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State Farm Fire and Casualty Co. v. Franklin Center for Government and Public Integrity

United States District Court, E.D. Virginia, Alexandria Division

April 4, 2014

STATE FARM FIRE AND CASUALTY COMPANY, Plaintiff,
v.
FRANKLIN CENTER FOR GOVERNMENT AND PUBLIC INTEGRITY, et al., Defendants.

MEMORANDUM OPINION

ANTHONY J. TRENGA, District Judge.

Certain defamation and business tort claims have been filed against defendant Franklin Center for Government and Public Integrity's ("FCGPI"). In this action, the parties seek a declaration of rights with respect to those claims under a business liability policy issued by plaintiff State Farm Fire and Casualty Company ("State Farm"). Before the Court are cross motions for summary judgment [Doc. Nos. 25 and Doc. No. 22], on which the Court held a hearing on March 7, 2014. Upon consideration of the parties' cross motions for summary judgment, the memoranda filed in support thereof and in opposition thereto, and the arguments of counsel at the hearing held on March 7, 2014, and for the following reasons, the Court concludes that State Farm has a duty to defend, as FCGFI claims. FCGFI's motion for summary [Doc. No. 22] is therefore GRANTED as to State Farm's duty to defend and State Farm's motion for summary judgment [Doc. No. 25] DENIED as to that issue.

Background

FCGPI is the named insured on a State Farm Businessowners Policy (the "Policy") in effect for the period May 12, 2012 to May 12, 2013. On or about April 8, 2013, GreenTech Automotive Inc. ("GreenTech") filed a civil action against FCGPI and Kenric Ward ("Ward"), an FCGPI employee, in the United States District Court for the Northern District of Mississippi, Oxford Division (the "Suit"). In the Suit, GreenTech alleges liability on the part of FCGPI for defamation (count 1) and intentional interference with business and prospective business relations (count 3), and liability on the part of Ward for intentional interference with business and prospective business relations (count 3). All of GreenTech's claims are based on two articles, authored by Ward, and posted by FCGPI on its website, Watchdog.org. The parties agree that the Policy was in full force and effect during the period relevant to GreenTech's claims.[1]

Analysis

In filing cross motions for summary judgment, the parties agree that there are no material issues of fact. Therefore, the Court must decide whether summary judgment is appropriate by looking at the four corners of the Policy and the complaint in the Suit. See Fuisz v. Selective Ins. Co. of Am., 61 F.3d 238, 241 (4th Cir. 1995).[2] As stipulated by the parties, the coverage issues pertain to: (1) the application of the Policy term "personal and advertising injury" to the claims alleged in the Suit; and (2) the application of Exclusion ¶17(a), (b), (k), (h)(1) and (n) in Section II to the claims alleged in the Suit.

In Virginia, the insured must establish a prima facie case that the claim is within the coverage as defined in the policy, absent exclusions. RAVCO Ins. Co. v. Ward, 715 F.Supp.2d 699, 706-707 (E.D. Va. 2010). The insurer must defend unless "it clearly appears from the initial pleading the insurer would not be liable under the policy contract for any judgment based upon the allegations." Res. Bankshares Corp. v. St. Paul Mercury Ins. Co., 407 F.3d 631, 636 (4th Cir. 2005) (quoting Reisen v. Aetna Life and Cas. Co., 225 Va. 327, 302 S.E.2d 529, 531 (1983)). The insurer bears the evidentiary burden of showing that an exclusion applies. RAVCO Ins. Co., 715 F.Supp.2d at 706-707. Further, the duty to defend arises whenever the complaint in the underlying action alleges facts and circumstances some of which, if proved, would fall within the risk covered by the policy. Fed Hill Homeowners Ass'n v. Cmty. Ass'n Underwriters of Am., Inc., 384 Fed.Appx. 209, 212 (4th Cir. 2010). The insurer's duty to defend "is broader than [the] obligation to pay, and arises whenever the complaint alleges facts and circumstances, some of which would, if proved, fall within the risk covered by the policy." AES Corp. v. Steadfast Ins. Co., 283 Va. 609, 617, 725 S.E.2d 532, 535 (2012) (quoting Virginia Elec. & Power Co. v. Northbrook Prop. & Cas. Ins. Co., 252 Va. 265, 268-69, 475 S.E.2d 264, 265-66 (1996)). The insurer can only avoid the duty to defend if it is clear that the insurer could not be liable under the policy for any judgment based upon the underlying allegations. Res. Bankshares Corp., 407 F.3d at 636.

Like any other contract, an insurance policy is construed according to its terms, so long as those terms are clear and unambiguous. RAVCO Ins. Co., 715 F.Supp.2d at 706-707. When a term is not defined in the policy, it is given its ordinary and accepted meaning. Travelers Prop. Cas. Co. of Am. v. Liberty Mut. Ins. Co., 444 F.3d 217, 222 (4th Cir. 2006); Scottsdale Ins. Co. v. Glick, 397 S.E.2d 105, 108 (1990). The Court must read words and provisions in the policy within the context of the policy as a whole. Res. Bankshares Corp., 407 F.3d at 636. Where an insurer is the author of a policy, as is invariably the case with respect to policies it issues, ambiguous language pertaining to policy terms is construed in favor of an insured. Thus, if there is any ambiguity regarding potential coverage, the insurer must provide a defense. Smith v. Allstate Ins. Co., 241 Va. 477, 403 S.E.2d 696, 697-98 (1991). Conversely, exclusions from coverage are enforceable only when the exclusions "unambiguously bring the particular act or omission within [their] scope." Floyd v. Northern Neck Ins. Co., 245 Va. 153, 427 S.E.2d 193, 196 (1993). Moreover, the burden rests on the insurer to establish the clear applicability of a particular exclusion from coverage. Johnson v. Insurance Co. of North America, 232 Va. 340, 350 S.E.2d 616, 618 (1986). Therefore, "[w]hen an initial pleading alleges facts and circumstances, some of which would, if proved, fall within the risk covered by the policy, the insurance company is obliged to defend its insured." Parker v. Hartford Fire Ins. Co., 222 Va. 33, 278 S.E.2d 803, 804 (1981) (internal quotations omitted).

A. "Personal and Advertising Injury"

The present dispute involves the Policy coverage in Section II, Coverage L - Business Liability. That section of the Policy provides in relevant part that State Farm "will pay those sums that the insured becomes legally obligated to pay as damages because of... personal and advertising injury' to which this insurance applies. [State Farm] will have the right and duty to defend the insured by counsel of [State Farm's] choice against any suit' seeking those damage."

The term "personal and advertising injury" is defined in Section II - Definitions, ¶ 18, which provides in pertinent part as follows:

18. "Personal and advertising injury" means injury, including consequential "bodily injury", arising out of one or more of the following offenses:
...
d. Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or ...

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