Tortious Interference Claims Based on Contract Breaches Found Within Exclusions to Directors & Officers As Well As "Advertising Injury" Coverage
Although the general rule is that facts, not labels of causes of action, trigger a defense under offense-based policies, as well as those looking to wrongful acts such as Directors & Officers policies, mere reference to terms that might otherwise trigger a defense, such as disparagement or misrepresentation, were deemed insufficient in and of themselves to show that the conduct fell within potential coverage.
Greektown Casino, LLC v. Zurich Am. Ins. Co., No. 07-CV-13583, 2008 WL 597814 (E.D. Mich. Feb. 29, 2008)
At issue were claims for tortious interference with contract and business relations causing Greektown to breach its agreement with plaintiffs. The court observed:
19. The comments, statements and representations made by Kewadin employees/agents were made for the specific purpose of wrongfully interfering with and inducing the disruption of existing business relationships, causing Greektown to terminate its business relationship with Lane and Lane & Associates.
Id. at *2.
There was no express cause of action for disparagement or fact allegations that denigrated the products, goods or services of another.
The court found Exclusion 4(h) to an American Home Assurance policy entitled Directors, Officers and Private Company Liability Insurance Policy precluded a defense. It excepted from coverage claims “alleging, arising out of, based upon or attributable to any actual or alleged contractual liability of the Company or any other Insured under any express contract or agreement.” Id. at *5.
A further exclusion references various types of claims, including antitrust, business competition, unfair trade practices, and tortious interference in another’s business or contractual relationships. The court found that the tortious interference claim was excluded by the anti-competitive behavior exclusion.
The court reasoned:
Lane’s complaint plainly alleges that Greektown breached an express contract for his services as an agent of record. Whether or not Greektown was actually a party or signatory to this alleged contract may be relevant to the merits of the underlying action – but not to the clear and unambiguous policy exclusion.
Id. at *6.
Looking at a separate “advertising injury” coverage policy by Zurich American, the court found that fact allegations of disparagement were sufficiently inarticulate under the tortious interference count to trigger a defense. The court analyzed and distinguished several unpublished Michigan cases – Veterans of Foreign Wars v. Auto-Owners Ins. Co., No. 202664, 1999 WL 33444142 (Mich. Ct. App. May 25, 1999) (per curiam) (unpublished), and National Union Fire Ins. Co. of Pittsburgh v. Alticor, Inc., No. 05-15, 2005 WL 2206461 (W.D. Mich. Sept.12, 2005) (unpublished), aff'd, Nos. 05-2479 & 06-2538, 2007 WL 2733336 (6th Cir. Sept. 19, 2007) (per curiam) (unpublished). Id. at *8.
The National Union case criticized the absence of any “actual allegation of product disparagement, slander or libel.” Id. at *9. The court noted that this determination was subsequently affirmed by the Sixth Circuit. The Sixth Circuit found the absence of a claim for damages “because of” the alleged misrepresentations or disparagement determinative and the mere recitation of terms such as “disparagement” or “misrepresentation” insufficient. National Union, 2007 WL 2733336, at *6. The court stated:
Plaintiffs’ argument is that there is a necessary inference from the wording of the tortious interference allegations in the complaint that Kewadin’s employees must have used disparaging or defamatory remarks. The Court agrees with the reasoning of the Michigan Court of Appeals in Veterans of Foreign Wars – and an insured’s assertion that an individual may have “possibly” used defamatory language in connection with a tortious interference claim is not sufficient, in itself, to show that the tortious interference claim is “arguably” within the “personal or advertising injury” policy coverage.
Id. at *9.
Discovery propounded by the insured to claimants in the underlying action, seeking factual clarification of the basis for alleged “disparagement” that complaint references but does not explain could well have led to a different result here.
Greektown Casino, LLC v. Zurich Am. Ins. Co., No. 07-CV-13583, 2008 WL 597814 (E.D. Mich. Feb. 29, 2008)
At issue were claims for tortious interference with contract and business relations causing Greektown to breach its agreement with plaintiffs. The court observed:
19. The comments, statements and representations made by Kewadin employees/agents were made for the specific purpose of wrongfully interfering with and inducing the disruption of existing business relationships, causing Greektown to terminate its business relationship with Lane and Lane & Associates.
Id. at *2.
There was no express cause of action for disparagement or fact allegations that denigrated the products, goods or services of another.
The court found Exclusion 4(h) to an American Home Assurance policy entitled Directors, Officers and Private Company Liability Insurance Policy precluded a defense. It excepted from coverage claims “alleging, arising out of, based upon or attributable to any actual or alleged contractual liability of the Company or any other Insured under any express contract or agreement.” Id. at *5.
A further exclusion references various types of claims, including antitrust, business competition, unfair trade practices, and tortious interference in another’s business or contractual relationships. The court found that the tortious interference claim was excluded by the anti-competitive behavior exclusion.
The court reasoned:
Lane’s complaint plainly alleges that Greektown breached an express contract for his services as an agent of record. Whether or not Greektown was actually a party or signatory to this alleged contract may be relevant to the merits of the underlying action – but not to the clear and unambiguous policy exclusion.
Id. at *6.
Looking at a separate “advertising injury” coverage policy by Zurich American, the court found that fact allegations of disparagement were sufficiently inarticulate under the tortious interference count to trigger a defense. The court analyzed and distinguished several unpublished Michigan cases – Veterans of Foreign Wars v. Auto-Owners Ins. Co., No. 202664, 1999 WL 33444142 (Mich. Ct. App. May 25, 1999) (per curiam) (unpublished), and National Union Fire Ins. Co. of Pittsburgh v. Alticor, Inc., No. 05-15, 2005 WL 2206461 (W.D. Mich. Sept.12, 2005) (unpublished), aff'd, Nos. 05-2479 & 06-2538, 2007 WL 2733336 (6th Cir. Sept. 19, 2007) (per curiam) (unpublished). Id. at *8.
The National Union case criticized the absence of any “actual allegation of product disparagement, slander or libel.” Id. at *9. The court noted that this determination was subsequently affirmed by the Sixth Circuit. The Sixth Circuit found the absence of a claim for damages “because of” the alleged misrepresentations or disparagement determinative and the mere recitation of terms such as “disparagement” or “misrepresentation” insufficient. National Union, 2007 WL 2733336, at *6. The court stated:
Plaintiffs’ argument is that there is a necessary inference from the wording of the tortious interference allegations in the complaint that Kewadin’s employees must have used disparaging or defamatory remarks. The Court agrees with the reasoning of the Michigan Court of Appeals in Veterans of Foreign Wars – and an insured’s assertion that an individual may have “possibly” used defamatory language in connection with a tortious interference claim is not sufficient, in itself, to show that the tortious interference claim is “arguably” within the “personal or advertising injury” policy coverage.
Id. at *9.
Discovery propounded by the insured to claimants in the underlying action, seeking factual clarification of the basis for alleged “disparagement” that complaint references but does not explain could well have led to a different result here.
