Truck Ins. Exchange v. BennettTruck Ins. Exchange v. Bennett
Opinion
Introduction
In the published portion of this opinion, we hold that a personal injury liability clause does not provide coverage for a cause of action for disparagement of title or slander of title brought against the insured. In the unpublished portion of this opinion, we find that under the circumstances of this case, the insurers did not waive their right to assert lack of coverage and to withdraw from defending the insured, and they were not estopped from doing so. We affirm a grant of summary judgment in favor of insurers in their suit seeking a declaration that they had no duty to defend and indemnify the insured against claims made against him in an underlying action.
Procedural History
The relevant procedural events in this complex case are as follows: On March 24, 1986, Kenneth J. Roberts (Roberts) and Mandeville Broadcasting Company (Mandeville) filed a complaint (the Roberts action) against Peter C. Bennett (Bennett). The Roberts action
1
alleged that Bennett had wrongfully claimed an ownership interest in radio station KROQ-FM as compensation for his services as Roberts’s attorney during the period in which Roberts acquired the Burbank Broadcasting Company (Burbank), the entity which formerly owned radio station KROQ-FM. Among many other causes of action, the Roberts action contained a “disparagement of title” cause of
Bennett also cross-complained, alleging 47 causes of action against Roberts, Mandeville, and other defendants.
In the action which gives rise to this appeal, Truck and other plaintiff insurers filed a complaint for declaratory relief (Code. Civ. Proc., § 1060) alleging two declaratory relief causes of action against Bennett. The declaratory relief causes of action alleged that although Truck and the other plaintiff insurers had provided a defense to the Roberts action pursuant to a complete reservation of rights, they denied any obligations under the insurance policies to defend or indemnify Bennett. A third cause of action sought declaratory relief against Charter Oak Fire Insurance Co. (Charter Oak), Associated Indemnity Insurance Company (Associated), and several other insurer defendants. It alleged that these insurers issued insurance policies to Bennett which provided coverage for defense and/or indemnity to him arising out of the breach alleged in the Roberts action. The third cause of action alleged that although the Roberts action had been tendered to these defendant insurers for defense and indemnity, only Truck and two other plaintiff insurers provided a defense in the Roberts action.
Several parties filed cross-complaints. On February 6, 1989, pursuant to Bennett’s motion, the trial court ordered proceedings stayed in the declaratory relief action filed by Truck and the other insurers.
Before the Roberts action was tried, Roberts dismissed his complaint against Bennett with prejudice. Trial proceeded on Bennett’s cross-complaint against Roberts. At the close of Bennett’s case, the trial court granted Roberts’s motion for nonsuit and dismissed all causes of action except those for quantum meruit and fraud. A February 5, 1991, judgment awarded Bennett $950,000 damages on his cross-complaint for recovery of legal fees against Roberts. The Court of Appeal 2 reversed the judgment on the cross-complaint against Roberts and remanded the matter with directions for the trial court to conduct a new trial on damages.
After the stay in Truck’s declaratory relief action was lifted, the trial court granted summary judgment motions in favor of Truck, Associated, and Charter Oak. Bennett filed a timely notice of appeal. Respondents are Truck, Associated, and Charter Oak.
The summary judgment motions were filed and ruled on by the trial court in 1992. Amendments to the summary judgment statute, Code of Civil Procedure section 437c, did not become effective until January 1, 1993. We therefore apply the standard of review according to the statute as it stood in 1992.
(Montrose Chemical Corp.
v.
Superior Court
(1993)
As a summary judgment motion raises only questions of law regarding the construction and effect of supporting and opposing papers, this court independently applies the same three-step analysis required of the trial court. We identify issues framed by the pleadings; we determine whether the moving party’s showing established facts that negate the opponent’s claim and justify a judgment in the moving party’s favor, and if it does, we finally determine whether the opposition demonstrates the existence of a triable, material factual issue.
(AARTS Productions, Inc.
v.
Crocker National Bank
(1986)
In an appeal from a summary judgment, this court independently reviews the trial court’s determination of questions of law. The trial court’s stated reasons supporting its ruling do not bind this court, which reviews the ruling, not its rationale.
(Stratton
v.
First Nat. Life Ins. Co.
(1989)
Issues
The published portion of this opinion addresses Bennett’s claim that because personal injury liability clauses in policies issued by Charter Oak, Truck, and Associated contained the words “disparaging” or “slander,” those personal injury liability clauses provided coverage for claims made against him in the Roberts action for disparagement or slander of title.
The unpublished portion of this opinion addresses whether a triable issue of fact existed concerning waiver and estoppel which would prevent Charter Oak from withdrawing from Bennett’s defense.
Discussion
1. The Personal Injury Liability Clauses in the Charter Oak, Truck, and Associated Policies, and Roberts’s Disparagement of Title Claims Against Bennett
The main issue in this appeal concerns whether the personal injury liability clauses provided coverage for Roberts’s disparagement of title claim
a. The Duty to Defend
An insurer has a duty to defend an insured if it learns from the complaint, or otherwise ascertains, facts that give rise to the potential of liability under the policy.
(Gray
v.
Zurich Insurance Co.
(1966)
To prevail in an action seeking declaratory relief on the issue of the duty to defend, the insured must prove the existence of a potential for coverage, while the insurer must establish the absence of any such potential. “[T]he insured need only show that the underlying claim
may
fall within policy coverage; the insurer must prove it
cannot.” (Montrose Chemical Corp.
v.
Superior Court, supra,
The duty to defend, although broad, is not unlimited; it is measured by the nature and kinds of risk covered by the policy. Interpretation of an insurance policy is a question of law. Interpretation of the policy must give effect to the parties’ mutual intention, insofar as it can be inferred, where possible, solely from the policy’s written provisions.
(Waller
v.
Truck Ins. Exchange, Inc.
(1995)
b. Allegations in the Complaint in the Roberts Action
The particular allegations of the complaint in the Roberts action, as supplemented by facts from the Court of Appeal opinion in Bennett v. Roberts, supra, B057316, are set forth as they relate to Bennett’s claims on appeal.
Roberts was the sole shareholder of Mandeville, which owned and operated radio station KROQ-FM until September 19, 1986.
Roberts retained Bennett as his attorney from 1971 until 1976. Between November 1972 and April 1973, Roberts lent $500,000 to Burbank, which in turn granted Roberts an option to obtain a 25 percent interest in Burbank. In late May 1973, pursuant to a second agreement, Roberts agreed to lend a further $350,000 to Burbank, which granted him an additional 25 percent ownership interest in Burbank. Bennett acted as Roberts’s attorney in these transactions. Bennett’s fiduciary duty to Roberts prohibited Bennett from acquiring any security or other pecuniary interest adverse to Roberts in connection with Bennett’s legal services to Roberts.
In June 1973, while Roberts was outside California, Burbank requested that Roberts immediately advance $50,000 to Burbank pursuant to Roberts’s second loan commitment. Roberts agreed to Bennett’s suggestion that Bennett, as Roberts’s attorney, approach City National Bank, a bank Roberts had previously used, and arrange a $50,000 loan to Roberts. Bennett would then forward the loan proceeds to Burbank on behalf of Roberts.
On June 13, 1973, without Roberts’s knowledge or consent, Bennett obtained a $50,000 loan from City National Bank in Bennett’s own name. Bennett advanced that amount to Burbank and purported to enter into a June 13, 1973, letter agreement with Burbank under which Bennett claimed he was entitled individually, and not as an agent for his client Roberts, to 3 percent of the total issued and outstanding stock and/or ownership interest in Burbank and its affiliated or related companies or enterprises.
Bennett also claimed he entered into an oral contingent fee agreement with Roberts. Under this alleged oral agreement, Bennett contended he was entitled to additional stock ownership interest of 25 percent of the total ownership interest acquired or owned by Roberts and any related persons, firms or companies in Burbank and any of its affiliated or related companies or enterprises. Bennett also contended he was entitled to 25 percent of all earnings or profits paid to Roberts or any related entity.
Roberts denied that he ever entered into a written or oral contingency fee arrangement with Bennett. The disparagement of title cause of action alleged
Finally, the complaint alleged that Bennett’s publications were materially false; clouded Roberts’s title to, and threatened the salability of Mandeville’s exclusive property; threatened the FCC license held by Mandeville; and interfered with Mandeville’s ability to do business. The publications made it necessary for Roberts to retain attorneys, undertake expensive investigation and collection, and bring the action. The action sought to adjudicate two issues: first, that the June 13, 1973, letter agreement conferred no rights in favor of Bennett either against Bennett’s then-client Roberts or later against Roberts’s wholly owned corporation Mandeville, the owner of KROQ-FM; and second, that the claims made in Bennett’s December 31, 1985, letter, casting doubt on Roberts’s sole former title to Burbank, on Mandeville’s former sole title, on Burbank’s former assets exclusive of the FCC broadcasting license, and on Mandeville’s former rights as exclusive holder of the FCC license to operate KROQ-FM, were false.
c. The Charter Oak Policy
The “Personal Injury and Advertising Injury Liability Coverage” of the Charter Oak policy states: “The Company will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of personal injury or advertising injury to which this insurance applies, sustained by any person or organization and arising out of the conduct of the Named Insured’s business, within the policy territory, and the Company shall have the right and duty to defend any suit against the Insured seeking damages on account of such injury, even if any of the allegations of the suit are groundless, false or fraudulent[.]”
The policy further defined “personal injury” to mean “injury arising out of one or more of the following offenses committed during the policy period: [¶ (1) false arrest, detention, imprisonment, or malicious prosecution; [¶ (2) wrongful entry or eviction or other invasion of the right of private occupancy; [D (3) a publication or utterance (a) of a libel or slander or other defamatory or disparaging material, or [¶ (b) in violation of an individual’s right of privacy; [¶ except publication or utterances in the course of or related to advertising, broadcasting, publishing or telecasting activities conducted by or on behalf of the Named [Insured.]” (Italics added.)
Based on the italicized wording, Bennett argues that the Charter Oak personal injury liability clause covered economic damages and injuries arising from Roberts’s disparagement of title claim. Bennett contends that the word “disparaging” means something other than injury to a person’s reputation, and instead means injury to real property, such as disparagement of title. We do not agree.
a. Disparagement of Title as Distinguished From Defamation
The word “disparaging” in the Charter Oak personal injury liability clause applies to defamation of a person’s reputation, not to an action for disparagement or slander of title to property.
The gravamen of an action for “disparagement of title,” also known as “slander of title,” differs from that of an action for personal defamation.
(Hill
v.
Allan
(1968)
Defamation, by contrast, injures a person’s reputation. Rather than interfering with a property right, economic relations, or the sale of goods, defamation invades the interest in personal or professional reputation and good name. A defamation claim vindicates personal interests, and is a personal injury.
(O’Hara
v.
Storer Communications, Inc.
(1991)
We are aware of no authority that includes disparagement or slander of title in the group of acts or offenses for which personal liability clauses provide coverage.
Like many such clauses, the Charter Oak personal injury liability clauses group personal injury into four subdivisions of similar injuries or tortious conduct. Given this context, it is not reasonable to interpret the term “disparagement” other than in relation to the class of torts in which it is placed, i.e., defamation torts dealing with injuries to character and reputation. (See
American Motorists Ins. Co.
v.
Allied-Sysco Food Services, Inc.
(1993)
The syntax and wording of the Charter Oak personal injury liability clause support this conclusion. In this clause, “disparaging” acts as a synonym for defamatory; it does not refer to a cause of action for “disparagement” of title. The Charter Oak personal injury liability clause uses the wording, “a libel or slander or other defamatory or disparaging material.” The adjectival “disparaging”—which differs from the noun “disparagement” used in a “disparagement of title” cause of action—explains and modifies the noun “material,” and is paired with its companion adjective, “defamatory.”
This language cannot reasonably be read to include any more than those causes of action customarily grouped together into the legal category of defamation. The reference to “disparaging” in the Charter Oak personal injury liability clause falls within the class of several torts that protect a person’s interest in reputation, dignity, and character.
(American Motorists, Ins. Co.,
v.
Allied-Sysco Food Services, Inc., supra,
We therefore find no basis for imposing a duty to defend on Charter Oak.
Bennett also claims that the “disparagement of title” cause of action in Roberts’s complaint created the potential for coverage under the personal injury liability clauses of the Truck and Associated policies. Bennett argues that these policy definitions, by including the word “slander,” provide coverage for a cause of action for “slander of title.”
Those policies use slightly different wording, 5 but the analysis is the same. Although based on “slander” and “slander of title,” this claim merely reiterates the argument for construing a personal injury liability clause containing the word “disparaging” to provide coverage for a “disparagement of title” action. For the reasons already discussed, we reject this argument.
d. The Cases Bennett Relies on Do Not Apply
No California case has held that a personal injury liability clause covers disparagement or slander of title. The sole authorities Bennett offers for the idea that a personal injury liability clause provides coverage for disparagement or slander of title are
Lindsey
v.
Admiral Ins. Co.
(N.D.Cal. 1992)
In
Lindsey,
two employees sued their insured employer under the Fair Employment and Housing Act for sexual harassment by Lindsey, a coemployee. Defendant insurers rejected the insured employer’s tender of defense to the complaint. The insured employer later sued the insurers, alleging that the employees’ complaint imposed on the insurers a duty to defend and indemnify pursuant to personal injury liability coverage, defined as “the
Lindsey
also addressed the insureds’ argument that the employees’ sexual harassment complaint sought damages for “disparagement.”
Lindsey
rejected this characterization of the sexual harassment cause of action.
Lindsey
stated: “The tort of disparagement has a very specific meaning under California law. The term ‘disparagement’ refers to the twin torts of trade libel and slander of title.
Leonardini
v.
Shell Oil Co.,
Lindsey
thus correctly finds that a sexual harassment complaint does not constitute an action for either trade libel or slander of title. In rejecting the sexual harassment plaintiffs’ theory, however,
Lindsey
concludes that the complaint before it could not possibly constitute a claim covered by a personal injury clause, because the complaint did not allege the necessary legal elements either for defamation
or
for trade libel or slander of title. (
That erroneous implication permits Bennett to urge Lindsey as authority for including a slander or disparagement of title cause of action among those for which a personal injury liability clause provides coverage. Bennett’s reading mischaracterizes Lindsey, however, and the authorities Lindsey relies upon do not support it.
Leonardini
v.
Shell Oil Co.
(1989)
Witkin, cited by both
Lindsey
and
Leonardini,
shows why personal injury liability does not include “disparagement of title” or “slander of title.”
Aetna Cas. & Sur. Co.
v.
Centennial Ins. Co., supra,
Aetna
found that a cause of action for “false designation of origin and unfair competition” (15 U.S.C. § 1125) and a “common law trade mark infringement” cause of action were not covered under the personal injury liability clause: as “ ‘publication or utterance of a libel or slander or of other defamatory or disparaging material.’ ”
{Aetna Cas. & Sur. Co.
v.
Centennial Ins. Co., supra,
Regarding the argument that a “generalized” unfair competition cause of action alleged a form of trade libel,
Aetna
stated correctly that “[t]rade libel is not .'. . a true libel and is not actionable as defamation. [Citation.] It is more akin to unfair competition. [Citation.] Trade libel and product disparagement are injurious falsehoods that interfere with business. Unlike classic defamation, they are not directed at the plaintiff’s personal reputation but rather at the goods a plaintiff sells or the character of his other business.”
(Aetna Cas. & Sur. Co.
v.
Centennial Ins. Co., supra,
Although
Aetna
assumes that a personal injury liability clause provides coverage for trade libel—a false assumption, we
believe—Aetna
found the complaint did not allege that the insured disparaged someone else’s products, but rather “palmed off’ or appropriated those products for its own use.
Analysis of the final cause of action in Aetna, “injury to business reputation,” proceeds similarly. Although the opinion suggests that injury to business reputation “would seem to be covered[,]” the complaint in Aetna alleged only that the insured copied plaintiff’s goods, which constitutes unfair competition or trademark infringement, not disparagement. Thus this cause of action raised no possibility of coverage under the personal injury liability clause. (Aetna Cas. & Sur. Co. v. Centennial Ins. Co., supra, 838 F.2d at pp. 351-352.)
Lindsey
and
Aetna
find that allegations in the complaints failed to satisfy all legal elements of the causes of action. Thus the legal insufficiency of the complaints made it unnecessary for
Lindsey
or
Aetna
to explore whether a personal injury liability clause would provide coverage of a satisfactorily pleaded complaint, and neither case embarked on that exploration. By focusing on the legal sufficiency of allegations in the complaints before them, instead of analyzing what personal injury liability coverage includes,
Aetna
and
Lindsey
illustrate the limits of that approach. Disparagement or slander of title is one of several torts that apply to business relations and which may be grouped under the label “ ‘injurious falsehood.’ ”
(Guess, Inc.
v.
Superior Court, supra,
We therefore find no basis for imposing a duty to defend on Charter Oak, Truck, or Associated.
3. Waiver and Estoppel by Charter Oak *
The judgment is affirmed. Costs awarded to respondents.
Klein, P. J., and Aldrich, J., concurred.
Appellant’s petition for review by the Supreme Court was denied June 18, 1997. Mosk, J., was of the opinion that the petition should be granted.
Notes
Roberts v. Bennett (Super. Ct. L.A. County, 1986, No. C59274).
Trial was held on Bennett’s cross-complaint, and Roberts appealed from that judgment; Bennett v. Roberts (Dec. 30, 1994) B057316 (nonpub. opn.).
Unless some interest in property is involved, the cause of action does not lie. “An action for slander of title is maintainable only by one who possess an estate or interest in the property.” (Annot., Slander of Title: Sufficiency of Plaintiff’s Interest in Real Property to Maintain Action (1991)
See comment a to section 624, “Disparagement of Property—Slander of Title,” in the Restatement Second of Torts, supra, page 343: “The association with personal defamation through the word ‘slander’ has unfortunately tended to lead the courts to regard the plaintiff’s property interest as somehow personified, and so defamed, and thus to look to the law of defamation. ‘Slander of title,’ however, differs from personal defamation in at least three important respects. One is that proof of special harm is required in all cases. . . . Another is that there must be proof of a greater amount of fault than negligence on the part of the defendant regarding the falsity of the statement. . . . The third is that because of the economic interest involved the disparagement of property may in a proper case be enjoined, whereas defamation normally cannot.”
Furthermore, a slander or disparagement of title action is assignable, as it arises from the violation of a property right; a defamation cause of action, as arising from the purely personal right of the reputation of the one injured, is not assignable.
(Goodley
v.
Wank & Wank, Inc.
(1976)
In California, the one-year statutory limitations period (Code Civ. Proc., § 340, subd. (3)) applies to defamation causes of actions as infringements of personal rights, while the two-year period (Code Civ. Proc., § 339, subd. 1) applies to injurious falsehood causes of action (including disparagement or slander of title) as infringements of property rights.
(Guess, Inc.
v.
Superior Court
(1986)
A defamation cause of action, involving a personal injury, can form a basis for prejudgment interest. (Civ. Code, § 3291;
O'Hara
v.
Storer Communications, Inc., supra,
231 Cal.App.3d at pp. 1117-1118.) By contrast, a slander or disparagement of title cause of action, vindicating a property interest, would not qualify for Civil Code section 3291 prejudgment interest.
(Holmes
v.
General Dynamics Corp.
(1993)
The Truck policy’s “coverages” clause states that the insurer agreed “[t]o indemnify the insured for all sums which the insured shall be legally obligated to pay as damages and expenses, all as more fully defined by the term ‘ultimate net loss’ on account of: [¶ 1. Personal Injuries, including death at any time resulting therefrom[;] [¶ 2. Property Damage; caused by or arising out of each occurrence happening anywhere in the world.” The policy defined “personal injury” in part as “libel, slander, defamation of character or invasion of rights of privacy[.]” Different wording appears in the 1986-1987 Truck policy, which defines “personal injury” to include “libel, slander, defamation, humiliation, or a publication or utterance in violation of a person’s right of privacy[.]”
The Associated policy states: “ ‘[Personal injury’ shall mean: [¶ 1. bodily injury, mental injury, mental anguish, shocks, sickness, disease, death and disability; [¶ 2. false arrest, false imprisonment, wrongful eviction, wrongful detention, malicious prosecution, discrimination, humiliation; [¶ 3. libel, slander, defamation of character, wrongful entry or invasion of rights of privacy.”
In
Leonardini,
an attorney brought a malicious prosecution action against a manufacturer of pipe resin after the manufacturer, in federal court, sought to enjoin the attorney’s alleged
See footnote, ante, page 75.