Selman Breitman Secures Summary Judgment Victory For Insurer On "Personal Injury" Issue; Will Pursue Defense Reimbursement From Insureds

​The firm's San Francisco office, led by Managing Partner Linda Wendell Hsu and Associate Jennifer Wahlgren, with help by Nevada-licensed Partner Galina Jakobson, secured a victory for its insurer client in an insurance coverage declaratory relief action.  The insurer was relieved of its duty to defend its insured, a medical implant company and its owner, against claims that they sought to destroy a former partner's business relationships.  The cross-complaint alleged, in claims for interference with prospective economic advantage, that the insured had poached lucrative business relationships that the former partner had previously developed with hospitals, irreparably damaging his reputation.  A Nevada federal judge agreed with the firm's arguments that the underlying cross-complaint did not allege a potentially covered claim for defamation.

The underlying cross-complaint alleged that the insureds had improperly interfered with the former partner's business relationships but did not allege that any disparaging statement was made by the insureds.  However, during the firm's coverage investigation, it located an email in which the insured advised a third party hospital that a "prior distributor" of medical implants was "banned" from selling those products.  The email didn't name the former partner, but the insured argued that the former partner was the former distributor and that this could be determined by implication.  The insured argued that this email gave rise to a potential coverage for defamation under the policy's personal and advertising injury provisions. The insurer agreed to defend under a reservation of rights and filed a declaratory relief action in federal court in Nevada. 

The Court agreed with the firm's arguments that the former partner never claimed that the insured made false statements about him. "[The] cross-complaint — even when read in conjunction with the . . . email — does not give rise to a potential claim for slander, libel or disparagement (or include allegations of these offenses), and therefore does not trigger [the insurer's] duty to defend under the 'personal and advertising injury' provision of the policy," the judge wrote.  In support of this argument, the firm cited to the recent California Supreme Court decision in Hartford Cas. Ins. Co. v. Swift Distribution, Inc., 59 Cal.4th 277, 284 (2014) ("Swift") , in which the Court held that, in order to trigger coverage, "a claim of disparagement requires a plaintiff to [allege] a false or misleading statement that (1) specifically refers to the plaintiff's product or business and (2) clearly derogates that product or business.  Each requirement must be satisfied by express mention or by clear implication."  The Court agreed that the cross-complaint and email did not rise to this level.

Going forward, the firm will bring another motion requiring the insured to reimburse the insurer for the fees and costs incurred in defending the cross-complaint, since that right was reserved in the reservation of rights letter and since such right is allowed under California and Nevada law.

Additional details of this case have been covered in the September 27 Law360 article “Medical Implant Co. Can’t Secure Defamation Coverage.” (subscription required for access)

If you have any questions about this decision, please feel free to reach out to Linda Hsu at lhsu@selmanlaw.com. 

Selman Breitman provides this information for educational purposes. Case results depend upon a variety of factors unique to each case. Case results do not guarantee or predict a similar result in any future case. This information should not be construed or relied on as legal advice or to create a lawyer-client relationship.