Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Hartford Casualty Insurance Co. v. Contextmedia

United States District Court, N.D. Illinois, Eastern Division

August 28, 2014

HARTFORD CASUALTY INSURANCE COMPANY, Plaintiff,
v.
CONTEXTMEDIA, INC., Defendant

For Hartford Casualty Insurance Company, Plaintiff, Counter Defendant: Ashley L. Conaghan, Michael John Duffy, Tressler LLP, Chicago, IL.

For ContextMedia, Inc., Defendant, Counter Claimant: Angela R. Elbert, LEAD ATTORNEY, Eric Y. Choi, Neal, Gerber & Eisenberg, Chicago, IL.

Page 571

MEMORANDUM OPINION AND ORDER

Robert M. Dow, Jr., United States District Judge.

Before the Court is Plaintiff's motion for partial summary judgment [21] and Defendant's

Page 572

cross-motion for summary judgment [29]. Plaintiff Hartford seeks a declaratory judgment from the Court determining that it has no duty to defend ContextMedia in a suit brought by Healthy Advice Networks LLC, a competitor of ContextMedia, in the Southern District of Ohio. ContextMedia's counterclaim seeks the opposite ruling, as well as damages resulting from Hartford's alleged breach of its duty to defend ContextMedia to date. For the reasons stated below, the Court grants Hartford's motion for partial summary judgment as to Count XII and denies Hartford's motion as to Counts I, VI, and VII as moot [21]. The Court denies ContextMedia's cross-motion for summary judgment [29].

I. Background[1]

ContextMedia transmits health information to patients in the waiting rooms of physicians' offices through a " digital media platform." Pl. Resp. to Def's SOF ¶ 29 [35]. According to its website, ContextMedia provides " patient marketing," " deliver[ing] messages to millions where and when they want it." Def's Resp. to Pl. SOF ¶ 29 [31]. The company does this by supplying literature directly to the offices of physician, and, mostly, by displaying programming on television screens that the company provides to physicians for their waiting rooms so that patients can view ContextMedia's programming while waiting to see the doctor. [31] at ¶ 31. The programming is delivered via a secure internet connection to a computer that is mounted behind each television set. [31] at ¶ 32. ContextMedia's programming includes both educational content and advertising. [31] at ¶ 30. The company provides the service to physicians free-of-charge and derives its revenue from pharmaceutical, nutrition, fitness, and device manufacturing companies that advertise on ContextMedia's network. [31] at ¶ 33. Pharmaceutical companies, in particular, purchase ads because marketers " view the point-of-care channel as a strategic and relevant place from which to message" since programming reaches patients minutes before they make decisions about pharmaceutical products with their doctors. [31] at ¶ ¶ 34-35. In fact, more than 75% of all global pharmaceutical companies are counted among ContextMedia's advertising clients. [31] at ¶ 36. Not surprisingly, various articles appear on ContextMedia's website, toting the advantages of point-of-care and place-based advertising. [31] at ¶ ¶ 37-41.

ContextMedia's insurer, Hartford Casualty Insurance Company (" Hartford" ), issued a series of business liability policies to ContextMedia that insured against certain risks for the period beginning August

Page 573

1, 2008 and ending August 1, 2013. [31] at ¶ 23. Among other things, ContextMedia's policy covered (1) " property damage" caused by an " occurrence" and (2) " personal and advertising injury," as defined by the policy and subject to exclusions. [31] at ¶ 26. By the policy's terms, " property damage" is both " [p]hysical injury to tangible property, including all resulting loss of use of that property" and " [l]oss of use of tangible property that is not physically injured." Id. An " occurrence" is " an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Id. And " personal and advertising injury" includes, among other things, " injury" " arising out of" " [o]ral, written, or electronic publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products, or services." Id.

Relevant here, the policy excluded property damage to " personal property in the care, custody, or control of the insured." [31] at ¶ 26. The policy also excluded " personal and advertising injury" " [a]rising out of an offense committed by an insured whose business is advertising, broadcasting, publishing, or telecasting." Id. at ¶ 27. On September 28, 2009, ContextMedia's insurance broker asked Hartford if the " Business of Advertising, Broadcasting, Publishing, or Telecasting" exclusion could be deleted from the policy. [37] at ¶ 24. Hartford informed ContextMedia's broker that Hartford " cannot delete this exclusion off of the policy for this classification," but that if ContextMedia " needs this coverage," Hartford could " send a request to [its] Alternative Market Placement team and see if coverage [could] be obtained that route." [37] at ¶ 25; [35-2] Exh. 2-B. The Declarations page on each of Hartford's policies identified ContextMedia as an " Advertising Agency," ([31] at ¶ 24), but, despite that label, ContextMedia maintains that it is not actually an advertising agency (or a company in the business of " advertising, broadcasting, publishing, or telecasting," for that matter). [31] at ¶ ¶ 27-28.

The policy imposed on ContextMedia a duty to notify Hartford " of an 'occurrence' or an offense which may result in a claim" " as soon as practicable." [31] at ¶ 26. It also obligated ContextMedia to " [i]mmediately send [Hartford] copies of any demands, notices, summonses or legal papers received in connection with the claim or 'suit.'" Id.

On January 20, 2011, ContextMedia received a letter from competitor Healthy Advice Networks LLC (" HAN" ). [31] at ¶ 16. In the letter, HAN alleged that ContextMedia had " accessed, removed, damaged and taken possession of various media equipment and other materials licensed to [HAN]" from the offices of several physicians. Id. at ¶ 17. The letter also evinced HAN's belief that ContextMedia had " intentionally interfered with contractual relationships between [HAN] and each Physician Office" and " generated and sent misleading and deceptive termination letters purportedly from the Physician Offices to Healthy Advice." Id. According to the letter, HAN had " already suffered material damages" as a result of ContextMedia's alleged conduct and was " prepared to protect its rights to the fullest extent of the law, including civil and criminal penalties." Id.

According to ContextMedia's Chief Financial Officer James Demas, upon receipt of the letter, ContextMedia interviewed employees and internally investigated the accusations. Pl. Resp. to Def's SOF ¶ 5 [35]. None of HAN's property turned up in the investigation, Demas says, and ContextMedia's legal counsel assured it that HAN's allegations of " interference" and

Page 574

those concerning " termination letters" were simply a " tactic by a fearful competitor." [35] at ¶ ¶ 6-8. Its investigation and discussions with counsel therefore convinced ContextMedia that HAN's allegations were unfounded. [35] at ¶ 8. In the words of Demas, " ContextMedia did not believe it had done anything wrong, did not believe it would face any liability for the allegations in the January 20, 2011 letter, and did not believe insurance coverage was at issue." [35] at ¶ 9. Therefore, on January 28, 2011, ContextMedia responded to HAN's letter, disavowing any wrongdoing, but did not notify Hartford of HAN's accusations at that time. [35] at ¶ 10. In the January 28 letter, ContextMedia's counsel informed HAN that it had returned to HAN " any equipment that ha[d] come into ContextMedia's possession" and of its legal position that ContextMedia had not interfered with HAN's contractual relationships because of ContextMedia's " broad privilege to solicit physicians to provide" its services and because HAN's physician contracts are " terminable at will." Def's Resp. to Pl.'s SOAF [37] ¶ 7; [15-3] at p. 1.

ContextMedia and HAN exchanged additional rounds of letters in the weeks that followed. Def's Resp. to Pl. SOF ¶ 20 [31]. On February 8, HAN responded to ContextMedia's January 28 letter by " reiterat[ing] its demand that ContextMedia return" all of HAN's property (noting that the property it had received via mail had been shipped from ContextMedia's office) and that it " cease and desist" from any illegal activities with regard to HAN's contractual relationships. [23-5] at p.2. HAN also reminded ContextMedia that, at least as early as January 20, ContextMedia had been " under a continuing legal duty to preserve all documents . . . that are relevant or potentially relevant to this matter or risk court-imposed sanctions, fines, or other penalties for spoliation of evidence." Id. HAN informed ContextMedia that it was " prepared to prosecute ContextMedia's unlawful actions to the full extent of civil and criminal law," if ContextMedia did not meet HAN's demands by February 11. Id. ContextMedia answered HAN's letter, as demanded, on February 11, renewing its position that it had returned all of HAN's property that ContextMedia had removed from physician's offices (with the exception of a media player that FedEx lost after ContextMedia attempted to mail it to HAN) and holding firm to its position that HAN's contracts with physicians are " terminable at will" by a physician who prefers the services of a " competitior with a superior service." Id. at p. 7. Given that, the letter described HAN's demands as " baseless." Id. ContextMedia made clear that its letter was " for settlement purposes only," was not " an admission of any liability or facts," and did not " waive any right, remedy, or position ContextMedia may have." [37] ¶ 9.

In a subsequent letter, dated March 1, 2011, HAN demanded that ContextMedia pay it $9,825 -- $1,425 for missing equipment that HAN accused ContextMedia of taking from physician's offices and $8,400 in attorney's fees -- and threatened to " pursue legal action against ContextMedia" if ContextMedia did not pay (and cease the other activity about which HAN complained in its letters) by March 4. [31] at ¶ 21. HAN's letter made clear that, in its view, neither ContextMedia nor the physicians in whose offices HAN had installed its equipment had authority to remove HAN's property, and that HAN's contracts with its physicians were not terminable at will. Id. Instead, HAN wrote, each of its contracts included a termination provision, requiring " a minimum service period and a specified notice period before the contract [could] be terminated." Id. Therefore, HAN's position was that ContextMedia's

Page 575

removal of HAN's equipment and its hand in facilitating the physicans' simultaneous cancellation of the HAN contracts, without regard for the termination provisions, constituted unlawful interference with HAN's contractual relationships. Id. Additionally, HAN's March 1 letter accused ContextMedia of misappropriating ContextMedia's trade secrets and intellectual property. Specifically, HAN alleged that ContextMedia had unlawfully accessed confidential and proprietary information on HAN's equipment before returning the property. Id. HAN made clear that unless it " receive[d] a proper explanation" for why ContextMedia had plugged in and accessed the proprietary content on HAN's equipment before returning it, HAN would have " no choice but to initiate action to maintain protection of its trade secrets and other intellectual property rights." Id. The letter noted that attorneys for HAN and ContextMedia had spoken by phone on February 25 and that HAN was dissatisfied with the representations made by ContextMedia's counsel during that call. Id.

On March 4, ContextMedia's lawyers responded with a letter that offered to reimburse HAN only for the media player lost by FedEx. Id. ContextMedia reiterated its position that it had returned all of the other equipment to HAN that ContextMedia had taken. Id. In addition, ContextMedia's letter proposed a procedure that the two companies follow in " situations in which a physician provides notice of his or her decision to switch from [HAN] to ContextMedia" or vice versa. Id. The proposed procedure would afford each company five days to remove its equipment from a physician's office from the date on which that physician decided to switch providers, at the end of which the new provider would be permitted to remove the competitor's equipment. Id. With respect to HAN's allegations of contractual interference, the letter merely stated that, although ContextMedia had not seen any of HAN's physician contracts, it would " continue to rely" on the representations by those physicians with respect to the contracts' termination provisions and the physicians' authority to authorize ContextMedia to remove HAN's property. Id. ContextMedia's position was that it was " entitled to rely on the physican's directions" until HAN provided ContextMedia with a copy of its contracts to prove otherwise. Id. HAN characterizes ContextMedia's letter as a " counteroffer[] to settle HAN's claims," but ContextMedia takes issue with that depiction. [31] at ¶ 22. Notably, ContextMedia's letter made no mention of HAN's allegations regarding trade secrets.

After ContextMedia sent its letter on March 4, it heard nothing from HAN for over seventeen months, when HAN sued ContextMedia in the Southern District of Ohio on August 10, 2012 and served ContextMedia ten days later. Pl. Resp. to Def's SOF ¶ 12 [35]; [31] at ¶ 6. HAN's second amended complaint (" SAC" ), which it filed on October 24, 2012, represents that HAN " deliver[s] health-related educational material in print and digital format to medical facilities throughout the United States." Pl. SOF Ex. A. ¶ 7 [23]. According to the SAC, HAN " broadcast[s]" its " educational offerings" via media equipment that it provides to the medical practices it services. [23] at ¶ ¶ 7-10. Before doing so, HAN enters into contracts with the practices, which outline the parties' relationship and responsibilities. Id. at ¶ 12. These contracts, HAN says, prohibit cancellation within the first six months and then require 30-60 days' notice before either HAN or the medical practice may cancel the agreement. Id. at ¶ 13. At all times, the SAC says, HAN's equipment and the contents of its programming

Page 576

remain HAN's property, and neither the medical practice nor any other party at a practice's direction are permitted to remove HAN's property without HAN's written consent. Id. at ¶ ¶ 12-13. HAN's asserts that " [i]n general, when Practices agree to the placement in their office of health education television monitors from ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.