”) (emphasis added); City of
Bozeman v. AIU Ins. Co., 865 P.2d 268, 273 (Mont. 1993) (where defamation was
the only covered claim, the jury found there was no defamation, and the parties did
not appeal this ruling, the insurer “did not have a contractual obligation under the
terms of its insurance policy . . . to represent [the insured] on appeal”). Aspen
Way’s counterclaims against Liberty Mutual were therefore properly dismissed.
See Mont. Code Ann. § 33-18-242(5) (“An insurer may not be held liable under
this section if the insurer had a reasonable basis in law or in fact for contesting the
claim or the amount of the claim, whichever is in issue.”).
4
Similarly, even though Hartford’s coverage was triggered by the Byrd
complaint, the Hartford exclusions ultimately precluded coverage. Further,
Hartford did not owe a duty to defend in the Washington action because the alleged
misconduct took place after the Hartford policies expired. Aspen Way’s
crossclaims against Hartford were therefore properly dismissed.
As to reimbursement, Aspen Way waived its argument that the district court
should have applied Pennsylvania and Washington law because “the argument was
not raised sufficiently for the trial court to rule on it.” Ruiz v. Affinity Logistics
Corp., 667 F.3d 1318, 1322 (9th Cir. 2012) (quoting In re Mercury Interactive
Corp. Sec. Litig., 618 F.3d 988, 992 (9th Cir. 2010)). Under Montana law, Liberty
Mutual and Hartford were entitled to recoup defense costs because Aspen Way
“implicitly accepted” their defenses under a reservation of rights. See Horace
Mann Ins. Co. v. Hanke, 312 P.3d 429, 434-35 (Mont. 2013); Travelers Cas. &
Sur. Co. v. Ribi Immunochem Research, Inc., 108 P.3d 469, 479-80 (Mont. 2005).
Aspen Way’s untimely objection to Liberty Mutual’s reservation of rights three
years after the defense commenced does not sufficiently distinguish this case from
Ribi and Horace Mann.
AFFIRMED.
5