Opinion
HHDCV156057541S
07-05-2016
OneBeacon America Insurance Company v. Hanover Insurance Company
UNPUBLISHED OPINION
MEMORANDUM OF DECISION ON CROSS MOTIONS FOR SUMMARY JUDGMENT
Cesar A. Noble, J.
The parties' cross motions for summary judgment in this declaratory judgment action contest whether an " act of malice" exclusion in a commercial general liability insurance policy (the " Policy") issued by the defendant, Hanover Insurance Company (Hanover), is clear and unambiguous given the location of its placement in an endorsement and its impact on other coverage not at issue in these motions. The plaintiff, OneBeacon America Insurance Company (OneBeacon), who issued a commercial general liability policy to insureds covered by the Hanover policy for a different policy period, also disputes Hanover's claim that a " Knowing Violation of Rights of Another" exclusion operates to withdraw coverage to the mutual insureds. The court grants summary judgment in favor of Hanover and denies OneBeacon's motion for summary judgment because it finds the " act of malice" exclusion clear and unambiguous as applied to the specific claims for which coverage under the Policy is claimed by OneBeacon.
FACTS AND PROCEDURAL HISTORY
The central issue in this case is whether Hanover had a duty to defend and indemnify its named insured, LogicSource, Inc. (LogicSource) and LogicSource's President and Chief Operating Officer, David Pennino, from claims made by a non-party, Williams Lea, Inc., in a lawsuit filed on July 3, 2012 in the Supreme Court of New York, captioned Williams Lea, Inc. v. LogicSource, Inc. et al., Index No. 652343/2012 (Williams Lea complaint.)
LogicSource and Pennino are collectively referred to herein as the Insureds.
The following allegations are contained in the Williams Lea complaint. Williams Lea is a leading global business process outsourcing company specializing in corporate information solutions. One critical component of its proprietary pricing methodology is the confidential and competitively sensitive inside information including clients' finances and operations which it had developed over the last decade and invested millions of dollars to refine. Pennino was employed by Williams Lea from 2005 to 2009 as the Senior Vice President of Business Development. He was thereafter hired by LogicSource directly from Williams Lea in 2009 and he currently works as LogicSource's President and Chief Executive Officer Pennino undertook a " coordinated and systemic effort to undermine and harm Williams Lea's business" and led " an invidious plan to unfairly compete with Williams Lea" by, among other things, misappropriating and using William Lea's confidential information and trade secrets aggressively soliciting Williams Lea employees to accept employment with LogicSource and making disparaging statements about Williams Lea to existing clients and prospects." The misconduct of Pennino and LogicSource was characterized as " a concerted effort at commercial piracy." Former employees of Williams Lea, including James Burnham and Jolion Seed, who were lured to LogicSource by the Insureds, allegedly utilized highly and competitively sensitive, confidential and propriety information of Williams Lea to unfairly compete for its existing clients.
The Williams Lea complaint is comprised of six counts which assert claims, in relevant part, of Misappropriation of Trade Secrets against LogicSource, Seed and Burnham (count one); Business Disparagement against LogicSource and Pennino (count two); Unfair Competition against LogicSource (count three); Tortious Interference with a Contract against LogicSource and Pennino (count four); Tortious Interference with Business Relations against LogicSource and Pennino (count six) and Breach of Contract against Pennino (count seven).
One Beacon does not claim that Seed and Burnham are insureds under the Hanover Policy and only demands defense and indemnity related damages from Hanover as to LogicSource and Pennino.
Count two is the central, indeed the sole, focus of OneBeacon's contention that coverage is afforded by the Policy. This count alleges that LogicSource and Pennino intentionally made and issued false statements regarding, among other things, the ability of Williams Lea to prove proper service to its clients. Williams Lea Complaint, ¶ 73. At the time that these false statements were made LogicSource and Pennino were motived by actual malice and knew that the statements were false and untrue, or that such statements were made with reckless and wanton disregard for the truth or falsity of the statements. Id., ¶ 74. Williams Lea claims it suffered damages as a proximate result of the untruthful statements and business disparagement made by LogicSource and Pennino. Id., ¶ 75.
LogicSource and Pennino were insured under a commercial general liability policy of insurance issued by One Beacon with effective dates of September 23, 2009 to September 23, 2010. OneBeacon participated in the defense of both LogicSource and Pennino together with another insurer, Westchester Fire Insurance Company (Ace), which insured LogicSource for the policy period of March 1, 2012 to March 1, 2013.
Ace is not a party to this lawsuit.
LogicSource and Pennino were insureds under two commercial general liability policies of insurance issued by Hanover with effective dates of September 23, 2012 to September 23, 2011 and September 23, 2011 to September 23, 2012. They tendered both the defense of the Williams Lea complaint and indemnity therefrom to Hanover who declined on the basis that it owed neither because the claims were excluded from coverage by three exclusions contained in its policy: an Intellectual Property exclusion; an act of malice Exclusion and a Knowing Violation of the Rights of Another exclusion.
In July of 2013 OneBeacon, LogicSource and Ace agreed to settle the claims flowing from the Williams Lea complaint. Pursuant to the settlement agreement, OneBeacon paid $150,000, Ace paid $165,000 and LogicSource paid $175,000. Hanover declined to contribute to the settlement. OneBeacon incurred $344,954.36 in defense costs relative to the defense of the Insureds from the Williams Lea Complaint. OneBeacon thereafter demanded that Hanover reimburse it the sum of $247,277.18 which represents one-half of its defense costs and contribution to the settlement. Hanover again declined the opportunity to contribute to either the defense or indemnity of the claims and this lawsuit followed.
As with any commercial liability policy the Hanover policy provides an initial broad grant of coverage then tailors the extent of coverage by exclusions. The pertinent grant of coverage in the Hanover policy is found in " Coverage B Personal and Advertising Injury Liability." The policy's insuring agreement provides that Hanover " will pay those sums that the insured becomes legally obligated to pay as damages because of 'personal and advertising injury' to which this insurance applies. We will have the right and duty to defend the insured against any 'suit' seeking those damages. However, we will have no duty to defend the insured against any 'suit' seeking damages for 'personal and advertising injury' to which this insurance does not apply." Section V--Definitions, of the Hanover policy, defines " personal and advertising injury" in pertinent part as " injury . . . arising out of one or more of the following offenses: . . .
b. Malicious prosecution: . . .
d. Oral 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;
e. Oral or written publication, in any manner, of material that violates a person's right of privacy;
f. The use of another's advertising idea in your " advertisement"; . . .
The Hanover policy limits the extent of its coverage by the following exclusions:
This Insurance does not apply to:
a. Knowing Violation Of Rights Of Another
" Personal and advertising injury" caused by or at the direction of the Insured with the knowledge that the act would violate the rights of another and would inflict " personal and advertising injury."
b. Material Published With Knowledge Of Falsity
'Personal and advertising injury' arising out of oral or written publication of material, if done by or at the direction of the Insured with knowledge of its falsity . . .
i. Infringement Of Copyright, Patent, Trademark Or. Trade Secret
" Personal and advertising injury" arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights, Under this exclusion, such other intellectual property rights do not include the use of another's advertising idea in your " advertisement" . . .
This exclusion is hereinafter referred to as the Knowing Violation of Rights of Another exclusion.
The Hanover Policy is modified by an Endorsement, Form 421-0820 which provides:
" THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
EXCLUSION-INFRINGEMENT OF COPYRIGHT, PATENT, TRADEMARK OR TRADE SECRET--CHANGES
This endorsement modifies insurance provided under the following;
COMMERCIAL GENERAL LIABILITY COVERAGE PART
A. Under COVERAGE B--PERSONAL AND ADVERTISING INJURY LIABILITY, Exclusion 2(i) is replaced with the following:
(i). Infringement of Copyright, Patent, Trademark or Trade Secret
This insurance does not apply to " Personal and Advertising Injury" arising out of:
(1) The actual or alleged infringement or violation of the following:
i. trade dress;
ii. trade name;
iii. trade secrets;
iv. trademark;
v. patent;
vi. copyright, but this exclusion does not apply to infringement of copyrighted materials or slogans in your " advertisements"; or any other Intellectual property rights or laws.
(2) Any act committed by the Insured with malice.
This exclusion is hereinafter referred to as the Intellectual Property exclusion.
This exclusion is hereinafter referred to as the acts of malice exclusion.
The Endorsement also replaces the Definitions section of the main policy as follows in relevant part:
" Personal and advertising injury" means injury . . . arising out of one or more of the following offenses: . . .
b. Malicious prosecution; . . .
d. Oral or written publication, in any manner, of material that slanders or libels a person or organization. This does not include any slander or libel related to the actual or alleged infringement or violation of any Intellectual property rights or laws.
e. Oral or written publication, in any manner, of material that disparages a person's or organization's goods, products or services.
OneBeacon's complaint alleges the above facts and claims a declaratory judgment that Hanover was obliged to defend and indemnify the Insureds and further seeks a pro-rata contribution from Hanover for the sums it paid as defense and indemnity costs. Central to this claim is the resolution of the applicability of the acts of malice and Knowing Violation of Rights Another exclusions. Cross motions for summary judgment were filed by both parties which the court decides in favor of Hanover and finds that it owed no coverage to LogicSource or Pennino because of the acts of malice exclusion.
II
STANDARD
" Summary judgment is a method of resolving litigation when pleadings, affidavits, and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law . . . The motion for summary judgment is designed to eliminate the delay and expense of litigating an issue when there is no real issue to be tried . . . However, since litigants ordinarily have a constitutional right to have issues of fact decided by a jury . . . the moving party for summary judgment is held to a strict standard . . . of demonstrating his entitlement to summary judgment." (Citation omitted; footnote omitted; internal quotation marks omitted.) Grenier v. Commissioner of Transportation, 306 Conn. 523, 534-35, 51 A.3d 367 (2012). See Practice Book § 17-49.
This court's analysis is further informed by familiar principles of interpreting insurance policies. " [C]onstruction of a contract of insurance presents a question of law . . . The [i]nterpretation of an insurance policy . . . involves a determination of the intent of the parties as expressed by the language of the policy . . . [including] what coverage the . . . [insured] expected to receive and what the [insurer] was to provide, as disclosed by the provisions of the policy . . . [A] contract of insurance must be viewed in its entirety, and the intent of the parties for entering it derived from the four corners of the policy [giving the] words . . . [of the policy] their natural and ordinary meaning . . . [and construing] any ambiguity in the terms . . . in favor of the insured . . ." (Citations omitted; internal quotation marks omitted.) Capstone Bldg. Corp. v. Am. Motorists Ins. Co., 308 Conn. 760, 773, 67 A.3d 961 (2013) citing Hartford Casualty Ins. Co. v. Litchfield Mutual Fire Ins. Co., 274 Conn. 457, 462-63, 876 A.2d 1139 (2005). " [A]ny ambiguity in a contract must emanate from the language used in the contract rather than from one party's subjective perception of the terms . . . As with contracts generally, a provision in an insurance policy is ambiguous when it is reasonably susceptible to more than one reading . . . Under those circumstances, any ambiguity in the terms of an insurance policy must be construed in favor of the insured because the insurance company drafted the policy.'" (Internal quotation marks omitted.) Johnson v. Connecticut Insurance Guaranty Association, 302 Conn. 639, 643, 31 A.3d 1004 (2011).
The question of whether an insurer has a duty to defend its insured, itself an exercise in policy interpretation, is also purely a question of law. New London County Mutual Insurance Co. v. Bialobrodec, 137 Conn.App. 474, 478, 48 A.3d 742 (2012). In construing the duty to defend as expressed in an insurance policy, the obligation of the insurer to defend does not depend on whether the injured party will successfully maintain a cause of action against the insured but on whether he has, in his complaint, stated facts which bring the injury within the coverage. Id., 478-79.
To prevail on a motion for summary judgment for a declaratory judgment that it has no duty to defend in an underlying action, an insurer must establish that there is no genuine issue of material fact either that no allegation of the underlying complaint falls even possibly within the scope of the insuring agreement or, even if it might, that any claim based on such an allegation is excluded from coverage under an applicable policy exclusion. Id. at 479. The insurer is necessarily limited to the provisions of the subject insurance policy and the allegations of the underlying complaint. Id. Therefore, it is only entitled to prevail under a policy exclusion if the allegations of the complaint clearly and unambiguously establish the applicability of the exclusion to each and every claim for which there might otherwise be coverage under the policy. Id.
Finally, " the duty to defend is considerably broader than the duty to indemnify. An insurer's duty to defend, being much broader in scope and application than its duty to indemnify, is determined by reference to the allegations contained in the [underlying] complaint . . . The obligation of the insurer to defend does not depend on whether the injured party will successfully maintain a cause of action against the insured but on whether he has, in his complaint, stated facts which bring the injury within the coverage. If the latter situation prevails, the policy requires the insurer to defend, irrespective of the insured's ultimate liability . . . It necessarily follows that the insurer's duty to defend is measured by the allegations of the complaint. Moreover, if an allegation of the complaint falls even possibly within the coverage, then the insurance company must defend the insured. In contrast to the duty to defend, the duty to indemnify is narrower: while the duty to defend depends only on the allegations made against the insured, the duty to indemnify depends upon the facts established at trial and the theory under which judgment is actually entered in the case." (Citations omitted, internal quotation marks omitted; emphasis in the original.) DaCruz v. State Farm Fire & Cas. Co., 268 Conn. 675, 687, 846 A.2d 849, 857-58 (2004).
III
ANALYSIS
Neither Hanover or OneBeacon dispute that absent any applicable exclusion coverage is afforded by the policy. The pertinent allegations of count two are that the insureds intentionally made and issued false statements regarding the ability of Williams Lea to provide proper service to its clients. This clearly falls within the endorsement's definition of Personal and Advertising Injury which includes " Oral or written publication, in any matter, of material that disparages a person's or organization's goods, products or services." The term disparagement refers to the denigration of the quality of a business' goods or services. QSP, Inc. v. Aetna Cas. & Sur. Co., 256 Conn. 343, 359, n.15, 773 A.2d 906 (2001). It is " [a] derogatory comparison of one thing with another . . . the act . . . of unfairly castigating or detracting from the reputation of . . . something . . . false and injurious statement that discredits or detracts from the reputation of another's product or business." Black's Law Dictionary 570 (10th ed. 2014). The false statements alleged in count two of the Williams Lea complaint would naturally serve to denigrate, discredit and detract from the reputation and business of Williams Lea. The dispositive issue is thus whether coverage is withdrawn by an exclusion.
Hanover argues that the exclusionary language found in three exclusions--the Intellectual Property, act of malice and Knowing Violation of Rights of Another exclusions--operate to exclude coverage for the claims in the Williams Lea complaint. One Beacon's complaint does not specify which counts directed to LogicSource and Pennino are covered under the Hanover policy. However, perhaps conceding the applicability of the Intellectual Property exclusion, OneBeacon's motion for summary judgment and memorandum of law in support of its motion argue that Hanover had a duty to defend the common insureds in connection with the Williams Lea complaint " [s]pecifically, . . . with respect to certain claims for business disparagement asserted against its insureds." The only count of the Williams Lea complaint which alleges a theory of business disparagement is count two. Further, OneBeacon's memorandum of law and its subsequent March 2, 2016 reply memorandum advance no argument as to coverage under the Hanover policy for any other count. The court thus deems abandoned by OneBeacon any claim that the Hanover policy affords coverage for any count other than count two of the Williams Lea complaint.
The court need not consider an argument neither argued or briefed. Hoenig v. Lubetkin, 137 Conn. 516, 524, 79 A.2d 278 (1951), Connecticut Dep't of Envtl. Prot. v. Xtra Lease, Inc., Superior Court, Docket No. CV000598293, 2002 WL 194497, at *1 [31 Conn.L.Rptr. 260, ] (Jan. 11, 2002, Beach, J.); Concerned Taxpayer of Thompsonville Fire Dist. v. Bd. of Fire Comm'rs of Thompsonville Fire Dist., Superior Court, judicial district of Hartford, Docket No. 136043230S, 2013 WL 5781094, at *2 (Oct. 3, 2013, Peck. J.)
A. Knowing Violation of the Rights of Another Exclusion
The court is not persuaded that the " Knowing Violation of the Rights of Another" exclusion avoids coverage for count two of the Williams Lea complaint. This provision excludes from coverage " 'Personal and advertising injury' caused by or at the direction of the Insured with the knowledge that the act would violate the rights of another and would inflict 'personal and advertising injury.'" It is true, as argued by Hanover, that the Williams Lea complaint repeatedly characterized the actions of the Insureds as intentional and motivated by a desire to damage the business of Williams Lea. Count two does, however, allege reckless in addition to intentional conduct. Paragraph 74 reads in its entirety: " At the time these false statements were made, LogicSource and Pennino were motivated by actual malice and knew that the statements were false and untrue, or that such statements were made with reckless and wanton disregard for the truth or falsity of the statements." Williams Lea Complaint, ¶ 74.
Hanover urges the court to read the totality of the claim in context suggesting that such would demonstrate the centrality of intentional conduct to the Williams Lea Complaint. It refers the court to a decision of the Court of Appeals of Washington in Grange Insurance Association v. Roberts, 179 Wash.App. 739, 743, 320 P.3d 77 (2013) which held that a complaint alleging defamation by the defendant/insured undertaken in order to intentionally interfere with the relationship between the defendant's mother and other parties implicated a " Knowing Violation of the Rights of Another" exclusion. This was so because read in context the complaint alleged conduct indicating that the insured intended and knew that her statements would cause interference in her sister's personal relationships thus violating the sister's rights. Id., 770.
OneBeacon counters that if the possibility exists that liability may be imposed as a consequence of the statements having been made in reckless disregard for their truth then the Knowing Violation of the Rights of Another exclusion is inapplicable. It refers the court to Travelers Property Casualty Co. of America v. Kansas City Landsmen, 592 Fed.Appx. 876, 2015 WL 137816 (11th Cir. Jan. 12, 2015) (violations committed with reckless disregard are not excluded under the " Knowing Violation of Rights of Another" exclusion). It further reminds the court that under Connecticut law " when an exclusion clause is relied upon to deny coverage, the insurer has the burden of demonstrating that the allegations of the underlying complaint cast that pleading solely and entirely within the policy exclusions, and further, that the allegations, in toto, are subject to no other interpretation." Vermont Mutual Insurance Co. v. Ciccone, 900 F.Supp.2d 249, 271 (D.Conn. 2012). This court is mindful that similarly, in order to prevail on its own motion for summary judgment on a claim of breach of the duty to defend, the insurer must establish that there is no genuine issue of material fact either that no allegation of the underlying complaint falls even possibly within the scope of the insuring agreement or, even if it might, that any claim based on such an allegation is excluded from coverage under an applicable policy exclusion. Lancia v. State National Insurance Co., 134 Conn.App. 682, 691, 41 A.3d 308 (2012).
Here the Williams Lea Complaint may be interpreted in a fashion that does not require that LogicSource and Pennino made the statements with the knowledge that the act would violate the rights of another and would inflict personal and advertising injury thus triggering the Knowing Violation of the Rights of Another exclusion. The trier of fact may disbelieve that the insureds intentionally made false statements as alleged in Paragraph 73 but may find LogicSource and Pennino liable because, while motived by actual malice, they made statements with reckless and wanton disregard for the truth or falsity of the statements. Malice has been defined by our courts in the context of a libel action as " any improper or unjustifiable motive" to the exclusion of the more limited " ill will or an intent or desire to injure" standard. Haxhi v. Moss, 25 Conn.App. 16, 19, 591 A.2d 1275, 1276-77 (1991). The Williams Lea Complaint may thus impose a liability on the Insureds that does not require a level of scienter as to the violation of the rights of another arising to the level of knowledge but may impose liability based on conduct inspired by ill will and a reckless disregard of whether another's rights will be injured. Accordingly, the court declines to find that Hanover's reliance on the " Knowing Violation of the Rights of Another" exclusion operates to clearly and unambiguously establish the applicability of the exclusion to the claim asserted in the Williams Lea complaint for which there might otherwise be coverage under the policy. New London County Mutual Insurance Co. v. Bialobrodec, supra, 137 Conn.App. 479.
B. Acts of Malice Exclusion
Hanover asserts that no coverage is provided for count two because of the explicit allegation therein that at the time the false statements were made the Insureds were motivated by actual malice. In its view coverage is excluded by the act of malice exclusion in the Endorsement which excludes from coverage " [a]ny act committed by the insured with malice."
One Beacon contends that the act of malice exclusion is ambiguous. It's claim is not that there is an intrinsic ambiguity in the exclusion itself but rather that when read in context an ambiguity is created primarily because it directly contradicts the coverage afforded for " malicious prosecution" and to a lesser degree because its location in a Section entitled " Infringement of Copyright, Patent, Trademark or Trade Secret" is incongruous.
OneBeacon argues that the acts of malice exclusion is ambiguous because it may be interpreted either as encompassing only the intellectual property offenses amongst which it is included or, more broadly, as being applicable to all injury for which coverage is provided. If the exclusion is interpreted to apply to all otherwise covered claims it would contradict expressly the coverage granted for malicious prosecution the proof of which requires the element of malice in addition to want of probable cause and a termination of suit in the plaintiff's favor. Harris v. Bradley Memorial Hospital and Health Center, Inc., 296 Conn. 315, 330, 994 A.2d 153 (2010). Such a result, in the view of OneBeacon, is irreconcilable and therefore ambiguous. The court in Allstate Property and Casualty Insurance Co. v. Choi, United States District Court, Docket No. 2:14-cv-00311 (SAB) (E.D. Washington, March 3, 2015) (2015 WL 917649), employed similar reasoning in its denial of the plaintiff's motion for summary judgment in a declaratory judgment action involving a dispute over insurance coverage for an underlying sexual assault and false imprisonment claim where the policies at issue contained an intentional and criminal acts exclusion. The court held that the intentional act exclusion was plainly incongruous with the policy's explicit grant of coverage for false imprisonment which is an intentional tort. [WL], 5. The incongruity resulted, in the court's view, in a blatant ambiguity which once resolved in favor of the insured, as it must, necessitated a finding of coverage. Id.
Conversely, as argued by Hanover, it is illogical for the acts of malice exclusion to apply to the intellectual property theories of liability because they are already excluded from coverage.
While OneBeacon expressly stated in its memorandum of law that it does not contend that the heading of a policy exclusion should necessarily encompass every single offense listed thereunder it suggests that this court should apply the same reasoning adopted by the Ninth Circuit Court of Appeals in court in the case of Safety Dynamics, Inc. v. Gen. Star Indem. Co., 475 Fed.Appx. 213 (9th Cir. 2012), which found an " unfair competition" exclusion ambiguous solely because of its illogical placement under a heading referencing intellectual property claims. Id., 214.
The court disagrees with both prongs of OneBeacon's attack of the application of the act of malice exclusion to the second count of the Williams Lea complaint. The court's analysis must begin with the language of the exclusion itself which provides that the insurance does not apply to " [a]ny act committed by the Insured with malice." The use of the word " any" in a contract to modify a phrase gives the resulting phrase an expansive meaning which courts will not restrict in the absence of a clear limitation in the text. Salce v. Wolczek, 314 Conn. 675, 686, 104 A.3d 694 (2014). The court finds no such clear limitation in the text and finds that the act of malice exclusion indeed does apply to all losses otherwise covered by the policy and not merely the intellectual property violations identified in the same section
The insertion of the exclusion in a section which bears the heading " Infringement of Copyright, Patent, Trademark or Trade Secret" does not render it ambiguous. Our Supreme Court has held that the title of an exclusion in an insurance policy does not limit the application of the exclusion to only the acts identified in the exclusion. Liberty Mutual Ins. Co. v. Lone Star Indus., Inc., 290 Conn. 767, 807-09, 967 A.2d 1 (2009) (exclusion for silica-related damages in endorsement to insurance policy entitled " Asbestos Exclusion Endorsement" is not ambiguous simply because silica damages are not mentioned in the title). " Although the title of the exclusion doubtless would be clearer and more useful if it were entitled 'Asbestos and Silica Exclusion Endorsement, ' rather than 'Asbestos Exclusion Endorsement, ' this does not render the language of the endorsement itself ambiguous." (Emphasis in the original.) Id., 808. Most important to the court's analysis was the fact that the endorsement " clearly and unambiguously excludes silica-related claims." Id.
Similarly, in Great Lakes International Trading, Inc. v. Traveler's Property Casualty Co. of America, United States District Court, Docket No. 3:13-cv-01522 (JAM) (D.Conn., Nov. 26, 2014) (2014 WL 6686633), United States District Court Judge Meyer found unambiguous a clear exclusion for flooding that was " quite infelicitously" and " awkwardly" located under a subheading " Earth Movement Sublimit & Deductible." The clarity of the wording of the exclusion was the predicate for this finding. " Although the flood exclusion surely could more appropriately have been set off from other text or located elsewhere in the endorsement, its wording inter se as a flood exclusion is clear." [WL]*2.
In Amherst Country Club, Inc. v. Harleysville Worcester Ins. Co., 561 F.Supp.2d 138 (D.N.H. 2008), the court found no ambiguity where an exclusion for groundwater movement was located in a section entitled " earth movement" because the language of exclusion was clear. " Whatever general impression the title [" Earth Movement" ] of the exclusion might cause, the language of the provision itself specifies 'the action of water under the ground surface' as an excluded cause. See Cross Petroleum v. United States, 51 Fed.Cl. 549, 555 (Ct.Cl.2002) (reasoning that title of contractual provision 'does not invite the court to ignore the plain meaning of the provision's language'); accord N.H. Ins. Guar. Ass'n v. Pitco Frialator, Inc., 142 N.H. 573, 580, 705 A.2d 1190 (1998) (ruling that language of statutory provision trumped its title)." Id., 148-9.
The court, having found that the language of the act of malice exclusion clearly and unambiguously applies to all otherwise covered losses cannot conclude that the failure of the subject heading or title to include a reference to it renders the section ambiguous. A finding of ambiguity for the inclusion of an otherwise unambiguous exclusionary clause located in a section containing exclusions of a differing nature, merely because the first exclusionary clause is not referenced in the section title, is an elevation of form over substance in which a court should not indulge.
This conclusion requires the court to address the argument that a broad application of the act of malice exclusion is irreconcilable with the Policy express grant of coverage for malicious prosecution. The argument is not persuasive for the simple reason that the second count of the Williams Lea complaint does not assert a claim for malicious prosecution. The Connecticut Supreme Court's decision in Lexington Ins. Co. v. Lexington Healthcare Grp., Inc., 311 Conn. 29, 84 A.3d 1167, 1173 (2014) is controlling on this issue. In Lexington the Supreme Court interpreted a provision of a professional liability insurance policy applying limits of coverage to " related" " medical incidents" to determine the amount of coverage available to cover multiple claims arising out of a fire in a nursing home which resulted in injury or death to thirteen residents. The trial court had found an ambiguity in the term " related" because it could refer to either a narrow or broad range of connections and construed the policy coverage broadly such that the individual claims of the residents were not " related" and therefore did not constitute a single " medical incident" within the meaning of the policy limitation. Id., 40. As a consequence of the trial court's ruling the $500,000 per medical incident limit applied to each individual defendant's claim separately and not to all of the claims collectively. Id.
The Supreme Court upheld the trial court's decision and rejected the insurer's argument that because several other courts had determined the term " related" to be unambiguous the trial court's conclusion was improper. " [C]ontext is often central to the way in which policy language is applied; the same language may be found both ambiguous and unambiguous as applied to different facts. Language in an insurance contract, therefore, must be construed in the circumstances of [a particular] case, and cannot be found to be ambiguous [or unambiguous] in the abstract . In determining whether there is an ambiguity, the clause must be read within its factual context. In sum, the same policy provision may shift between clarity and ambiguity with changes in the event at hand and one court's determination that the term related was unambiguous, in the specific context of the case that was before it, is not dispositive of whether the term is clear in the context of a wholly different matter." (Citations omitted; internal quotation marks omitted, emphasis in original.) Id., 42.
The issue of whether an ambiguity exists when the Policy's acts of malice exclusion is considered in the context of coverage for a malicious prosecution claim is not before the court and, pursuant to the instruction provided by the Connecticut Supreme Court in Lexington, plays no bearing in the court's analysis. There is no dispute, however, that the same exclusion when applied to Williams Lea's claim for disparagement would operate to withdraw such a claim from coverage due to the explicit allegation that the disparaging statements were motivated by actual malice. Because this allegation brings the claim within the exclusion for an " act committed by the insured with malice" the coverage exclusion is applicable and no coverage is provided by the Hanover policy.
CONCLUSION
The court finds that the " act of malice" exclusion is clear and unambiguous when applied to the allegations of count two of the Williams Lea complaint and operates to exclude coverage therefore. Accordingly, Hanover's motion for summary judgment (Entry #111.00) is GRANTED, and OneBeacon's cross motion for summary judgment (Entry #112.00) is DENIED.