No Duty to Defend Antitrust Suit Alleging Malicious Disparagement

Applying Texas law, the United States District Court for the Southern District of Texas has held that there is no duty to defend an insured under a CGL policy for allegations of malicious disparagement, where the policy precluded coverage for knowingly false disparagement and knowing attempts to violate others’ rights and inflict personal and advertising injury. Chartis Spec. Ins. Co. v. JSW Steel (USA), Inc., No. 4:14-cv-01527 (S.D. Tex. Jul. 8, 2015).

In pertinent part, the policy afforded coverage for “personal and advertising injury,” including “oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products, or services.” The policy excluded coverage for “personal and advertising injury caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict personal and advertising injury,” “personal and advertising injury arising out of oral or written publication of material, if done by or at the direction of the insured with knowledge of its falsity,” and “personal and advertising injury arising out of a breach of contract, except an implied contract to use another’s advertising idea in [the insured’s] advertisement.”

The underlying claimant filed suit against the insured and others, alleging that the defendants had conspired to drive the underlying claimant out of business. With regard to the insured, the claimant asserted that the insured agreed to join the conspiracy and to breach its contract with the claimant based on disparaging remarks about the claimant that were made by the other defendants. The claimant also contended that the defendants published false and disparaging statements about the underlying claimant’s economic interests “with malice and without privilege.” The underlying complaint included counts for violation of the Sherman Act, breach of contract, tortious interference, business disparagement, and conspiracy. At the time of trial, the only remaining claims against the insured were for breach of contract and antitrust violations. The jury returned a verdict in the claimant’s favor and against the insured on those claims. Though the insured’s carrier had been providing the insured with a defense subject to a reservation of rights, after the verdict was rendered, the insurer denied coverage and refused to pay the insured’s defense costs on appeal or indemnify the insured for the judgment.

The insurer filed suit against the insured, seeking a declaration that it had no duty to defend or indemnify the insured. On cross-motions for summary judgment, the court analyzed the allegations in the underlying complaint and held that the insurer had no duty to defend the insured in the first instance. In the court’s view, “[t]he complaint seem[ed] to allege that all of the disparagement was actually committed by parties other than [the insured], and [the insured’s] wrongdoing was limited to its breach of contract (also excluded from coverage) in aid of the conspirators’ antitrust violations.” The court maintained that, “even if the disparagement were alleged or imputed to the [the insured], it would not be covered as it was a knowing attempt to violate [the underlying claimant’s] rights . . . .” Moreover, according to the court, the underlying complaint’s disparagement allegations were tethered to statements that were purportedly false and malicious and, accordingly, excluded from coverage.

With respect to the insured’s duty to indemnify, however, the court concluded that a decision on that issue was premature while the underlying action remained pending on appeal. The court stated that, once there was a final judgment on the claim, the parties could move at that time for a final determination on indemnity coverage.


Wiley Executive Summary

Sign up for updates

Necessary Cookies

Necessary cookies enable core functionality such as security, network management, and accessibility. You may disable these by changing your browser settings, but this may affect how the website functions.

Analytical Cookies

Analytical cookies help us improve our website by collecting and reporting information on its usage. We access and process information from these cookies at an aggregate level.