Ringler Associates Inc. v. Maryland Cas. Co.

• Decision Date: 23 May 2000
• Docket Number: No. A082472.,A082472.
• Court: California Court of Appeals Court of Appeals
• Parties: RINGLER ASSOCIATES INCORPORATED, Plaintiff and Appellant, v. MARYLAND CASUALTY COMPANY et al., Defendants and Respondents.

96 Cal.Rptr.2d 136

80 Cal.App.4th 1165

RINGLER ASSOCIATES INCORPORATED, Plaintiff and Appellant, v. MARYLAND CASUALTY COMPANY et al., Defendants and Respondents.

No. A082472.

Court of Appeal, First District, Division 3.

May 23, 2000.

Rehearing Denied June 22, 2000.

Dale E. Fredericks, for Plaintiff and Appellant Ringler Associates Incorporated

Wright, Robinson, Osthimer & Tatum, James C. Nielsen and Thomas H. Nienow, San Francisco, for Defendants and Respondents Maryland Casualty Company

McGUINESS, P.J.

Ringler Associates Incorporated (Ringler) appeals from summary judgment granted in favor of respondents Maryland Casualty Company (Maryland) and Northern Insurance Company of New York (Northern). The trial court found that under a "first-publication" exclusion clause contained in a general liability insurance policy respondents had issued to Ringler, respondents had no duty to defend or indemnify certain defamation claims asserted against Ringler in two underlying lawsuits. On appeal, Ringler contends: (a) the trial court erred in construing the first-publication exclusion broadly to bar coverage for defamatory utterances or publication of material whose first publication allegedly took place before the inception of the insurance policy; (b) respondents breached their duty to defend; (c) respondents are liable to indemnify Ringler for a share of its settlement costs; (d) by failing adequately or promptly to reserve their rights, respondent insurers waived any right to withdraw from Ringler's defense; and (e) respondents were procedurally barred from unilaterally withdrawing from Ringler's defense. None of Ringler's contentions are meritorious, and we therefore affirm the judgment.

Factual and Procedural Background

Ringler is in the business of providing consulting and annuity brokerage services in connection with the purchase of annuities used to fund structured settlements of personal injury cases.¹ Ringler obtained a general commercial liability insurance policy, number EPA10078278 (the Policy), effective from June 4, 1990, to June 4, 1991,² from Maryland and Northern.³ In addition to providing traditional coverage for bodily injury and property damage, the Policy provided coverage for "personal injury" and "advertising injury," defined to include various forms of commercial defamation or trade libel and slander, "but only if the offense was committed in the 'coverage territory' during the policy period."

The Policy defines "personal injury" as "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...." The term "advertising injury" is defined in identical language. In either case, coverage is limited to slanders and other defamations committed or published during the one-year period between June 4, 1990, and June 4, 1991; the Policy specifically excludes coverage for any such libel, slander or disparagement "[a]rising out of oral or written publication of material whose first publication took place before the beginning of the policy period"⁴ (Italics added.) In other words, the Policy expressly does not cover republication of defamatory material whose first publication took place before June 4,1990.

Ringler was one of several other firms named as a defendant in two related lawsuits filed in San Francisco Superior Court: Weil Insurance Agency, Inc. v. Manufacturers Life Ins. Co., et al. (Super. Ct. S.F. City and County, 1990, No. 920327) (Weil), and Legal Economic Evaluations, Inc. v. Metropolitan Life Ins. Co., et al. (Super. Ct. S.F. City and County, 1990, No. 928624) (Legal Evaluations). The predecessor of the Legal Evaluations case, arising out of the same underlying facts, was originally filed in Santa Clara County on April 27, 1989, over a year before the inception of the Policy on June 4, 1990. The Weil case was filed on June 7, 1990, just three days after the inception of the Policy; the Legal Evaluations lawsuit was subsequently filed in San Francisco Superior Court on February 6, 1991. The cases were vigorously litigated and ultimately decided by the California Supreme Court. (Manufacturers Life Ins. Co. v. Superior Court (1995) 10 Cal.4th 257, 41 Cal.Rptr.2d 220, 895 P.2d 56.)

Both the Weil and Legal Evaluations actions concerned "certain acts perpetrated ... in connection with the sale of annuities used to fund `structured settlements' of personal injury claims." The plaintiffs described themselves as corporations engaged in the business of providing consulting and annuity brokerage services in connection with such annuity-funded structured settlements. The lawsuits targeted life insurers that sold annuities to liability insurers to fund structured settlements, as well as brokers—such as Ringler—that arranged for the sale of annuities and provided consulting services to liability carriers in the negotiation of settlements.

Specifically, the underlying lawsuits alleged that in order artificially to depress the cost of structured settlements, various named defendants, including Ringler, conspired to boycott and injure the plaintiffs through various alleged practices, including the publication and dissemination of false, disparaging, defamatory and derogatory statements about the plaintiffs and their services. These alleged defamatory statements included, among other things, that plaintiffs were unprofessional and conducted their business contrary to lawful industry standards, and injury victims and their attorneys doing business with plaintiffs would forfeit the available tax exemption applicable to structured settlement proceeds. The Weil complaint specifically alleged that beginning "in the early 1980's" the defendants conspired to prohibit brokers from providing "critical information" to victims, to boycott any broker who provided such information or consulting services to injury victims, and to defame and disparage any brokers (allegedly including plaintiffs) who provided such services to injury victims; all the named defendants had joined the conspiracy "[a]t least by 1986"; and in late 1987 and early 1988, Ringler itself specifically schemed with annuity sellers to disparage plaintiffs. The Weil complaint alleged various specific acts in furtherance of the defendants' conspiracy, occurring on various occasions between May 1985 and June 1988. Identical allegations were made in the Legal Evaluations complaint. Notably, both the Weil and the Legal Evaluations complaints made only broad, generalized allegations that Ringler and the other defendants had made defamations disparaging the respective plaintiffs' businesses in specified ways. Neither complaint actually set out any alleged defamatory statements verbatim or with specificity.

Ringler tendered the defense of the Weil action to respondents in June 1990, the same month it was filed. Respondents promptly agreed to contribute pro rata to Ringler's defense, along with Ringler's prior insurers. In April 1991, Ringler tendered the defense of the LEE action, even though the complaint had not yet been served and Ringler conceded that "[t]here is presently no need for a defense." In December 1991, when respondents' claims adjuster contacted Ringler's counsel, the Legal Evaluations action still had not been served. After respondents' claims adjuster told Ringler's attorney that plaintiffs' counsel in the Weil and Legal Evaluations cases had stated that there were "several incidents of slander" at issue, Ringler's attorney told the claims adjuster to "stop talking with" plaintiffs' attorney about the nature and extent of the allegations in the case.

In July 1992, respondents again asked Ringler's counsel for a status report on the Weil and Legal Evaluations actions "in order to properly evaluate coverage," and specifically inquired whether the Legal Evaluations action had yet been served. Respondents also advised Ringler that "[r]eview of the complaint reveal[s] that there are allegations that are not covered under the [P]olicy," and "[a]ny defense of this action will be done ... under a strict reservation of rights." By letter dated August 31, 1992, respondents sent Ringler's counsel a letter formally reserving respondents' rights with respect to the Weil action, and specifically referencing the first-publication exclusion in the Policy.⁵ Neither Ringler nor its counsel objected to or contested this reservation of rights at that time.

As soon as respondents accepted Ringler's tender of defense in the Weil and Legal Evaluations actions, respondents commenced investigation of the claims made in those two lawsuits. Because Weil and Legal Evaluations were both filed not long after the inception of the Policy, were both based on allegations of wrongdoing beginning in the early 1980's, and did not allege that any new or different defamations were first published after June 4, 1990, it appeared on the face of the lawsuits that the first-publication exclusion would be applicable to bar coverage of the claims made in both lawsuits. Among other things, respondents sought through their attorneys to ascertain whether there was any evidence outside the Weil and Legal Evaluations pleadings suggesting the possibility that the Weil and LEE plaintiffs could have amended their complaints to claim that new and different slanders had been committed during the time period covered by the Policy.

By letter dated January 20, 1993, respondents' attorney notified Ringler that respondents'"full reservation of rights" with respect to the Weil action applied equally to the Legal Evaluations action, stated that respondents' investigation indicated "there may be no duty to further provide a defense nor indemnify" Ringler with respect to either action, specifically cited the first-publication exclusion, and expressly restated respondents' reservation of ...