The United States District Court for the District of Minnesota recently granted an insurer’s motion for summary judgment based upon its finding that the underlying claims were excluded by the policy’s broadly worded Product Exclusion. W3i Mobile, LLC v. Westchester Fire Insurance Co., No. 08-6370 (D. Minn. November 20, 2009). A copy of the decision can be found here.
The insured provided “mobile content” (i.e., customized ring tones, sports scores, weather alerts, etc.) to customers through cellular telephone technology. Various complaints were filed against the insured alleging that it caused customers to be charged for unauthorized mobile content (“Underlying Claims”). The insured tendered the Underlying Claims to the insurer for payment under the Business and Management Indemnity Policy issued to the insured. The insurer denied coverage based upon an exclusion that provided that the insurer would not be liable for loss on account of any Claim “alleging, based upon, arising out of, attributable to, directly or indirectly resulting from, in consequence of, or in any way involving: ... any goods or products manufactured, produced, processed, packaged, sold, marketed, distributed, advertised or developed” by the insured (the “Products Exclusion”).
After the insured filed suit for breach of contract and declaratory judgment, the insurer moved for summary judgment on the grounds that coverage for the Underlying Claims was excluded under the Products Exclusion. The insurer first argued that the Underlying Claims arose out of the insured’s product (the “mobile content”) and were therefore excluded by the Products Exclusion. Interestingly, the court acknowledged the broad application of the “arising out of” language, but held that the causal connection between the mobile content and the Underlying Claims was not sufficient causal connection for the “arising out of” language to preclude coverage. Rather, the court agreed that the Underlying Claims were “attributable to, directly or indirectly resulting from, in consequence of, or in any way involving” the mobile content. Accordingly, the court held that the remaining portion of the Products Exclusion was the key to excluding coverage.
Furthermore, the court held that the broad exclusionary language did not render the Policy’s coverage illusory because the Policy covered liability beyond the insured’s products and the insured had failed to show that the insured paid a specific premium for products coverage (as opposed to the other coverage under the Policy). The court found that because the Underlying Claims involved the mobile content, they were not covered and the insurer had no duty to defend. Accordingly, the court granted the insurer’s motion for summary judgment.