Reliance Ins. Co. v. Shenandoah South, Inc., No. 95-2839

• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)
• Writing for the Court: Before BEAM and MORRIS SHEPPARD ARNOLD; JONES
• Citation: 81 F.3d 789
• Parties: RELIANCE INSURANCE COMPANY, a corporation, Plaintiff--Appellee, v. SHENANDOAH SOUTH, INC., Gary Snadon, Richard Gallagher, Eugene Bicknell and C. Wayne Newton, Defendants--Appellants.
• Docket Number: No. 95-2839
• Decision Date: 19 April 1996

Page 789

81 F.3d 789 RELIANCE INSURANCE COMPANY, a corporation, Plaintiff--Appellee,
v.
SHENANDOAH SOUTH, INC., Gary Snadon, Richard Gallagher,
Eugene Bicknell and C. Wayne Newton, Defendants--Appellants. No. 95-2839. United States Court of Appeals,
Eighth Circuit. Submitted Jan. 12, 1996.
Decided April 19, 1996.

Page 790

Appeal from the United States District Court for the Western District of Missouri.

Gary Alfred Love, Ozark, MO, argued, for appellants.

Martin J. Buckley, St. Louis, MO, argued, for appellee.

Before BEAM and MORRIS SHEPPARD ARNOLD, Circuit Judges, and JONES, ^* Senior District Judge.

JONES, Senior District Judge.

Shenandoah South, Inc. and its officers and directors (hereinafter collectively referred to as Shenandoah South), appeal a declaratory judgment finding that the commercial general liability policy issued to it by Reliance Insurance Company (Reliance) does not provide coverage for an action brought against it by Wayne Newton. For the reasons stated below, we affirm the district court. ¹

I.

In the underlying action, entertainer Wayne Newton brought suit against Shenandoah South and its officers and directors relating to Shenandoah South's operation of the "Wayne Newton Theater" in Branson, Missouri. Newton alleges breach of contract, breach of implied covenant of good faith and fair dealing, negligent mismanagement, and negligent misrepresentation. In essence, Newton claimed that he had been cheated by Shenandoah South, both through deliberate acts intended to deprive Newton of compensation he was due, and through Shenandoah South's incompetence in running the theater. Newton also claimed that his reputation was damaged as a result of Shenandoah South's actions.

Page 791

The policy in question covers liability of the insureds ² for bodily injury, property damage, personal injury, and advertising injury as those terms are defined in the policy. The parties agree that coverage does not exist under the bodily injury or property damage portions of the policy.

Shenandoah South asserts that Count III (negligent mismanagement) of Newton's Second Amended Complaint is within the scope of coverage under the personal and advertising injury provisions. ³ Newton's Second Amended Complaint alleges that:

In promoting and operating a theater named after Newton, defendants necessarily have relied on his reputation and good will with the theater-going public.

Defendants owed Newton a duty to operate and manage the Theater in a manner consistent with good and reasonable management practices designed to and capable of producing a profit, upon which much of Newton's compensation depends. Defendants further owed Newton a duty to exercise reasonable care in the operation of the Theater so as to avoid injury to Newton's reputation. It was foreseeable that breach of these duties would result in injury to Newton.

* * *

As a direct and proximate result of defendants' breaches, Newton has been injured in the form of lost compensation under the Agreement and damage to his reputation and good will in the community....

Newton's Second Amended Complaint pp 44, 45, and 47.

It is Shenandoah South's position that these allegations of damage to reputation, contained within the claim for negligent mismanagement, are sufficient to trigger coverage, or at least a duty to defend, under the policy issued by Reliance. They further insist coverage exists based on allegations in Newton's complaint that Shenandoah South "turned away inquiries from tour operators anxious to purchase tickets for 1994 [performances] by falsely claiming they had not yet received Newton's 1994 schedule." Newton's Second Amended Complaint p 12.

After Shenandoah South advised Reliance of this litigation, the current declaratory action was commenced by Reliance. The issue facing the district court and this court on appeal is whether coverage under the Reliance policy extends to the claims made in the Newton lawsuit. On cross motions for summary judgment, the district court found...