Liberty Mut. Ins. Co. v. Westport Ins. Corp., C.A. No. 2:07-CV-3729.
| Decision Date | 29 June 2009 |
| Docket Number | C.A. No. 2:07-CV-3729. |
| Citation | 664 F.Supp.2d 587 |
| Court | U.S. District Court — District of South Carolina |
| Parties | LIBERTY MUTUAL INSURANCE COMPANY, Plaintiff, v. WESTPORT INSURANCE CORPORATION, Defendant. |
Morgan S. Templeton, William Wharton Watkins, Jr., Elmore and Wall, Charleston, SC, for Plaintiff.
Cravens Duval Ravenel, Baker Ravenel and Bender, Columbia, SC, for Defendant.
This matter is before the Court on Defendant Westport Insurance Corporation's ("Westport" or "Defendant") Motion for Summary Judgment under Federal Rule of Civil Procedure 56 and Plaintiff Liberty Mutual Insurance Company's ("Liberty Mutual" or "Plaintiff") Motion for a Jury Trial. For the reasons set forth herein, Defendant's Motion is granted, rendering Plaintiff's Motion moot.
This matter is factually related to another matter in which this Court previously issued an Order, Murphy v. Jefferson Pilot Communications Co., 657 F.Supp.2d 683 (D.S.C.2008). The case involved the actions of Donald Feldman ("Feldman"), formerly the "Assistant VP News" for Jefferson Pilot and news director for WCSC, whose bizarre behavior included making untrue allegations about attorney Elizabeth Murphy ("Murphy") in what appears to have been an attempt to impress Sandra Senn ("Senn"), another local attorney and panelist on one of WCSC's talk shows, who did not get along with Murphy. Feldman claimed that he had been on an airplane with Murphy, and made accusations about Murphy's behavior on the airplane. Feldman also printed fraudulent letters of correspondence between himself and Murphy to show to Senn to make it appear as if he was pursuing a lawsuit against Murphy on behalf of WCSC. Murphy discovered that Feldman had been making these allegations about her, and brought an action against Feldman, Jefferson Pilot, and WCSC for defamation and intentional infliction of emotional distress.
The initial jury trial took eight days. At the end of the trial, the trial judge granted Jefferson Pilot and WCSC's Motion for a directed verdict. After deliberating, the jury returned a $9 million verdict against Feldman. Originally, Liberty Mutual had retained attorney Patrick Higgins to represent Feldman, but Feldman had retained his own attorney, and specifically informed Liberty Mutual that he waived any insurance coverage and had no desire to cooperate with Liberty Mutual. After the verdict was returned, Feldman filed for Chapter 7 bankruptcy.
Murphy appealed the trial court's grant of a directed verdict as to Jefferson Pilot and WCSC. The South Carolina Court of Appeals reversed and remanded the matter for a retrial. At the end of this second trial, the jury found that Jefferson Pilot and WCSC were responsible for Feldman's behavior, and were liable for $4 million in damages.
In February 2008, after being assigned by Feldman any claims which he may have had against WCSC and Jefferson Pilot, Murphy brought an action in federal court seeking to enforce the original $9 million judgment against Feldman obtained in the first trial. However, this Court held that the claim against WCSC was barred by the applicable three-year statute of limitations, that no valid claim against WCSC for breach of contract existed, and that the issue of liability was foreclosed by res judicata.
The present matter involves a dispute between two insurance companies. Plaintiff issued an insurance policy to Jefferson Pilot covering the time period in question, a commercial general liability policy ("CGL"), which had a limit of $1,000,000.00 per occurrence and $3,000,000.00 overall. Plaintiff issued a second insurance policy to Jefferson Pilot during the time period in question which was an umbrella excess liability policy with a $10,000,000.00 limit per occurrence.
For its part, Defendant also issued an insurance policy to Jefferson Pilot during the time period in question providing for media and personal injury liability coverage with a $10,000,000.00 limit. This policy provided that Defendant would cover any sort of defamation or intentional infliction of emotional distress:
committed in the acquisition, researching, filming, videotaping, preparation, utterance or dissemination of "matter" first published, printed, produced, distributed, exhibited, displayed, broadcast, telecast, cablecast, "advertised" or contracted for by the insured or with the insured's permission, or with the permission of the insured's "subsidiary", during the policy period.
Defendant's policy defines "matter" as "words, sounds, or images, made or to be made available to a mass public audience through the insured's publications, broadcasts, films or other forms of mass media."
After the underlying events of defamation and outrage occurred, and the initial lawsuit had been commenced in state court, John D. Nesbitt ("Nesbitt"), a claims specialist for Defendant, was assigned to the matter. Initially, Defendant took no coverage position, but in notes made on May 2, 2001, Nesbitt wrote that his initial thought was that On July 2, 2001, Plaintiff agreed to defend the suit on behalf of Jefferson Pilot, and also to represent any possible interest of Defendant in the case.
On November 29, 2001, Nesbitt sent a letter to Jefferson Pilot reserving rights, essentially claiming that Defendant did not believe that it owed Jefferson Pilot a defense and that Feldman was not an insured. However, Nesbitt's reason for this was not that the defamation and infliction of emotional distress was not broadcast in a certain medium, but rather that Feldman was acting outside the course of his employment when these actions occurred.
Plaintiff's claim specialist working on the case was Patrick Crotty ("Crotty"). In correspondence, Crotty claims that Nesbitt acknowledged that Defendant's policy would provide insurance coverage for the underlying acts. Crotty's understanding at the time, then, was that the first $1,000,000.00 of liability to Jefferson Pilot would be insured by Plaintiff, but that the next $10,000,000.00 in liability would be insured by Defendant. Nesbitt appears to have been under a similar understanding, as he sent Crotty a letter dated May 15, 2003, asserting that he understood that settling might be a possibility, but stating that:
This letter will remind you of your obligation to settle a claim within your policy limits of liability and not act in a way to the detriment of Westport or the insured. Westport reserves all rights under the policy and at law to make an indemnity claim against Liberty Mutual in the event that it fails to resolve this matter within the underlying layer of coverage, unnecessarily exposing Westport and the insured to additional liability.
(Pl.'s Ex. L.) While he did not explicitly state that Defendant would be responsible for insuring any liability beyond $1,000,000.00, Nesbitt clearly did not believe that Defendant was completely insulated from its coverage obligations under the policy.
On July 11, 2005, Crotty mailed Nesbitt a letter which purported to confirm a "layering agreement:"
I also wanted to confirm that we are in agreement regarding the layers of insurance:
Layer # 1
Liberty Mutual Insurance Company— Primary General Liability Policy—Combined Single Limit of $1,000,000
Westport Insurance Corporation—Primary Media Liability Policy, but excess over Layer # 1. $10,000,000 limit with a $100,000 self-insured retention If a judgment were to exceed $11,000,000, we will have to discuss any and all other excess policies for Jefferson Pilot Communications. However, I simply find it hard to believe this case ever exceeds $11,000,000.
(Pl.'s Ex. M.) Nesbitt acknowledged in deposition testimony that he never gave any indication of any opposition to this layering scheme for coverage obligations. Both parties proceeded under the assumption that this was the scheme in place.
However, in 2006, Nesbitt was transferred within Defendant's organization, and was no longer responsible for the matter at hand. In January 2007, Stacie Gram ("Gram") was appointed as the new claims representative in this case. An attorney was retained to investigate the matter on behalf of Defendant and examine Defendant's exposure. When Gram obtained the policy in question and read through it carefully, she noted the language surrounding the "matter" requirement and specifically asked the attorney to look into it. On June 26, 2007, the attorney determined that due to the "matter" requirement, Defendant owed Jefferson Pilot no coverage for liability arising out of Feldman's actions. Then, on July 6, Defendant notified Jefferson Pilot that it was denying any potential claim for coverage. The reasoning given by Defendant was that Feldman's defamation and infliction of emotional distress had nothing to do with the "matter" his employer generally used to reach a mass audience, and therefore was not covered by the policy.
Plaintiff filed the present action in this Court on November 14, 2007. It asserts five causes of action: (1) a declaratory judgment that Defendant's decision to refuse to extend coverage to Jefferson Pilot was improper; (2) Defendant waived its right to refuse coverage by representing that Jefferson Pilot was insured in this matter, and is stopped from now denying coverage; (3) and (4) that Plaintiff is entitled to legal and equitable subrogation in this matter; and (5) that Defendant is liable for the breach of an implied contract. This matter was originally assigned to Judge C. Weston Houck, before being reassigned on January 7, 2009. Shortly before being reassigned, Defendant had filed a Motion for Summary Judgment on all five of Plaintiffs claims for relief, to which Plaintiff filed a Response in Opposition.
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