The Cincinnati Insurance Company v. Zaycon Foods LLC
2:17-cv-00140
| E.D. Wash. | Feb 13, 2018Background
- Cincinnati Insurance issued CGL policies (including Coverage B for personal and advertising injury) to Zaycon Foods covering 2013–2017.
- Richard Braddock sued Zaycon and several managers in state/federal claims alleging securities violations, fraud, negligent misrepresentation, breach of fiduciary duty, and breach of contract arising from his ouster as CEO.
- Cincinnati sought a declaratory judgment that it has no duty to defend or indemnify Zaycon in the Braddock suit; Cincinnati moved for summary judgment and Zaycon cross-moved on the duty to defend.
- Coverage B insures against ‘‘personal and advertising injury’’ including slander/libel (oral or written publication that slanders or libels a person or organization).
- Zaycon conceded the suit falls outside other coverage arguments and relied solely on an asserted potential defamation exposure to trigger a duty to defend; Cincinnati argued the underlying complaint does not allege defamation or damages for reputational harm.
- The district court evaluated the complaint (and available extrinsic facts) to determine whether any claim could conceivably impose liability for defamation and concluded none could.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Cincinnati have a duty to defend Zaycon under Coverage B for alleged defamation? | No duty; the underlying complaint does not allege claims that fall within policy coverage. | Yes; factual allegations and extrinsic facts show defendants made false statements to shareholders that disparaged Braddock, which could trigger coverage for defamation. | Held: No. The underlying complaint does not conceivably allege defamation or seek damages for reputational harm, so no duty to defend or indemnify. |
Key Cases Cited
- Nat’l Sur. Corp. v. Immunex Corp., 297 P.3d 688 (Wash. 2013) (duty to defend arises when complaint could impose liability within coverage)
- Truck Ins. Exch. v. VanPort Homes, Inc., 58 P.3d 276 (Wash. 2002) (same principle on duty to defend)
- Am Best Food, Inc. v. Alea London, Ltd., 229 P.3d 693 (Wash. 2010) (insurer must defend where any reasonable interpretation of facts or law could result in coverage)
- Woo v. Fireman’s Fund Ins. Co., 164 P.3d 454 (Wash. 2007) (extrinsic facts may give rise to duty to defend but not when claims clearly fall outside policy)
- Grange Ins. Ass’n v. Roberts, 320 P.3d 77 (Wash. App. 2013) (defamation compensates injury to reputation)
- Eastwood v. Cascade Broad. Co., 722 P.2d 1295 (Wash. 1986) (elements and purpose of defamation)