## United States Court of Appeals FOR THE EIGHTH CIRCUIT

_____________ No. 97-3534SD

_____________ St. Paul Fire and Marine Insurance * Company; St. Paul Mercury Insurance * Company, * * Appellants, *

* v. * * Medical X-Ray Center, P.C.; Lynn A. * Hendrickson, M.D.; Andrew Ian Soye, * M.D.; Daryl R. Wierda, M.D., * * Appellees. *

_____________ Appeals from the United States District Court for the District No. 97-3577SD of South Dakota.

_____________ St. Paul Fire and Marine Insurance * Company; St. Paul Mercury Insurance * Company, * * Appellees, *

* v. * * Medical X-Ray Center, P.C.; Lynn A. * Hendrickson, M.D.; Andrew Ian Soye, * M.D.; Daryl R. Wierda, M.D., * * Appellants. *-2- _____________ Submitted: May 14, 1998

Filed: June 10, 1998

_____________ Before RICHARD S. ARNOLD, JOHN R. GIBSON, and FAGG, Circuit Judges.

_____________ FAGG, Circuit Judge. Medical X-Ray Center, P.C. (MXC), a South Dakota radio logy group, was sued by a competing radiologist , Dr. Ralph Read, for tortious interference with prospective business relationships and violation of state and federal antitru st laws. A jury found for Rea d on two of his antitrust claims, but the verdicts for Read were overturned. See Read v. Medical X-Ray Center, P .C. , 110 F.3d 543, 544 (8th Cir. 1997), cert. denied , 118 S. Ct. 299 (1997). St. Paul Fire and Marine Insurance Company and St. Pau l Mercury Insurance Company (collectively St. Paul) insured MXC under general and profe ssional liability policies. After the trial, St. Paul brought this diversity actio n seeking a declaratory judgment that St. Paul had no duty to defend MXC in Read’ s lawsuit because neither policy covered the damages Read sought. On cross-motions for summary judgment, the district court dec ided there was coverage under the general liabi lity policy, but not under the professional liability policy. St. Paul appeals, an d MXC cross appeals. We affirm on St. Paul’ s appeal and dismiss MXC’s cross-appeal as moot. We review the district court’s summary judgment decision de novo. S ee Allstate Ins. Co. v. Burrough , 120 F.3d 834, 838 (8th Cir. 1997). In this diversity case, South Dakota law governs our interp retation of St. Paul’s insurance policies. See id. Under South Dakota law, an insurer’s duty to defend is much broader than the duty to pay a ju dgment rendered against the insured. See Bayer v. Employers Reinsurance Corp. , 383 N.W.2d 858, 860 (S.D. 1986). “‘An insurer must defend its insured if the-3-

plea dings in the action against the insured allege facts which, if established, woul d support a re covery under the policy.’” Id. (quoted cases omitted). Any doubt abou t whether the claim against the ins ured arguably falls within policy coverage is resolved in the insured’s favor. See id. at 861. To avoid the duty to defend, the insurer has the burden to show the policy clearly does not cover the claim. See id. The general liability policy in thi s case provides St. Paul has “the right and duty to defend any c laim or suit for covered injury or damage made or brought against any protec ted person.” Among other types of injury, the policy covers “personal injury,” which i s defined as “injury, other than bodily injury, caused by . . . written or spoken material made public which belittles the product or work of other s.” Thus, St. Paul had a duty to de fend Read’s lawsuit against MXC if any of Read’s claims were for injury caused by public statements MXC made belittling Read or his work.

In his complaint, Read alleged MXC’s actions sought to eliminate him as a competitor

in violation of state and federal antitrust laws. Read also alleged MXC’s actio ns amounted to intentional interference with prospective business relationships

. As factual support for all his claims, Read alleged that during a medical staff meeting at a major area hospital, an MXC representative told the staff that Read’s propose d working arrangement there was insufficient to meet his patients’ needs. Rea d expanded on this allegation

in his amended complaint, claiming MXC had made misleading and inaccurate statements to members of the hospital’s medical staff to discourage the m from choosing Read to perform radiology services. Read incorporated this allegation into his tort claim, which asserted that based on his longstanding association with the hospi tal medical staff, he had a legitimate expectation of providing services there , MXC intentionally and maliciously interfered with that prospective busines s relationship, and because of MXC’s actions, Read was una ble to establish the business relationship and suffered financially. To remedy the tort, Read sought actual an d punitive damages.-4-

We conclu de St. Paul had the duty to defend Read’s lawsuit against MX C because Read’ s complaints allege facts that would support recovery under the general liability polic y. See Bayer , 383 N.W.2d at 860. Read’s tort claim was for injurie s cause d by MXC’s actions, including MXC’s public statement indicating Read’ s radiology services were inferior. MXC ’s statement was a factual basis for Read’s tort claim b ecause MXC made the statement to hospital staff with whom Read sought a business re lationship. The statement was a cause of the alleged tort injury. Thus , Rea d’s tort claim “arguably falls within policy coverage.” Id. at 861. That is enough to trigger St. Paul’s duty to defend under South Dakota law. See id. It does not matter that the cou rt dismissed the tort claim at the close of Read’s case. See Hawkeye

Security Ins. Co. v. Clifford , 366 N.W.2d 489, 491-92 (S.D. 1985).

St. Paul as serts that under the plain language of the policy, a duty to defend i s trigg ered only by a claim for covered damage, and not an isolated allegation in a pleading for which no damages are sought . According to St. Paul, there is no coverage because Read brought no defamation or trade libel claim based on the belittlin g statement. Neither the policy language nor South Dakota law supports this view. St. Paul cites several cases, but they are all distinguishable or unpersuasive. In Reliance Ins. Co. v. Shenandoah South, Inc. , 81 F.3d 789, 792 (8th Cir. 1996), the polic y c o vered damages resulting from “‘oral or written publication of material that slanders
or libels a per son . . . or disparages a person’s goods, products, or services.’” Th e plaintiff alleged th e insured’s negligent mismanagement of his theater “‘damage[d] his
re putation and good will in the community.’” Id. at 791. We held the policy did no t
cover the claim because the negligent mismanagement did not libel or slander th e plaintiff or disparage his services. See id. at 792. In this case, th e policy covers injuries
caus ed by publicized, belittling statements. Read alleged in his complaint that MX C made a statement belittling Read’s service to others at a hospital staff meeting, and this statement brought about his tort i njury. Cf. Mulberry Square Productions, Inc. v. State Farm Fire & Cas. Co. , 101 F.3d 414, 421 (5th Cir. 1996) (in case involving similar policy language, pleadings did not trigger insurance coverage because plaintiff’s-5-

compl aint did not allege disparaging statements as factual basis for tort claims). I n Larson v. Co ntinental Cas. Co. , 377 N.W.2d 148, 149 (S.D. 1985), the court held a policy covering personal injury did not cover a racial discrimination claim against a buildin g owner who refused to rent to the plaintiff. In Crum & Forster Ins. Co. v

. Pacific Empl oyers Ins. Co. , 907 F. Supp. 312, 314 (D.S.D. 1995), the court held th e libel, slander, or disparagement coverage of a general li ability policy did not encompass
a wro ngful termination action where the plaintiff merely alleged his wrongfu l termination injured his reputation. A nd in Microtec Research, Inc. v. Nationwide Mut. Ins. Co. , 40 F.3d 968, 972 (9th Cir. 1 994), the court found no personal injury coverage because the plaintiff did not allege the insured made a statement that disparaged th e plaintiff’ s reputation. In sum, St. Paul failed to carry its burden to show the genera l liability policy clearly does not cover Read’s tort claim against MXC. See Bayer , 383 N.W.2d at 861.

Bec ause St. Paul had a duty to defend Read’s lawsuit against MXC under th e general liability policy, and MXC stated at oral argument that the duty under just one policy is sufficient, we dismiss as moot MXC’s cross-appeal asserting St. Paul had a duty to defend under the professional liability policy.
A true copy.

Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.