First Circuit affirms coverage for defamation claims against Bill Cosby

I've posted here, here, and here about the declaratory judgment lawsuit brought by AIG Property Casualty Company asserting that it has no duty to defend Bill Cosby in the defamation lawsuits brought against him.  Those suits allege that Cosby lied when he denied allegations of rape, thereby defaming his accusers.

 

In AIG Property Casualty Co. v. Cosby, __ F.3d __, 2018 WL 2730762 (1st Cir.), the United States Court of Appeals for the First Circuit has affirmed the decision of the United States District Court for the District of Massachusetts holding that AIG must defend Cosby. 

 

The AIG homeowner's and umbrella policies provide coverage for defamation claims.  The issue in dispute is whether  exclusions for claims "arising out of" sexual misconduct apply.  The District Court had held that the meaning of arising out of is ambiguous and therefore AIG must defend. 

 

The court noted that in a different coverage of the umbrella policy there is an exclusion for damages "arising out of, or in any way involving, directly or indirectly, any sexual misconduct."  The exclusion applicable to the defamation claim did not include that specific language.  Since every word in an insurance contract must be presumed to have meaning, the less specific language in the applicable exclusions must be interpreted as requiring a closer connection between the alleged defamation and the alleged sexual assaults. 

 

The court added that the phrase arising out of is not inherently ambiguous, and that its holding is limited to this case, where the ambiguity question is close to begin with and where a similar exclusion in the same policy was more broadly worded. 

 

Declaratory judgment action filed on Bill Cosby defamation lawsuit

My favorite Boston news source, Universal Hub, has posted about a declaratory judgment complaint filed by Bill Cosby's insurer with respect to the defamation allegations against him. 


As is well-known, the plaintiffs in the underlying suit allege that Cosby gave them roofies and then raped them while they were unconscious.  Because the statute of limitations has expired on the sexual assault charges themselves, the underlying plaintiffs have alleged that Cosby defamed them by denying their allegations. 


Cosby's homeowners' policies and excess policy, all issued by AIG, provide coverage for personal injury, which includes defamation.


In the lawsuit just filed, AIG, seeks a declaration that coverage is excluded because the defamation claims were claims for personal injury "arising out of" actual, alleged or threatened sexual misconduct, molestation or harassment. 


It is well-settled under Massachusetts law that "arising out of" denotes an intermediate causation, more than causation-in-fact but less than proximate cause. 


The complaint does not say whether AIG is currently defending Cosby under a reservation of rights.  If it is, one can expect that the strategy from Cosby's attorneys will be to stall on the declaratory judgment lawsuit, because if the eventual ruling finds no coverage the longer it takes to make that decision the more of Cosby's attorney's fees in the underlying suit get paid by AIG.  Even if AIG is not currently defending the underlying claim, Cosby's side is unlikely to be in a rush to have the DJ action decided.  Unlike most people, Cosby is presumably in a financial position to pay whatever attorneys' fees are incurred in defending the underlying suit; if he wins the declaratory judgment action he will be reimbursed for those fees.  If he files a counterclaim for breach of contract he'll get interest on those fees as well. 

Appeals Court finds duty to defend where loss may have arisen out of use of excluded boat and use of a different boat that was excepted from exclusion

Jeffrey and Nicole Crispo (the Crispos) were aboard their power boat, the MSJC69, and were towing a lobster boat, the Laina Lou, owned by Steven Crispo. Steven and Dana Gagne were aboard the lobster boat. The MSJC69's propeller shaft became entangled on a mooring line. After cutting loose the Crispos were unable to restart the boat because the battery was dead. The Laina Lou dropped anchor and the two boats remained attached by the tow line. The Crispos were unable to use the running lights because of the dead battery.

Approximately ten minutes later a ferry operated by BHC collided with the two vessels.

Steven, Jeffrey, Nicole, and Gagne sued BHC for personal injuries and property damage. BHC asserted claims for indemnification and contribution against the Crispos, alleging that their negligence caused the accident.

The Crispos sought coverage for the counterclaims from Quincy Mutual, their homeowner's insurer, which filed a declaratory judgment action. The policy excluded coverage for losses arising out of use of boats, but the lobster boat fell into an exception to that exclusion.

In Quincy Mut. Fire ins. Co. v. Crispo, 80 Mass. App. Ct 484 (2011), the Massachusetts Appeals Court held that a duty to defend is triggered when a loss "arises out of" both a a use that is excluded from coverage and a use that is excepted from the exclusion.

The court noted that the underlying complaints did not distinguish between the use of the two vessels with respect to which caused the accident. Therefore, the allegations of the underlying complaints "raise the possibility that the claims against the Crispos arose from their use of the Laina Lou."

The court also noted that no anti-concurrent causation clause applies to the exclusion, although such a clause does apply to other parts of the policy. Under Massachusetts law, where an anti-concurrent cause provision is included with reference to exclusions in one part of the policy and omitted with reference to other parts of the policy, the absence of such a provision means that a loss caused by a risk excluded in the section without the provision will be covered if a covered risk also contributed to the loss.

Quincy Mutual argued that the phrase "arising out of" in the exclusion conveyed the same limitation on coverage as an anti-concurrent causation provision. While noting that "arising out of" denotes an intermediate level of causation, the court held that its use in an exclusion, without more, could not reasonably be understood as denying coverage for damages connected to the insured's simultaneous undertaking of an excluded risk and a risk specifically excepted from the exclusion, where both caused the injury.

Superior Court discusses "arising out of"

My first foray into insurance coverage issues was when, as a young insurance defense associate, I argued the meaning of the phrase "arising out of" in an insurance policy to the First Circuit Court of Appeals. I convinced the court that the phrase denoted intermediate causation--more than causation-in-fact but less than proximate cause--such that a construction site accident injuring the employee of the insured subcontractor "arose out of" the subcontractor's work even though the subcontractor did not proximately cause the accident.

Mike Tracy of Rudolph Friedmann LLP has sent me over the latest foray into "arising out of."

In Massachusetts Property Ins. Underwriting Ass'n v. Gallagher, 2009 WL 2568547, 18 year old Stephen McMaster died in an apparent suicide after ingesting an overdose of propoxyphene. Gallagher's mother sued Scaduto, alleging that Scaduto had negligently left the drug in a place in his home accessible to McMaster, despite knowing of McMaster's fragile emotional state. At issue in the Massachusetts Superior Court was whether Scaduto was covered by his homeowner's policy.

The policy excluded bodily injury "arising out of the use, sale, manufacture, delivery, transfer or possession by any person of [] Controlled Substance(s). . . . However, this exclusion does not apply to the legitimate use of prescription drugs by a person following the orders of a licensed physician."

The court noted that the phrase "arising out of" suggests causation analogous to "but for" causation.

It rejected Gallagher's argument that McMaster's death came within the exception to the exclusion because it "arose out of" Scaduto's legitimate prescription use of the drug.

The court held that there was a "separate and independent" application of the exclusion to McMaster's own use of the drug. McMaster's use of the drug came within the exclusion and did not fall within the exception. There was therefore no coverage under the policy.