As with any scenario, the question of how an insurance policy applies to the claim is entirely separate from the question of the insured’s liability. With respect to the coverage question, I think your conclusion about the meaning of libel is incorrect. What does “defamatory” mean? According to Black’s Law Dictionary, defamation requires false statements. The CGL only provides coverage for damages if the statements are proven false.
Another dimension is the contractor’s allegation that Frank’s statements have disparaged his business. Disparagement of a business’ products or services is also in scope of the definition of PAI. Disparagement also requires false statements.
I believe the CGL insurer might have a duty to defend the deli and Frank for these allegations, but the duty to indemnify/pay any damages to the contractor will depend on all of the facts as well as the provisions of Coverage B and the CGL policy.
But, exclusion b isn’t excluding all coverage for all false statements. We know exclusions are generally construed narrowly by the courts. E.g., it applies to the extent “the insured” knows its statement is false.
If exclusion b is interpreted broadly to apply to all false statements, it would potentially eviscerate coverage for the offenses of slander, libel and disparagement in Coverage B.
The written publication of untrue, defamatory statements that lower a person’s esteem in his or her community and that gives rise to a legal cause of action against the publisher.
In my opinion all insureds should refrain from public criticism of someone they have done business with regardless of whether or not there is coverage. When a claim is filed there is almost always going to be some amount of reserve opened for the claim until it is settled. The existence of a claim and loss reserve can increase premiums and make it harder to market the account.
Additionally, many construction contracts are extremely one sided with indemnification provisions that benefit the more sophisticated party. In this case the contract likely has more experience with contracts and thus will be the beneficiary of overly broad indemnification provisions. For example, it is not uncommon for a contract to require that one party indemnify the other for all acts relating to the project regardless of fault or negligence. In this case the negative statement relates to the project and will likely cause the contractor harm (even if it is true). In this case the deli owner could be on the hook for damages due to the contractual wording.
As with any scenario, the question of how an insurance policy applies to the claim is entirely separate from the question of the insured’s liability. With respect to the coverage question, I think your conclusion about the meaning of libel is incorrect. What does “defamatory” mean? According to Black’s Law Dictionary, defamation requires false statements. The CGL only provides coverage for damages if the statements are proven false.
Another dimension is the contractor’s allegation that Frank’s statements have disparaged his business. Disparagement of a business’ products or services is also in scope of the definition of PAI. Disparagement also requires false statements.
I believe the CGL insurer might have a duty to defend the deli and Frank for these allegations, but the duty to indemnify/pay any damages to the contractor will depend on all of the facts as well as the provisions of Coverage B and the CGL policy.
Mark, thanks for the comment.
I’m going to have to disagree with you. The ISO CGL does not require false statements. It actually specifically excludes them. See exclusion b.
But, exclusion b isn’t excluding all coverage for all false statements. We know exclusions are generally construed narrowly by the courts. E.g., it applies to the extent “the insured” knows its statement is false.
If exclusion b is interpreted broadly to apply to all false statements, it would potentially eviscerate coverage for the offenses of slander, libel and disparagement in Coverage B.
According to IRMI the definition of libel is
The written publication of untrue, defamatory statements that lower a person’s esteem in his or her community and that gives rise to a legal cause of action against the publisher.
In my opinion all insureds should refrain from public criticism of someone they have done business with regardless of whether or not there is coverage. When a claim is filed there is almost always going to be some amount of reserve opened for the claim until it is settled. The existence of a claim and loss reserve can increase premiums and make it harder to market the account.
Additionally, many construction contracts are extremely one sided with indemnification provisions that benefit the more sophisticated party. In this case the contract likely has more experience with contracts and thus will be the beneficiary of overly broad indemnification provisions. For example, it is not uncommon for a contract to require that one party indemnify the other for all acts relating to the project regardless of fault or negligence. In this case the negative statement relates to the project and will likely cause the contractor harm (even if it is true). In this case the deli owner could be on the hook for damages due to the contractual wording.
Patrick–I love these articles! Keep them coming!