The policyholder in Maids on Call, LLC v. Ohio Security Ins. Co., 2018 WL 264088 (D. Neb. Jan. 2, 2018) (Connecticut and Nebraska law) was sued for allegedly abandoning a housecleaning franchise operation, beginning a new housecleaning business in the same location using the same customer list, and poaching customers and goodwill. The policyholder tendered its defense of the lawsuit under only that portion of the “Personal and Advertising Injury Liability” coverage part providing coverage for injury arising out of “[o]ral 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 court very carefully read the complaint and its causes of action for breach of contract, trademark infringement, false designation of origin and unfair competition, tortious interference with contract, and civil conspiracy and found that the fundamental elements of libel or slander were not expressly alleged, and allegations such as conspiring to operate a competing business and pirating goodwill did not trigger the duty to defend, even under a theory of implied or implicit disparagement.
In Atlantic Cas. Ins. Co. v. Garcia, 2017 WL 6542978 (7th Cir. Dec. 22, 2017) (Indiana law), the insurer sought a declaration that its policies’ “Claims in Process” exclusion excluded coverage for the investigation and remediation of environmental contamination. The property at issue had been used as a dry cleaning facility from 1946 to 2000, and in 1999 the dry cleaning company reported a leak in one of it its underground solvent tanks to the Indiana Department of Environmental Management. IDEM conducted a site investigation, groundwater monitoring wells were installed, and IDEM requested additional investigation in 2001 and additional testing in April 2004. The policyholders purchased the property in August 2004 and claimed they had no knowledge of the contamination when the insurer issued its policies in 2009, both of which contained a “Claims in Process” exclusion excluding coverage for:
“1. any loss or claim for damages arising out of or related to ‘bodily injury’ or ‘property damage’, whether known or unknown:
- which first occurred prior to the inception date of this policy; or
- which is, or is alleged to be, in the process of occurring as of the inception date of this policy.
- any loss or claim for damages arising out of or related to ‘bodily injury’ or ‘property damage’, whether known or unknown, which is in the process of settlement, adjustment or ‘suit’ as of the inception date of this policy.”
The parties agreed that property damage occurred prior to the policies’ inception, but the policyholders argued that the exclusion was ambiguous because the phrase “whether known or unknown” could modify either the phrases “loss or claim for damages” or “‘bodily injury’ or ‘property damage’”. The court rigorously applied the rules of grammar and construction and rejected this argument for two reasons. First, the court held that if the phrase “whether known or unknown” was intended to modify the phrase “any loss or claim for damages”, a comma would follow the phrase “claim for damages” with the phrase “known or unknown” following immediately thereafter such that the exclusion would read, “any loss or claim for damages, whether known or unknown, arising out of or related to ‘bodily injury’ or ‘property damage’”. However, because the phrase “whether known or unknown” followed the phrase “‘bodily injury’ or ‘property damage’” and those phrases were separated by a comma, the phrase “known or unknown” clearly modified only the immediately preceding phrase “’bodily injury’ or ‘property damage’”. The court also found that the policyholders’ proffered reading of the exclusion would render the clause excluding claims “in the process of settlement, adjustment or ‘suit’” redundant because any such claim would also be excluded under the policyholder’s interpretation as an excluded claim “in the process of occurring.” Thus, the court read the “Claims in Process” exclusion to exclude coverage for losses or claims for damages arising out of known or unknown property damage that occurred or was in the process of occurring prior to the policies’ inception.
These rulings reflect the age-old importance of careful reading and proper grammar, and the insurance industry and its underwriters, along with teachers, parents, and English majors alike, should rejoice.