The U.S. Court of Appeals for the Eleventh Circuit, ruling in favor of an insurance company that wrote a policy insuring against misappropriation claims, affirmed the dismissal of a suit to recoup attorneys’ fees for an underlying set of allegations for misappropriation of name and photographic likeness. The unanimous panel interpreted the terms of a professional liability insurance policy and concluded as a matter of law that the insurer was not responsible for attorneys’ fees arising from wrongful conduct that occurred before the insurance policy was in place. The Zodiac Group, Inc. v. Axis Surplus Ins. Co., Case No. 13-10941 (11th Cir., Oct. 22, 2013) (per curium).
The present action was bound up with earlier actions between the insured, the Zodiac Group (Zodiac) and a former business partner, Linda Georgian (Georgian). In 2001, Zodiac, a family business marketing “1-800 number” psychic hotlines, entered into an endorsement deal with Georgian, a “renowned psychic.” Under the terms of the agreement, Georgian agreed to endorse Zodiac’s telephone psychic services in her role as co-host of infomercials on the Psychic Friends Network. The arrangement lasted until 2007, when the endorsement agreement ended.
Beginning in 2008, Georgian launched a series of actions alleging, inter alia, that after the endorsement agreement ended, Zodiac continued to use her likeness on its website, in print advertisement, and in national call solicitations. The initial Florida state court action was dismissed for lack of prosecution, but Georgian filed a second, federal, suit in 2009, again alleging that Zodiac had misappropriated her image, invaded her privacy and falsely implied that she continued to endorse Zodiac’s services. The Florida district court dismissed most of the counts in Georgian’s amended complaint and the parties settled the remaining claims.
In the midst of the misappropriation allegations, Zodiac secured professional liability insurance from Axis on October 1, 2008. After renewing the policy, coverage continued until October 1, 2010 and was retroactive from March 6, 1998. The policy stated that it would insure against claims such as those asserted by Georgian, including commercial appropriation of name or likeness. As soon as Georgian filed the federal complaint in 2009, Zodiac requested that Axis indemnify the cost of defending the second suit. Axis denied the claim because the second suit was substantially similar to the first state court action and arose from facts that pre-dated Zodiac’s insurance coverage. In denying Zodiac’s claim, Axis explained that the claims in Georgian’s federal complaint were “first made” in the April 2008 state court action and could not be treated as new claims falling within the terms of the insurance policy because the policy did not cover claims arising from wrongful acts committed prior to the policy’s inception date.
Zodiac sued Axis for breach of contract. After the district court ruled that Zodiac failed to state a claim upon which relief could be granted, Zodiac appealed.
The 11th Circuit interpreted the terms of the insurance policy anew and agreed that dismissal was proper. The appellate panel held that the plain language of the insurance policy precluded coverage based on the timing and substance of Georgian’s first action in April 2008. Specifically, under the policy, all claims “arising from the same Wrongful Act” are deemed to be made on the same date. Here, all “Wrongful Acts” related by “common facts, circumstances, transactions, events and/or decisions” would be treated as a single “Wrongful Act.” Ultimately, the court concluded that the record and the language of the policy did not support Zodiac’s contention that the filing of the second, federal, suit constituted a new “Wrongful Act.” Moreover, the policy further provided a formula for determining the date on which Axis would be responsible for indemnification. Because Axis did not receive notice of Georgian’s claims until January 2010, and the wrongful Acts were committed prior to inception of insurance coverage, the formula excluded legal fees incurred as a result of Georgian’s federal misappropriation allegations.