Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-arwd-3_23-cv-03026/USCOURTS-arwd-3_23-cv-03026-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Declaratory Judgment

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1 

IN THE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF ARKANSAS

HARRISON DIVISION

STATE AUTOMOBILE MUTUAL 

INSURANCE COMPANY PLAINTIFF

 

V. CASE NO. 3:23-CV-3026

 

THE EUREKA SPRINGS CITY ADVERTISING

AND PROMOTIONAL COMMITTEE; CAROL WRIGHT; 

JEFF CARTER; JAMES DEVITO; HARRY MEYER; 

MELISSA GREEN; PATRICK BURNETT; THE CITY

OF EUREKA SPRINGS, ARKANSAS; BUTCH BERRY;

KIM STRYKER; LACY ECKBERG; TRACY JOHNSON;

GINA RAMBO; JAMES R. “RICK” BRIGHT; GREG MOON;

KAREN PRYOR; and LONNIE CLARK DEFENDANTS

 

MEMORANDUM OPINION AND ORDER

Now before the Court is Plaintiff State Automobile Mutual Insurance Company’s 

Motion for Summary Judgment (Doc. 50). In this Declaratory Judgment Action, State 

Automobile Mutual Insurance Company (“State Auto”) seeks a declaration that it has no 

duty to defend or indemnify certain Defendants in an underlying state-court action. The 

Motion is fully briefed and ripe for review. For the reasons stated in this Order, State Auto’s 

Motion for Summary Judgment is GRANTED. 

I. BACKGROUND

A. Factual History

As the Court has previously remarked, the factual history of this case is rather 

tumultuous. Put simply, it involves several months of in-fighting amongst the members 

and employees of the Eureka Springs City Advertising and Promotional Committee 

(“CAPC”). The CAPC is a commission of the City of Eureka Springs that promotes the 

city and manages fiscal and financial affairs associated with the collection of CAPC taxes 

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from Eureka Springs businesses. The in-fighting began as early as 2019 and peaked in 

early 2021 when certain CAPC members and employees were ousted from their positions 

via an alleged drawn-out smear campaign. Those who were removed sued the City, the 

CAPC, its remaining commissioners, and the Mayor in the Circuit Court of Carroll County, 

Arkansas for various claims described below. 

The CAPC is insured by State Auto. State Auto filed suit in this Court seeking a 

declaratory judgment that the Policy does not afford coverage to the CAPC or its members 

in the state-court case and, consequently, that State Auto owes no duty to defend or 

indemnify the CAPC, the City, or its members in that lawsuit.1 

For purposes of this Order, the Court will place the separate Defendants in two 

groups according to their roles in the state-court action: 

• “State-Court Plaintiffs” include:

o Tracy Johnson, former events director of the CAPC;

o Gina Rambo, former interim executive director of the CAPC;

o James R. “Rick” Bright, former finance director and former interim 

director of the CAPC; 

o Greg Moon, former commissioner of the CAPC; and

o Karen Pryor, former sales director of the CAPC. 

• “Eureka Defendants” include: 

o The CAPC;

o The City of Eureka Springs, Arkansas;

1 Though State-Court Plaintiffs contend that there is coverage as to nearly all claims in 

the state suit, Eureka Defendants agree with State Auto that there is no coverage for any 

claims in the underlying lawsuit. (Doc. 64, ¶ 4; Doc. 65, pp. 1-2). 

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o Butch Berry, mayor of Eureka Springs; 

o Kim Stryker, employee of Eureka Springs as Chief Administrative 

Assistant to Mayor Berry;

o Carol Wright, former commissioner and chair of the CAPC; 

o Jeff Carter, former commissioner and chair of the CAPC; 

o James DeVito, former commissioner of the CAPC and city 

councilman;

o Harry Meyer, former commissioner of the CAPC and city councilman;

o Melissa Green, former commissioner of the CAPC and city 

councilwoman;

o Lacy Eckberg, former executive director of the CAPC prior to 

Rambo;

o Patrick Burnett, former commissioner of the CAPC; and

o Lonnie Clark, finance director of the CAPC. 

Collectively, the State-Court Plaintiffs filed twenty-three causes of action against 

the Eureka Defendants, including various tort, contract, and statutory claims. State-Court 

Plaintiffs’ twenty-fourth cause of action is a direct action against State Auto and is made 

only “[t]o the extent [its] polic[y] cover[s] the actions and omissions of the [Eureka] 

Defendants.” (Doc. 50-3, p. 35). 

The operative complaint in the underlying suit is the State-Court Plaintiffs’ Third 

Amended Complaint (“TAC”). Totaling almost 120 pages of mostly non-chronological, 

frequently redundant factual allegations, it is not a model of clarity. The Court attempts to 

make a timeline below of the main events that form the basis of the state case. While this 

does not capture every factual allegation, it provides an outline to organize the Court’s 

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discussion of coverage.2 Because the Court ultimately finds that there is no possibility of 

coverage under the facts as pled, it does not make findings as to disputed facts. 

Accordingly, wherever the Court discusses the facts of the underlying suit, it is describing 

the facts as alleged in the TAC. 

• Early 2020: 

o Carol Wright allegedly made defamatory statements about State-Court

Plaintiffs in an email to a private detective, John Brooks. These 

statements included alleging that Rick Bright was having an affair with 

Greg Moon and another city councilman. (Doc. 50-2, pp. 62-63; Doc. 

50-4, p. 44). Wright released these communications to the local press in 

response to an Arkansas FOIA request around January 28, 2021. (Doc. 

50-2, p. 63). The TAC claims that Wright’s release of these 

communications was nonresponsive to the FOIA request. Id. 

o Lacey Ekberg sent Jeff Carter an email accusing State-Court Plaintiffs 

of routing CAPC business to outside businessowners, which the Court 

understands to mean giving local businessowners who were not 

affiliated with the CAPC improper access to CAPC computers and 

information. State-Court Plaintiffs claim that Carter made Ekberg send 

this email. Doc. 50-3, p. 27; see also Doc. 50-2, p. 76.

2 The facts stated in the outline are taken directly from the TAC. Several of these facts 

are repeated in various iterations throughout the nearly 120 pages, and the Court does 

not aim to resolve internal inconsistencies that are immaterial to its analysis.

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• January 27, 2021:

o Carter held two meetings with local citizens and businessowners at 

which he allegedly made defamatory statements against Tracy Johnson, 

Gina Rambo, and Bright. (Doc. 50-2, p. 27). He also told attendees that 

Moon would be removed from the CAPC. Id.

o Wright sent an email to the editor of a local newspaper that accused

State-Court Plaintiffs of giving local businessmen improper access to 

CAPC files and allowing these outside influences to dictate the running 

of the CAPC. Id. at p. 73. 

o Moon was removed from his position as CAPC commissioner by a vote 

of the other commissioners. State-Court Plaintiffs claim this vote could 

not actually remove Moon because the vote was either illegal and/or 

received insufficient votes. Id. at pp. 20-21. 

o Following Moon’s removal, the remaining commissioners voted to 

defund Johnson’s position with the CAPC, which State-Court Plaintiffs 

allege was similarly inadequate. (Doc. 50-3, p. 22). Eureka Defendants 

represented to Johnson that she had been terminated. Id. at p. 24. 

• February 5, 2021: Carter held another meeting with local citizens at which he, 

again, allegedly defamed State-Court Plaintiffs, including accusing Johnson of 

embezzlement. (Doc. 50-2, pp. 52, 75).

• February 9, 2021: Melissa Green told Rodney Slane, husband of 

Councilwoman Autumn Slane, that Rambo and Johnson were stealing money 

from the CAPC, along with other similar accusations against Bright and Pryor. 

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Id. at p. 59. This conversation was allegedly recorded by Mr. Slane and was 

later published in a local newspaper. Id.

• February 17, 2021: Kim Stryker repeated defamatory statements about 

Johnson and Rambo to Mr. Slane. These statements included that Johnson 

and Rambo were stealing money from the CAPC, which Stryker had heard from 

Carter telling Berry. Id. at pp. 52, 60.

• February 22, 2021:

o In concert with Carter and Wright, Green allegedly filed a false police 

report, accusing State-Court Plaintiffs of “theft of business” by giving 

outside businessowners access to CAPC computers and information. A 

newspaper reported this on December 7, 2021. Id. at pp. 74, 76.

o Berry and Lonnie Clark allegedly contacted the Arkansas Legislative 

Audit to falsely report that Johnson had stolen money from the CAPC. 

Id. at pp. 19, 50, 76. A local newspaper later published an article 

regarding this activity. Id. at pp. 50-51. 

• February 23, 2021: Carter allegedly made defamatory remarks about Rambo 

in an email to the other commissioners, accusing her of ethics violations and 

unprofessional behavior. Id. at p. 58.

• February 24, 2021: 

o Rambo was terminated from her position with the CAPC. (Doc. 50-3, p. 

24).

o Per a vote by Carter, Wright, Green, James DeVito, Harry Meyer, and/or 

Patrick Burnett, the CAPC altered the meeting minutes from January 27, 

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2021. The alteration falsely showed that Moon’s removal received 

sufficient votes. (Doc. 50-2, p. 30).

• March 5, 2021: Rambo was asked to go to the police station for questioning 

regarding Green’s police report. Id. at p. 18.

• April 5, 2021: Berry made allegedly defamatory statements to Councilwoman 

Slane, including accusing Johnson of embezzlement. (Doc. 50-2, p. 50). This 

conversation also included a comment by Berry that he “did not know how 

employees can expect to sue their employers and not get fired,” referring 

apparently to State-Court Plaintiffs’ lawsuit. (Doc. 50-3, p. 10). Councilwoman

Slane recorded this conversation, and it was later released to a local 

newspaper. (Doc. 50-2, p. 50). 

• April 14, 2021: A local newspaper published allegedly defamatory statements

made by Berry, Carter, and Green about Johnson. Id. at pp. 19, 51. 

• April 27, 2021: An emergency hearing was held regarding the removal of 

Moon, at which Carter testified that Moon’s removal had received sufficient 

votes, which State-Court Plaintiffs contend amounted to perjury. Id. at pp. 22, 

43–44.

• May 26, 2021: According to the TAC, the state court issued an order finding 

Moon’s removal to be illegal, ultra vires, and a nullity. Id. at p. 23. Moon tried to 

attend a meeting within his capacity as commissioner, providing the order to 

the other commissioners, but he was still barred from the meeting. Id.

• August 6, 2021: Moon resigned from the CAPC. Id. at p. 41.

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• Late 2021: Eureka Defendants decided to move the CAPC’s office and made 

the move without telling Bright or Pryor. (Doc. 50-3, p. 10). Pryor was told she 

would not be given a space in the new offices with the other CAPC employees.

Id.

• April 27, 2022: Berry published an article in a local newspaper titled “Truth is 

Power,” which allegedly repeated the embezzlement allegations against 

Johnson. (Doc. 50-2, pp. 51-52).

Throughout the TAC, State-Court Plaintiffs allege that the actions taken, 

particularly the defamation, were part of an overarching plan to remove State-Court 

Plaintiffs from their roles on the CAPC. See, e.g., id. at p. 13 (“[I]n furtherance of their 

efforts to remove Moon and certain CAPC staff, Berry[,] Wright, Carter, [and] Green made 

false defamatory statements about Moon, Johnson, Bright, and Rambo . . . .”); id. at p. 27 

(“[I]n furtherance of his preparations,” Carter “made false slanderous allegations against 

Tracy Johnson, Gina Rambo, and Rick Bright . . . .”); id. at p. 35 (“As part of and in 

furtherance of their plan, Defendants Wright, Carter[,] Green and Berry agreed that their 

plan to remove Moon and take control of the CAPC would also include making defamatory 

allegations about Moon, Johnson, Rambo[,] and Bright that would create [ ] knowingly 

false, yet facially ostensible reasons to remove them from their positions with the 

CAPC.”). 

B. Relevant Policy Provisions

State Auto issued a Businessowners Policy to the CAPC, Policy Number 

1000368247, with a coverage period of December 5, 2020, to December 5, 2021 (“the 

Policy”). (Doc. 50-1, p. 14). The Policy listed the CAPC as the named insured and the 

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City of Eureka Springs as an “other named insured.” Id. The Policy outlines who is 

covered under the Policy as follows: 

C. Who Is An Insured

1. If you are designated in the Declaration as: 

. . . 

d. An organization other than a partnership, joint venture or limited 

liability, you are an insured. Your “executive officers” and directors 

are insureds, but only with respect to their duties as your officers or 

directors. . . . 

2. Each of the following is also an insured:

a. Your “volunteer workers” only while performing duties related to 

the conduct of your business, or your “employees”, other than either 

your “executive officers” (if you are an organization other than a 

partnership, joint venture or limited liability company), or your 

managers (if you are a limited liability company) but only for acts 

within the scope of their employment by you or while performing 

duties related to the conduct of your business. However, none of 

these “employees” or “volunteer workers” are insureds for:

(1) “Bodily injury” or “personal and advertising injury”:

(a) To you . . . or to a co-“employee” while in the course of his 

or her employment or performing duties related to the conduct 

of your business, or to your other “volunteer workers” while 

performing duties related to the conduct of your business;

. . . .

(Doc. 50-1, p. 64). No party contests that the Eureka Defendants are insureds under the 

policy. 

Coverage for Business Liability requires State Auto to “pay those sums that the 

insured becomes legally obligated to pay as damages because of ‘bodily injury’, ‘property 

damage’ or ‘personal and advertising injury’ to which this insurance applies,” but that State 

Auto “will have no duty to defend the insured against any ‘suit’ seeking damages for 

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‘bodily injury’, ‘property damage’ or ‘personal and advertising injury’ to which this 

insurance does not apply.” (Doc. 50-1, p. 54). The parties do not seek coverage for bodily 

injury or property damage. See Doc. 57, p. 8 (State-Court Plaintiffs’ concession); Doc. 65, 

p. 1 (Eureka Defendants’ concession). Thus, the only relevant coverage questions are 

(a) whether the State-Court Plaintiffs make claims for “personal and advertising injury,”

and (b) to the extent that they do, whether the insurance applies to those injuries. 

1. “Personal and Advertising Injury” Definition

Business Liability Coverage applies to “personal and advertising injury” “caused 

by an offense arising out of [the insured’s] business.” (Doc. 50-1, p. 54). For an injury to 

constitute a personal or advertising injury, it must arise out of one of the enumerated 

offenses in the Policy: 

F. Liability and Medical Expenses Definition 

. . .

14. “Personal and advertising injury” means injury, including consequential 

‘bodily injury’, arising out of one or more of the following offenses: 

a. False arrest, detention or imprisonment; 

b. Malicious prosecution;

c. [W]rongful eviction . . . ; 

d. Oral or written publication, in any manner, of material that slanders 

or libels a person or organization or disparages a person’s or 

organization’s goods, products or services; 

. . . 

f. The use of another’s advertising idea in your “advertisement”; or 

g. Infringing upon another’s copyright, trade dress or slogan in your 

“advertisement”.

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(Doc. 50-1, pp. 66, 68–69). Paragraph F.14.e of Section II (omitted above) defines 

“personal and advertising injury” to include “oral or written publication, in any manner, of 

material that violates a person’s right of privacy.” (Doc. 50-1, p. 68). However, this is 

explicitly excluded by an endorsement that amends the definition of “personal and 

advertising injury.” (Doc. 50-1, p. 76).

2. “Personal and Advertising Injury” Exclusions

The Policy specifically carves out certain injuries from coverage for “personal and 

advertising injury.” Relevant here, Paragraph B.1.p. of Section II of the Policy specifically 

excludes injuries arising out of knowing infliction of “personal and advertising injury,”

knowing defamation, or breach of contract: 

B. Exclusions

1. Applicable To Business Liability Coverage 

This insurance does not apply to: 

. . . 

p. Personal And Advertising Injury 

“Personal and advertising injury”: 

(1) Caused by or at the direction of the insured with the knowledge 

that the act would violate the rights of another and would inflict 

“personal and advertising injury”; 

(2) Arising out of oral or written publication, in any manner, of 

material, if done by or at the direction of the insured with knowledge 

of its falsity; 

. . . 

(5) Arising out of a breach of contract, except an implied contract to 

use another’s advertising idea in your “advertisement”; 

. . . . 

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(Doc. 50-1, p. 56, 61). 

A later endorsement adds an additional exclusion to Paragraph B.1.p and further 

excludes “personal and advertising injury” that arises out of “any access to or disclosure 

of any person’s . . . confidential or personal information, including . . . financial 

information, credit card information, health information or any other type of nonpublic 

information.” (Doc. 50-1, p. 101) (“Disclosure of Personal Information Exclusion”). 

3. Criminal Acts Exclusion

Paragraph B.1 of Section II of the Policy also excludes:

r. Criminal Acts 

“Personal and advertising injury” arising out of a criminal act committed by 

or at the direction of the insured. 

(Doc. 50-1, p. 62). 

4. Employment-Related Practices Exclusion

Lastly, the Policy includes an endorsement that adds an exclusion to Paragraph 

B.1 of Section II to exclude employment-related practices: 

This insurance does not apply to “bodily injury” or “personal and advertising 

injury” to: 

(1) A person arising out of any:

(a) Refusal to employ that person; 

(b) Termination of that person’s employment; or 

(c) Employment-related practices, policies, acts or omissions, such 

as coercion, demotion, evaluation, reassignment, discipline, 

defamation, harassment, humiliation, discrimination or malicious 

prosecution directed at that person[.]

. . . .

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This Exclusion applies: 

(1) Whether the injury-causing event described in Paragraph (a), (b) or (c) 

above occurs before employment, during employment or after employment 

of that person; 

(2) Whether the insured may be liable as an employer or in any other 

capacity; and

(3) To any obligation to share damages with or repay someone else who 

must pay damages because of the injury. 

(Doc. 50-1, p. 99). 

C. Procedural History

State-Court Plaintiffs first filed their state-court suit in 2021. Over the next two 

years, they filed various iterations of the complaint. The final, operative TAC was filed on 

May 30, 2023. 

On May 17, 2023, State Auto filed its request for a declaratory judgment in this 

Court seeking declarations that it had no duty to defend or indemnify Eureka Defendants 

in the underlying state action. State-Court Plaintiffs asked this Court to abstain from ruling 

on the declaratory judgment or stay the case pending resolution in the state case, which 

this Court denied in a Memorandum Opinion and Order dated February 20, 2024. See

Doc. 43. The parties then engaged in discovery, and State Auto moved for summary 

judgment on August 5, 2024, which became ripe on September 9, 2024. 

II. LEGAL STANDARD

A. Summary Judgment

Under Federal Rule of Civil Procedure 56(a), “[t]he court shall grant summary 

judgment if the movant shows that there is no genuine dispute as to any material fact and 

the movant is entitled to judgment as a matter of law.” The Court must view the facts in

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the light most favorable to the opposing party and give that party the benefit of any 

inferences that logically can be drawn from those facts. Canada v. Union Elec. Co., 135 

F.3d 1211, 1212–13 (8th Cir. 1997). The moving party bears the burden of proving the 

absence of a genuine dispute of material fact and that it is entitled to judgment as a matter 

of law. See Fed. R. Civ. P. 56(c); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 

U.S. 574, 586–87 (1986); Nat’l Bank of Com. of El Dorado v. Dow Chem. Co., 165 F.3d 

602, 606 (8th Cir. 1999). 

Once the moving party has met its burden, the non-moving party must “come 

forward with ‘specific facts showing that there is a genuine issue for trial.’” Matsushita, 

475 U.S. at 587 (quoting Fed. R. Civ. P. 56(c)). “[T]he mere existence of a scintilla of 

evidence in support of the [moving party’s] position will be insufficient” to survive summary 

judgment. Anderson v. Durham D&M, L.L.C., 606 F.3d 513, 518 (8th Cir. 2010) (quoting 

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)). Rather, for there to be a 

genuine issue of material fact that would preclude summary judgment, the non-moving 

party must produce evidence “such that a reasonable jury could return a verdict for the 

nonmoving party.” Allison v. Flexway Trucking, Inc., 28 F.3d 64, 66 (8th Cir. 1994) (quoting 

Liberty Lobby, Inc., 477 U.S. at 248).

B. Determining Coverage

In Arkansas, “[t]he duty to defend and the duty to indemnify ‘are distinct, 

independent obligations.’” Safeco Ins. Co. of Am. v. Dooms, 617 F. Supp. 3d 980, 989 

(W.D. Ark. 2022) (quoting S. Farm Bureau Cas. Ins. Co. v. Watkins, 2011 Ark. App. 388, 

at *7 (2011)). “As a general rule . . . the pleadings against the insured determine the 

insurer's duty to defend.” Kolbek v. Truck Ins. Exch., 2014 Ark. 108, at *6 (2014) (citing 

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Murphy Oil USA, Inc. v. Unigard Sec. Ins. Co., 347 Ark. 167, 175 (2001) (collecting 

cases)). “Because the duty to defend is based only on the allegations in the underlying 

pleadings, it ‘is broader than the duty to indemnify.’” Dooms, 617 F. Supp. 3d at 989–90 

(quoting Kolbek, 2014 Ark. 180, at *6). “To trigger a duty to defend . . . the complaint must 

allege facts that would come within the coverage of the policy.” Scottsdale Ins. Co. v. 

Morrowland Valley Co., LLC, 2012 Ark. 247, at *9 (2012) (citing Murphy Oil, 347 Ark. at 

176). “[W]hen there is a possibility that the injury or damage [may] fall within the policy 

coverage,” the duty to defend arises. Kolbek, 2014 Ark. 180, at *6 (citing Murphy Oil, 347 

Ark. at 176). But “[w]here there is no possibility that the damage alleged in the complaint 

may fall within the policy coverage, there is no duty to defend.” Id.

Insurers have a duty to indemnify “if the proved facts show an event occurred for 

which coverage applies.” Dooms, 617 F. Supp. 3d at 990. The duty to indemnify turns not 

on the pleadings but on “the actual facts and circumstances giving rise to liability in the 

underlying suit.” 43 Am. Jur. 2d Insurance § 676 (2022) (collecting cases). However, 

“[c]ourts are permitted to rule on an insurer's duty to indemnify before the insured's liability 

has been established in the underlying lawsuit.” Dooms, 617 F. Supp. 3d at 990 (citing 

Kolbek, 2014 Ark. 180, at *9–10). Given that the duty to defend is broader than the duty 

to indemnify, “if there is no duty to defend, there is no duty to indemnify.” Auto-Owners 

Ins. Co. v. Hambuchen Constr., Inc., 2016 WL 7634791, at *2 (E.D. Ark. Nov. 18, 2016); 

see also Landers Auto Grp. No. One, Inc. v. Cont'l W. Ins. Co., 621 F.3d 810, 815 (8th 

Cir. 2010) (“If Continental does not have a duty to defend Landers on these claims, it 

certainly cannot have a duty to indemnify based on any of the same claims. There is 

simply no coverage under the policy for the Clark complaint in its present form.”). 

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III. THRESHOLD POLICY INTERPRETATION ISSUES

The Court will first address the parties’ arguments regarding the interpretation of 

certain exclusions. Then, the Court will go through the causes of action in the State TAC 

and analyze whether there is a possibility of coverage triggering a duty to defend and, if 

so, whether there is a material issue of fact as to whether State Auto might be required to 

indemnify Eureka Defendants.

In Arkansas, “[w]hen reviewing insurance policies,” courts must “adhere to the 

longstanding rule that, where the terms of the policy are clear and unambiguous, the 

policy language controls.” Smith v. Shelter Mut. Ins. Co., 327 Ark. 208, 210 (1997)

(citations omitted). A court need not look to rules of construction unless an ambiguity 

exists. Id. (citations omitted). And “[t]he terms of an insurance contract are not to be 

rewritten under the rule of strict construction against the company issuing it so as to bind 

the insurer to a risk which is plainly excluded and for which it was not paid.” Id. (citations 

omitted). “Contracts of insurance should receive a practical, reasonable, and fair 

interpretation consonant with the apparent object and intent of the parties in light of their 

general object and purpose.” Parker v. S. Farm Bureau Cas. Ins. Co., 104 Ark. App. 301, 

305 (2009).

“On the other hand, if the language is ambiguous,” the court “will construe the policy 

liberally in favor of the insured and strictly against the insurer.” Elam v. First Unum Life

Ins. Co., 346 Ark. 291, 297 (2001) (citations omitted). “Language is ambiguous if there is 

doubt or uncertainty as to its meaning and it is fairly susceptible to more than one 

reasonable interpretation.” Id. (citations omitted). “[W]here the issue of ambiguity may be 

resolved by reviewing the language of the contract itself”—that is, without looking to 

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extrinsic evidence—"it is the trial court’s duty to make such a determination as a matter 

of law.” Id. None of the interpretation issues here require looking to extrinsic evidence or 

deciding disputed facts, thus the Court is able to resolve any such issues as a matter of 

law. 

A. Plaintiff’s Ambiguity Arguments

1. Endorsements and Exclusions Do Not Render the Policy Ambiguous

State-Court Plaintiffs argue that the Policy is ambiguous as a matter of law 

because its endorsements an exclusions conflict with other provisions of the Policy, and 

the Policy should, thus, be construed against State Auto. “Generally, exclusions in a policy 

or its endorsements are as much a part of the contract as other parts and must be given 

the same consideration in determining what coverage exists,” George v. Great Lakes 

Reinsurance (UK) PLC, 2015 Ark. App. 36, at *5 (2015) (citing Schultz v. Farm Bureau 

Mut. Ins. Co., 328 Ark. 64 (1997)), and “absent statutory strictures to the contrary, 

exclusionary clauses are generally enforced according to their terms,” Smith, 327 Ark. at

210 (citations omitted). State-Court Plaintiffs’ contention “stumbles over the wellestablished rule of insurance law that where provisions in the body of the policy conflict 

with an endorsement or a rider, the provision of the endorsement governs.” George, 2015 

Ark. App. at *6. (citing Union Elec. Co. v. AEGIS Energy Syndicate 1225, 713 F.3d 366, 

368 (8th Cir. 2013); Hendricks v. Curators of Univ. of Mo., 308 S.W.3d 740, 746 (Mo. Ct.

App. 2010); 2 Couch on Insurance 3d §§ 21:21, 21:22 (1996)).

While State-Court Plaintiffs may have a point that insurance contracts would 

benefit from more straightforward drafting and language, the Policy at issue here is not at 

all atypical of insurance contracts. The exclusion for knowing defamation is included in 

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the Coverage Form in the clearly labelled “Exclusions” section located within several 

pages of the definition for “personal and advertising injury.” (Doc. 50-1, p. 61). The

endorsement amending the definition of “personal and advertising injury” to exclude 

privacy injuries is appended to the Policy and clearly marked “THIS ENDORSEMENT 

CHANGES THE POLICY. PLEASE READ IT CAREFULLY.” Id. at p. 76; see George, 2015 

Ark. App. at *5. The Employment-Related Practices (“ERP”) Exclusion endorsement

contains an identical warning. See id. at p. 99. The mere presence of these exclusions 

and endorsements that may conflict with the definitional section for “personal and 

advertising injury” does not render the Policy ambiguous. See George, 2015 Ark. App. at 

*5. 

As the court in Talen v. Employers Mutual Casualty Co. aptly noted: 

The fact the policy's general definition of the term “personal injury” 

encompasses defamation does not set up a fatal inconsistency or ambiguity 

because in another section of the policy the employment-related-practices 

exclusion coverage is excluded for certain personal injuries, including 

defamation, in a particular context. An insurance policy may exclude 

coverage for particular injuries or damages in certain specified 

circumstances while providing coverage in other circumstances.

703 N.W.2d 395, 403 (Iowa 2005) (brackets omitted) (quoting Frank & Freedus v. Allstate 

Ins. Co., 52 Cal. Rptr. 2d 678, 684 (1996)). 

2. The Phrase “Directed At” in the Employment-Related Practices 

Exclusion Is Not Ambiguous

State-Court Plaintiffs also contend that the ERP Exclusion is ambiguous due to its 

use of the phrase “directed at” in excluding injuries arising out of

Employment-related practices, policies, acts or omissions, such as 

coercion, demotion, evaluation, reassignment, discipline, defamation, 

harassment, humiliation, discrimination or malicious prosecution directed 

at that person[.]

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(Doc. 50-1, p. 99 (emphasis added)). State-Court Plaintiffs argue that the Exclusion is 

“more likely meant to cover those situations in which constructive, good faith 

communications are ‘directed at’ or communicated to the person about whom they are 

spoken or written in an employment related context . . . , but, for reasons unintended or 

incidental to the communication come into possession of a third party.” (Doc. 57, p. 18).

This argument is a nonstarter. Cambridge Dictionary defines the phrase “direct 

something at someone/something” to mean “to aim something in a particular direction or 

at a particular person.” Direct Something at Someone/Something, CAMBRIDGE 

DICTIONARY, https://dictionary.cambridge.org/us/dictionary/english/direct-at

[https://perma.cc/TWT2-RPPY]. In the case of defamation, it is not required that a 

defamatory statement be made to a person for it to be aimed at them. To the contrary, 

defamatory statements, by their nature, require publication to a third party. The plain 

meaning of the phrase “directed at” as used in this exclusion is synonymous with 

“targeting,” and in the defamation context, a defamatory statement may target someone 

without being made to them.

Moreover, defamation is commonly described as being “directed at” a person when 

it is about them, even if the statement is not made to that person. And other courts, 

including the Eighth Circuit, have described defamation in this way in other contexts 

without noting any ambiguity or confusion. See, e.g., Brummett v. Taylor, 569 F.3d 890, 

892 (8th Cir. 2009) (citations omitted) (describing defamation as being “directed at” a 

person when it is “of and concerning” that person); Tholen v. Assist Am., Inc., 528 F. Supp. 

3d 1017, 1024 (D. Minn. 2021) (“A plaintiff does not have to be specifically named in the 

defamatory statement so long as a reader by fair implication would understand the 

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statement to be directed at the plaintiff. Whether an allegedly defamatory statement 

concerns that plaintiff is generally a question of fact for the jury.” (emphasis added)

(cleaned up)); see also Vitti v. Vockrodt, 2016 WL 4487884, at *4 (W.D. Mo. Aug. 24, 

2016) (similar). 

The Court does not believe that “directed at” as used in the ERP Exclusion is 

ambiguous, and it will not adopt State-Court Plaintiffs’ strained interpretation. See 2 

Couch on Insurance 3d § 21:18 (2024) (“[T]he rule of ambiguity does not require that the 

court search for an ambiguity when the meaning of the policy is clear. In fact, courts are 

not authorized to put a strained and unnatural construction on the terms of a policy in 

order to create an uncertainty or ambiguity.” (footnotes omitted)).

B. Scope of the Employment-Related Practices Exclusion

As recited above, this exclusion bars coverage of employment-related practices. 

And while the ERP Exclusion provides examples of “employment-related practices,” 

including defamation, discrimination, and humiliation, the Policy provides no additional 

information as to when a practice, like defamation, is “employment related.” State-Court 

Plaintiffs bring multiple counts of defamation, so the relevant question here is when is a 

practice like defamation “employment-related?” 

Because the Arkansas Supreme Court has not spoken on this issue, or ERP 

exclusions more broadly, the Court “may consider relevant state precedent, analogous 

decisions, considered dicta, . . . and any other reliable data.” Bass v. Gen. Motors Corp., 

150 F.3d 842, 847 (8th Cir. 1998) (citations omitted).

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1. Does A State-Court Plaintiff Have to Be An Employee for Their

Injuries to Be “Employment-Related”?

First, the Court considers whether “employment-related practices” must 

necessarily involve an employee, as opposed to claims between two appointed officials. 

There appears to be no dispute between the parties that Rambo, Bright, and Pryor were 

all employees of the CAPC and/or Eureka Springs, that Johnson was either an employee 

or independent contractor, and that Moon was an appointed commissioner on the CAPC. 

No party, however, raises the issue of Johnson being an independent contractor or Moon 

being an appointed official as potentially precluding their claims from falling within the 

ERP Exclusion. Still, the Court feels it necessary to address this point. 

Looking to the language of the Policy, the Court concludes that, under the facts of 

this case, the Exclusion unambiguously applies to employees as well as independent 

contractors and appointed officials. Starting with the plain language of the term 

“employment-related,” the Court turns to dictionary definitions. In deciding a similar case, 

the First Circuit cited the following definitions: 

“Employment” is defined as “the state of being employed; employ; service.” 

The Random House Dictionary of the English Language 638 (2d ed. 1987). 

The definition of “employ” is “to hire or engage the services . . . provide 

employment for; have or keep in one’s service.” Id. “Employment” 

encompasses a number of arrangements between two parties in which one 

party performs services or duties for another. See, e.g., American Heritage 

Dictionary 586 (4th ed. 2000) (defining “employ” to mean “to engage the 

services of; put to work,” and “employment” to mean “the act of employing,” 

“the state of being employed,” and “[t]he work in which one is engaged; 

occupation”); Webster’s II New Riverside University Dictionary 429 (1994) 

(same); The American Heritage Dictionary 450 (2d col. Ed.1985) (same).

Ruksznis v. Argonaut Ins. Co., 774 F.3d 784, 788 (1st Cir. 2014). In reliance on these 

definitions, the First Circuit concluded that an appointed plumbing inspector of a town

who operated as an independent contractor, even though not an employee, “was 

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employed by the Town and performed his duties as a municipal official for the Town as 

part of the employment.” Id. at 789. The Court finds that the plain language of the 

Exclusion does not preclude its applicability to Johnson’s or Moon’s claims. 

The Policy’s language taken in context supports this reading. To start, the ERP 

Exclusion states that it bars coverage for bodily or personal and advertising injuries to a 

“person” that arise out of specific employment-related practices; it does not specify that 

the injured person be an “employee” of the insured. Doc. 50-1, p. 99; see Hartford Ins. 

Co. of the Midwest v. Price Postel & Parma LLP, 2012 WL 13012654, at *7-9 (C.D. Cal. 

Nov. 21, 2012) (applying a materially similar ERP exclusion to bar coverage for injuries to 

a partner of a firm, in part, because “[t]here is no express language that limits application 

of the exclusion to situations in which the injured party is an employee of the insured”);

George S. May Intern. Co. v. Arrowpoint Capital Corp., 2012 WL 3264397, at *7 (La. App. 

Aug. 10, 2012) (interpreting a materially similar exception and determining that the 

language of the exclusion “does not limit its applicability to those individuals who have an 

employment relationship with the insured.”). The Exclusion’s reference to injuries to a 

“person” contrasts the language in the Policy’s “Employer’s Liability” Exclusion that bars 

coverage for bodily injury to “[a]n ‘employee’ of the insured arising out of and in the course 

of: [ ] Employment by the insured; or [ ] Performing duties related to the conduct of the 

insured’s business.” (Doc. 50-1, p. 57).

Lastly, it skirts reason to assume that the parties intended to enter into an 

insurance contract that barred coverage for defamation committed by a commissioner 

against, for example, the interim executive director, but not against another commissioner 

simply because one was hired and one was appointed. As in Ruksznis, Moon is a 

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municipal official who performed his duties as an appointed commissioner as part of his 

employment with Eureka Springs and the CAPC, and Johnson is an employee or 

independent contractor who did the same. Without any argument on this issue from the 

parties, the Court has followed what it believes the Arkansas Supreme Court would do, 

guided by persuasive authority on this issue, and finds that the ERP Exclusion sweeps in 

employment-related injuries even to those who are not employees in the technical sense.

2. When Does An Injury “Arise Out Of” an “Employment-Related Practice”?

In Cooper v. Westfield Insurance Co., 488 F. Supp. 3d 430 (S.D.W. Va. 2020), the 

district court for the Southern District of West Virginia noted that federal courts are divided 

“as to whether the language of the ERP exclusions should be narrowly or broadly 

defined.” Id. at 440. The court explained, “[t]he division focuses on the breadth of the 

phrase ‘arising out of any . . . employment-related practices, policies, acts or omissions.’” 

Id. (citations omitted). 

Though the Arkansas Supreme Court has interpreted the phrase “arising out of” 

broadly, these decisions are limited to interpretations of certain coverage-granting 

provisions, rather than exclusions. See, e.g., Hisaw v. State Farm Mut. Auto. Ins. Co., 353 

Ark. 668, 678–81 (2003). Notwithstanding this distinction, a broad interpretation of this 

phrase is in keeping with other jurisdictions’ interpretation of this phrase within the context 

of ERP exclusions. See, e.g., Capitol Indem. Corp. v. 1405 Assocs., Inc., 340 F.3d 547, 

550 (8th Cir. 2003) (applying Missouri’s broad interpretation of “arising out of” to a 

materially identical ERP exclusion); Peterborough Oil Co., Inc. v. Great Am. Ins. Co., 397 

F. Supp. 2d 230, 241 (D. Mass. 2005) (applying Massachusetts’s similarly broad 

interpretation). The key difference in whether courts construe the exclusion narrowly or 

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broadly depends on whether they focus on the phrase “arising out of” or “employment 

related.” In other words, while some courts interpret the phrase “arising out of” as 

“requiring a broad construction of the ERP exclusion to bar coverage for any claim arising 

out of the employment relationship,” others interpret “employment related” to limit the 

exclusion to “matters that directly concern the employment relationship itself, such as . . . 

tortious acts that may accompany [ ] personnel decisions.” Cooper, 488 F. Supp. 3d at 

440 (comparing the breadth of Capitol Indemnity with the narrowness of Peterborough 

Oil). 

“Under Arkansas law, insurance policy provisions should be interpreted in favor of 

the insured, and exclusions are to be strictly construed against the insurer with all 

reasonable doubts in favor of the insured.” Bruce Oakley, Inc. v. Farmland Mut. Ins. Co., 

245 F.3d 1027, 1029 (8th Cir. 2001) (citations omitted). Though both the broad and narrow 

interpretations are reasonable, the Court believes the narrower interpretation is more 

favorable to the insured. The Court further believes it would be inappropriate to adopt the 

broad interpretation of the ERP Exclusion for two reasons. First, in its broad interpretation 

of “arising out of” in Hisaw, the Arkansas Supreme Court was interpreting a coveragegranting provision in which a broad construction was more favorable to the insured; it is 

not clear whether the Arkansas Supreme Court would take a similarly broad approach in 

interpreting an exclusion that barred coverage. And second, mapping the construction of 

the term “arising out of” onto the construction of the provision as a whole overlooks two 

distinct relationships at play here: (a) the causal relationship between the injury and the 

tortious conduct, delineated by the phrase “arising out of,” and (b) the relationship 

between the tortious conduct and the employment, delineated by the phrase “employment 

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related.” Accordingly, the Court will adopt the narrower construction, looking to 

Peterborough Oil and other jurisdictions that provide a more nuanced framework for 

analyzing the ERP Exclusion.

The term “employment related” “is not technical in nature,” but is “used in its 

ordinary sense, i.e., related to employment,” and “it modifies the specified acts (including 

defamation).” Frank & Freedus, 52 Cal. Rptr. 2d. at 684.3 State-Court Plaintiffs propose 

that, for an act to be employment related, it must occur within the context of employment. 

(Doc. 57, p. 25). State-Court Plaintiffs then argue that the alleged defamation in this case 

occurred outside the employment context because the statements were made at 

breweries, on phone calls, and in letters—i.e., outside the “work setting.” See Doc. 57, p. 

29. State-Court Plaintiffs cite no case law for this interpretation of what constitutes an 

employment context.

Instead, the Court has gleaned several factors from other jurisdictions that may be 

weighed in considering whether tortious conduct, like defamation, occurred within the 

employment context: whether there is a nexus between the tortious statements and the 

employment; whether the statement concerned the person’s work performance; the 

temporal proximity between the defamation and the term of employment; whether the 

underlying tortfeasor and plaintiff have a relationship outside the employment 

relationship; and whether the defamation accompanied a personnel decision. See Low v. 

Golden Eagle Ins. Co., 128 Cal. Rptr. 2d 423, 428-29 (1st Dist. 2002) (nexus and outside 

relationship) (synthesizing Loyola Marymount Univ. v. Hartford Accident & Indem. Co.,

3 The only case law from the Arkansas Supreme Court that this Court was able to locate 

mentioning “employment-related” involved statutory interpretation regarding retirement 

plans. This did not prove at all helpful to construing the term in this context. 

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271 Cal. Rptr. 528 (2d Dist. 1990); Frank & Freedus, 52 Cal. Rptr. 2d 678, HS Servs., Inc. 

v. Nationwide Mut. Ins. Co., 109 F.3d 642 (9th Cir. 1997); and Golden Eagle Ins. Corp. v. 

Rocky Cola Cafe, Inc., 114 Cal. Rptr. 2d 16 (2d Dist. 2001), several of which considered 

whether the statement was made about work performance); Peterborough Oil, 397 F. 

Supp. 2d at 238 (personnel decision); Talen v. Emps. Mut. Cas. Co., 703 N.W.2d 395, 

403-04 (Iowa 2005) (work performance). 

Under the narrower interpretation—and certainly under Capitol Indemnity’s 

broader construction if applied—State-Court Plaintiffs miss the mark on the meaning of 

“employment related.” In order to give structure to the Court’s analysis and adopt a 

framework more favorable to the insured, the Court will use the identified factors to 

describe the connection between the tortious conduct and the employment and, thereby, 

assess the sufficiency of the relationship. 

IV. COVERAGE4

Courts may evaluate coverage using the following steps: (1) “examine the facts of 

the insured’s claim to determine whether the policy’s insuring agreement makes an initial 

grant of coverage”; (2) if coverage is triggered under the policy, “examine the various 

exclusions to see whether any of them preclude coverage of the present claim”; and (3) 

4 Nearly all—if not all—of the defamation causes of action are pled as “intentional” 

defamation. However, State-Court Plaintiffs make some alternative arguments in the TAC

that if defamation was not intentional and knowing, it was reckless or even negligent. 

State Auto asks this Court to assess coverage under certain exclusions that bar coverage 

for defamation that is knowingly false. Although the Eureka Defendants agree with State 

Auto that there is no coverage as to any claims, they object to this Court making any 

findings as to the Eureka Defendants’ mens rea. Unique to this case is that the 

intentionality of the conduct will likely affect the immunity analysis under Arkansas Code 

§ 21-9-301(a) in the state court. Therefore, this Court will avoid making such a 

determination as it decides coverage. 

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if an exclusion applies, “look to see whether any exception to that exclusion reinstates 

coverage.” Hambuchen Constr., Inc., 2016 WL 7634791, at *3 (quoting Columbia Ins. 

Grp., Inc. v. Cenark Project Mgmt. Servs., Inc., 2016 Ark. 185, at *6 (2016)). If, however, 

under the first step, “it is clear that the policy was not intended to cover the claim asserted, 

the analysis ends there.” Id. (quoting Cenark Project Mgmt. Servs., 2016 Ark. 185, at *6).5

A. Duty to Defend

1. Cause of Action No. 1: No Coverage Because No Personal or Advertising 

Injury Pled and/or Because the ERP Exclusion Applies and/or Because the 

Criminal Acts Exclusion Applies 

Cause of Action No. 1 is a claim brought by Moon against certain Eureka 

Defendants that asserts they intentionally interfered with Moon’s contract/prospective 

business dealings and interfered with the performance of his duties as a public official.6

This Cause of Action covers a broad range of factual allegations, only one of which—

defamation—falls within the Policy’s definition of an offense that may cause “personal and 

advertising injury.” This Cause of Action alleges that Wright published false stories about

Moon, including that Moon threatened to kill Wright. (Doc. 50-2, p. 26). According to the 

TAC, these statements were made as part of Wright’s “campaign to remove Moon from 

the CAPC.” Id.

5 For the sake of brevity, where step two is clearly determinative, the Court may assume 

arguendo that coverage was triggered under step one.

6 Cause of Action No. 1: “A Claim for the Tort of Intentional Interference with 

Contract/Prospective Business Dealings and for Interference with a Public Official’s 

Performance of Duties, A Claim by Greg Moon Against Berry, Wright, Carter, Green, 

Meyer, DeVito, and Burnett individually and in Their Official Capacities as Mayor and 

CAPC Commissioners” (Doc. 50-2, p. 26).

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Compared to the other Causes of Action in the TAC, there is limited information 

about the statements Wright made here, making it more difficult to determine whether 

there is a “nexus” between the statements and Moon’s position with the CAPC. The TAC

frames these statements as advancing Wright’s goal of removing Moon, and there is no 

allegation of an outside relationship that would provide an alternative motive for these 

statements.7 In fact, the Cause of Action states that Eureka Defendants’ “plan to remove 

Moon and take control of the CAPC would also include making defamatory allegations 

about Moon . . . that would create a knowingly false, yet facially ostensible reason[ ] to 

remove [him] from [his] position[ ] with the CAPC.” (Doc. 50-2, p. 35). This places the

relationship between the statements and Moon’s employment with the CAPC well within 

the range required to establish these statements as employment related. Thus, to the 

extent the claim for interference with business dealing relies on the alleged defamatory 

statements, coverage for any resulting injuries would be barred under the ERP Exclusion. 

To the extent any personal or advertising injury is alleged regarding interference 

with a public official’s duties, coverage for such an injury would be barred under the 

Criminal Acts Exclusion. See infra Section IV.A.2 (discussing Cause of Action No. 3). 

Because this claim is predicated on acts that either do not allege “personal and 

advertising injury” or that fall under the ERP Exclusion or Criminal Acts Exclusion, there 

is no possibility of coverage. 

7 The Court’s understanding is that some parties may have had some degree of outside 

relationship—as many of them were owners of local businesses that presumably 

competed for business, advertising opportunities, or funding. However, the allegations in 

the TAC focus on the defamatory statements as intending to justify the removal from the 

CAPC. So, while there may have been some degree of outside relationship, there is no 

allegation, indication, or argument that it was the basis of the defamation. 

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2. Causes of Action Nos. 2 and 3: No Coverage Under the Criminal Acts 

Exclusion

Causes of Action Nos. 2 and 3 allege that Eureka Defendants Wright, Carter, 

Meyer, Burnett, Green, and DeVito violated certain Arkansas criminal statutes, evidencing

their negligence towards State-Court Plaintiffs.8 More specifically, Cause of Action No. 2 

alleges that Eureka Defendants violated Arkansas Code §§ 5-53-102 and 5-54-121, state 

felonies, by tampering with public records and committing perjury regarding the CAPC’s 

removal of Moon. (Doc. 50-2, p. 42). Cause of Action No. 3 claims that Eureka Defendants 

violated Arkansas Code § 5-54-102 by interfering with Moon’s—i.e., a public official’s—

duties, which is a misdemeanor under Arkansas law. (Doc. 50-2, p. 46). Because the 

Policy explicitly excludes personal and advertising injuries that arise out of criminal acts 

committed by or at the direction of the insured, Causes of Action Nos. 2 and 3—which are 

entirely predicated on the violation of criminal statutes—are barred from coverage.

3. Cause of Action No. 4: No Coverage Under the ERP Exclusion 

Cause of Action No. 4 alleges that certain Eureka Defendants slandered and 

libeled Bright and Moon.9 Specifically for this Cause of Action, the TAC alleges that 

8 Cause of Action No. 2: “Violation of Statute as Evidence of Negligence or Other Fault; 

Violation of A.C.A. §§ 5-54-121 and 5-53-102[;] The Felony of Tampering with a Public 

Record and The Felony of Perjury, Claims of Greg Moon, Rick Bright, Gina Rambo and

Tracy Johnson and All other Plaintiffs, Individually and as Taxpayers Against Wright, 

Carter, Meyer, Burnett, Greene and DeVito” (Doc. 50-2, p. 42).

Cause of Action No. 3: “Violation of Statute, A.C.A. § 5-54-102[;] Interference with Public 

Officials’ Performance of Duties, a Claim for Negligence by Plaintiff Greg Moon, Tracy 

Johnson, Gina Rambo, Rick Bright and Karen Pryor Against Defendants Wright, Carter, 

DeVito, Greene, Meyer and Burnett in Their Individual and Official Capacities” (Doc. 50-

2, p. 46).

9 Cause of Action No. 4: “The Intentional Tort of Slander and Libel[;] A Claim by Greg 

Moon and Rick Bright Against Wright, Carter, Berry, Greene, DeVito and Meyer 

Individually and/or in Their Official Capacities” (Doc. 50-2, p. 47).

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Eureka Defendants made statements that Moon was “unable, ineligible, or unqualified” to 

serve on the CAPC before illegally removing him and fraudulently reporting that they had 

sufficient votes and authority to do so. (Doc. 50-2, p. 48). Apparently, Eureka Defendants

then represented that Bright, acting as secretary, had failed to accurately capture the vote 

to remove Moon. Id. After Moon was removed, Bright was removed from his role as acting 

secretary. Id.

The statements about Moon concerned whether he was fit to serve on the CAPC, 

and the statements about Bright were that he performed his job poorly by inaccurately 

capturing the January 27 vote on Moon’s removal. Both of these have a “nexus” between 

the statements made and Moon’s and Bright’s employment with the CAPC. See Low, 128 

Cal. Rptr. 2d at 428. There is no allegation or argument from State-Court Plaintiffs that 

the defamatory statements were motivated or related to any outside relationship. Id.

Lastly, the statements were allegedly made “in furtherance of [Eureka Defendants’] efforts 

to remove Moon and certain CAPC staff,” (Doc. 50-2, p. 13), “in order to create a 

knowingly false, yet facially ostensible reason to remove them from their positions with 

the CAPC.” (Doc. 50-2, p. 24). Thus, the statements accompanied a personnel decision. 

See Peterborough, 397 F. Supp. 2d at 238. Again, because this is sufficient for the alleged 

harm to fall within the ERP Exclusion, there is no possibility of coverage.

4. Cause of Action No. 5: No Coverage Under the ERP Exclusion

The TAC alleges in Cause of Action No. 5 that Carter and Berry defamed 

Johnson.10 Per the TAC, Stryker asserted that Carter told Berry that Johnson had 

10 Cause of Action No. 5: “The Intentional Tort of Defamation, Slander and Libel[;] A Claim 

by Tracy Johnson Against Butch Berry, and Jeff Carter, Individually and in Their Official 

Capacities” (Doc. 50-2, p. 49).

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embezzled CAPC funds. (Doc. 50-2, p. 52). Berry then allegedly communicated this to 

Councilwoman Slane, who recorded the conversation. Id. at p. 50. This recorded 

conversation was then published to a newspaper in Eureka Springs. Id. at p. 51. 

Apparently, Berry then published an article on April 27, 2022, titled “Truth is Power,” where 

he repeated these allegations. Id. at pp. 51-52. This Cause of Action further alleges that 

Berry and/or Clark told the Arkansas Legislative Audit that Johnson was stealing from the 

City and/or the CAPC. Id. at p. 50.

Assuming this claim falls within the Policy’s grant of coverage, the defamatory 

statements would be excluded from coverage under the ERP Exclusion. To start, the 

statements were allegedly made “in furtherance of [Eureka Defendants’] efforts to remove 

. . . certain CAPC staff,” like Johnson. Id. at p. 13. That is, according to the TAC, Eureka 

Defendants were justifying the termination of Johnson. See id. at p. 24; Peterborough, 

397 F. Supp. 2d at 238. Further, the content of the statements related to her job 

performance and the relationship with her employer, creating a nexus between the 

statement and her employment. See, e.g., Low, 128 Cal. Rptr. 2d at 428. Lastly, there is 

no allegation or argument of any outside relationship between Johnson and Carter or 

Berry that could provide an alternative explanation or purpose as to why a defamatory 

statement was made. See, e.g., id.11

11 Though the TAC does allege that Berry wrote the “Truth is Power” article to restore his 

reputation after being accused of lying about the embezzlement allegations, this does not 

break the causal chain between the alleged defamation and Johnson’s employment; the 

comment still revolved around Johnson’s conduct as an employee of the city and was 

made by the Mayor of the city, during an ongoing attempt to legitimize the personnel 

decision to terminate Johnson and other personnel decisions regarding other State-Court 

Plaintiffs. 

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Because the alleged statements occurred within the employment context, the

Court finds there is no possibility of coverage as to the allegations in this Cause of Action.

5. Cause of Action No. 6: No Coverage Under the ERP Exclusion and/or 

Because It Is a Privacy Claim

Cause of Action No. 6 alleges that Eureka Defendants defamed Johnson, Rambo, 

Bright, and Pryor, primarily through statements made by Carter in meetings he held with 

Eureka Springs citizens on January 27 and February 5, 2021.12 The Court will summarize 

the alleged statements made against each State-Court Plaintiff. 

According to the TAC, Carter stated that Rambo used her position as Interim 

Executive Director to route business directly to certain local businesses to the exclusion 

of others, in violation of state law. (Doc. 50-2, p. 53). The TAC further alleges that Carter 

accused Rambo of creating a new budget line within the CAPC for her own use. Id. at p. 

55. Carter allegedly made other statements about how Rambo performed her role 

unethically and lacked the ability to do the job. Id. at p. 57. Beyond his statements at these 

meetings, Carter allegedly emailed the other commissioners regarding ethical and 

professional violations by Rambo, id. at p. 58, and told Berry that Rambo was stealing 

money, id. Stryker then told Mr. Slane that Carter had told Berry that Rambo embezzled

funds with Johnson—a conversation that was allegedly recorded and published in the 

newspaper. Id. at p. 60.

Allegedly, Carter made several remarks that Johnson was acting improperly within 

her role as events coordinator for the CAPC, was difficult to work with, and should not 

12 Cause of Action No. 6: “The Intentional Torts of Defamation, Slander, Libel and False 

Light[;] A Claim of Tracy Johnson, Gina Rambo, Rick Bright and Karen Pryor Against Jeff 

Carter, Butch Berry, Melissa Green, and Kim Stryker Individually and in Their Official 

Capacities” (Doc. 50-2, p. 53).

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have been hired. Id. at pp. 55-57. He also allegedly accused her of deleting records and 

receipts to cover up her improper actions, id. at p. 57, and told Berry that she was stealing, 

id. at p. 58, among other similar statements. Additionally, Green allegedly accused 

Johnson of embezzling funds from the CAPC, receiving kickbacks, and double dipping in 

CAPC funds. Id. at p. 59. Then, on April 5, 2021, Berry allegedly accused Johnson of 

embezzlement when speaking with Councilwoman Slane. Id. at p. 61. 

Carter allegedly accused Bright of “inundat[ing] [C]arter with paperwork or 

information in response to Carter’s request for information,” which the TAC claims 

damaged Bright’s reputation. Id. at pp. 55, 56. Additionally, the TAC alleges that Carter 

accused Rambo, Johnson, and Bright of unethically giving preferential treatment to a 

former CAPC commissioner. Id. at p. 56. And Carter allegedly stated that if an audit were 

performed on the CAPC it would “burn them at the stake,” apparently implying improper 

conduct by Rambo, Johnson, Bright, and Pryor, id. at p. 55, and accusing them of being 

responsible for missing funds in the CAPC accounts, id. at p. 59. 

The Court concludes that any defamation alleged here falls within the ERP 

Exclusion and, thus, is barred from coverage. In addition to the general allegations that 

the defamation in this case was made “in furtherance” of Eureka Defendants’ plan to 

remove State-Court Plaintiffs from their positions with the CAPC, id. at p. 13, Cause of 

Action No. 6 specifically states that Eureka Defendants were attempting to “clear the way 

. . . to first remove Greg Moon from the CAPC and afterwards get rid of Rambo, Johnson, 

and Bright,” id. at p. 56, and that the statements were “made to justify the actions that 

[Eureka Defendants] would take against [State-Court Plaintiffs] in the very near future,” 

id. at p. 54. This, again, demonstrates how the TAC frames the statements as justification 

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for the personnel decision of removing the State-Court Plaintiffs.13 See Peterborough, 

397 F. Supp. 2d at 238. There is no evidence of outside relationships between the parties

that would otherwise motivate the statements, leaving the alleged purpose of their 

statements—i.e., “clear[ing] the way . . . to get rid of” State-Court Plaintiffs—as the primary 

context for the alleged tortious conduct. See Low, 128 Cal. Rptr. 2d at 428. Lastly, the 

statements all regard some aspect of the State-Court Plaintiffs’ performance of their jobs

within the CAPC, creating a nexus between the statements and employment. See id. As 

with the previous causes of action for defamation, the relationship between the 

defamatory statements here and the employment falls well within the ERP Exclusion. 

This Cause of Action, like many in the TAC, alleges that the Eureka Defendants 

placed the State-Court Plaintiffs in a false light. False light is an invasion of privacy claim, 

see, e.g., Dodrill v. Ark. Democrat Co., 265 Ark. 628, 637–38 (1979) (adopting false light 

as an invasion of privacy claim separate from defamation), and thus does not fall within 

the scope of “personal and advertising injury” under the Policy. See Doc. 50-1, pp. 68, 76. 

For these reasons, there is no possibility of coverage for Cause of Action No. 4.

6. Cause of Action No. 7: No Coverage Under the ERP Exclusion and/or 

Because It Is a Privacy Claim

Cause of Action No. 7 alleges that Wright defamed, libeled, and/or slandered Bright 

and placed him in a false light through her communications with Detective John Brooks 

13 Though many of the statements in this Cause of Action and throughout the TAC were 

made to people outside the CAPC and Eureka Springs employment, this does not take 

the statements outside the employment context where, as here, the employment context 

is working for the City. 

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and by subsequently releasing these communications to the press under the guise of 

responding to a FOIA request.14

Because the defamatory statement claims that Bright, as an employee of the 

CAPC, was having an affair with Moon, an appointed commissioner of the CAPC, there 

is a “nexus between the allegedly defamatory statement . . . and [Bright’s] employment 

by the [CAPC].” Low, 128 Cal. Rptr. 2d at 428. The TAC makes clear that these allegations 

were made “in furtherance of [Eureka Defendants’] efforts to remove” Bright from his 

employment with the CAPC. (Doc. 50-2, p. 13). That is, the statements were made to 

preemptively justify the planned termination of Bright and Moon’s employment—a 

personnel decision. See Peterborough, 397 F. Supp. 2d at 238. And there is no allegation 

or evidence that Wright and Bright had any relationship outside the context of their work 

for the CAPC that would otherwise motivate these statements. Low, 128 Cal. Rptr. 2d at

428. Any injury alleged from this defamation arose out of an employment-related practice, 

and, thus, the Court finds that coverage for the defamation alleged in Cause of Action 

No. 7 is excluded under the ERP Exclusion. To the extent Bright seeks relief for injuries 

under a theory of false light, such injuries arise out of a privacy violation and are excluded 

from coverage. See Doc. 50-1, pp. 68, 76. Accordingly, there is no possibility of coverage 

for Cause of Action No. 7. 

7. Cause of Action No. 8: No Coverage Because It Is a Privacy Claim

Cause of Action No. 8 seeks relief for the intentional torts of intrusion, false light, 

and invasion of privacy for Wright’s communications to Detective Brooks regarding 

14 Cause of Action No. 7: “The Intentional Torts of Defamation/Libel and Slander and False 

Light; A Claim by Rick Bright Against Carol Wright Individually and in Her Official Capacity” 

(Doc. 50-2, p. 62).

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Bright.15 The Policy’s amended definition of “personal and advertising injury” explicitly 

excludes injuries that arise out of “oral or written publication, in any manner, of material 

that violates a person’s right of privacy.” (Doc. 50-1, pp. 68, 76). Thus, there is no 

possibility of coverage here. 

8. Cause of Action No. 9: No Coverage Under the ERP Exclusion

Cause of Action No. 9 is premised on the allegation that Wright gave Bright a poor 

performance evaluation and then released the evaluation to the press under the guise of 

responding to a FOIA request.16 The TAC alleges that these actions were in retaliation

against Bright for notifying certain commissioners that Lacy Ekberg—a close friend of 

Wright’s—was not coming to work or performing her duties. Bright claims that, in 

retribution, Wright “authored a document that resulted in [ ] Bright being placed on 

probation” and filled out a negative performance evaluation. (Doc. 50-2, p. 67). The 

performance evaluation allegedly included accusations that Bright was shifting money, 

lacked focus, was disloyal to the CAPC, was insubordinate, and had conflicting interests, 

among other similar claims. Id. at pp. 67-68. Allegedly Wright then released this 

evaluation in response to a FOIA request from the press, despite it not being responsive 

to the request, and portions of the evaluation were published in a local newspaper. Id. at

p. 68. 

15 Cause of Action No. 8: “The Intentional Tort of Intrusion/ False Light/ Invasion of 

Privacy[;] A Claim by Rick Bright Against Carol Wright[,] Both Individually and in Her 

official Capacity as a CAPC Commissioner” (Doc. 50-2, p. 64).

16 Cause of Action No. 9: “Intentional Torts of Defamation/ Libel and Slander and Violation 

of A.C.A. §§ 25-19-104, 105[;] A Claim by Rick Bright Against Carol Wright” (Doc. 50-2, p. 

66).

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Wright’s actions in emailing fellow commissioners, having Bright placed on 

probation, completing a negative performance evaluation, and publishing said evaluation 

to third parties all fall under the ERP Exclusion. The statements were made in the context 

of Bright’s employment with the CAPC and his actions within his role. There is no 

evidence that Bright had a relationship with Wright outside their positions on the CAPC. 

See Low, 128 Cal. Rptr. 2d at 428. The defamatory statements were accompanied by a 

personnel decision to put Bright on probation, and the evaluation, by its very nature, was 

employment related. See Peterborough, 397 F. Supp. 2d at 238. In fact, according to

State-Court Plaintiffs’ argument, this is precisely the type of instance that would qualify as 

employment-related defamation: an internal evaluation related to work performance that 

is released to third parties. See Doc. 57, p. 18 (arguing that the ERP Exclusion is 

reasonably “more likely meant to cover” situations where an employer communicates 

constructive criticism to a person “but, for reasons unintended or incidental to the 

communication come into possession of a third party”). Accordingly, because these 

alleged injuries arose out of an employment-related practice, there is no possibility of 

coverage.

9. Cause of Action No. 10: No Coverage by Concession of All Parties

The parties agree that the Policy does not cover any injuries arising out of the 

alleged conduct in Cause of Action No. 10.17 See Doc. 57, p. 8 (State-Court Plaintiffs’ 

17 Cause of Action No. 10: “Negligent Hiring/ Appointment and Failure to Properly 

Investigate and Vett [sic] Carol Wright for Appointment to the Position of Commissioner 

of the Eureka Springs City Advertising and Promotion Commission, a Claim of all Plaintiffs 

Both Against Butch Berry, Individually and in His Official Capacity” (Doc. 50-2, p. 70).

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concession); Doc. 64, ¶ 4 (Eureka Defendants admitting to State Auto’s statement of fact 

that there is no coverage). Accordingly, there is no coverage for these claims. 

10. Cause of Action No. 11: No Coverage Under the ERP Exclusion and/or the 

Criminal Acts Exclusion

Cause of Action No. 11 alleges that certain Eureka Defendants defamed certain 

State-Court Plaintiffs.18 More specifically, this Cause of Action alleges that Wright 

defamed Rambo, Johnson, Bright, and Pryor by sending an email to Detective Brooks 

that stated or implied that these State-Court Plaintiffs “allowed businessmen from the 

community to dictate how the CAPC office would be run, . . . allowed these local 

businessmen access to files and computers at the CAPC, and . . . allowed [these 

businessmen] to [harass CAPC employees],” (Doc. 50-2, p. 74), along with other similar 

statements. The TAC then alleges that Wright sent this same communication to the editor 

of a local newspaper nearly a year later. Id. at p. 73. According to the TAC, Green then 

filed a false police report, “at Carter[’]s urging,” that “echo[ed]” the statements made by 

Wright. Id. at p. 74. The existence of the police report and the statements were later 

published in local newspapers. Id. at pp. 75–75. Finally, the TAC alleges that Carter made 

similar accusations in his January 27 and February 5 meetings, and that Berry made 

similar accusations to Councilwoman Slane on April 5. Id. at p. 75. 

The statements alleged in this Cause of Action fall within the ERP Exclusion. They 

were made about State-Court Plaintiffs’ performance within their roles as employees of 

18 Cause of Action No. 11: “The Intentional Torts of Defamation/ Libel and Slander[;] A 

Claim by Johnson, Rambo, Moon, Bright, and Pryor Against Berry, Wright, Jeff Carter, 

Green, and Meyer Both Individually and in Their official Capacities” (Doc. 50-2, p. 73). 

Though this Cause of Action states that it is a claim brought by Johnson, Rambo, Moon, 

Bright, and Pryor, none of the allegations pled in this Cause of Action involve Moon. 

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the CAPC, and thus have a close nexus to State-Court Plaintiffs’ employment. See Low, 

128 Cal. Rptr. 2d at 428. There is no evidence that there were any outside relationships 

between those making the statements therein and those at whom the statements were 

directed. Id. And, as with the other allegations of defamation thus far, these statements 

were made within the context of discrediting State-Court Plaintiffs’ competence and ethics 

as a means of justifying their termination from the CAPC. See Peterborough, 397 F. Supp. 

2d at 238. This is a sufficient connection for this cause of action to fall within the ERP 

Exclusion. To the extent this Cause of Action relies on Green’s alleged filing of a false 

police report, that would be excluded under the Criminal Acts Exclusion. See infra Section 

IV.A.12 (discussing Cause of Action No. 13). Because this coverage for injuries under this 

Cause of Action is barred under the ERP Exclusion and, in part, under the Criminal Acts 

Exclusion, there is no possibility of coverage.

11. Cause of Action No. 12: No Coverage Under the ERP Exclusion and/or the 

Criminal Acts Exclusion 

Cause of Action No. 12 alleges that Green and Carter defamed Rambo, Johnson, 

Bright, and Pryor by filing a false police report that accused these State-Court Plaintiffs 

of engaging in “the crime of theft of business.”19 The TAC alleges that these statements 

were then published to other members of the community and the press. (Doc. 50-2, p. 

77). Based on the Court’s determination as to Cause of Action No. 11, supra, to the extent 

the statements that formed the basis of the police report constituted defamation, they are 

barred under the ERP Exclusion. And, pursuant to the Court’s determination as to Cause 

19 Cause of Action No. 12: “The Intentional Tort of Defamation, Libel and Slander[;] A 

Claim of Rambo, Johnson, Bright and Pryor Against Melissa Greene and Jeff Carter[,] 

Both Individually and in Their Official Capacities” (Doc. 50-2, p. 76).

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of Action No. 13, infra, the actions that form the basis of Cause of Action No. 12—i.e., 

filing a false police report—were criminal acts. Coverage for such injuries resulting from 

the allegedly false report would be barred under the Criminal Acts Exclusion. Accordingly, 

there is no possibility of coverage for this claim. 

12. Cause of Action No. 13: No Coverage Under the Criminal Acts Exclusion

State-Court Plaintiffs bring a claim for negligence on the allegation that Green filed 

a false police report and that Carter made false statements to the police, in conspiracy 

with other Eureka Defendants, namely Wright.

20 The TAC alleges that such actions were 

in violation of Arkansas Criminal Code §§ 5-54-122 and 5-3-401, which range from a 

Class A misdemeanor to Class D felony. The Policy explicitly excludes from coverage

personal and advertising injuries that arise out of criminal acts committed by or at the 

direction of the insured, so any claimed injury resulting from the alleged conduct under 

Cause of Action No. 13 is not covered. 

13. Cause of Action No. 14: No Coverage Under the ERP Exclusion and/or 

Because It Is a Privacy Claim

In Cause of Action No. 14, all State-Court Plaintiffs bring a claim of defamation and 

false light against Carter for his statements made at the January 27, 2021 meeting held 

with local citizens and businessowners, which were recorded and later published in a 

local newspaper.21 (Doc. 50-2, pp. 80, 82). The TAC claims that Carter’s attendance and 

20 Cause of Action No. 13: “Violation of a Criminal Statute as Evidence of Negligence or 

other Culpable Conduct[;] Filing a False Police Report and Conspiracy to File a False 

Police Report: A Claim of Rambo, Johnson, Bright and Pryor Against Melissa Greene and 

Jeff Carter” (Doc. 50-2, p. 77).

21 Cause of Action No. 14: “The Intentional Tort of Defamation/ Libel/ Slander/ False Light, 

a Claim of All Plaintiffs Against Jeff Carter, Both Individually and in His Official Capacity” 

(Doc. 50-2, p. 79).

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statements at this meeting were “[i]n furtherance of the conspiracy of the defendants to 

eliminate Greg Moon, take over the CAPC, and terminate the office staff.” Id. at p. 80. It 

further claims that “[d]ue to the conspiratorial conduct involved . . . Moon was illegally 

removed as CAPC Commissioner” and the CAPC “terminated Rambo and Johnson.” Id.

at p. 82. The statements involved accusations that have already been discussed in this 

Order, including that the State-Court Plaintiffs were giving preferential treatment to 

particular businessowners, that Johnson was embezzling money from the CAPC, that 

Rambo had created a new budget line to spend out of, that Bright was untrustworthy on 

financial matters, and other similar statements. See id. at pp. 80-82. 

To the extent the statements alleged here are defamatory, coverage for any 

resulting injuries would be barred under the ERP Exclusion. The statements had a close 

nexus to State-Court Plaintiffs’ roles within the CAPC. Low, 128 Cal. Rptr. 2d at 428. The 

context and explicit pleadings demonstrate that these statements were made to justify the 

Eureka Defendants’ imminent actions to remove Moon and other CAPC employees, 

thereby tying them to a planned personnel decision. See Peterborough, 397 F. Supp. 2d 

at 238. Further, there is no evidence or allegation that Carter had an outside relationship 

with State-Court Plaintiffs that could provide an alternative context or purpose for these 

statements. Low, 128 Cal. Rptr. 2d at 428. Thus, any injuries that arose out of the alleged 

defamation arose out of an employment-related practice. To the extent State-Court 

Plaintiffs seek relief for injuries under a theory of false light, such injuries arise out of

privacy violations and are excluded from coverage. See Doc. 50-1, pp. 68, 76. Therefore,

there is no possibility of coverage for the claims alleged in this Cause of Action.

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14. Cause of Action No. 15: No Coverage Because No Personal or Advertising 

Injury and/or the ERP Exclusion Applies 

Cause of Action No. 15 claims that certain Eureka Defendants committed the tort 

of negligence as evidenced by their violations of the Arkansas Deceptive Trade Practices 

Act, Ark. Code Ann. §§ 4-88-101 et seq.

22 More specifically, the TAC alleges that Eureka 

Defendants employed a bait-and-switch tactic with Johnson’s hiring and employment, 

resulting in her losing status and/or pay. (Doc. 50-3, p. 3). The Court does not see how 

these allegations fall within the coverage of the policy, as there is no personal or 

advertising injury alleged here. Further, to the extent any personal or advertising injury 

were alleged, this Cause of Action revolves entirely around the employment-related 

practices of the CAPC, namely termination and/or employment-related coercion or 

demotion. See Low, 128 Cal. Rptr. 2d at 428; Peterborough, 397 F. Supp. 2d at 238. 

There is no possibility of coverage for the harm alleged in this cause of action.

15. Cause of Action No. 16: No Coverage Because No Personal and Advertising 

Injury Alleged and/or the ERP Exclusion Applies

Cause of Action No. 16 alleges that certain Eureka Defendants committed fraud, 

injuring Rambo and Johnson.23 More specifically, the TAC claims that representations 

were made that Rambo had authority to hire Johnson, but after Rambo and Johnson 

reasonably relied on those representations, they were fired. (Doc. 50-3, p. 6). Again, the 

22 Cause of Action No. 15: “A Claim for the Violation of the Arkansas Deceptive Trade 

Practices Act and a Claim For Negligence, a Claim by Plaintiffs Gina Rambo and Tracy 

Johnson Against Defendants Berry, Wright, Carter, the City and the CAPC” (Doc. 50-3, p.

1).

23 Cause of Action No. 16: “Fraud, Actual or Constructive[;] A Claim by Gina Rambo and 

Tracy Johnson Against The City of Eureka Springs, The Eureka Springs CAPC, Butch 

Berry, Carol Wright and Jeff Carter[,] Individually and/or in Their Official Capacities” (Doc. 

50-3, p. 5).

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Court does not see how the injuries alleged in this Cause of Action constitute personal or 

advertising injuries as defined in the Policy, and State-Court Plaintiffs have not provided 

argument on this. Further, to the extent personal or advertising injury is alleged here, it 

falls squarely within the ERP Exclusion, as such injuries allegedly arose out of termination 

of employment and employment-related acts such as coercion. See Doc. 50-1, p. 99. 

Accordingly, there is no possibility of coverage for this claim.

16. Causes of Action Nos. 17 and 18: No Coverage Under Breach of Contract 

Exclusion and/or the ERP Exclusion

Causes of Action Nos. 17 and 18 make claims for breach of contract, 

reinstatement, and constructive termination related to Rambo, Johnson, Bright, and 

Pryor’s employment with the CAPC.24 Cause of Action No. 17 alleges that, as a result of 

Moon’s removal, Rambo and Johnson were “ostensibly fired” in violation of the law. (Doc. 

50-3, pp. 7–9). The TAC claims this illegal firing violated the terms of their employment as 

laid out in the employee handbook. Id. Cause of Action No. 18 pleads breach of contract 

based upon the constructive termination of Bright and Pryor following the termination of 

Johnson and Rambo. Id. at pp. 9–11. 

To the extent these causes of action arise out of breach of contract, coverage is 

explicitly barred under the policy, which excludes personal and advertising injuries 

“[a]rising out of a breach of contract.” See Doc. 50-1, p. 61. Moreover, these claims fall 

24 Cause of Action No. 17: “Breach of Contract, or, Alternatively, a Claim for 

Reinstatement, a Claim of Rambo and Johnson Against the City, the CAPC, Berry, Wright, 

Carter, Greene, Meyer and DeVito, Individually and in Their Official Capacities” (Doc. 50-

3, p. 7).

Cause of Action No. 18: “Constructive Termination, Breach of Contract[;] A Claim of Rick 

Bright and Karen Pryor Against Berry, Wright, Carter, Greene, Meyer, Burnett and 

DeVito[,] The CAPC and The City of Eureka Springs” (Doc. 50-3, p. 9).

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squarely within the ERP Exclusion, which excludes coverage for personal or advertising 

injury “arising out of any . . . [t]ermination of that person’s employment.” See id. at p. 99. 

Therefore, there is no possibility of coverage under the Policy for Causes of Action Nos. 

17 and 18. 

17. Cause of Action No. 19: No Coverage Because Recovery for Civil Conspiracy 

Relies on Damages for Injuries That Are Not Covered 

Cause of Action No. 19 alleges that Eureka Defendants engaged in a conspiracy 

to gain control of the CAPC and eliminate State-Court Plaintiffs by taking the various 

actions detailed throughout the TAC.25 “A civil conspiracy is not actionable in and of itself, 

but a recovery may be had for damages caused by acts committed pursuant to the 

conspiracy.” Faulkner v. Ark. Children's Hosp., 347 Ark. 941, 961 (2002) (citations 

omitted). That is, under Arkansas law, recovery for the conspiracy alleged depends on 

the damages caused by acts committed pursuant to the conspiracy.

The alleged conspiracy is predicated on actions that the Court has found in this 

Order to have no possibility of coverage. A plaintiff can only recover on a claim of civil 

conspiracy for the damages caused by the acts committed pursuant to the conspiracy. 

Therefore, to the extent the underlying acts are barred from coverage, so is the conspiracy 

because State-Court Plaintiffs’ recovery for conspiracy is wholly dependent on the 

commission of the alleged acts—all of which are excluded. 

25 Cause of Action No. 19: “Conspiracy to Gain Control of the Eureka Springs CAPC, To 

Stack the CAPC With Appointees of Their Choosing and to Eliminate the Plaintiffs by 

Engaging in Defamatory Conduct/ Libel/ Slander/ False Light and by Violating Arkansas’ 

Criminal Law, A Claim of All Plaintiffs Against Berry, Carter, Wright, Greene, DeVito, Meyer 

and Burnett, In Their Individual and official Capacities” (Doc. 50-3, p. 11).

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18. Cause of Action No. 20: No Coverage Under the Criminal Acts Exclusion

State-Court Plaintiffs allege that Berry, Carter, Wright, Green, DeVito, and Meyer

committed the tort of negligence as evidenced by their abuse of office and corruption in 

violation of Arkansas Code § 5-52-107.26 Abuse of public office under § 5-52-107 can 

range from a Class A misdemeanor to a Class B felony. Because the Policy explicitly 

excludes “personal and advertising injury” that arises out of criminal acts committed by or 

at the direction of the insured, there is no possibility of coverage for any claimed injury 

resulting from the alleged conduct under Cause of Action No. 20.

19. Cause of Action No. 21: No Coverage Under the ERP Exclusion

Cause of Action No. 21 brings a claim for defamation against Ekberg, Carter, and 

Green on behalf of Rambo, Johnson, Bright, and Pryor.27 The core of the allegations in 

this claim relates to the April 30, 2020 email from Ekberg to Carter, on which Green’s 

allegedly false police report was later based. (Doc. 50-3, p. 27). This email allegedly 

claimed that State-Court Plaintiffs were allowing CAPC business to be “routed to outside 

businesses.” Id.28 Allegedly, Carter then shared this information with Green, who—at 

Carter’s request—filed a police report. Id.

26 Cause of Action No. 20: “Corruption in Public Office/ Abuse of Office[;] A Claim of 

Negligence Based Upon Violation of An Arkansas Criminal Statute, A.C.A. § 5-52-107[;] 

a Claim by Moon, Rambo, Johnson and Bright Against Berry, Carter, Wright, Green, 

DeVito and Meyer” (Doc. 50-3, p. 21).

27 Cause of Action No. 21: “The Intentional Tort of Defamation/ Libel and Slander[;] A 

Claim by Rambo, Johnson, Bright and Pryor Against Lacy Ekberg, Jeff Carter and Melissa 

Green, Individually and in Their Official Capacities” (Doc. 50-3, p. 26). 

28 The Court’s understanding is that—at a high level—this included giving outside local 

businessowners improper access to CAPC computers and information. 

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The Court has already addressed the statements that are the basis of this claim in 

its discussion of Causes of Action Nos. 11, 12, and 13. These statements were made 

about State-Court Plaintiffs’ performance of their roles with the CAPC in order to discredit 

them and justify their termination. Accordingly, coverage for injuries for Cause of Action 

No. 21 is barred under the ERP Exclusion.

20. Causes of Action Nos. 22 and 23: No Coverage Because They Are Privacy

Claims and/or Fall Under the Disclosure of Personal Information Exclusion

Causes of Action Nos. 22 and 23 allege that certain Eureka Defendants violated 

the Arkansas FOIA and committed the tort of invasion of privacy by publicly disclosing 

private and confidential information that is exempted from FOIA mandates.29 Such 

information allegedly included dates of birth, phone numbers, addresses, direct deposit 

information, copies of driver’s licenses, and marital status. 

Under the Policy, injury arising out of “oral or written publication, in any manner, of 

material that violates a person’s right of privacy” does not fall within coverage. (Doc. 50-

1, pp. 68, 76). Further, the Policy excludes “personal and advertising injury” “[a]rising out 

of any . . . disclosure of any person’s . . . confidential or personal information, including 

. . . financial information, credit card information, health information, or any other type of 

nonpublic information.” Id. at p. 101. Per the definition of “personal and advertising injury”

and the Disclosure of Personal Information Exclusion, there is no possibility of coverage 

for this claim. 

29 Cause of Action Nos. 22 & 23: “Violations of Freedom of Information Act And The Tort 

of Invasion of Privacy by Revealing Public Disclosure of Personal, Private Confidential 

Excluded Information, A Claim of Plaintiffs Greg Moon, Gina Rambo, Tracy Johnson, Rick 

Bright and Karen Pryor Against Kim Stryker[,] Carol Wright And The City of Eureka 

Springs, Arkansas” (Doc. 50-3, p. 29).

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21. Cause of Action No. 24: Issue of Coverage Not Applicable

The final cause of action in the TAC is a direct action against State Auto under 

Arkansas Code § 23-79-210, and, thus, the issue of coverage is not in question. 

* * *

In sum, because the TAC alleges no claim for which there is a possibility of 

coverage, State Auto has no duty to defend the underlying action, as a matter of law. 

B. Duty to Indemnify 

“[T]he duty to defend is broader than the duty to indemnify.” Murphy Oil, 61 S.W.3d 

at 812. Because the Court finds that there is no possibility of coverage as to any of the 

causes of action alleged in the TAC, State Auto “certainly cannot have a duty to indemnify 

based on any of the same claims.” Landers Auto Grp. No. One, Inc., 621 F.3d at 815. 

Accordingly, the Court finds State Auto has no duty to indemnify Eureka Defendants. 

V. CONCLUSION

State Auto Policy No. 1000368247 provides no coverage for the underlying claims 

alleged by State-Court Plaintiffs, and thus, State Auto has no duty to defend or indemnify 

the Eureka Defendants in the underlying action. Therefore, IT IS HEREBY ORDERED

that State Auto’s Motion for Summary Judgment (Doc. 50) is GRANTED. Judgment will 

enter contemporaneously with this Opinion, and the case is DISMISSED. 

IT IS SO ORDERED on this 15th day of November, 2024.

________________________________

 TIMOTHY L. BROOKS

UNITED STATES DISTRICT JUDGE

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