DAVE'S DETAILING, INC. v. XL SPECIALTY INSURANCE COMPANY
Filing
61
ENTRY DENYING XL SPECIALTY INSURANCE COMPANY'S MOTIONS FOR SUMMARY JUDGMENT 31 51 AND DENYING CATLIN INSURANCE COMPANY'S CROSSMOTION FOR SUMMARY JUDGMENT 45 . Signed by Judge Richard L. Young on 8/2/2013. (PG)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
DAVE’S DETAILING, INC. d/b/a THE
ALLEN GROUPE,
Plaintiff,
vs.
CATLIN
INC.
INSURANCE
COMPANY,
Intervening Plaintiff,
vs.
XL SPECIALTY INSURANCE
COMPANY,
Defendant.
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1:11-cv-1585-RLY-DKL
ENTRY ON XL SPECIALTY INSURANCE COMPANY’S MOTIONS FOR
SUMMARY JUDGMENT AND CATLIN INSURANCE COMPANY’S CROSSMOTION FOR SUMMARY JUDGMENT
Plaintiff, Dave’s Detailing, Inc. d/b/a The Allen Groupe (“TAG”), brought this
action against former liability insurer, XL Specialty Insurance Company (“XL
Specialty”), to recover losses incurred in a lawsuit in Nevada (the “Nevada Lawsuit”).
Catlin Insurance Company, Inc. (“Catlin”) insured TAG throughout the Nevada Lawsuit.
This court granted Catlin’s motion to intervene this suit as a plaintiff for a claim of
contribution and reimbursement against XL Specialty. XL Specialty now moves for
summary judgment against both TAG and Catlin, while Catlin moves for summary
judgment against XL Specialty as to the duty to defend. For the reasons set forth below,
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the court DENIES XL Specialty’s motion for summary judgment against TAG. Further,
as to XL Specialty’s duty to defend, the court DENIES both Catlin’s and XL Specialty’s
motions for summary judgment.
I.
Background
On April 5, 2010, Appearance Group, Inc. (“Appearance Group”) filed an action
in Nevada State Court against TAG and its employees, asserting tort and breach of
contract claims related to the actions of a former Appearance Group employee who later
worked for TAG. (Compl. ¶ 9). XL Specialty provided a Commercial General Liability
Aviation Insurance Policy (“XL Policy”) to TAG for the period from January 17, 2009 to
January 17, 2010. (Id. at ¶ 8). Catlin provided similar insurance for the policy period of
January 17, 2010 through January 17, 2011 (“Catlin Policy”).
On August 3, 2010, Catlin’s claims supervisor, Robert M. Kern, sent XL Specialty
a copy of the First Amended Complaint from the Nevada Lawsuit. (Declaration of
Richard Imbrogno (“Imbrogno Decl.”), Ex. A). Kern noted that Catlin was defending
TAG and its employees in the suit and demanded that XL Specialty tender a defense and
indemnify TAG based on its prior policy. (Id.). Kern provided neither the Original
Complaint nor any other information regarding the case. On December 13, 2010, TAG’s
outside counsel made a written demand upon XL for defense and indemnity under the XL
Policy. (Compl., Ex. B).
On January 6, 2011, XL Specialty agreed to provide a defense to TAG in the
Nevada Lawsuit “because certain allegations in the First Amended Complaint which
could be read to allege defamation are potentially covered by the policy issued by XL to
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[TAG].” (Imbrogno Decl., Ex. B). In particular, XL Specialty stated that the allegations
in paragraph 84 of the First Amended Complaint may potentially be covered in the
personal injury section of Coverage B since they may involve publication of material that
slanders, libels, or disparages. (Id.). This allegation states: “Groth falsely informed
Appearance Group customers and/or other third parties that Appearance Group was going
to shut down its Clark County operations.” (Nevada Amend. Compl. ¶ 84).
Despite XL’s Specialty’s agreement to provide a defense, it also noted that this
defense was subject to a reservation of rights and that several policy exclusions may
apply to this defamation claim, including actions that involve willful violations or
knowledge of their falsity. (Imbrogno Decl., Ex. B). Additionally, XL Specialty stated
that although it would offer a defense to the defamation allegations, it disclaimed
coverage for all other causes of action because they were not even potentially covered
under the XL Policy. (Id.).
After agreeing to defend the Nevada Lawsuit, XL Specialty learned that the
Original Complaint in the action included two additional causes of action not in the First
Amended Complaint: (1) “Business Disparagement against Groth”; and (2) “Commercial
Defamation Per Se against Groth.” (Nevada Orig. Compl., Seventeenth and Eighteenth
Cause of Action; Imbrogno Decl., Ex. D). XL Specialty also discovered the Court
Minutes of June 15, 2010 for the Nevada Lawsuit, which stated:
Arguments by Counsel regarding . . . commercial defamation claim. Mr.
Ferenbach noted he filed a motion to amend and would not be proceeding
with the defamation claim . . . Court stated its findings and noted the
commercial defamation claim is dismissed . . . .
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(Imbrogno Decl., Exs. D, G). On June 20, 2010 – five days after this court hearing
-- the Appearance Group filed its First Amended Complaint, which Catlin
ultimately sent to XL Specialty in August 2010.
Based on this new information, on April 28, 2011, XL Specialty notified
TAG and Catlin that (1) no cause of action pending against TAG was potentially
covered by the XL Policy; (2) XL Specialty never had a duty to defend or
indemnify TAG or its employees; and (3) XL Specialty disclaimed coverage for
all the allegations in the First Amended Complaint. (Imbrogno Decl., Ex. D). On
May 9, 2011, counsel for TAG responded to XL Specialty, stating that XL
Specialty still owed a defense and indemnification to TAG under the XL Policy
and requested XL Specialty’s appearance at a mediation for the lawsuit on May
17, 2011. (Compl., Ex C).
On May 16, 2011, XL Specialty reiterated in a letter to TAG that it would
not be providing coverage and thus would not send a representative to the
mediation for the Nevada Lawsuit. (Imbrogno Decl., Ex. H). By contrast, Catlin
provided a defense to TAG in the Nevada Lawsuit pursuant to the Catlin Policy.
Ultimately, the suit was settled and resulted in TAG paying $675,000 to
Appearance Group. (Def.’s Memo., Ex. A).
On November 30, 2011, TAG filed this action. On October 31, 2012, this
court granted Catlin’s motion to intervene as a plaintiff in this matter. XL
Specialty now moves for summary judgment against both plaintiffs while
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intervening plaintiff Catlin moves for summary judgment as to XL Specialty’s
duty to defend TAG.
II.
Standard
Summary judgment is proper “if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” FED.
R. CIV. P. 56(a). A “material fact” is one that “might affect the outcome of the suit under
the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). To that
end, a genuine dispute as to a material fact exists if “there is sufficient evidence favoring
the nonmoving party for a jury to return a verdict for that party.” Id. at 249.
The burden is upon the movant to identify those portions of the “pleadings,
depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any,” which the movant believes demonstrates an absence of a genuine issue
of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Further, parties
may assert that “the materials cited do not establish the absence or presence of a genuine
dispute,” and parties may also object to the admissibility in evidence of the material cited.
FED. R. CIV. P. 56(c)(1), (2). Once the movant has met this burden, the nonmoving party
may not rest upon mere allegations or denials in its pleadings, but “must set forth specific
facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 250.
In sum, the court’s function is not “to weigh the evidence and determine the truth
of the matter but to determine whether there is a genuine issue for trial.” Anderson, 477
U.S. at 249.
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Here, XL Specialty and Catlin have filed cross-motions for summary judgment,
but this neither alters the applicable standard nor implies there are no genuine issues of
material fact. R.J. Corman Derailment Services, LLC v. Int’l Union of Operating
Engineers, 335 F.3d 643, 647 (7th Cir. 2003). Instead, in determining whether genuine
and material factual disputes exist, the parties’ respective memoranda and exhibits are
analyzed and all facts and reasonable inferences resolved and construed in a light most
favorable to the respective non-movant. IPofA W. 86th St. 1, LLC v. Morgan Stanley
Mortg. Capital Holdings, LLC, No. 1:09-cv-0573, 2011 WL 3021578, at *2 (S.D. Ind.
July 21, 2011). Thus, when considering XL Specialty’s motion for summary judgment,
the court must consider the evidence in the light reasonably most favorable to Catlin, and
vice versa. Midwestern Indem. Co. v. Laikin, 119 F. Supp. 2d 831, 833 (S.D. Ind. 2000).
III.
Discussion
As a federal court sitting in diversity, this court must apply the choice-of-law rules
of the forum state (Indiana) in determining which state’s substantive law applies. State
Farm Mut. Auto. Ins. Co. v. Conway, 779 F. Supp. 963, 967 (S.D. Ind. 1991) (citing
Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487 (1941)). Here, XL
Specialty states in its brief – and TAG and Catlin agree – that the principal location of the
insured is Indiana and thus Indiana law governs. See Dunn v. Meridian Mut. Ins. Co.,
836 N.E.2d 249, 251 (Ind. 2005) (“An insurance policy is governed by the law of the
principal location of the insured risk during the term of the policy”); G & S Holdings,
LLC v. Cont’l Cas. Co., No. 3:09-cv-00592, 2011 WL 855345, at *5 (N.D. Ind. Mar. 8,
2011) (noting the Indiana Supreme Court has adopted the uniform-contract-interpretation
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approach in the insurance context and, as a result, a district court in Indiana hearing such
a case must “apply the law of a single state in interpreting an insurance policy, even if the
policy covers multiple risks in multiple states”). That said, XL Specialty references
Nevada law when discussing the elements for causes of action in the Nevada Lawsuit.
The court need not belabor this choice of law issue at this time as differences in state law
for these torts, if any, have no bearing on this motion. Accordingly, the court will apply
Indiana law to the interpretation of the XL Policy.
A. Duty to Defend
Under Indiana law, the duty to defend is broader than the duty to indemnify.
Liberty Mut. Ins. Co. v. OSI Indus., Inc., 831 N.E.2d 192, 200 (Ind. Ct. App. 2005). To
that end, an insurance company may be required to defend an entire suit if the policy is
applicable even though it may not be responsible for all the damages assessed.
Transamerica Ins. Servs. v. Kopko, 570 N.E.2d 1283, 1285 (Ind. 1991). Moreover, it is
the nature of the claim, not its merit, which establishes the insurer’s duty to defend.
Trisler v. Indiana Ins. Co., 575 N.E.2d 1021, 1023 (1991). As a result, “if it is
determined that an insurer has a contractual duty to defend a suit based upon risks it has
insured, the insurer will not be relieved of that obligation, regardless of the merits of the
claim.” Id.
The court determines an insurer’s duty to defend by “comparing the underlying
factual allegations of the complaint with the relevant provisions of the insurance policy.”
Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Mead Johnson & Co., No. 3:11-cv-161,
2012 WL 6627068, at *2 (S.D. Ind. Dec. 19, 2012) (citing Indiana Farmers Mut. Ins. Co.
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v. North Vernon Drop Forge, Inc., 917 N.E.2d 1258, 1272 (Ind.Ct.App.2009)). By
extension, the complaint’s “legal labels” are immaterial to the duty to defend. Indiana
Farmers, 917 N.E.2d at 1271 (citing COUCH ON INSURANCE § 126:3 (3d ed. 2008)
(“[T]he legal theory asserted by the claimant is immaterial to the determination of
whether the risk is covered . . . [A] claim clearly excluded from policy coverage cannot
be turned into a covered risk by styling the pleadings to fit the policy language.”)).
Instead, the court must determine the duty to defend by examining the “allegations of the
complaint coupled with those facts known to or ascertainable by the insurer after
reasonable investigation.”1 Trisler, 575 N.E.2d at 1023. “If the pleadings reveal that a
claim is clearly excluded under the policy, then no defense is required.” Liberty Mut, 831
N.E.2d at 198.
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There is uncertainty under Indiana law whether an insurer is required to conduct further
investigation when assessing its duty to defend. In Kopko, the Indiana Supreme Court held that
“[t]he duty to defend is determined solely by the nature of the complaint.” 570 N.E.2d at 1285;
see also Travelers Cas. & Sur. Co. v. Elkins Constructors, Inc., No. 97-1807, 2000 WL 748091,
at *6 (S.D. Ind. June 6, 2000) (holding the district court was bound by Seventh Circuit decision
to follow the doctrine set forth in Kopko). By contrast, the parties here cite the standard that the
Indiana Court of Appeals has set forth post-Kopko, finding that a “duty to defend is determined
from the allegations of the complaint and from the facts known or ascertainable by the insurer
after an investigation has been made.” Indiana Farmer Mut. Ins. Co. v. Ellison, 679 N.E.2d
1378, 1382 (Ind. Ct. App. 1997); Wayne Twp. Bd. of Sch. Comm’rs v. Indiana Ins. Co., 650
N.E.2d 1205, 1208 (Ind. Ct. App. 1995) (same). The Indiana Court of Appeals attempted to
reconcile these cases in Monroe Guar. Ins. Co. v. Monroe, explaining that the duty to investigate
only comes into play if the facts underlying the complaint are in dispute. 677 N.E.2d 620, 623
(Ind. Ct. App. 1997). Additionally, this court examined the issue in depth in Trinity Homes LLC
v. Ohio Cas. Ins. Co., and found that in determining a duty to defend, “an insurer is entitled to
rely on the allegations of the underlying complaint as well as those facts known or ascertainable
by the insurer through a reasonable investigation.” No. 1:04-cv-1920, 2007 WL 1021825, at * 7
(S.D. Ind. Mar. 30, 2007). The court agrees with the analysis in Trinity Homes; accordingly, in
determining XL Specialty’s duty to defend, the court will evaluate any facts obtained through
reasonable investigation.
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1.
Allegations and XL Policy
TAG and Catlin argue that several allegations in the Nevada Lawsuit give rise to a
duty to defend for XL Specialty. Specifically, Appearance Group alleged that “Groth
falsely informed Appearance Group customers and/or other third parties that Appearance
Group was going to shut down its Clark County operations.” (Nevada Amend. Compl. ¶
84). And Appearance Group further alleged that Groth “falsely stat[ed] to Appearance
Group customers that Appearance Group could no longer provide reliable service
because it may need to shut down its Clark County operations.” (Id. at ¶¶ 91, 117).
Based on these allegations, among others, Catlin and TAG argue that the First
Amended Complaint gave rise to defamation and disparagement claims, which are
covered under the XL Policy. Coverage B of the XL Policy applies to:
(a) Personal injury caused by an offense arising out of your
Aviation operations, excluding advertising, publishing, broadcasting
or telecasting done by or for you;
(b) Advertising injury caused by an offense committed in the
course of advertising your goods, products or services; but only if
the offense was committed in the coverage territory during the
policy period.
(XL Policy 3). These terms are later defined:
Personal injury means injury, other than bodily injury, arising out
of one or more of the following offenses: . . . oral or written
publication of material that slanders or libels a person or
organization or disparages a person’s or organization’s goods,
products or services.
Advertising injury means injury arising out of one or more of the
following offenses: . . . oral or written publication of material that
slanders or libels a person or organization or disparages a person’s or
organization’s goods, products or services.
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(Id. at 9-10). However, this coverage does not apply to personal or advertising injury
“[a]rising out of oral or written publication of material, if done by or at the direction of
the insured with knowledge of its falsity.” (Id. at 3).
Based principally on paragraph 84 of the First Amended Complaint, XL Specialty
initially determined that it owed TAG coverage under the personal injury section of
Coverage B of the XL Policy because of the potential coverage for the defamation
allegations. XL Specialty, however, now argues that it had no such duty because (1) the
causes of action were dropped in the First Amended Complaint; and (2) the Minute Order
dismissed the commercial defamation claim. Further, XL Specialty argues that
commercial defamation and business disparagement are “both in the nature of
defamation” and, as a result, the Appearance Group abandoned both claims. By
extension, XL Specialty contends that since it undertook a defense based strictly on the
defamation allegations, the abandonment of such claims eliminates its duty to defend.
a. Defamation
XL Specialty does not contest that the factual allegations of the First Amended
Complaint gave rise to a duty to defend because of a potential defamation claim. The
crux of the issue is whether Appearance Group abandoned the claim and thus relieved XL
Specialty of a duty to defend. The court now examines the facts ascertained by XL
Specialty during its investigation.
XL Specialty’s investigation revealed the following facts: (1) counsel for
Appearance Group stated in open court it would not be proceeding on the defamation
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claim; (2) the Nevada court noted that “the commercial defamation claim is dismissed”;
and (3) subsequent to that hearing, Appearance Group filed a First Amended Complaint
which omitted a defamation cause of action that was included in the Original Complaint.
Based on these factors, XL Specialty could reasonably conclude that Appearance Group
had abandoned any potential defamation claim, and thus, XL Specialty justly refused to
defend the defamation allegations. See Freidline v. Shelby Ins. Co., 774 N.E.2d 37, 42
n.6 (Ind. 2002) (“Where an insurer’s independent investigation of the facts underlying a
complaint against its insured reveals a claim is patently outside of the risk covered by the
policy, the insurer may properly refuse to defend.”).
That said, TAG and Catlin argue that a defamation claim still exists because the
underlying factual allegations remain in the First Amended Complaint. This argument
fails. Indeed, any attempt by Appearance Group to reassert a defamation claim or amend
its complaint to include a defamation claim would be futile. See Bower v. Jones, 978
F.2d 1004, 1008 (7th Cir. 1992) (“An amendment is futile when it merely restates the
same facts using different language, or reasserts a claim previously determined.”);
Westbrook v. Archey, No. 1:05-cv-00057, 2006 WL 44207, at *1 (N.D. Ind. Jan. 9, 2006)
(“An amendment is futile when it reasserts a claim previously determined.”).
Lastly, contrary to TAG’s and Catlin’s contentions, XL Specialty has not
determined its duty to defend by merely examining the labels of the cause of action. In
fact, XL Specialty originally undertook a duty to defend without any labels for
defamation or disparagement; instead, it based this decision solely on paragraph 84 of the
First Amended Complaint. (See Compl., Ex. B (TAG’s outside counsel warned XL
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Specialty in its initial demand for coverage that “[w]hile there is no cause of action
entitled defamation, libel or slander, the First Amended Complaint contains three
references to a potential claim of defamation or disparagement”)). Plaintiffs cannot claim
that XL Specialty is now basing its decision on missing labels when the initial decision to
defend stemmed from the same allegations. Thus, this argument carries little weight.
Accordingly, the defamation claim had been abandoned, and XL Specialty has no duty to
defend under the XL Policy for allegations relating to defamation.
b. Disparagement
As noted above, the court first looks to the factual allegations of the complaint to
determine whether there was a duty to defend as to any potential disparagement claims.
Here, Appearance Group alleges that TAG’s employee falsely told Appearance Group
customers that Appearance Group would be shutting down its Clark County operations
and thus could not provide reliable service. (Nevada Amend. Compl. at ¶¶ 84, 91, 117).
Coverage B of the XL Policy applies to personal and advertising injuries, including those
resulting from oral or written publication of material that “disparages a person’s or
organization’s goods, products or services.” To that end, Black’s Law Dictionary (7th
ed. 1999) defines “disparage” as “to dishonor (something or someone) by comparison” or
“to unjustly discredit or detract from the reputation of (another’s property, product, or
business).” See Rain v. Rolls-Royce Corp., 626 F.3d 372, 380 (7th Cir. 2010)
(concluding that the Indiana Supreme Court would rely on dictionary definitions of
“disparage” to determine the meaning of the word in a settlement agreement). In this
case, notifying a competitor’s customers that the competitor is closing down a branch
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would certainly discredit the reputation of another’s business and product. Thus, XL
Specialty would have a duty to defend based on the allegations of the First Amended
Complaint.
That does not end the inquiry, however, as XL Specialty again argues that its
investigation indicated that the disparagement claim had been abandoned and thus no
coverage was required. As with the defamation claim, a cause of action for
disparagement was included in the Original Complaint and omitted from the First
Amended Complaint. And much like defamation, the underlying allegations for
disparagement remain in the First Amended Complaint. (See Nevada Amended Compl.
¶¶ 84, 91, 117). But the similarities end there. Counsel for Appearance Group stated it
would not proceed on the defamation claim yet said nothing of disparagement; similarly,
the court noted the dismissal of the defamation claim – singular – not defamation claims.
Nevertheless, XL Specialty argues that a disparagement claim is practically the
same as a defamation claim, and as a result, the court intended to dismiss all claims
arising from the allegations. This speculation is not convincing. Under Indiana law,
disparagement is similar to defamation yet is still distinct. For instance, disparagement
differs from defamation “in that it seeks to protect economic interests rather than
reputational interests.” Sanderson v. Indiana Soft Water Servs., Inc., No. 00-0459, 2004
WL 1784755, at *7 (S.D. Ind. July 23, 2004) (acknowledging that there is “limited
recognition” of disparagement in Indiana).2 Thus, the court dismissing the commercial
2
Likewise, the same result would occur if the court were to analyze this issue under Nevada law.
See Clark Cnty. Sch. Dist. v. Virtual Educ. Software, Inc., 125 Nev. 374, 386 (2009) (“The
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defamation claim would not be clear evidence of intent to dismiss any disparagement
claims as well.
Moreover, the definitions of “Personal Injury” and “Advertising Injury” in the XL
Policy note a distinction between defamation and disparagement. Specifically, material
that slanders or libels a person or organization is set off by the disjunctive “or” from
material that disparages a person or organization. Thus, while these causes of action may
be similar, the plain language of the policy identifies them as distinct. See Indiana Ins.
Co. v. N. Vermillion Cmty. Sch. Corp., 665 N.E.2d 630, 635 (Ind. Ct. App. 1996) (“The
use of the disjunctive ‘or’ before ‘disparaging’ suggests that something different though
similar and additional to ‘defamatory’ is intended.”). Hence, defamation cannot be
construed as merely a synonym for disparagement and vice versa.
In sum, although the factual allegations were not clearly outside the XL Policy, a
question of material fact remains as to whether the disparagement claim had been
abandoned by Appearance Group or dismissed by the Nevada Court. See DSM Desotech,
Inc. v. 3D Sys. Corp., 900 F. Supp. 2d 783, 789 (N.D. Ill. 2012) (denying summary
judgment where question of fact remained as to whether defendant could reasonably infer
elements required to prove a cause of action for business disparagement differ from the elements
required to prove classic defamation and, necessarily, defamation per se”) (citing Hurlbut v. Gulf
Atl. Life Ins. Co., 749 S.W.2d 762, 766 (Tex. 1987) (explaining that an “action for defamation is
to protect the personal reputation of the injured party, whereas the action for injurious falsehood
or business disparagement is to protect the economic interests of the injured party against
pecuniary loss”)).
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that plaintiff intended to abandon its patent infringement claims). Consequently, a
material issue of fact remains as to whether XL Specialty had a duty to defend.3
Since the court has found a material issue of fact as to the duty to defend, it need
not address any of Catlin’s or XL Specialty’s other arguments for coverage or exclusions
of coverage, respectively. See Travelers Cas. & Sur. Co. v. Elkins Constructors, Inc.,
No. 97-1807, 2000 WL 724006, at *1 (S.D. Ind. May 18, 2000) (“Even if recovery in the
underlying suit is premised upon several theories of liability, some of which are excluded
from policy coverage, the insurer still is obligated to defend if even only one theory falls
within the policy’s coverage.”) (citing Kopko, 570 N.E.2d at 1285). Accordingly, the
court denies both Catlin’s and XL Specialty’s motion for summary judgment as to the
duty to defend. Moreover, to the extent that XL Specialty’s motion for summary
judgment against TAG concerns the duty to defend, this motion is also denied.
B. Duty to Indemnify
The duty to indemnify “does not arise until the party seeking indemnity suffers
loss or damages; that is, at the time of payment of the underlying claim, payment of a
3
XL Specialty argues in a footnote – without citation to any authority – that even assuming
disparagement constitutes a cause of action distinct from defamation, under Nevada law, all
claims in the First Amended Complaint required proof of “knowledge that the claims were
false”; hence, the exclusion under the XL Policy for material published “with knowledge of its
falsity” would apply. This misstates Nevada law. The element of malice is required to state a
claim for business disparagement. Clark Cnty. Sch. Dist., 125 Nev. at 386. This is proven when
the defendant either intended to cause harm to the plaintiff’s pecuniary interests or had
knowledge of a statement’s falsity, but it also may be shown by a defendant publishing a remark
with reckless disregard for its truth. Id.; see also Nikish Software Corp. v. Manatron, Inc., 801 F.
Supp. 2d 791, 799 (S.D. Ind. 2011) (stating that actual malice exists under Indiana law when “the
defendant publishes a defamatory statement with knowledge that it was false or with reckless
disregard of whether it was false or not”) (citation omitted). As a result, there is an issue of fact
as to whether the exclusion is applicable, and thus the court does not find XL Specialty’s
argument persuasive.
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judgment on the underlying claim, or payment in settlement of the underlying claim.”
Henthorne v. Legacy Healthcare, Inc., 764 N.E.2d 751, 757 (Ind. Ct. App. 2002) (citation
omitted). Here, settlement of the Nevada Lawsuit makes this issue ripe for judgment.
1. Defamation claim
As discussed in detail above, the court finds that the defamation claim had been
abandoned, and thus XL Specialty has no duty to defend such allegations under the XL
Policy. Because Indiana law states that an insurer’s duty to defend is broader than its
duty to indemnify, it is self-evident that “an insurer who has no duty to defend has no
duty to indemnify its insured either.” Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v.
Mead Johnson & Co., No. 3:11-cv-161, 2012 WL 6627068, at *5 (S.D. Ind. Dec. 19,
2012); United Nat. Ins. Co. v. Dunbar & Sullivan Dredging Co., 953 F.2d 334, 338 (7th
Cir. 1992). Thus, XL Specialty has no duty to indemnify TAG for the lawsuit with
respect to any defamation allegations.
2. Disparagement
In contrast to defamation, an issue of fact remains as to whether XL Specialty had
a duty to defend any disparagement claims. Though the duty to indemnify is not as broad
as the duty to defend, the same material question of fact as to the abandonment of the
disparagement claim prevents summary judgment as to the duty to indemnify. As a
result, XL Specialty’s motion for summary judgment against TAG must be denied.
Because the court has found a material issue of fact exists for a duty to indemnify, at this
time it need not address XL Specialty’s arguments concerning exclusions under the XL
Policy which may preclude coverage for other allegations.
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IV.
Conclusion
For the reasons set forth above, the court finds that XL Specialty’s summary
judgment motions (Docket ## 31, 51) against TAG and Catlin are DENIED. Moreover,
Catlin’s motion for summary judgment (Docket # 45) as to the duty to defend is
DENIED.
SO ORDERED this 2nd day of August 2013.
_______________________________
RICHARD L. YOUNG, CHIEF JUDGE
__________________________________
United States District Court
RICHARD L. YOUNG, CHIEF
Southern District of Indiana JUDGE
United States District Court
Southern District of Indiana
Distributed Electronically to Registered Counsel of Record.
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