                                                                NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT
                              ________________

                                     No. 13-1515
                                  ________________


                NATIONWIDE MUTUAL INSURANCE COMPANY,
                       SUCCESSOR BY MERGER TO
                        HARLEYSVILLE MUTUAL

                                           v.

                      DAVID RANDALL ASSOCIATES, INC.;
                           RAYMOND H. MILEY, III,

                                                      Appellants

                                  ________________

                      Appeal from the United States District Court
                        for the Eastern District of Pennsylvania
                        (D.C. Civil Action No. 2-12-cv-04208)
                       District Judge: Honorable J. Curtis Joyner
                                   ________________

                               Argued November 21, 2013

             Before: AMBRO, SMITH, and CHAGARES, Circuit Judges

                            (Opinion filed: January 9, 2014)

F. Emmett Fitzpatrick, III, Esquire (Argued)
Flamm Walton
794 Penllyn Pike
Blue Bell, PA 19422

      Counsel for Appellants
Laura K. Hoensch, Esquire
William T. Salzer, Esquire (Argued)
Swartz Campbell
50 South 16th Street
Two Liberty Place, 28th Floor
Philadelphia, PA 19102

       Counsel for Appellee
                                   ________________

                                       OPINION
                                   ________________

AMBRO, Circuit Judge

I. Background

       Nationwide Mutual Insurance Company (“Nationwide”) insured David Randall

Associates, Inc. (“Randall Associates”) and its director Raymond H. Miley, III (“Miley”)

under a commercial general liability policy (the “Policy”). The Policy provided coverage

for “bodily injury” and “property damage,” but only if such damage was caused by an

“occurrence.” JA 105a. An “occurrence” is defined as “an accident, including

continuous or repeated exposure to substantially the same general harmful conditions.”

Id. at 118a. The Policy did not cover “‘[b]odily injury’ or ‘property damage’ expected or

intended from the standpoint of the insured.” Id. at 106a.

       In May 2011, City Select Auto Sales, Inc. (“CSAS”) filed a putative class action

(the “Class Action”) against Randall Associates and Miley in the United States District

Court for the District of New Jersey. The Class Action Complaint alleged that they had

violated the Telephone Consumer Protection Act, 47 U.S.C. § 227 (“TCPA”), by sending

unsolicited facsimile advertisements. It also alleged that Miley


                                            2
        approved, authorized and participated in a scheme to broadcast faxes by
        (a) directing a list to be purchased and assembled; (b) directing and
        supervising employees and third parties to send the faxes; (c) creating and
        approving the form of faxes to be sent; (d) determining the number and
        frequency of the facsimile transmissions; and (e) approving and paying
        third parties to send the faxes.

JA at 40a. The Class Action Complaint further alleged that Randall Associates and

Miley

        knew or should have known that (a) Plaintiff and the other class
        members had not given express invitation or permission for Defendants or
        anybody else to fax advertisements about Defendants’ goods or services,
        (b) that Plaintiff and the other class members did not have an established
        business relationship, and (c) that [the faxes sent by the Defendants were]
        an advertisement.

Id. at 44a.

        In July 2012, Nationwide brought this action against Randall Associates and Miley

in the United States District Court for the Eastern District of Pennsylvania, and requested

a declaratory judgment that it was not obligated to defend or indemnify either of them in

the Class Action, as Randall Associates’ transmission of unsolicited faxes was intentional

and thus not covered by the Policy. Both sides filed motions for summary judgment.

The District Court granted Nationwide’s motion and denied the cross-motion of Randall

Associates and Miley. They timely appealed. 1

II. Discussion

        We exercise plenary review over the District Court’s grant of a motion for

summary judgment, and assess the record using the same summary judgment standard


1
  The District Court had jurisdiction under 28 U.S.C. § 1332, and we have appellate
jurisdiction under 28 U.S.C. § 1291.
                                             3
that guided the District Court. Gardner v. State Farm Fire & Cas. Co., 544 F.3d 553,

557 (3d Cir. 2008).

A.       Duty to Defend

         Under Pennsylvania law, an insurer has a duty to defend “whenever the complaint

filed by the injured party may potentially come within the coverage of the policy.”

Gedeon v. State Farm Mutual Auto. Ins. Co., 188 A.2d 320, 322 (Pa. 1963). In

Pennsylvania damages may not be recovered under an “accidental coverage” policy if the

insured acted intentionally. Courts consider whether the insured “desired to cause the

consequences of his act or if he acted knowing that such consequences were substantially

certain to result.” United Servs. Auto. Ass’n v. Elitzky, 517 A.2d 982, 989 (Pa. Super. Ct.

1986).

         In deciding this case, we are persuaded by the reasoning of a prior case that is

virtually indistinguishable – Melrose Hotel Co. v. St. Paul Fire and Marine Insurance

Co., 432 F. Supp. 2d 488 (E.D. Pa. 2006), aff’d, 503 F.3d 339 (3d Cir. 2007).2 In

Melrose, the insured (Melrose Hotel Company) hired a third party to send fax

advertisements. 432 F. Supp. 2d at 490. When a recipient of those faxes sued Melrose

Hotel alleging violations of the TCPA, the Hotel’s insurer claimed it had no duty to

defend under a policy that provided coverage for only accidental property damage. Id. at

505. The Hotel argued that a duty to defend existed because the underlying complaint


2
 In Melrose Hotel, our Court issued a Judgment Order explicitly adopting the District
Court’s ruling and rationale. There is an issue as to whether such a Judgment Order is
precedential. We do not address the question in this opinion, but flag it for our Court’s
future consideration.
                                               4
asserted that it “should have known” that the faxes were unauthorized and that “such

language equates with unintentional conduct and therefore falls under the Policy.” Id. at

504. The Melrose Hotel Court rejected this “should have known” argument, finding

instead that the underlying complaint – which contained no factual allegations that the

Hotel acted negligently, that the faxes were sent by mistake, or that it believed the faxes

were being sent with the receiver’s permission – asserted unequivocally that the Hotel

“intended to fax its advertisements to Class members.” Id. at 510.

       Here, CSAS’s complaint in the Class Action similarly contains no factual

allegations that Randall Associates acted negligently, that the faxes were sent by

accident, or that it mistakenly believed the faxes were sent with the recipients’

permission. Rather, the Class Action Complaint alleges that Miley was actively involved

in the scheme to broadcast fax advertisements. Accordingly, the District Court correctly

found that, despite language in the Complaint that Randall Associates “knew or should

have known” of the TCPA violations, the Complaint’s “allegations of a sophisticated

scheme, alongside the inherently intentional nature of sending a fax advertisement … ,

[are] squarely outside the Policy’s coverage for an ‘accident’ and within the Policy’s

exclusion for coverage which is ‘expected or intended.’”

       Appellants argue that, rather than following Melrose Hotel, we should look to

Telecommunications Network Design Inc. v. Brethren Mutual Insurance Co., 83 Pa. D. &

C. 4th 265 (Pa. Com. Pl. 2007), a Pennsylvania trial court decision that disagreed with

Melrose Hotel’s reasoning. In Brethren Mutual, a plaintiff brought suit against Paradise

Distributing Inc. for, inter alia, violating the TCPA by sending unauthorized faxes. Id.

                                             5
at 267. The plaintiff later amended its complaint to add Canafax Marketing, the third

party vendor hired by Paradise to send the faxes, as a defendant. Id. at 271. The

underlying complaint asserted that Paradise and Canafax “knew or should have known

that their misappropriation of [plaintiff’s] resources was wrongful and without

authorization.” Id. at 273. The Pennsylvania Court declined to follow Melrose Hotel and

held that Brethren Mutual, the insurer, had a duty to defend Paradise because, without

knowing more about the relationship between Paradise and Canafax, the Court could not

find that Paradise “intentionally transmitted its advertisements to the plaintiff class.” Id.

at 276 (“It is possible that in hiring Canafax, Paradise did not intend or expect its

advertisements to be sent to unwilling recipients and that Canafax did so without

Paradise’s knowledge and/or consent”).

       We are not persuaded by Brethren Mutual in our case. Unlike that decision, where

the nature of the relationship between the policyholder and the third-party vendor was

unknown, here the relationship between Randall Associates and the third-party vendor is

well defined – the Class Action Complaint explicitly alleges Miley’s involvement with

the fax transmissions. Additionally, in Brethren Mutual the plaintiff amended the

underlying complaint to include the third party vendor as a defendant, suggesting that the

plaintiff considered the vendor to have committed wrongdoing separate from the

policyholder. Here the Class Action Complaint names only Randall Associates and

Miley as defendants and in no way suggests that Randall Associates negligently hired a

third party that, unbeknownst to it, acted unlawfully. Finally, although the Pennsylvania

Supreme Court has not addressed the particular legal issue of a duty to defend in TCPA

                                              6
cases, nothing supports Randall Associates’ contention that, if confronted with the issue,

the Pennsylvania Supreme Court would follow Brethren Mutual rather than Melrose

Hotel. See Robertson v. Allied Signal, Inc., 914 F.2d 360, 378 (3d Cir. 1990) (“In cases

where the state’s highest court has not considered the precise question to be answered,

the federal court is called upon to predict how the state court would resolve the issue

should it be called upon to do so.”). No Pennsylvania appellate court has considered

Brethren Mutual.

       On the merits, numerous other cases, when determining whether conduct is

“accidental” in non-TCPA contexts, are clear that even if the policyholder were

negligent, the damages that occurred from the policyholder’s negligence must be

“fortuitous” in nature in order to qualify as resulting from an accident. See, e.g.,

Specialty Surface Int’l., Inc. v. Cont’l. Cas. Co., 609 F.3d 223, 238-39 (3d Cir. 2010)

(“damages that are a reasonably foreseeable result” are not a covered “occurrence”);

Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A.2d

888, 899 (Pa. 2006) (faulty workmanship claim did not “present the degree of fortuity

contemplated by the ordinary definition of ‘accident’”). Accordingly, the crucial inquiry

in deciding whether an insurer has a duty to defend is whether the damages “were caused

by an event so unexpected, undesigned and fortuitous as to qualify as accidental.”

Donegal Mut. Ins. Co. v. Baumhammers, 938 A.2d 286, 293 (Pa. 2007). Here, the

damages caused by Randall Associates’ transmission of faxes were a reasonably

foreseeable result of its and Miley’s conduct and not sufficiently “fortuitous.” While

Appellants might not have intended to violate the TCPA, they did intend to send the faxes

                                              7
and knew that sending them would use the recipients’ paper, toner, and time. The

District Court correctly found that Nationwide did not have a duty to defend.

B.     Duty to Indemnify

       An insurer has a duty to indemnify only if it has a duty to defend—“a duty to

defend is broader than the duty to indemnify,” and therefore “a finding that [the insurer

does not have a duty to defend] will also preclude a duty to indemnify.” Kvaerner, 908

A.2d at 896 n.7 (internal citations omitted). Because the District Court properly

determined that Nationwide did not have a duty to defend Randall Associates,

Nationwide also did not have a duty to indemnify that entity.

                                       *   *   *   *   *

       For these reasons, we affirm.




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