Hartford Fire Insurance Company v. The Western Union Company

Background

Hartford Fire Insurance Company sued its insureds, The Western Union Company and Western Union Financial Services, concerning coverage under a commercial general liability policy. The dispute arose from a separate lawsuit involving claims that Western Union provided financial support to the Donetsk People’s Republic, a Russian-backed separatist group, in connection with the group’s activities and the downing of Malaysia Airlines Flight 17. Western Union tendered that lawsuit to Hartford Fire, seeking coverage.

Hartford Fire sought a declaration that it had no duty to defend or indemnify Western Union. Western Union asserted counterclaims seeking a declaration that Hartford Fire had those duties, along with damages for alleged breach of contract and statutory bad faith. Western Union moved for partial judgment on the pleadings. Hartford Fire cross-moved for judgment on the pleadings and moved to dismiss Western Union’s counterclaims.

Legal standard

The court treated a motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) under the same general standard used for a motion to dismiss for failure to state a claim. Judgment on the pleadings is appropriate when the material facts are undisputed and the court can decide the matter from the pleadings. The parties agreed that Colorado substantive law governed the insurance dispute.

Under Colorado law, an insurer generally has a broad duty to defend when the underlying complaint alleges any facts that might fall within policy coverage. To avoid that duty, the insurer must establish that the underlying allegations fall entirely within policy exclusions and that there is no factual or legal basis for eventual indemnification.

War Exclusion

The policy excluded bodily injury arising, directly or indirectly, from war, warlike action, or insurrection, among other events. The court focused on the insurrection provision and defined an insurrection as a violent uprising by a group or movement acting specifically to overthrow the established government and seize its powers.

The court concluded that the allegations in the underlying complaint met that definition. The complaint described the Donetsk People’s Republic as an identifiable group seeking to create a pro-Russia state through forceful acquisition of power and control in eastern Ukraine. It also alleged that the group sought to undermine the Ukrainian government and increase Russian control over territory. The court held that the downing of Flight 17 arose from an insurrection under the policy, even if the group had additional motives such as intimidation, influence, profit, or propaganda.

The court therefore held that the claims against Western Union fell within the War Exclusion. Hartford Fire consequently had no duty to defend Western Union. The court also stated that, if the indemnification issue was not already moot because the underlying claims had been voluntarily dismissed, the absence of a duty to defend meant that Hartford Fire also had no duty to indemnify Western Union.

Financial Services Exclusion

The policy separately excluded bodily injury resulting from an insured’s rendering of or failure to render financial services. The policy’s definition of financial services included activities such as acting as an electronic funds-transfer agent, arranging interbank transfers, and selling or issuing certain financial instruments.

The court held that this exclusion independently barred coverage. According to the allegations in the underlying complaint, Western Union’s role was to provide money-transfer services that allowed funds to reach people raising money for the Donetsk People’s Republic. The court treated those factual allegations—not the complaint’s broader legal description of the conduct as “material support”—as the basis for determining the duty to defend. It concluded that the alleged conduct fell squarely within the Financial Services Exclusion.

Disposition

The court held that both exclusions applied. Western Union’s motion for partial judgment on the pleadings was DENIED. Hartford Fire’s cross-motion for judgment on the pleadings and its motion to dismiss Western Union’s counterclaims were both GRANTED. The clerk was directed to enter judgment consistent with the opinion and close the case.