G.M. Sign, Inc. v. St. Paul Fire & Marine Ins. Co.

Case: 17-14247 Date Filed: 04/12/2019 Page: 1 of 17

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT
________________________

No. 17-14247
________________________

D.C. Docket No. 1:14-cv-02977-ELR

G.M. SIGN, INC.,
as Judgment Creditor; and assignee of
MFG.com,

Plaintiff - Counter Defendant -
Appellant,

versus

ST. PAUL FIRE & MARINE INS.CO.,

Defendant - Counter Claimant -
Appellee.

________________________

Appeal from the United States District Court
for the Northern District of Georgia
________________________

(April 12, 2019)
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Before MARTIN, JILL PRYOR and JULIE CARNES, Circuit Judges.

PER CURIAM:

This appeal is the second in a dispute between an insurer and its insured’s

judgment creditor and assignee concerning the insured’s right to indemnification

under its insurance policy. G.M. Sign, Inc. brought this action seeking a

declaratory judgment that St. Paul Fire & Marine Insurance Company was required

to indemnify its insured, MFG.com, for liability MFG incurred for faxing

advertisements to recipients it mistakenly thought had consented to receipt. The

district court concluded that St. Paul had no duty to indemnify MFG because,

under Georgia law, no accident occurred when MFG sent the junk faxes with the

mistaken belief that the recipients had agreed to receive them. Accordingly, the

district court granted St. Paul summary judgment.

In ruling, the district court relied on our decision in Mindis Metals, Inc. v.

Transportation Insurance Co., which held that under Georgia law intentional

conduct premised on erroneous information is not an “accident” for general

liability insurance purposes. 209 F.3d 1296, 1297 (11th Cir. 2000). On appeal,

G.M. Sign argues that the district court erred in granting St. Paul summary

judgment because under Georgia law the term “accident” covers injuries resulting

from negligent acts. We conclude that G.M. Sign’s argument is foreclosed by

Mindis Metals. We therefore affirm the district court.

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I. BACKGROUND

Because we write for the parties, we recite only the facts necessary to

understand our ruling. For a fuller account, see our previous opinion, G.M. Sign,

Inc. v. St. Paul Fire & Marine Insurance Co., 677 F. App’x 639 (11th Cir. 2016)

(unpublished).

A. Facts

MFG began a fax advertising program by purchasing lists of people who

MFG believed had consented to receive marketing materials by fax. MFG’s belief

that the recipients had agreed to receive the faxes turned out to be mistaken.

Between September 18, 2005, and November 15, 2008, MFG sent approximately

494,212 fax advertisements to the people included on the purchased lists. At the

time it sent the faxes, MFG thought that its advertising program complied with all

applicable laws.

MFG purchased from St. Paul a series of commercial general liability

insurance policies from 2003 to 2009 (the “Policies”). The Policies covered

“property damage” caused by “an event.” Doc. 51-21 at 64. 1 They defined

property damage as “physical damage to tangible property of others, including all

resulting use of that property” or “loss of use of tangible property of others that

isn’t physically damaged.” Id. The Policies defined an “event” as “an accident,

1
“Doc. #” refers to the numbered entry on the district court’s docket.

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including continuous or repeated exposure to substantially the same general

harmful conditions.” Id. at 65. The Policies did not define the term “accident.”

B. Procedural History

G.M. Sign brought a putative class action against MFG in Illinois state court,

alleging among other things violations of the Telephone Consumer Protection Act

(“TCPA”), 47 U.S.C. § 227. The complaint alleged that MFG had on several

occasions sent fax advertisements to G.M. Sign and the other members of the

putative class, without the recipients’ permission. After MFG notified St. Paul of

the lawsuit and demanded a defense and coverage, St. Paul notified MFG that it

was denying MFG’s demands. MFG removed G.M. Sign’s action to federal court

and moved to dismiss. After the district court denied the motion, the parties jointly

stipulated to dismissal without prejudice of all the claims, which the court

accepted. G.M. Sign then brought another action in state court, asserting the same

claims against MFG on behalf of the same class of plaintiffs.

MFG and G.M. Sign eventually settled, agreeing that MFG was liable to the

class in the total amount of $22,536,500. As part of the settlement agreement,

MFG agreed to pay $460,000 of this amount. The parties further stipulated that the

remaining amount MFG owed the class could only be satisfied from the Policies.

MFG assigned to the class its claims against and rights to payment from St. Paul

under the Policies.

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G.M. Sign, on behalf of itself and the other class members, brought this

action in Georgia state court, requesting a declaratory judgment that the Policies

covered the settled claims. St. Paul removed the case to federal district court and

filed a counterclaim requesting a declaratory judgment that it owed no coverage.

The parties filed cross-motions for summary judgment; the district court concluded

that MFG had failed to notify St. Paul of G.M. Sign’s second suit, which was a

condition precedent for coverage. The district court thus granted St. Paul’s

summary judgment motion, denied G.M. Sign’s motion, and entered judgment

in St. Paul’s favor. G.M. Sign appealed, and we vacated the district court’s order

granting St. Paul summary judgment on the notice issue and remanded for further

consideration.

On remand, the parties again filed cross-motions for summary judgment.

The district court again granted summary judgment to St. Paul, this time on the

ground that the Policies did not cover the property damage MFG caused.

Specifically, the district court ruled that under Mindis Metals, “the intentional

delivery of fax advertisements does not qualify as an ‘accident’ under Georgia law,

even if the sender erroneously believed that it had consent to send the fax

advertisements.” Doc. 81 at 12, 18.

G.M. Sign again appeals.

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II. STANDARD OF REVIEW

“We review an order granting summary judgment de novo and apply the

same legal standards that governed the district court’s decision.” Hegel v. First

Liberty Ins. Corp., 778 F.3d 1214, 1219 (11th Cir. 2015). To prevail on summary

judgment, the movant must show “that there is no genuine dispute as to any

material fact and the movant is entitled to judgment as a matter of law.” Fed. R.

Civ. P. 56(a).

III. DISCUSSION

In this appeal, G.M. Sign argues that St. Paul is required to indemnify MFG

for its TCPA liability because the term “accident” under Georgia law covers

injuries resulting from negligence. According to G.M. Sign, MFG sent the faxes

negligently because it never intended to send any faxes without the recipients’

consent. Thus, according to G.M. Sign, MFG had no intent to injure the recipients.

St. Paul responds that no accident occurred when MFG sent the faxes because by

sending the faxes, MFG intended to cause the relevant property damage: the use of

the recipients’ fax machines and the depletion of their ink and paper. According to

St. Paul, MFG’s mistaken belief that the recipients agreed to receive the faxes is

immaterial. We agree with St. Paul. G.M. Sign also argues that St. Paul is

estopped from contesting coverage because it wrongfully breached its duty to

defend, but we reject this argument as well.

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A. No Accident Occurred Because in Sending the Faxes MFG Engaged in
Intentional Conduct Premised on Erroneous Information.

Under Georgia law, “an insurance policy is simply a contract, the provisions

of which should be construed as any other type of contract.” Taylor Morrison

Servs., Inc. v. HDI-Gerling Am. Ins. Co., 746 S.E.2d 587, 590 (Ga. 2013)

(alteration adopted) (internal quotation marks omitted). 2 This appeal presents a

question of contract interpretation: whether, under the Policies, an “accident”

occurred when MFG intentionally sent faxes that caused the recipients’ fax

machines to suffer property damage 3 given that MFG mistakenly thought the

recipients had consented to receive the faxes. The Policies provide no definition

for the term “accident.” But when an insurance policy fails to define a term or

otherwise indicate that the term “is used in an unusual sense, [Georgia courts]

attribute to that term its usual and common meaning.” Id. at 590-91. The usual

and common meaning of “accident,” according to the Supreme Court of Georgia,

is “an unexpected happening without intention or design.” Id. at 591 (internal

2
As we explained in our earlier opinion, “[t]he insurance policies at issue here were
issued in Georgia.” G.M. Sign, Inc., 677 F. App’x at 642. The parties agree that Georgia law
governs whether the Policies provided coverage for MFG’s TCPA liability.

3
Neither party disputes that property damage occurred when MFG sent the faxes at issue.
Courts have concluded that the use of a fax machine to print a fax, including the depletion of the
machine’s ink and paper, constitutes property damage. See, e.g., Resource Bankshares Corp. v.
St. Paul Mercury Ins. Co., 407 F.3d 631, 639 (4th Cir. 2005) (agreeing with the Seventh Circuit
in American States Insurance Co. v. Capital Associates of Jackson County, Inc., 392 F.3d 939,
943 (7th Cir. 2004)).

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quotation marks omitted). Prior published precedent of this Court requires us to

conclude that no accident occurred when MFG sent the faxes at issue here.

Applying Georgia law, in Mindis Metals, we considered whether

“intentional conduct premised on erroneous information” constitutes an accident.

209 F.3d at 1297. We acknowledged that other jurisdictions were divided on the

issue, but we nonetheless concluded that under Georgia law such conduct was not

an accident. Id. We adopted the reasoning of the district court opinion in Macon

Iron & Paper Stock Co. v. Transcontinental Insurance Co., 93 F. Supp. 2d 1370

(M.D. Ga. 1999), and attached that decision to our opinion. Mindis Metals, 209

F.3d at 1297-1302.

In Macon Iron, the district court addressed whether negligent conduct

constituted an accident under Georgia law. There, a scrap metal recycler

purchased railcars from the general manager of a railroad. Mindis Metals, 209

F.3d at 1297. The recycler paid the general manager personally for the railcars.

Id. When the railroad learned of these transactions, it reported the general manager

to the police and sued the recycler for the unauthorized transactions. Id. at 1298.

The railroad and the recycler settled the railroad’s claims. Id. Although the

recycler had two insurance policies that covered “property damage” caused by an

“accident,” the insurance companies refused to defend the recycler or indemnify it

for the settlement amount. Id. at 1298-99. The recycler then sued the insurers,

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claiming the policies provided coverage. Id. at 1298. The district court disagreed

based on its conclusion that no accident occurred when the recycler purchased the

railcars and scrapped them. Id. at 1301. Even if the recycler mistakenly believed

that the general manager personally owned the railcars, the court concluded, no

accident occurred because the recycler intended to damage the railcars by “cutting

them up for use as scrap metal.” Id.

Macon Iron relied on two decisions from the Court of Appeals of Georgia

addressing whether an accident occurred for general liability insurance purposes,

Glens Falls Insurance Co. v. Donmac Golf Shaping Co., 417 S.E.2d 197 (Ga. Ct.

App. 1992), and Georgia Farm Bureau Mutual Insurance Co. v. Meriwether, 312

S.E.2d 823 (Ga. Ct. App. 1983). In Glens Falls, a construction company built a

golf course on a site without realizing that much of the new course sat on federally

protected wetlands. Glens Falls, 417 S.E.2d at 198. When the company was sued,

it filed an action against its insurer seeking a declaratory judgment that the insurer

was required to provide a defense and coverage under a commercial general

liability insurance policy. Id. The insurance company denied coverage under an

exclusion that applied to property damage “expected or intended from the

standpoint of the insured.” Id. at 198-99. The Court of Appeals ruled that the

exclusion was inapplicable because the developer did not intend to build on federal

wetlands. Id. at 199. The court reasoned that in determining whether the

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construction of the course on wetlands was expected or intended, “[t]he issue is not

whether [the construction company] intended to build the project in its present

location . . . but whether [the company] had the specific intent called for by the

policy to cause the alleged damages.” Id.

In Meriwether, a property owner was sued after he placed a gate across a

road that he believed to be on his property but may have been on public property.

Meriwether, 312 S.E.2d at 823-24. The property owner had an insurance policy

that covered property damage caused by an occurrence, which the policy defined

as “an accident which results in . . . property damage neither expected nor intended

from the standpoint of the insured.” Id. (alteration adopted) (emphasis omitted).

After the property owner demanded that his insurer provide him a defense to the

plaintiffs’ action, the property owner’s insurer sought a judgment declaring that it

had no duty to defend. Id. at 823. The Court of Appeals concluded that the insurer

had no duty to defend because no “accident” occurred when the property owner

closed the gate. Id. at 824. The court reasoned that the property owner’s conduct

could not be accidental because he “intentionally blocked the disputed way.” Id.

Acknowledging its duty to avoid interpreting decisions of the Georgia

appellate court as conflicting, the district court in Macon Iron followed Meriwether

and distinguished Glens Falls, the later-decided case, on the ground that Glens

Falls, unlike Meriwether, interpreted an exclusion to insurance coverage, which

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Georgia law requires courts to construe narrowly. Mindis Metals, 209 F.3d at 1300

(“Glens Falls can be read without contradicting [Meriwether]. In contrast to

Meriwether, the court in Glens Falls was interpreting an exclusion to insurance

coverage. . . . [E]xclusions to insuring agreements require a narrow construction.”

(internal quotation marks omitted)). Macon Iron read Meriwether as standing for

the proposition that under Georgia law “an ‘accident’ does not include damage to

persons or property when that damage is intentionally inflicted, even where that

intentional conduct is caused by erroneous information.” Id. Because Mindis

Metals agreed with Macon Iron and adopted its reasoning, we are bound here by

this statement of Georgia law unless state law has since changed or been clarified.

See World Harvest Church, Inc. v. GuideOne Mut. Ins. Co., 586 F.3d 950, 957

(11th Cir. 2009), certified question answered, 695 S.E.2d 6 (Ga. 2010).

Applying the rule we adopted in Mindis Metals to the facts of this case

yields the conclusion that under Georgia law, no accident occurred when MFG sent

faxes with the mistaken belief that the recipients had consented to receive them.

MFG intended to send the faxes and thus intended to cause the resulting property

damage, the use of the fax machines and the depletion of the machines’ ink and

paper. The fact that MFG mistakenly thought the recipients had consented to

receive the faxes is insufficient under Mindis Metals to render the property damage

an accident under Georgia law. Therefore, the Policies’ property damage

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provisions provided no coverage for the TCPA liability arising from MFG’s

conduct. The district court correctly granted St. Paul summary judgment.

G.M. Sign contends that Mindis Metals no longer controls because a

subsequent decision of the Supreme Court of Georgia clarified state law. See Am.

Empire Surplus Lines Ins. Co. v. Hathaway Dev. Co., 707 S.E.2d 369 (Ga. 2011).

As earlier stated, our prior precedent rule requires us to follow Mindis Metals

unless state law has since been “change[d] or . . . clarified in a way that is

inconsistent with the state law premise” of Mindis Metals. World Harvest Church,

586 F.3d at 957 (internal quotation marks omitted). Thus, we would be free to

accept G.M. Sign’s invitation to reinterpret Georgia law in light of Hathaway if

that case changed or clarified the state law premise of Mindis Metals. But in our

view it did neither.

In Hathaway, a general contractor sued its plumbing subcontractor after the

plumber’s work damaged surrounding property. Hathaway, 707 S.E.2d at 370.

After entry of a default judgment against the subcontractor, the general contractor

filed an action against the subcontractor’s insurer. Id. The general contractor

sought coverage under the subcontractor’s commercial general liability insurance

policy, which provided coverage for property damage resulting from an

“occurrence,” defined as an “accident.” Id. The Supreme Court of Georgia held

that the property damage resulting from the negligent work was an occurrence

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under the policy. Id. at 372. It reasoned that “[a] deliberate act, performed

negligently, is an accident if the effect is not the intended or expected result; that

is, the result would have been different had the deliberate act been performed

correctly.” Id. (internal quotation marks omitted).

Hathaway does not change or clarify the state law premise of Mindis Metals.

The state law premise of Mindis Metals is that “an ‘accident’ does not include

damage to persons or property when that damage is intentionally inflicted, even

where that intentional conduct is caused by erroneous information.” Mindis

Metals, 209 F.3d at 1300. Because the effect of the subcontractor’s negligence on

the neighboring property was neither intended nor expected, Hathaway does not at

all address the question whether an accident occurs when an insured intentionally

inflicts property damage based on erroneous information.4

G.M. Sign relies on Hathaway to argue that, in the instant case, “had the act

of faxing been performed correctly and faxes only been sent to consenting

recipients, there would have been no injury.” Appellant’s Br. at 24; see id. at 18,

20. This argument is misplaced for two reasons. First, as we have explained,

Hathaway did not change the premise of Mindis Metals, by which we are bound.

See World Harvest Church, Inc., 586 F.3d at 957. Second, contrary to G.M. Sign’s

4
Because we are bound by Mindis Metals and required to apply Georgia law, we decline
to address the cases from other jurisdictions that G.M. Sign cites in support of its argument that
an accident occurred here.

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argument, the same property damage—the use of the recipients’ fax machines and

the corresponding depletion of the machines’ ink and paper—would have resulted

had the faxes been sent only to consenting recipients. MFG plainly intended to

occupy the machines; whether it intended to violate the TCPA by sending the faxes

without the recipients’ consent is immaterial.

G.M. Sign urges the Court to follow a line of Georgia cases supporting the

proposition that “the term ‘accident’ for purposes of property damage coverage . . .

include[s] injuries resulting from negligence.” Appellant’s Br. at 21. 5 Assuming

for purposes of this opinion that this is an accurate statement of Georgia law, it is

not inconsistent with Mindis Metals. The term “accident” may at once include

injuries resulting from negligence but exclude injuries resulting from intentional

conduct premised on erroneous information. In determining whether an accident

occurred, Georgia law asks whether a happening was expected or intended. See

Taylor Morrison, 746 S.E.2d at 590-91 (defining the term “accident” as “an

unexpected happening without intention or design” (internal quotation marks

omitted)). Whether the act that caused the happening was intentional, negligent,

or both is of no moment. See Hathaway, 707 S.E.2d at 372 (“A deliberate act,

5
These cases include: Maxum Indem. Co. v. Jimenez, 734 S.E.2d 499 (Ga. Ct. App.
2012); Cincinnati Ins. Co. v. Magnolia Estates, Inc., 648 S.E.2d 498 (Ga. Ct. App. 2007);
Allstate Ins. Co. v. Justice, 493 S.E.2d 532 (Ga. Ct. App. 1997); and Crook v. Ga. Farm Bureau
Mut. Ins. Co., 428 S.E.2d 802 (Ga. Ct. App. 1993).

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performed negligently, is an accident if the effect is not the intended or expected

result; that is, the result would have been different had the deliberate act been

performed correctly.” (internal quotation marks omitted)). 6 In this case, the result

would not have been different had the deliberate act been performed correctly (i.e.,

if the faxes had been sent to consenting recipients).

Because we decide that the Policies do not cover the property damage for

which G.M. Sign seeks coverage, we do not address the applicability of any

exclusions that might bar coverage.

B. St. Paul Is Not Estopped from Denying Coverage.

G.M. Sign argues that St. Paul is estopped under Illinois law from denying

coverage because St. Paul breached its duty to defend MFG in the Illinois state

court action brought by G.M. Sign. St. Paul responds that Illinois law is

inapplicable and that under Georgia law the wrongful denial of a duty to defend

does not estop an insurer from contesting coverage. St. Paul has the better side of

this argument under the law of either state.7

6
At oral argument, G.M. Sign’s counsel relied on the Supreme Court of Georgia’s
decision in Taylor Morrison to argue that an accident occurred and coverage was triggered
because the TCPA claims, as strict liability claims, could have been established without proving
intent. But G.M. Sign failed to raise this argument in its briefing, and we therefore decline to
consider it. See McFarlin v. Conseco Servs., LLC, 381 F.3d 1251, 1263 (11th Cir. 2004) (“A
party is not allowed to raise at oral argument a new issue for review.”).

7
Although the parties agree that Georgia law governs the question whether the Policies
provided coverage for MFG’s TCPA liability, see supra note 2, the parties disagree as to whether
Georgia or Illinois law controls the estoppel analysis. G.M. Sign argues that Illinois law applies
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St. Paul is correct that under Georgia law, an insurer that wrongfully denies

a duty to defend is not estopped from later contesting coverage. See Henning v.

Cont’l Cas. Co., 254 F.3d 1291, 1295 (11th Cir. 2001) (concluding that under

Georgia law, “an insurer is not estopped from asserting the defense of lack of

coverage or other policy defenses even if it wrongfully fails to defend”). In

contrast, under Illinois law, an insurer that fails to defend its insured under a

reservation of rights or seek a declaratory judgment that no coverage exists “and is

later found to have wrongfully denied coverage . . . is estopped from raising policy

defenses to coverage.” Emp’rs Ins. of Wausau v. Ehlco Liquidating Tr., 708

N.E.2d 1122, 1134-35 (Ill. 1999). Nevertheless, “[a]pplication of the estoppel

doctrine is not appropriate if the insurer had no duty to defend.” Id. at 1135. And

an insurer has no duty to defend under Illinois law when a comparison of the

policy and the complaint indicates that “there clearly was no coverage or potential

for coverage.” Id. We need not decide whether Illinois law applies because even

assuming it does, the result is the same. Here, G.M. Sign’s complaint in the

Illinois state court action failed to allege facts that would have triggered coverage

because the complaint failed to allege that MFG caused unexpected or unintended

property damage by sending junk faxes to G.M. Sign and others. Therefore, St.

because G.M. Sign filed the action against MFG, for which St. Paul refused to defend or
indemnify MFG, in Illinois state court.

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Paul is not estopped from contesting coverage under the law of either Georgia or

Illinois.

IV. CONCLUSION

We conclude that the Policies provided MFG with no coverage here because

no accident occurred when MFG intentionally sent faxes with the mistaken belief

that the recipients had consented to receive them. We further conclude that St.

Paul is not estopped from denying coverage. We therefore affirm the district

court’s grant of summary judgment to St. Paul.

AFFIRMED.

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