Why it matters

Be mindful of what relief the plaintiff seeks. Here, the relief sought in the underlying litigation was limited to an injunction; the plaintiff did not include a request for damages. The defendant’s insurer therefore was not obligated to defend the claim. The insurer had declined the demand to defendant, taking the position that the complaint alleged harm that could not be “readily compensated for in damages,” and requested only temporary and permanent injunctive relief. The Wisconsin federal court judge sided with the insurer, adding that a claim for attorneys’ fees did not change the plaintiff’s request from injunctive relief into damages.

Detailed Discussion

Habush Habush & Rottier and Cannon & Dunphy are rival personal injury law firms in Wisconsin. Habush sued Cannon for violations of the state’s privacy law for allegedly bidding upon the keywords “habush” and “rottier” so that an online search would turn up results for the Cannon firm and not the Habush site.

The Habush complaint claimed that the harm caused to the firm could not be “readily compensated for in damages” and requested both a temporary and permanent injunction against Cannon to remove their advertisements from all Internet sites in response to searches using the contested keywords (or a combination of the words).

Although the Habush complaint did not seek damages, the firm did ask the court to award attorneys’ fees. A trial court granted summary judgment for Cannon & Dunphy, a decision affirmed on appeal.

Travelers Property Casualty Company of America, Cannon’s insurer, refused to defend the law firm under a commercial general liability policy. The policy provided that Travelers would insure for “ ‘those sums that [Cannon & Dunphy] becomes legally obligated to pay as damages because of “personal injury” or “advertising injury” to which this insurance applies,’ and that Travelers has the ‘right and duty to defend [Cannon & Dunphy] against any “suit” seeking those damages.’ ”

The insurer argued that the term “damages” was limited to legal damages and did not extend the duty to defend to actions seeking injunctive relief.

Cannon pointed to Habush’s claim for attorneys’ fees, arguing that the litigation was transformed by the request into a suit seeking damages.

U.S. District Court Judge Rudolph T. Randa disagreed.

Attorneys’ fees are not damages, the court wrote, citing to a Wisconsin Supreme Court case that held “damages … unambiguously means legal damages” or “legal compensation for past wrongs or injuries,” but “does not encompass the cost of complying with an injunctive decree.” An action seeking injunctive relief, therefore, did not trigger coverage under the policy at issue.

The court noted that if the requested injunctive relief is intended to compensate for past wrongs – such as a request for payments pursuant to a Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) action – then related costs may be considered damages.

A typical injunctive relief request is not akin to damages, Judge Randa wrote, because it is not considered remedial, but forward-looking. Cannon & Dunphy did not argue that the injunction pursued by the Habush plaintiffs was distinguishable from a “typical injunction,” he said.

For similar reasons, the requested attorneys’ fees could not be considered damages, the court said. Federal statutes – like the Fair Housing Act – consider attorneys’ fees and costs as separate from a plaintiff’s right to damages. And while attorneys’ fees might be understood as monetary compensation when imposed for an already sustained injury, that was not the case in the underlying dispute.

“The Habush plaintiffs incurred legal fees, but only in an effort to stop Cannon & Dunphy from doing what it was doing,” Judge Randa wrote. “Thus, the claim for fees must be considered part of the costs of ‘conforming [Cannon & Dunphy’s] future conduct,’ not ‘legal recompense for injuries sustained.’ ”

Even if the underlying complaint did meet the definition of a suit for damages, the court found that a “Knowing Violation” policy exception applied to preclude coverage. The exclusion eliminated coverage for an advertising injury “caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict ‘personal injury’ or ‘advertising injury,’ ” the court explained. As the Habush complaint alleged Cannon’s actions were intentional, “the exclusion applies because Cannon & Dunphy was attempting to lure potential customers from Habush Habush and Rottier.”

Judge Randa granted summary judgment for the insurer.

To read the decision in Travelers Property Casualty Co. v. Cannon & Dunphy, click here.