Datamaxx Applied Technologies, Inc. v. Chubb Custom Insurance Company

[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 21-13451
Non-Argument Calendar
____________________
DATAMAXX APPLIED TECHNOLOGIES, INC.,
a Florida corporation,
Plaintiff-Appellant,
versus
BROWN & BROWN, INC.
d.b.a. Halcyon Underwriters, Inc., et al.,
Defendants,
CHUBB CUSTOM INSURANCE COMPANY,
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2 Opinion of the Court 21-13451
Defendant-Appellee.
____________________
Appeal from the United States District Court
for the Middle District of Florida
D.C. Docket No. 6:20-cv-00291-CEM-DCI
____________________
Before W ILSON, B RANCH, and ANDERSON, Circuit Judges.
PER CURIAM:
Datamaxx Applied Technologies, Inc., (“Datamaxx”)
appeals from the district court’s grant of summary judgment in
favor of Chubb Custom Insurance Co., (“Chubb”), in Datamaxx’s
suit seeing a declaratory judgment that the parties’ insurance
contract obligated Chubb to indemnify Datamaxx in a 2018 lawsuit
brought by a third-party, Gold Type Business Machines, Inc.,
(“GTBM”). The district court granted Chubb’s motion for
summary judgment after concluding that Datamaxx’s 2018
indemnification claim “correlate[d]” to Datamaxx’s conduct
underlying a 2014 settlement between it and GTBM, which, in
turn, “correlate[d]” to Datamaxx’s indemnification claim to its
previous insurer, AIG, in that case, placing it outside Chubb’s
coverage agreement. After careful review, we affirm.
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21-13451 Opinion of the Court 3
I. BACKGROUND
Prior to the onset of the present litigation, GTBM, a
software provider, developed and sold a product called “Info-Cop,”
which permits “National Crime Information Center (“NCIC”)
terminal operators”—including, but not limited to, law
enforcement officers—to access motor vehicle and warrant
information from multiple law enforcement databases from
remote locations. Seeking to exploit the broader market of non-
NCIC terminal operators, GTBM patented a process and system to
permit non-NCIC terminal operators to query the NCIC, Criminal
Justice Information System (“CJIS”), and other restricted systems
in a manner compliant with applicable rules and regulations
regarding the access, use, and dissemination of such data.
GTBM subsequently entered into a Development and
License Agreement, (“DLA”), with Datamaxx—a software
provider for law enforcement, public safety organizations, and the
security industry—to incorporate GTBM’s system into Datamaxx’s
existing product suite, Omnixx, to create a jointly-developed
“Enhanced Product.” In exchange, Datamaxx would share the
sales revenue from the “Enhanced Product” with GTBM. Pursuant
to the DLA, GTBM licensed its patent “together with other
intellectual property rights (including trade secrets and confidential
business information) to [Datamaxx] solely to develop, make use,
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4 Opinion of the Court 21-13451
sell, and offer to sell the contemplated” “Enhanced Product.”
Furthermore, the parties agreed to label any product that fell
within their agreed-upon definition of “Enhanced Product” with
their jointly-owned “GREENLIGHT” trademark.
But according to GTBM, rather than promoting
GREENLIGHT—the “Enhanced Product” version of Omnixx—
Datamaxx used the enhanced product code and marketed its own
competing product, Omnixx+. Consequently, GTBM
simultaneously filed suit and initiated arbitration against
Datamaxx, alleging, in relevant part, that Datamaxx incorporated
its product source code into Omnixx+, violating the terms of the
DLA which exclusively limited the use of that code to
GREENLIGHT. Datamaxx reported the lawsuit to its then-
insurer, AIG, in September 2013. Ultimately, the parties settled in
May 2014. Although AIG partially reimbursed Datamaxx for the
settlement payment, Datamaxx released AIG from any future
“related” claims.
Following the parties’ settlement, and initially unbeknownst
to GTBM, Datamaxx marketed a separate product, “Redtail.” In
GTBM’s view, Redtail, a visitor management system that cross-
checks a visitor’s identification with various security databases—
including the FBI’s, various DMVs’, and the Sex Offender
registry—shares Greenlight’s functionality and infringes on its
patented process.
In 2018, Datamaxx entered a new liability and indemnity
insurance policy with Chubb, effective on April 15, 2018. Coverage
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21-13451 Opinion of the Court 5
applied on a “claims-made basis.” Under the policy’s “Claims Made
Liability Coverage Common Provisions:”
C. All claims that correlate with an act will be deemed
to have been made at the time the first of such claims
is deemed to have been made . . .
. . .
F. This coverage does not apply to any damages, loss,
cost or expense in connection with any claim that
correlates with an act, if such act also correlates with
any claim deemed to have been made before the
beginning of this policy period.
The policy defined an “act” as “an act, error, or omission. Includes
all correlated acts, errors, omissions and all series of continuous or
repeated acts, errors or omissions.” Datamaxx and Chubb did not
define “correlate” in the policy agreement.
Later that year, Datamaxx notified GTBM that it intended
to terminate the DLA, effective December 2018, but planned on
continuing to market and sell Redtail. As a result, in October 2018,
GTBM again initiated arbitration against Datamaxx, alleging, as
pertains to this appeal, that Datamaxx breached the parties’
settlement agreement, the DLA, and the two agreements’ implied
covenants of good faith and fair dealing. GTBM contended that, as
part of the settlement, Datamaxx agreed that it had not and would
not develop or sell any additional product using any code written
for the parties’ “Enhanced Product.” Likewise, GTBM maintained
that Datamaxx agreed not to market or sell any new product
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6 Opinion of the Court 21-13451
competing with the “functionality of Greenlight or any Enhanced
Product.” Nevertheless, GTBM alleged that Datamaxx’s
development, marketing, and sale of Redtail used GTBM’s
proprietary code and technological know-how to compete with
Greenlight. Moreover, GTBM claimed that, by developing Redtail
under its own brand, Datamaxx deprived GTBM of revenue to
which it was entitled, “defeat[ing] the objects of the Settlement
Agreement [and the DLA] and depriv[ing] GTBM of the fruits of
[those] agreement[s] . . . .”
Datamaxx tendered an indemnification claim to Chubb on
October 29, 2018, and, after Chubb denied coverage in December
2018, it sent one to AIG, as well. Datamaxx then filed the present
lawsuit against Chubb, seeking a declaratory judgment of Chubb’s
obligation to defend and indemnify it in the GTBM litigation.
Datamaxx and GTBM settled the second lawsuit in January 2020.
Before the district court, Datmaxx and Chubb cross-
motioned for summary judgment with respect to Chubb’s duty to
indemnify Datamaxx. Addressing Chubb’s argument that
coverage did not extend to Datamaxx’s 2018 GTBM litigation claim
because it related to Datamaxx’s 2014 litigation claim, the district
court analyzed the language in the policy’s “Claims-Made Liability
Coverage” provision. Noting that neither party claimed that the
provision’s use of the word “correlate” was ambiguous, the district
court found that various dictionaries define “correlate”
synonymously with “relate,” and applied our precedent from cases
involving “related claims” provisions. First, pointing to our
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21-13451 Opinion of the Court 7
decision in
Continental Casualty Co. v. Wendt, 205 F.3d 1258, 1262
(11th Cir. 2000), the district court explained that “related” claims
include “both logical and causal connections.” The district court
concluded that the acts alleged in both the 2014 and 2018 litigation
“involve [Datamaxx] improperly using the Greenlight code in its
own, competing product.” Put another way:
While the products themselves differ, the acts are
essentially the same. In both [suits] . . . it is alleged
that [Datamaxx] used the proprietary information,
patented method, and code related to Greenlight to
develop and sell its own competing product, that
[Datamaxx] failed to pay GTBM as they agreed, and
that [Datamaxx] was undermining the entire business
partnership between it and GTBM by utilizing the
fruits of that partnership to develop its own products
to compete with the partnership’s product. The
overarching plan and mod[us] operandi in the acts
underlying the [suits] were nearly identical.
Indeed, the district court emphasized that, because the 2018 suit
“alleges a breach of the settlement of the First GTBM Litigation[,]
[i]t would simply defy logic to conclude that those claims are not
related.” And, as a result of its determination that the 2018 claims
correlated to the acts underlying the 2014 litigation, the district
court found that they predate the policy’s coverage period and
were not covered by the parties’ agreement. Consequently, the
district court granted summary judgment in Chubb’s favor and
denied Datamaxx’s motion for summary judgment.
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Datamaxx timely appealed.
II. ANALYSIS
On appeal, Datamaxx argues that the district court erred by
treating the “Claims-Made Liability Coverage” portion of the
policy as a coverage prerequisite, rather than an exclusion, and that
Chubb failed to carry its burden to establish that the exclusion
applied to the 2018 litigation claims. In Datamaxx’s view, Chubb
cannot prevail because the acts underlying the 2014 lawsuit do not
“correlate” to those implicated in the 2018 suit. Datamaxx further
maintains that the district court improperly conflated “related
claims” provisions with the “narrower” and “reciprocal, causal”
correlating claims provision to which the parties agreed, and
therefore erred in applying our precedent on “related claims”
provisions. We disagree.
We review
de novo both a district court’s order granting
summary judgment and its interpretation of language in an
insurance contract.
See Yarbrough v. Decatur Hous. Auth., 941
F.3d 1022, 1026 (11th Cir. 2019);
Hegel v. First Liberty Ins. Corp.,
778 F.3d 1214, 1219 (11th Cir. 2015).
“Florida law places on the insured the burden of proving
that a claim against it is covered by the insurance policy. The
burden of proving an exclusion to coverage is, however, on the
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21-13451 Opinion of the Court 9
insurer.”1
LaFarge Corp. v. Travelers Indem. Co., 118 F.3d 1511,
1516 (11th Cir. 1997) (internal citation omitted).2 And, where
policy language is “susceptible to more than one reasonable
interpretation, one providing coverage and the other limiting
coverage, the insurance policy is considered ‘ambiguous’ and must
1 Contrary to Datamaxx’s position, the “Claims-Made Liability Coverage”
portion of the policy is a coverage prerequisite, not an exclusion. Under
Florida law, “[i]nsurance policies may contain exclusionary provisions that
exclude certain risks from the scope of coverage, and exclusionary provisions
may carve out coverage exceptions for losses that ensue from an excluded
cause of loss.”
Liberty Mut. Fire Ins. Co. v. Martinez, 157 So. 3d 486, 488 (Fla.
5th DCA 2015) (citing
Swire Pac. Holdings, Inc. v. Zurich Ins. Co., 845 So. 2d
161, 167-168 (Fla. 2003)). In other words, an exclusion removes the insurer’s
obligation to cover something which, absent that exclusion, would otherwise
fall within the coverage afforded by a given policy.
Yet, the “Claims-Made Liability Coverage” policy provision clarifies
that “this insurance applies only if: . . . such act was not first committed before
the applicable Retroactive Date shown in the Declarations or after the end of
the policy period,” before explaining that, to receive coverage, claims must
first be made against an insured “after the beginning of the policy period; . . .
before the end of the policy period; or” during a third period not relevant to
this appeal. However, for coverage purposes, “[a]ll claims that correlate with
an act will be deemed to have been made at the time the first of such claims is
deemed to have been made.” Consequently, any act correlating to a claim
made prior to the inception of coverage is deemed to have been made prior to
coverage, placing it outside the policy period. Accordingly, the policy
provision does not “exclude [any] risks from the scope of coverage,” and is
therefore not an exclusion.
See Martinez, 157 So. 3d at 488.
2 Both parties agree that Florida law applies because the policy was issued and
delivered to Datamaxx in Florida and does not contain any contrary choice of
law provision.
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10 Opinion of the Court 21-13451
be ‘interpreted liberally in favor of the insured and strictly against
the drafter who prepared the policy.’”
State Farm Fire and Cas. Co.
v. Steinberg, 393 F.3d 1226, 1230 (11th Cir. 2004) (quoting
Auto-
Owners Ins. Co. v. Anderson, 756 So.2d 29, 34 (Fla. 2000)).
Nevertheless, “the mere failure to provide a definition for a term
involving coverage does not necessarily render the term
ambiguous.”
Wendt, 205 F.3d at 1262.
This appeal turns on the definitions of two contractual
terms, one defined by the parties and one left to common usage.
The insurance policy defines the first term, “act,” as “an act, error
or omission,” and “includes all correlated acts, errors or omissions
and all series of continuous or repeated acts, errors or omissions.”
The second term, “correlate,” requires us to look outside the
policy. Datamaxx does not provide us with a specific definition,
instead referring the Court to the Merriam-Webster online
dictionary.
After looking at the dictionary, the district court treated
“correlates” and “relates” as synonymous and proceeded to apply
our precedent in
Wendt and a series of unpublished cases to
determine whether, weighing a series of factors, the act underlying
the 2018 litigation bore logical and causal connections to
Datamaxx’s 2014 claim. But
Wendt dealt with claims that “relate,”
not claims that “corelate.”
See Wendt, 205 F.3d at 1263. We agree
with Datamaxx that Chubb “did not draft a ‘related claims’
exclusion . . . and instead opted for ‘correlates[,]’” which “must be
considered consequential.”
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21-13451 Opinion of the Court 11
Datamaxx insists that “correlates” “connotes reciprocal,
causal relationships.” Granted, Merriam-Webster defines the
transitive verb “correlates” to mean, “establish[ing] a mutual or
reciprocal relation between,” “show[ing] correlation or a causal
relationship between,” or “present[ing] or set[ting] forth so as to
show relationship.” “Correlate.”
Merriam-Webster.com
Dictionary, Merriam-Webster, https://www.merriam-
webster.com/dictionary/correlate. But it defines “correlation”
“
specifically” to mean “a relation existing between phenomena or
things or between mathematical or statistical variables which tend
to vary, be associated, or occur together in a way not expected on
the basis of chance alone.” “Correlation.”
Merriam-Webster.com
Dictionary, Merriam-Webster, https://www.merriam-
webster.com/dictionary/correlation. In other words, although
causation begets correlation, correlation does not imply causation.
See Brown v. Ent. Merchants Ass’n, 564 U.S. 786, 800 (2011) (Scalia,
J.) (explaining that studies “based on correlation, not evidence of
causation,” do not establish causative relationships). Thus,
although “correlates” is narrower than “relates,” as used in the
policy it requires nothing more than a showing that acts and claims
“tend to vary, be associated, or occur together in a way not
expected on the basis of chance alone.”
See supra “Correlate;”
“Correlation.”
Datamaxx insists that its 2014 claim bears no correlation to
the act underlying its 2018 claim because the two Datamaxx
products at issue, Omnixx+ and Redtail, “worked differently.”
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More specifically, Datamaxx maintains that in 2014, GTBM alleged
that it “reverse-engineered” Greenlight source code and
incorporated it into Omnixx+, or, “[a]t its essence, the first lawsuit
claimed that Datamaxx misappropriated GTBM’s Greenlight
source code for its own and falsely held out Omnixx+ as a different
product when it was really the same.” On the other hand,
Datamaxx explains that GTBM never claimed that GTBM used
Greenlight source code, but, instead “that users of Redtail were
able to access Greenlight’s ‘functionality’ through a back-end
application programming interface, called an ‘API.’”3
Although we appreciate the significant difference between
source code and APIs, in this case, the way in which the product
operated is a distinction without a difference. Datamaxx freely
admits in its brief that:
[a]n API is just a method by which two applications “talk to”
each other. The dispute in the 2018 arbitration, then, was
over whether Datamaxx was permitted to sell a product
(Redtail) that ‘talked to’ background search databases
through Greenlight. The user interacted directly with
3 “What is an API? The Federal Circuit described an API as a tool that ‘allow[s]
programmers to use . . . prewritten code to build certain functions into their
own programs, rather than write their own code to perform those functions
from scratch.’ Through an API, a programmer can draw upon a vast library
of prewritten code to carry out complex tasks.”
Google LLC v. Oracle
America, Inc., --- U.S. ----, 141 S. Ct. 1183, 1191 (2021) (quoting
Oracle America,
Inc. v. Google, Inc., 750 F.3d 1339, 1349 (Fed. Cir. 2014)).
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21-13451 Opinion of the Court 13
Redtail, and the Greenlight API allowed information to pass
to and from other applications on other networks.
We agree with Datamaxx’s characterization of the 2018 litigation
and associated claim. However, contrary to Datamaxx’s claims on
appeal, GTBM’s 2013 complaint explicitly accuses Datamaxx of
stealing and selling the source code for Greenlight’s API,
specifically, and depriving GTBM of its share of the resulting
market recognition and revenue.
Tellingly, in disputing the district court’s conclusion that the
acts underlying its 2018 claim “correlate” to the 2014 claims,
Datamaxx concedes that, in the earlier suit: “GTBM claimed
Datamaxx was liable . . . because it cut out Greenlight altogether.”
Put another way, GTBM sued Datamaxx because it developed a
unique product that integrated GTBM’s proprietary API code
without adhering to the agreed-upon revenue-sharing or labeling
schemes for any product using that code.
Likewise, after settling its first lawsuit for breaking its
agreement and depriving GTBM of the revenue and market-
recognition to which it was entitled, Datamaxx built another
system that not only interfaced, but also competed, with
Greenlight’s API, without adhering to the agreed-upon revenue-
sharing or labeling schemes for any product using GTBM’s code.
In either case, GTBM’s claim was never really that “Datamaxx was
liable . . . because it cut out Greenlight altogether,” but, instead,
that Datamaxx was liable because it cut out GTBM, altogether.
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14 Opinion of the Court 21-13451
Hence, Datamaxx’s second attempt to circumvent and
violate the DLA necessarily correlates to—or “tend to vary, be
associated, or occur together in” an unusual way—the 2014 claim
stemming from its first attempt to circumvent and violate the DLA.
After GTBM sued Datamaxx for cutting it out of the deal by
recreating Greenlight, Datamaxx allegedly tried again by building
a new application that would draw information from Greenlight
without requiring Datamaxx to share the resulting revenue.
Because Chubb has produced evidence that Datamaxx previously
tried to avoid paying GTBM for the Greenlight API in 2013, Chubb
has carried its burden to show that Datamaxx’s repeated, but
slightly different, attempts to profit from the Greenlight API
without paying GTBM “tend to vary” together.
Because Chubb has shown that Datamaxx’s 2018 claim
“correlates” to an act correlating to a claim made before the onset
of policy coverage, the district court properly granted summary
judgment in Chubb’s favor.
AFFIRMED.
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