An Indiana company sued for recording customers’ personal information over the phone without their knowledge did not publish that information as required to trigger a duty to defend by its insurer in a California lawsuit, the 7th Circuit Court of Appeals affirmed Tuesday.
Defender Security Co. filed a lawsuit against First Mercury Insurance Co. alleging breach of contract and bad faith after the insurer denied coverage and refused to defend the security company in a lawsuit. A California resident sued Defender claiming it recorded telephone calls with her that included personal information, such as date of birth and Social Security number, without her permission or notifying her of the recording.
At issue in Defender Security Company v. First Mercury Insurance Company, 14-1805, is whether those recordings are considered an oral or written “publication” of material that violates a person’s right to privacy under Defender’s insurance policy with First Mercury. If yes, then First Mercury had a duty to defend under the policy. Defender argued that the subject material doesn’t have to be communicated to any third party to be considered “published,” and that publication occurred when the subject material was transmitted to Defender’s recording device.
The insurance policy does not define “publication,” so the judges looked to its plain meaning and the Indiana Supreme Court to determine publication requires communication to a third party. The 7th Circuit also rejected Defender’s claim that the term is ambiguous, meaning the policy should be interpreted in its favor to require First Mercury to defend it.
“In the district court, Defender put all of its eggs in the ‘publication-means-recording’ basket. It did not raise the alternative argument that even if First Mercury’s narrower definition of ‘publication’ prevailed, Defender satisfied the narrower definition because it communicated the recordings to third parties. Defender could have alleged that fact in its pleadings – after all, if Defender did communicate the recordings to others, then it knew or should have known that fact,” Judge Michael Kanne wrote. “But Defender did not allege it. Nor did it make the argument in its opposition to the motion to dismiss, or move to amend the complaint. The district court committed no error by not considering an argument Defender never made, based on facts it did not allege.”