McCormack Baron Management Services, Inc. v. American Guarantee & Liability Ins. Co., 81181

• Citation: 989 S.W.2d 168
• Decision Date: 27 April 1999
• Docket Number: No. 81181,81181
• Court: United States State Supreme Court of Missouri
• Parties: 15 IER Cases 66 McCORMACK BARON MANAGEMENT SERVICES, INC., Appellant, v. AMERICAN GUARANTEE & LIABILITY INSURANCE COMPANY, Respondent.

Page 168

989 S.W.2d 168

15 IER Cases 66

McCORMACK BARON MANAGEMENT SERVICES, INC., Appellant, v. AMERICAN GUARANTEE & LIABILITY INSURANCE COMPANY, Respondent.

No. 81181.

Supreme Court of Missouri En Banc.

April 27, 1999.

Jeffrey A. Cohen, Merle L. Silverstein, Mark E. Goodman, Clayton, for Appellant.

Karen L. Kendall, Peoria, IL, Steven J. Hughes, St. Louis, Robert D. Rowland, Edwardsville, IL, for Respondent.

WILLIAM RAY PRICE, Jr., Judge.

McCormack Baron Management Services sought a declaratory judgment against American Guarantee & Liability Insurance to enforce the personal injury liability provision of an insurance policy. American Guarantee filed for summary judgment, arguing that the term "offenses" as used in the policy requires that a third-party claim must state one of a specific list of causes of action to be covered by the policy. The trial court agreed and entered summary judgment in favor of American Guarantee. Because we find that the word "offenses" when used in conjunction with the words "disparages a person's ... services" does not limit coverage only to a "cause of action" or "claim" for "injurious falsehood," we reverse the judgment and remand the case.

I.

McCormack is a Missouri corporation that manages real estate throughout the United States. Several years ago, McCormack hired Management Security, Inc. (MSI), a security guard service, for its Lexington Village housing project in Cleveland, Ohio. Enoch Bennett began working for MSI as a security guard at Lexington Village in the mid-1980s. ¹ In 1993, Carl Brathwaith was hired by MSI and worked under Bennett's supervision. From November 1993 through February 1994, Bennett complained to his supervisor, both orally and in writing, that Brathwaith often came to work drunk and sometimes would not work his assigned hours. Despite Bennett's complaints, Brathwaith was not disciplined.

In early February 1994, Bennett again wrote a letter to his supervisor complaining that Brathwaith's conduct was reckless and unlawful. Bennett's supervisor showed the letter to Rosalyn Edwards, McCormack's property manager at Lexington Village. Edwards told Bennett's supervisor that the letter constituted insubordination. Bennett was fired. Bennett filed a multi-count suit in Ohio against MSI and McCormack. Bennett's complaint contains one claim against McCormack, titled "Tortious Interference with a Contractual Relationship." Bennett asserts that he was fired as a direct result of Edwards' statements to his supervisor. His complaint alleges that McCormack, through its agent Edwards, acted "willfully, maliciously, and without justification, in a conscious disregard of [Bennett's] rights...."

McCormack had purchased an insurance policy from American Guarantee in June 1993 through one of American Guarantee's St. Louis agents. The policy contains a comprehensive commercial insurance package that covers McCormack's management of Lexington Village. The policy provides, in relevant part, that American Guarantee will pay those sums that [McCormack] becomes legally obligated to pay as damages because of "personal injury" or "advertising injury"

to which this coverage part applies. [American Guarantee] will have the right and duty to defend any "suit" seeking those damages.

The policy, in relevant part, defines "personal injury" as an ... injury, other than "bodily injury", arising out of one or more of the following offenses:

* * *

d. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;

* * *

(emphasis added).

The policy also excludes certain personal injuries from coverage. The exclusion provision relevant here is:

This insurance policy does not apply to:

a. "personal injury" or "advertising injury":

(1) arising out of oral or written publication of material, if done by or at the direction of the insured with knowledge of its falsity.

(emphasis added).

McCormack reported Bennett's lawsuit to American Guarantee and requested that American Guarantee provide a defense for McCormack pursuant to the personal injury liability provision in the insurance policy. American Guarantee refused to provide a defense because it claimed that the policy did not cover Bennett's suit.

On July 1, 1996, McCormack sought a judgment declaring that the policy obligates American Guarantee to provide a defense in the Bennett action and also obligates American Guarantee to indemnify McCormack against any liability arising out of that suit. McCormack filed a motion for summary judgment contending that the insurance policy covered Bennett's lawsuit. It argued that Bennett's claim arose out of an oral publication that allegedly slandered, libeled, or disparaged the services of Bennett and was, therefore, a "personal injury" claim covered by the policy. American Guarantee filed its own motion for summary judgment, stating that it had no duty to defend or indemnify McCormack in Bennett's lawsuit. The trial court granted summary judgment in favor of American Guarantee. McCormack appealed. On appeal, McCormack renews its argument that the reference in the policy to an "[o]ral or written publication of material that ... disparages a person's or organization's goods, products or services" encompasses Bennett's claim.

II.

At issue in this lawsuit are two separate duties, the duty to defend and the duty to indemnify. See Robert E. Keeton and Alan I. Widiss, Insurance Law, section 9.1 (1988) ; 1 Couch on Insurance Law, section 1:7 (3d ed.1997). Each duty requires separate analysis. We first address American Guarantee's duty to defend McCormack in the Bennett lawsuit.

A.

1.

The duty to defend is broader than the duty to indemnify. See Butters v. City of Independence, 513 S.W.2d 418, 424 (Mo. banc 1974). ² "To suggest that the insured must prove the insurer's obligation to pay before the insurer is required to provide a defense would make [the duty to defend] provision a hollow promise...." 13 John A. Appleman & Jean Appelman, Insurance Law and Practice, section 4684 (rev.vol.1976). "The duty to defend arises whenever there is a potential or possible liability to pay based on the facts at the outset of the case and is not dependant on the probable liability to pay based on the facts ascertained through trial." Id. The duty to defend is determined by comparing the language of the insurance policy with the allegations in the complaint. See Butters, 513 S.W.2d 418, 424 (Mo. banc 1974); Zipkin v. Freeman, 436 S.W.2d 753, 754 (Mo. banc 1968). If the complaint merely alleges facts that give rise to a claim potentially within the policy's coverage, the insurer has a duty to defend. See Butters, 513 S.W.2d at 424; Zipkin, 436 S.W.2d at 754.

Accordingly, the specific question before us is whether a policy that insures against an "offense" of an "oral publication" that "disparages a person's ... services" provides coverage for a complaint alleging that: 1) "Ms. Rosalyn Edwards, property manager at Lexington Village and agent of [McCormack,] ... informed [Bennett's supervisor] that [Bennett's] letter constituted insubordination and asked that [Bennett] be removed from his post at Lexington Village"; 2) Bennett was fired as a result of Edwards' statements; and 3) Edwards acted "willfully, maliciously, and without justification, in a conscious disregard of [Bennett's] rights...."

2.

The interpretation of an insurance policy is a question of law. Columbia Mutual Ins. Co. v. Schauf, 967 S.W.2d 74, 76 (Mo. banc 1998). We do not use "technical, philosophical, or scientific meanings of the terms, nor a restricted meaning acquired in legal usage." Appleman, section 7384. Rather, we apply the meaning "which would be attached by an ordinary person of average understanding if purchasing insurance." Appleman, section 7384; see, e.g., Shahan v. Shahan, 988 S.W.2d 529 (Mo. banc 1999); Farmland Indus., Inc. v. Republic Ins. Co., 941 S.W.2d 505, 508 (Mo. banc 1997).

There can be no serious question raised that the statements alleged in the lawsuit disparaged Bennett's services as a security guard. "Disparage" is defined as "to lower in esteem or reputation," "to diminish the respect for," "to lower in rank by actions or words," or "to speak slightingly of." Webster's Third New Int'l Dictionary 653 (1961) ; see City Group, Inc. v. Ehlers, 198 Ga.App. 709, 402 S.E.2d 787, 788 (1991). See also Bank One, Milwaukee, NA v. Breakers Development, Inc., 208 Wis.2d 230, 559 N.W.2d 911 (1997)(using dictionary definition to determine plain meaning of "goods" and "products" in policy language identical to that in this case); First State Ins. Co. v. Alpha Delta Phi Fraternity, 39 U.S.P.Q.2d 1905 (Ill.App.1995)(using dictionary definition to determine plain meaning of "advertising injury" in policy language identical to that in this case).

American Guarantee does not really contest this conclusion. Instead it argues that the term "disparages" is used in its policy in connection with the term "offenses." Thus, it argues that the policy does not cover all claims based upon disparaging comments, but instead only the cause of action of disparagement, now referred to as "injurious falsehood." See Cuba's United Ready Mix, Inc. v. Bock Concrete Foundations, 785 S.W.2d 649, 651 (Mo.App.1990); Prosser and Keeton, The Law of Torts, sec. 128, pp. 963-64 (5th ed.1984). American Guarantee continues to argue that there is no coverage here because the allegations complained of were in a count titled "Tortious Interference with a Contractual Relationship," not "injurious falsehood," and because the tort of "injurious falsehood" requires as an element that the disparaging statement be false, while the policy contains a specific exclusion for any publication made by the insured "with knowledge of its falsity." We are not persuaded by American Guarantee's argument.

The word "offense" cannot be read to limit coverage only to a...