* The Honora ble Joseph M . Hood, Un

ited States D istrict Judg e for the Ea stern Dist rict o f Kentucky, sitting by designation. 1

NOT RECOM

MENDED F OR FULL-T EXT PUBL ICATION File Name: 04a0022n.06 Filed: October 8, 2004 No. 03-6236 UNITED STATES COURT OF APPEALS FOR THE SI

XTH CIRC UIT S MITH & N EP HEW I NC ., Plaintiff-A

ppellant, On Appeal f rom the v. United Stat es District C ourt for the Wester

n District of

Tennessee F EDERAL I NSURANCE C OMPANY , Defendant-

Appellee

. ______________________________/

BEFORE: KENNEDY

and COOK , Circuit Ju

dges; and H ood, Distri ct Judge. * KENNEDY , Circuit Ju

dge. This appeal arise s out of a di versity acti on for decl ar atory judgment in which Smith & Nephew sought to es tablish that

Federal Insu

rance Com

pany had breached de fense and indem nity obligations it owed to Sm ith & Nephew

under commer cial general

liability policies Fed

eral issued

on behalf of

Smith & Ne

phew. Both

parties mo ved for sum

mary judg

ment, with Federal seeking dismissal and Smith

& Nephew

requesting a declaration

that Federal

was liable f

or reasonab le costs it incurred in defending and settling a lawsuit fi led against i t by Lt. Col . Mary E. Re id. The dist rict court granted Fed

eral’s motion for summary judgment and denied Smith & Nephew’s motion. For the following reasons, we REVERSE.2 BACKGROUND Smith & Nephew is a Memphis based manufacturer of medical and surgical implements, and it supplies the se products

to hospitals

and clinics, incl uding arme d forces medical cente rs. Smith & Nephew pu

rchased com

mercial ge

neral liabili

ty insurance

policies from Federal with coverage effective from April 1, 1993 to September 20, 1995. InFebruary 19 97, Reid f iled a lawsu

it naming S mith & Nep hew as a def endant. It al so named T.G. Medica l, Inc., a di stributor f or Smith & N ephew, and its principa

l, Terry Geu

rink, as defendant s. InMay 1999, Reid filed an amended complaint. Both complaints essentially allege the

same underlying

facts, nam

ely, that Sm

ith & Nephew

conspired w

ith T.G. Me dical Inc., T erry Geurink, and Col. Allan Bucknell, Reid’s immediate supervisor, to violate federal procur em ent stat utes and to conceal those violations. Specifically, Reid stated tha t during the course of h e r service at Brooke A

rmy Medica

l Center (“B AMC”), she discovered that Col. B ucknell had

accepted travel and other ex

pense reim

bursemen ts for Sm ith & Nephew

conferenc es, allegedl

y in violation of feder al procure ment laws and regulations. After Reid filed a formal complaint regarding Bucknell’s

conduct, she claimed that he, along with the defendants, took actions to undermine Reid’s reputation a

nd credibili

ty in order th at her claim s of procur ement violation s would not be taken seriously. T o conceal th e procurement violatio ns, Reid all eged, Buck nell, T.G. Medical, and Geurink carried out a series o f acts intended to discredit her and to damage her reputation. Many of these allege d acts were in the nature of

defamatory and dispa

raging sta

tem ents about R

eid’s integrity and compe

tence as a ph

ysician. Mo reover, in f

urtherance o f the consp iracy to conceal

the procurementviolations, Reid allege d that T.G. Medical and Geurink

malicious ly prosecute d a civil action against

her. According to Reid, T.G. Medical and Geurink falsely claimed that she defamed3

T.G. Medical

and to rtiously interfered with T.G. Medical’s contracts with Smith & Nephew and BAMC. InMay 1999, S mith & Nep hew provided notice to Fe deral with

respect to th e Reid lawsu it and forwarded

to the insure

r a copy of R

eid’s amen

ded compl aint. Afte

r reviewing

the compl aint, Federal concluded t

hat the Reid ’s lawsuit wa s not covere d by Smith & Nephew’s

policy. The

reafter, Smith & Nephew expended sums to defend itself and eventually settled with Reid. The comm

ercial gener

al liability i

nsurance con

tract at issue

states, in re levant parts : COVERAGE BOD ILY INJURY, PROPERTY DAMAGE, PERSONAL IN JURY, AND ADVERTISING INJURY [-] We w

ill pay damages the ins ured becomes legally obligated to pay by reason of liability imposed by law ... because of ... personal injury or advertising inj ury to w hich this insurance ap

plies. This

insurance

applies ... to personal i

njury or adv ertising inju

ry only if caused by an offense committed during the po licy pe riod. We will defend any claim or suit against

the insured s eeking such damages. DEFINITIONS PERSONAL INJURY [-] means injury, other than bodily injury, arising out of one or more of the following offen ses comm itted in the c ourse of yo ur busines s . .. 2. malicious prosecution; ... 4. oral or written publication of

material that slanders or libels a person ... or disparages a

person’s .. . services. EXCLUSIONS This insurance does not apply to: INTENTIONAL FALSEHO ODS [-] p er sonal injury ... a rising out of

oral or writt

en publication of materi al, if done by or at the d

irection of

the insured w

ith knowled

ge of its falsity; ... 3. arising out of the willful violation of a penal statute or committed by or with the consent of the insured. After reading the a

llegations i

n Reid’s am

ended com

plaint again st the insuranc e contract, the district cou

rt held that F ederal did no t owe a duty to def end Smith

& Nephew, b ecause, it concluded, Reid allege d in her am ended com plaint that S mith & Nephew eng aged only in a conspiracy

to violate procurement statutes and to conceal their viola tion, which is not c overed by the policy, and not that Smith & Nephew engaged in a conspiracy to injure Reid.4 ANALYSI S We first consi der whether Federa l had a duty

to defend S mith & Nephew against Reid’s lawsuit. Tennessee

courts have held th at “[a]n in surer’s duty to defend i s separate an

d distinct [ as well as broader than] the insurer’ s obligation to pay claim s under

[a] policy .” Drexel Che

m. Co. v. Bituminous Ins. Co ., 933 S.W.2d 471, 480 (Tenn. Ct. App. 1996). In de termining an insurer’s

duty to defend, co

urts lo ok to the insurance contract provisions and to the alle gations in the relevant action. Id . “If

even one of

the allegations is covered by the policy, the insurer has a duty to defend, irrespective of the number of allegations that may be excluded by the policy. ” Id . Tennessee law further provides that “[an] insurer may not properly refuse to defend an action a gainst i ts insured unless ‘it is plain from the face of the complaint that the allegations fail to state facts that br ing the

case within or po tentially wi thin the poli cy’s coverag e.’” Id . Where the allegations of the complaint are ambigu

ous, any do

ubts regardi

ng their suf

ficiency to

trigger a defense ob ligation are

resolved infavor of the insure d. See D empster Bro s., Inc. v. United States Fid. & Guar. Co ., 388 S.W.2d 153 , 154-56 (Ten

n. Ct. App . 1964). Fi

nally, in determining

an insurer’s

duty to def

end, courts typically begin and en

d their analy sis with

the four corners of the complaint. See St. Paul Fire and Marine Ins. Co. , v. Torpoco , 879 S.W.2d 831, 834-35 (Tenn. 1994). Following this pr ecedent, we must read t

he insuranc e contract ag ainst the alle gations in Rei d’s complaint to determine whether the contract required Federal to defend Smith & Nephew. Rather than first re ad the allega

tions in the original com

plaint again st the te rms of the cont ract to determine whether Fed

eral had a du

ty to defend under the originalcomplain t, the distric t court

only read the alle gations i n the amend ed complai nt agains t the ter ms of the contract because it concluded, inreliance upon Fed. R. Civ. P. 15, that an ame nded comp laint comp letely super cedes the ori ginal1 The cases cited by the district court also do not support this propositi on. See St. Pau l Fire

and Marine Ins. C

o., v. Torp oco , 879 S.W .2d 831, 83 2-34 (Tenn. 1994) (finding a duty t o defend under amended c omplaint, but presenti ng no issue a s to existence of duty und

er original c omplaint) ; Planet Rock, Inc. v. Regis INs. Co., 6 S.W.3d 484, 489 (Tenn. Ct. App. 1999) (finding duty to defend with reference to both original and amended complaints).

2 Smith & Ne

phew notes

that the dist

rict court, in

choosin g to focus entirely upon the allegations of the am ended com plaint, ma y have been i

nfluenced by the fact t

hat Smith & Nephew did not notify

Federal of

the Reid law suit until it s ent Fe deral the am ended com

plaint. How ever, since Federal did

not raise any

issue regard

ing timeli ness of not

ic e as a de fense to its claim for coverage, Smith & Ne

phew argue s, Federal m

ust be found to have waived it. We do notconsider here for the fir st time wh ether Federa l waived its delayed

notification defense w

hen the issue was never presented to the district court. 5 complain t. Although R

ule 15 does p

rovide that a

n amended

complain

t supercedes an original complaint with respect to which allegations and issues are pr esented to the court f

or dispositi on, it does notsupport the

proposition

that a court need not cons ider whethe r there was a d

uty to defend while the original

complaint was the effective pleading. 1 To determ ine whether

there was a d

uty to defend under the original complaint, we must therefore read the allegations of the original complaint against the i

nsurance co ntract. 2 I n the original

complain

t, Reid alleg ed that “Def endants, T. G. Medical a nd [Smith & Nephew]

. . . conspired

with Bucknell to injure [

her]” by en

gaging in conduct intended to discre dit her. Furthermore, Reid al leged, in f urtherance o f the consp iracy betwe en Defend ants, T.G. Medic al malicious ly pr osecuted

Reid by clai

ming that she defam

ed it and tort

iously inter

fered with

its contracts with SNR

and BAMC. It is clear that t hese allegat

ions impli cate the pers onal injury coverage under the contract for malicious prosecution and defam

ation. Thus , Federal wo

uld have had a duty to def

end under th e original co mpla int un less it could point to an e xclusion or

another provision in the policy that would permit it to deny coverage.6

Federal raises three a

rguments in support o f its conten

tion that it owes no duty t o defend Smith & Nephew. F irst, Federa l notes that t

he allegatio ns only alleg e that th e ot her defend ants committ ed the offenses of defamation and malicious prosecution, and that the policy does not cover the acts of Smith & Nephew’s co-defendants. This argument misses the mark. The relevant insuring language provides, “[w]e will pay damages the insured becomes legally obligated to pay by reason of liability im

posed by law

... because of ... personal injury ... caused by an offense.” This language indicates, therefore, that

what matt

ers for purp oses of det

ermining c overage is th e asserted lia bility of the insured, not whethe r it com mitted the wrongful acts. If Smith & Nephew engaged in a conspiracy

to defam e and malic iously pros ecute Reid, then th e policy woul d apply to co ver it because Smith & Ne

phew would

be legally ob ligated to pa y damages

to Reid, even

though it di d

not commit any of the o vert acts in

furtherance of the conspiracy, since a conspirator is held liable for the acts of its co-conspirators. Next, Federal contends that the policy excludes coverage for Reid’s cl aim because she alleged that her personal injuries arose out of Smith & Nephew’s willful violation of a penal statut e. This argument also fails. Although Federal did not identify the penal statute in issue, it can only be referring to the procurem

ent laws tha

t Reid allege d

Smith & Nephew violated. See 41 U.S.C. § 423. Smith & Nephew co ntends that t he exclusio n does not ap

ply because

Reid did not allege a

willful violation of the procurement statutes. However, even if Reid had alleged a willful violation of the procurementstatutes, th at would still not exc

use Federal

from its d efense obl igations. T

his Circuit’ s decision in Aetna Cas. & Sur. Co. v. Sunshine Corp., 74 F.3d 685 (6th Cir. 1996), is instructive. In Suns hine , the in sured (Suns hine) sough t a defense i

n connectio n with a suit

alleging tha

t it had obtained and used a confidential

credit report regarding its tenants (the Crockers) in vi olation of the7

Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §§ 1681 et seq . Id . at 686. The Crocke rs alleged that this violation, among

others, resu

lted in injur

ie s for i nvasion of privacy, mental anguish, and embarrass ment. Id. The Sunshine court assumed that the injuries alleged by the Crockers were of

a type that cou

ld trigger co verage unde

r the policy. If it

were, the court thought it “clear that at the very least Aetna has a c ontractual o bligation to

provide sun shine a def

ense” becau se even “if the re

was a violation o f the FCRA , ... it rem ain[ed] to be seen whether the viol ation was willful.” Id. Becausethe Crocker s could r ecover dam

ages for a non-willfu

l violation o f the FCRA , this court concluded

that the “penal statute” exclusion could not vitiate Aetna ’s duty to defend Sunshine. Id. Similarly, even if Rei d alleged tha t Smith & N ephew willf

ull y violated pr ocuremen

t statutes, that would not excuse Federal from defending the Reid act

ion because

Reid did no t need

to establish

a willful violation to prevail on her 42 U.S.C. § 1985(1) claim. To s usta in that claim , Reid was required to prove only t

hat Smith & Nephew conspired to in jure her “in [

her] person or property on account off [her] lawful discharge of the duties of [her] off ice.” 42 U. S.C. § 198 5(1). There fore, since Reid could r

ecover dam

ages even if she were una

ble to prove

that Smith

& Nephew willfully viol ated the pro curement s tatutes, the “penal statu

te” exclusio n does not vi

tiate Federa

l’s duty to defend Smith & Nephew. Finally, Federal agues that it owes no duty to defend because, it claims, Re id’s pe rsonal injuries did not arise

out of an of

fense com mitted in t he course of Smith & Nephew’s

business. This argument fails becau se Smith & Ne phew’s alle ged particip ation in the c onspiracy w as to furthe r its business interests by ensuring tha t its favo red relationship with Bucknell and BAMC would be preserved.3 For instance, Reid alleged that the agreement between Bucknell and Smith & Nephew

included concealment of Bucknell’s acceptance of gifts from Smith & Nephew; Smith & Ne phew concealed from the United States its payments of “gifts” through its certifications of procurement 8 Next, we consider whether Fe der al owed a duty to defend Smith & Nephew under the amended complain t. In Smith & N ephew’s m otion for su

mmary ju dgment, i t submitte d that Reid’ s allegations of malicious prosecution and defamation applied to it, and thus that Federal owed a duty to defend it. The distric t court ackno wledged tha t if either of

these conten

tions impl icated Sm

ith & Nephew, absent an exclusion in the policy, Fed eral would h ave a duty to

provide a de fense. Since

we conclude that Reid alleged in her amended c o mplaint that Smith & Nephew engaged in a conspiracy

to defam e her, which

independen

tly requires

Federal to p rovide Smith & Ne p hew a defense, we need not addr ess whether Reid also alleged that Smith & Nephew engaged in a conspiracy

to malicio

usly prosec

ute her. There are no direct allega

tions in Rei d’s amend

ed compla

int that Smith & Ne

phew defa

med her. Rather, she

alleged that

only Buckn ell, Geurink, and T.G. Me dical to ok overt a ctions t o defame her. However, as the di strict court noted, Reid often alleged that the actions a gainst her were the products of conspiracies. For instance, Reid alleged that “[t]he activities of Geurink, T.G. Medic al, and Bucknell to

damage R

eid’s reputa

tion were overt acts in

furtheranc e of the cons

piracy.” Th

us, if Reid claimed that Smith & Nephew was part of the conspiracy to defame her, then her allegations would invo ke the policy ’s coverage. The district

court ackno wledged tha

tsome am

biguity rega

rding which

conspiracie s Smith & Nephew par

ticipated in

arose from

Reid’s changes to h er original complain t. Through out both complain ts, Reid plainl

y all eged th at Smith & N ephew was i nvolved in a

conspiracy

to violate procurementstatut es an d to cover up those violat

ions. 3 The district

court noted , however, thatintegrity; and as part of the defe ndants’ agre ement to conceal the “gifts” Bucknell received from

Smith & Nephew, Smith & Nephew sent a letter to Bu

cknell seeki

ng reimbu

rsement f rom Buck nell of the expenses he incurred at a medical conference which Smith & Nephew had paid. 9 Reid’s amended c omplaint a ppears to dis tinguish th

i s conspiracy

to conceal th e procurement law violations from the c onspiracy to injure Reid , when it all eges, “[a] s a result of the continuing conspiracy

betw een Buckne ll, [Smit h & Nephew] , Geurink an d T.G. Medi cal to violat

e federal procurementregulations , to conceal their violations, and the conspiracy between Bucknell, Geurink and T.G. Medical to injure Reid to prevent discovery of the procurement violations, a nd the actions taken in fu

rtherance th ereof by De fendants, Plaintiff Reid has suf

fered . . . i

njuries.” Based upon this allegation , whic h appears to delineate two separate conspiracies, with Smith & Nephew as a particip ant only in

the conspira

cy to violate

procurem ent statutes

and to conce al their violation, and based upon the fact tha

t Reid never direct

ly alleged th at Smith & N ephew def amed her, the district c ourt conclu ded that Fed

eral did not owe a duty to d efend Sm ith & Nephew

because Reid’s amended complaint di d not allege th at Smith & N ephew enga ged in wron

gdoing whi ch injured her. Smith & Nephew ch allenges thi s conclusio n, rel yin g upon paragraphs 95 and 96 of the

a me nded complain t in support o f its conten

tion that Re id did in fac t allege that S mith & Nephew

was part of a conspiracy

to defam e her. The paragra phs read, “t

he continui

ng conspira

cy between Bucknell and the Defendants to violate the federal statutes and regulations relating to procurement integrity, and their con

tinuing eff

orts to conce al the violatio ns, extende d to effort s to prevent R eid’s complain ts about the violations of federal statutes and regulations to be taken seriou sly. Buckn ell, Geurink, and T.G. Me dical each took action

designed to damage Reid’s reputation and credibility.” Sm ith & Ne phew argues that this conspiracy between Bucknell and the Defendants must have10

included Smith & Ne

phew becau se Smith & N ephew was a defendant . Since a conspirator is liable for the acts of its co-co nspirators, this allegati on necessaril y alleges, Smith & Ne

phew conte

nds, that Smith & Ne

phew is liab le for defa

ming Reid . We agree

. Although one could re concile the a llegation th at a

p pears to deli

neate two se

parate conspiracie s, one in which Smith & Nephew conspired to violate procurement statutes, and the other inwhich the re

maining d efendants conspired to

injure Reid, with the allegations that allege that “the Defendan ts” conspired to

defame R

eid so that he

r complaint s would not be taken seriously, by interpreting “the Defen

dants” to inc lude all the d efendants excep t Smith & Ne phew, such a construction would run counter to the presumpt ions that a cou rt must accord to the insured. As noted above, Ten

nessee law provide s that

an “insurer may not properly refuse to defend an action against its insured u

nless ‘it is plain from the face of the complaint that the alleg ations fail to state facts that bring th e case within or potential ly within th e policy’s co ver age.’” Drexel Chem., 933 S.W.2d at 480. Moreover, where the allegations of the complaint are ambiguous, any doub ts regarding their suff

iciency to trigger a d

efense obligation are resolved in favor of the insured. See Demp ster Bros. , 388 S.W.2d at 154-56. Resolving the ambiguities in Reid’s amended complaint infavor of

Smith & Nephew, w e conclude t hat it is not “

plain from

the face of

the compl aint” that Reid’s allegations do not allege that Smith & Nephew conspired to in jure her. Thus, Fede

ral owed a duty to defend Smith & Nephew.

CONCLUS ION Since the amended complaint did not make the original complaint mootw ith respect to whether there was a duty to defend under the original complaint, we first considered the al legations11

made in the original complai nt. The ori ginal compl aint clearly a lleged that S mith & Nep hew conspired to injure Re id. Since Fe deral can po int to no exc lusion in the policy that would perm

it it to avoid its d

uty to defend, F ederal thus h ad a duty todefend und er the origin al complai

nt. With respect to th e amended

complain t, we also conclude that

Federal owe d a duty to de fend since it is notplain on the

face of the

complai nt that Reid did not alleg e that Smit h & Nephew c onspired to injure her. Therefore , we REVER SE the distr ict court’s ju

dgment an

d remand t

he case for fu rther proceedings consistent with this opinion.