61 F.3d 238 (4th Cir. 1995), 94-2120, Fuisz v. Selective Ins. Co. of America

Docket Nº:94-2120.
Citation:61 F.3d 238
Party Name:Richard C. FUISZ, Plaintiff-Appellant, v. SELECTIVE INSURANCE COMPANY OF AMERICA, Defendant-Appellee.
Case Date:August 01, 1995
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit

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61 F.3d 238 (4th Cir. 1995)

Richard C. FUISZ, Plaintiff-Appellant,



No. 94-2120.

United States Court of Appeals, Fourth Circuit

August 1, 1995

Argued May 4, 1995.

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ARGUED: Robert H. Shulman, Howrey & Simon, Washington, DC, for appellant. William Randolph Allcott, Jr., Harman, Claytor, Corrigan & Wellman, Richmond, VA, for appellee. ON BRIEF: Steven N. Gersten, Howrey & Simon, Washington, DC, for appellant. John M. Claytor, Harman, Claytor, Corrigan & Wellman, Richmond, VA, for appellee.

Before ERVIN, Chief Judge, and NIEMEYER and DIANA GRIBBON MOTZ, Circuit Judges.

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Reversed in part, vacated in part, and remanded by published opinion. Judge DIANA GRIBBON MOTZ wrote the majority opinion, in which Chief Judge ERVIN joined. Judge NIEMEYER wrote a dissenting opinion.



This case requires us to decide whether an insurer must provide a defense, pursuant to a personal liability policy, to an insured against whom a defamation action has been filed. The policy expressly provides coverage for defamation, but excludes coverage for acts committed with intent to cause personal injury and for acts arising out of the insured's business. In light of these exclusions, the district court held that the insurer had no duty to defend or indemnify the insured and so granted summary judgment to the insurer. We conclude that neither policy exclusion is clearly applicable to the claims made in the underlying complaint that was filed against the insured. Accordingly, as to indemnification, we vacate the judgment; as to the duty to defend, we reverse and remand with direction that the district court award summary judgment to the insured.


The relevant facts are undisputed. Selective Insurance Company of America (Selective) sold to Dr. Richard A. Fuisz two identical Personal Catastrophe Liability Policies--the first policy was effective from February 20, 1991, to February 20, 1992, and the second from February 20, 1992, to February 20, 1993. Both policies provide:

If a suit is brought against an insured for damages because of bodily injury, personal injury, or property damage caused by an occurrence 1 to which this policy applies, we [Selective] will provide a defense at our expense by counsel of our choice.

(Emphasis added.) The policies define "personal injury" to include "injury arising out of ... [l]ibel, slander or defamation of character...."

The policies also contain numerous exclusions from coverage, including two material to this case. The first states that Selective will not provide coverage for "any act committed by or at the direction of an insured with intent to cause ... personal injury...." The other relevant exclusion provides:

We [Selective] do not cover bodily injury, personal injury or property damage arising out of or in connection with a business engaged in by an insured.... This exclusion applies but is not limited to an act or omission, regardless of its nature or circumstance, involving a service or duty rendered, promised, owed, or implied to be provided because of the nature of the business.

(Emphasis added.) Under the policies, "[b]usiness includes trade, profession, occupation or the continuing of an activity with monetary gain or the hope or expectation of monetary gain."

On April 17, 1992, Terex Corporation, Terex Equipment Limited and KCS Industries (collectively "Terex"), filed a complaint against Fuisz and Seymour M. Hersh in United States District Court for the District of Columbia alleging claims of libel and slander against both defendants. In its complaint, Terex alleges that Fuisz "embarked on a scheme and plan to injure plaintiffs by publicly disseminating false accusations designed to tarnish their good name and reputation in the business community." Terex further alleges that "[i]n or about 1987," Fuisz and Terex entered into negotiations whereby Fuisz would act as a Terex representative in Saudi Arabia. Fuisz and Terex were unable to reach any agreement, however. Thus, negotiations between the two ceased and, according to the complaint, Fuisz launched a personal "vendetta" in order "to retaliate against [Terex] for the loss of a business opportunity Fuisz believed to be extremely lucrative."

Terex goes on to state that Fuisz, with the aid of Hersh, in late 1991 and early 1992, published several defamatory statements accusing Terex of violating federal law by supplying military equipment to Sadaam Hussein

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and the government of Iraq during the recent Persian Gulf War. Accordingly, in its complaint Terex seeks compensatory and punitive damages "under the common law for defamation" against Fuisz and Hersh. The Terex complaint contains four causes of action against Fuisz--three based on libel and one on slander. With respect to each of the four claims, Terex alleges that "Fuisz published the defamatory statements ... [and] knew that the statements were false, or published the statements with reckless disregard as to whether they were true or false." In addition, Terex alleges that "[i]n publishing these false and defamatory statements ..., Fuisz was motivated by actual malice and wrongfully and willfully intended to injure plaintiffs."

On May 17, 1992, Fuisz notified Selective of the pending Terex complaint and requested that Selective provide him with a defense to the suit pursuant to the terms of the personal liability policy it had issued to him. Selective denied coverage solely on the basis of the intentional acts exclusion. Fuisz again requested coverage and Selective responded by again denying coverage--this time listing the business exclusion as an additional basis for the denial.

Fuisz subsequently filed this action, seeking a declaratory judgment that Selective must defend and indemnify him in the Terex lawsuit. Fuisz moved for summary judgment with regard to Selective's duty to defend, and the district court denied the motion. Selective then moved for summary judgment with regard to both its duty to defend and its duty to indemnify, relying on the intentional acts exclusion and the business exclusion. Fuisz responded by filing another motion for summary judgment with respect to the duty to defend. Ruling from the bench, the district court denied Fuisz's motion and granted Selective's motion, reasoning:

I find there are no issues of fact in dispute that this issue is to determined by looking at the four corners of this policy. And there is an exclusion for libel and slander that arises out of or in connection with a business engaged in by the insured. And the solicitation of the discussions of this contract certainly is a business that he was engaged in. And that these statements that are alleged to have been made were made, did arise out of that business that he was engaged in. And the fact that it didn't result in a contract which was fruitful to him, it was still a business that he was involved in.

I also find that the allegations in this complaint allege an intentional personal injury that was done with the intent to harm, and that exclusion applies as well.

Fuisz timely appealed the district court's decision to this Court.


We review a grant of summary judgment de novo. United States v. Jefferson-Pilot Life Ins. Co., 49 F.3d 1020, 1021 (4th Cir.1995); see also Salve Regina College v. Russell, 499 U.S. 225, 231, 111 S.Ct. 1217, 1221, 113 L.Ed.2d 190 (1991) (concluding that federal courts of appeal must review de novo district court determinations of state law). Summary judgment is appropriate only when "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Hinkleman v. Shell Oil Co., 962 F.2d 372, 375 (4th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 831, 121 L.Ed.2d 701 (1992). Where, as here, there are no material facts in dispute, summary judgment review turns solely on the question of whether the trial court properly construed the law.

In addition, we must resolve this diversity action pursuant to Virginia law because the case was filed in federal court in the Eastern District of Virginia. Nguyen v. CNA Corp., 44 F.3d 234, 237 (4th Cir.1995). Virginia adheres to traditional choice of law rules; with respect to contract actions like this one, the place of contracting governs the substantive issues of the case. Frye v. Commonwealth, 231 Va. 370, 345 S.E.2d 267, 272 (1986). Selective issued the two personal liability policies to Fuisz from its office in Richmond, Virginia, and the policies were delivered to Fuisz--a Virginia resident--in Great Falls, Virginia. Therefore, as Selective recognizes, notwithstanding the fact that

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its principal place of business is in New Jersey, the substantive law of the Commonwealth of Virginia controls our interpretation of the insurance policy.

As in many other states, the duty of an insurer to defend an insured in Virginia "is broader than its obligation to pay" or to indemnify its insured. Brenner v. Lawyers Title Ins. Corp., 240 Va. 185, 397 S.E.2d 100, 102 (1990). Indeed, an insurer may be required to provide a defense even where the ultimate resolution of the case demonstrates that the insurer is not liable for indemnification. See Lerner v. General Ins. Co. of America, 219 Va. 101, 245 S.E.2d 249, 252 (1978) (where underlying claim for punitive damages "was ancillary to the claim for compensatory damages" insurer had a duty to defend the insured against the punitive damages claim even if public policy prohibited indemnity for a punitive damages award). Determination of whether an insurer has a duty to defend requires examination of (1) the policy language to ascertain...

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