L & D OF OREGON v. American States Ins.

• Decision Date: 15 November 2000
• Citation: 171 Or. App. 17,14 P.3d 617
• Parties: L & D OF OREGON, INC., an Oregon corporation, Appellant, v. AMERICAN STATES INSURANCE COMPANY, an Indiana Insurance corporation, Respondent.
• Court: Oregon Court of Appeals

14 P.3d 617

171 Or. App. 17

L & D OF OREGON, INC., an Oregon corporation, Appellant, v. AMERICAN STATES INSURANCE COMPANY, an Indiana Insurance corporation, Respondent.

(98-CV-0375-MS; CA A106860)

Court of Appeals of Oregon.

Argued and Submitted April 10, 2000.

Decided November 15, 2000.

Milly Whatley argued the cause for appellant. With her on the briefs were Gregory P. Lynch, and Hurley, Lynch & Re, P.C.

Thomas M. Christ, Multnomah, argued the cause for respondent. With him on the brief was Mitchell, Lang & Smith.

Before EDMONDS, Presiding Judge, and ARMSTRONG and KISTLER, Judges.

EDMONDS, P.J.

This is an action for defense costs and indemnity brought by L & D of Oregon, Inc. (L & D) against its insurer, American States Insurance Company (American States). L & D was the defendant in a civil action brought in federal court by a former employee, Crespi. The complaint in the underlying action alleged, among other things, that management and other employees at the L & D workplace made racially derogatory and otherwise disparaging comments to him. Crespi alleged the same basic facts in support of four claims labeled, "employment discrimination" (three counts), "intentional infliction of emotional distress," "negligent retention and supervision," and "wrongful discharge." L & D tendered the Crespi complaint to American States, which refused to defend on the ground that the complaint did not allege the occurrence of a covered event as defined in its policy.¹ L & D settled the lawsuit with Crespi and brought this breach of contract action against American States to recover the costs of its defense and the amount of the settlement. Both parties moved for summary judgment, ORCP 47, and the trial court entered judgment in favor of American States.

L & D argues that American States had a contractual obligation to defend under the policy because Crespi's complaint contained factual allegations that would satisfy all the elements of claims for slander and invasion of privacy, both of which are covered claims under paragraphs 1(d) and 1(e) of the policy. According to L & D, the facts alleged in the underlying complaint determine whether American States has a duty to defend, not the labels placed on the claims by the underlying plaintiff. American States counters that although the label placed on a claim may not be determinative, Crespi's complaint does not allege conduct covered by the policy. We affirm.

An insurer has a duty to defend its insured if the complaint against the insured provides any basis for which the insurer's policy provides coverage. Ledford v. Gutoski, 319 Or. 397, 400, 877 P.2d 80 (1994); Nielsen v. St. Paul Companies, 283 Or. 277, 280, 583 P.2d 545 (1978). That determination is made by a comparison of two documents: the complaint and the insurance policy. American Hardware Ins. Group v. West One Auto., 167 Or.App. 244, 247, 2 P.3d 413 (2000). An insurer should be able to determine from the face of the complaint whether its policy requires it to accept tender of the defense. Ledford, 319 Or. at 400, 877 P.2d 80. If the claims against the insured as set forth in the complaint could, without amendment, serve as the basis for liability for conduct covered by the policy, the insurer must defend. American Hardware Ins. Group, 167 Or.App. at 247, 2 P.3d 413. "[A]ny `doubt as to whether or not the allegations of a complaint against the insured state a cause of action within the coverage of a liability policy sufficient to compel the insurer to defend the action * * * will be resolved in the insured's favor.'" Minnis v. Oregon Mut. Ins. Co., 162 Or.App. 198, 209, 986 P.2d 77 (1999), rev. allowed 330 Or. 120, 6 P.3d 1097 (2000) (quoting Blohm et al. v. Glens Falls Ins. Co., 231 Or. 410, 416, 373 P.2d 412 (1962)).

We agree with plaintiff that reliance on the labels placed on counts in a complaint alone is not sufficient to determine the duty to defend. Minnis, 162 Or.App. at 201 n. 1, 986 P.2d 77 ("The basis for coverage is not necessarily limited to the legal theory with which the underlying plaintiff labeled the claim."). Rather, it is the "conduct" alleged that is critical to the determination.² The policy provides that "[American States] will pay those sums that the insured becomes legally obligated to pay as damages because of personal injury." "Personal injury" within the meaning of the policy means "other than `bodily injury.'" When those definitions are read with the coverage provisions for slander and invasion of privacy set forth in paragraphs 13.d. and 13.e., we understand the policy to insure against legally cognizable claims for slander and invasion of privacy. In other words, Crespi's claims are not covered under the terms of the policy unless the conduct alleged satisfies the legal elements for those torts. See Blohm, 231 Or. at 415,

373 P.2d 412 (holding that it is the insurer's duty to defend where the complaint against the insured "states a cause of action which may lie within the coverage of the policy.").

We turn to whether the Crespi complaint contains sufficient allegations of conduct to serve as the basis for liability for either an invasion of privacy/publication of private information claim or a defamation claim. The primary elements required to make out a claim for invasion of privacy/publication of private information are: 1) that the plaintiff had private information which would otherwise have remained private; 2) that the defendant made that private information known to the public or to a large number of people; and 3) that the publication of that information would have been offensive to a reasonable person. Tollefson v. Price, 247 Or. 398, 401-02, 430 P.2d 990 (1967).

L & D argues that all the allegations of conduct required to establish a claim for invasion of privacy can be found in the following language in Crespi's complaint:

"[U]pon making plans to socialize with other black persons after work, being told comments by manager Tony Sanchez that plaintiff and his friends were intending to hold a meeting of the `Black Panthers' after work[.]"

Assuming without deciding that the other elements of the tort of invasion of privacy are contained within the paragraph upon which L & D relies, the conduct complained of by Crespi does not include disclosure to the public or to a large number of people. To constitute an actionable invasion of privacy, a disclosure of private facts must be public in the sense that it was communicated "either to the public generally or to a large number of persons as distinguished from one individual or a few." Tollefson, 247 Or. at 402, 430 P.2d 990. Here, the only allegation in the complaint is that a specific coworker made comments to Crespi about Crespi's social plans. The trial court did not err when it ruled that defendant had no obligation to defend Crespi's complaint under paragraph "13.e." of the policy.

The conduct necessary for a defamation claim is: 1) the making of a defamatory statement; 2) the "publication" of the defamatory material; and 3) a resulting special harm (unless the defamatory statement gives rise to presumptive special harm). Muresan v. Philadelphia Romanian Pentecostal Church, 154 Or.App. 465, 473, 962 P.2d 711, rev. den. 327 Or. 621, 971 P.2d 413 (1998).

At oral argument, L & D argued that the conduct amounting to a claim for slander can be found in the following allegations in Crespi's complaint. Crespi alleges that he was employed by L & D "as an automobile lubrication and service technician." he also alleges:

"9.

"During the course of his employment with defendant, [Crespi] was subjected to a hostile work environment because of his membership in the black race through racially motivated conduct, repeated derogatory comments and remarks, and racial slurs by managers, supervisors and co-employees, which conduct was accepted, encouraged and condoned by defendant through its managers, promoting and creating an atmosphere of hostility toward plaintiff. Said conduct, racial slurs and remarks included the following:

"* * * * *

"5. When asking for tire pressure on vehicles being regularly told the tire pressure was `big, black and round like your mama' or `big, black and round like your d—k';

"* * * * *

"8. Being forced to hear racist and derogatory jokes and comments often times made in the presence of or by defendant's managers, including without limitation;

"* * * * *

"e. being told jokes and comments about working on the plantations;

"* * * * *

"g. being asked what's long and hard on a black man, and being told the answer was the `second grade,'

"* * * * *

"10. Being told certain jobs were `nigger work[.]'

"10.

"As a direct and proximate result of the disparate and hostile work environment to which plaintiff was subjected by defendant during his employment, plaintiff experienced extreme emotional and psychological distress, pain, suffering, humiliation, embarrassment, anger, worry, fear and marital strife all to his non-economic damage in the amount of $1,000,000.00."

As the Supreme Court said in Barnett v. Phelps, 97 Or. 242, 191 P. 502 (1920),

"Spoken words are either actionable or not actionable. Actionable words are divided into two classes: (1) Those which are actionable in themselves, or per se; and (2) those which are actionable only upon allegation and proof of special damage, or per quod. Defamatory words, where spoken, may or may not be actionable per se, depending upon whether or not they may properly be assigned to one or more of the several classes of cases which the rules of the common law have designated as actionable per se. If defamatory words are not actionable per se the complainant must allege and prove special damage. Words of both classes are actionable on the same ground and for the same reason. * * * `The material element,' this court has said, `which lies at the foundation of the action of slander is social disgrace, or damages to character in the opinion of other men.' Quigley v.

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