                                                                           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                           NOT FOR PUBLICATION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.




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