Opinion ID: 2071197
Heading Depth: 2
Heading Rank: 1

Heading: The claims against Clinton and Bennett.

Text: In Count 1 of his complaint, Flocco alleged, on information and belief, that defendants Clinton and Bennett, acting in concert with Rust and Trosino, used President Clinton's policy with State Farm Fire as a pretext for the unlawful conversion of approximately ... $1,100,000 of State Farm Funds to the use and benefit of William J. Clinton, and have deprived State Farm of that sum. According to Flocco, each of the defendants unlawfully exercised ownership, dominion or control over State Farm funds. Flocco alleged that Rust and Trosino have done so by authorizing payments of State Farm funds for the benefit of Mr. Clinton even though State Farm had no legal duty to make such payments, [13] and that Clinton and Bennett have done so by receiving and retaining these funds, or the benefit thereof. Finally, Flocco asserted, on information and belief, that Clinton and Bennett, as well as Rust and Trosino, were all aware that there [was] no ground whatever for any claim that State Farm had any duty to defend Mr. Clinton against Ms. Jones' suit. The trial judge dismissed Count I, holding that Flocco had failed in that count to state a claim upon which relief could be granted. Citing Washington v. John T. Rhines Co., 646 A.2d 345, 346 n. 1 (D.C. 1994), the judge recognized that [i]n deciding a motion to dismiss pursuant to [Super. Ct. Civ. R.] 12(b)(6), the complaint is read in the light most favorable to the claimant and the factual allegations are accepted as true. Nevertheless, the judge concluded that on these facts, no relief can be granted for a derivative claim in conversion. The judge reasoned as follows: [T]he conversion count must be analyzed as one made by State Farm Fire for accepting and paying a claim made on behalf of a policyholder who held a valid policy at the time the claim was made. So analyzed, Count I cannot stand. At the time the claim was made, Clinton owned a valid liability insurance policy issued by State Farm Fire. Through his attorney, he made a claim on that policy in connection with a lawsuit filed against him. The insurer determined to pay the claim, that is, to support the defense of the lawsuit filed against the policyholder. Pursuant to that determination, it transferred certain funds either to Clinton or his attorney. By filing a derivative action on behalf of either State Farm Mutual or State Farm Fire against President Clinton and his attorney, plaintiff is forced into the position of asserting that State Farm Fire could claim that Clinton and Bennett converted State Farm Fire funds which State Farm Fire determined should be paid to those defendants. To state the proposition is to refute it. It cannot logically be that defendants Clinton and Bennett exercised unlawful dominion and control over State Farm Fire funds when State Farm Fire paid those funds to them pursuant to a claim made on a valid State Farm Fire insurance policy. Without unlawful ownership, dominion, or control, there can be no conversion, and Count I must be dismissed. Conversion has generally been defined as any unlawful exercise of ownership, dominion or control over the personal property of another in denial or repudiation of his rights thereto. Chase Manhattan Bank v. Burden, 489 A.2d 494, 495 (D.C. 1985) (quoting Shea v. Fridley, 123 A.2d 358, 361 (D.C.1956)). In the present case, Flocco claims to have sufficiently alleged conversion by asserting first, that Clinton, Bennett, Rust and Trosino all knew that the money in question belonged to State Farm Fire and that Clinton and Bennett had no right to it, and second, that in spite of their knowledge, the defendants took the funds away from their rightful owner and transferred them to a wrongdoer President Clintonwho allegedly had made a knowingly false claim of coverage. But even if conversion could be established by proof that Clinton and Bennett knew that the President was not entitled to the fundsan issue we need not and do not decideFlocco's complaint nevertheless fails. The flaw in Flocco's argument is that he treats as a fact, known to Clinton and Bennett, the proposition that the policy did not apply, when in reality that proposition turns on an unresolved and somewhat dubious legal theory. The complaint thus alleges that Clinton and Bennett knew a fact that, in our view, they could not have known because it is subject to genuine dispute and therefore not knowable. President Clinton's insurance policy, while excluding claims for discrimination and intentional conduct, [14] obligated State Farm Fire to pay for a net loss for personal injury, including libel, slander and defamation of character. Paula Jones' suit against the President included claims of defamation. Under familiar principles of insurance law, any reasonable doubt which may arise as to the meaning or intent of a condition of [the policy] will be resolved against the insurer. Cameron v. USAA Property & Cas. Ins. Co., 733 A.2d 965, 968 (D.C.1999) (citations omitted); accord, West American Ins. Co. v. Vago, 197 Ill.App.3d 131, 143 Ill.Dec. 195, 553 N.E.2d 1181, 1184, appeal denied, 133 Ill.2d 574, 149 Ill.Dec. 340, 561 N.E.2d 710 (1990) (The insurer must defend its insured if the complaint alleges facts which are within or potentially within policy coverage. . . The duty to defend exists even if the complaint alleges several causes of action and only one is within potential policy coverage.) (citations omitted). In Stanback v. Westchester Fire Ins. Co., 68 N.C.App. 107, 314 S.E.2d 775 (1984), the insured's umbrella policy provided coverage for suits against the insured for personal injury, including, inter alia, malicious prosecution and intentional infliction of emotional distress. The policy contained an exclusion for any act committed by . . . the insured with intent to cause personal injury or property damage. Id. at 778. The insured had been sued by his wife for inflicting mental anguish and for maliciously instituting a lawsuit against her without probable cause. The insurer denied coverage to the plaintiff, citing the exclusion for actions for injury resulting from intentional acts. The court ruled in favor of the insured: In this case the policy defined personal injury to include false arrest, false imprisonment, wrongful eviction, wrongful detention, malicious prosecution, libel and slander. These are clearly intentional torts. This definition when read in conjunction with exclusion (e), which purportedly attempts to exclude intentional torts, creates an ambiguity in the policy. Our supreme court has held that when language is used in an insurance policy which is reasonably susceptible of differing constructions, it must be given the construction most favorable to the insured, since the insurance company prepared the policy and chose the language. See Grant v. [Emmco] Insurance Co., 295 N.C. 39, 243 S.E.2d 894 (1978). In this case the apparent conflict between coverage and exclusion must therefore be resolved in favor of plaintiff, and we therefore reject defendants's argument that Mrs. Stanback's allegations regarding intentional infliction of mental anguish and malicious prosecution are excluded from coverage by exclusion (e). Id. at 779; see also Scudder v. Hanover Ins. Co., 201 Ill.App.3d 921, 147 Ill.Dec. 386, 559 N.E.2d 559, 562 (1990) ([U]nder Illinois law, policy provisions excluding coverage for acts committed by the insured with intent to cause personal injury will only exclude coverage if the insured acted with specific intent to injure, unless the policy states otherwise.); Burns v. Middlesex Ins. Co., 558 A.2d 701, 702 (Me. 1989) (exclusion from coverage of bodily injury ... which is expected or intended by the insured did not negate insurer's duty to defend suit against insured for defamation, invasion of privacy, and intentional infliction of emotional distress; exclusion applies only where insured subjectively wanted to cause bodily injury and subjectively foresaw it as practically certain; [i]f there is any legal or factual basis that could be developed at trial, which would obligate the insurer to pay under the policy, the insured is entitled to a defense) (emphasis in original) (citation omitted); but cf. Commercial Union Ins. Companies v. Sky, Inc., 810 F.Supp. 249, 254-55 (W.D.Ark.1992) (no duty to defend defamation claims made in insured's brief, where those claims arose out of the underlying non-covered claim of sexual harassment). [15] The question whether, as Flocco alleges, President Clinton and Mr. Bennett knew that the policy did not apply to Ms. Jones' action must be analyzed with the foregoing principles in mind. In our view, Flocco's critical allegation cannot be reconciled with the authorities we have cited. Indeed, Flocco's own submission to the trial court demonstrates that Clinton and Bennett could not have known what Flocco alleges that they knew. As a part of that submission, Flocco's attorney included a copy of Symposium: Is the President getting special insurance treatment for the Paula Jones lawsuit?, Insight, July 21, 1997, at 24-27. This symposium contains what is in effect a debate between two insurance experts who reached opposite conclusions on the issue. Richard Giller, a Los Angeles insurance lawyer, argued as follows: Neither Pacific Indemnity nor State Farm legally are [sic] obliged to provide the president with a defense in the Jones case, based upon the nature of the allegations of Jones' complaint, the terms and conditions of the two policies, applicable case law and the strong public policy against allowing people accused of sexual wrongdoing to pass off their liability to insurance companies. So why would Pacific Indemnity or State Farm agree to share in the million-dollar cost of defensea figure that could double or triple quickly? At least to this expert, the answer is simple and straightforward: because their policyholder is the President of the United States. If you or I were accused of the same wrongdoing of which Jones has accused the President, neither company would have lifted a finger to assist us. In Mr. Giller's view, Ms. Jones' defamation claim, like the other counts in her complaint, was based on intentional misconduct on the part of President Clinton, and it therefore fell outside the scope of the President's policy with State Farm Fire. [16] Id. at 24. But Sean Mooney, a senior vice president and economist at the Insurance Information Institute, was of a different opinion: The first issuewhether policies held by the president would provide coverageis relatively easy to answer. They do. The president purchased umbrella liability policies from two different insurance companies. These policies provide coverage for any personal injury for which a covered person legally is responsible. The policy defines personal injury to include mental anguish and injury, false arrest, false imprisonment, humiliation, libel, slander and defamation of character. As long as acts such as these were alleged in the Jones lawsuit the insurance company normally will provide coverage. Specifically, the lawsuit alleged false imprisonment and defamation of character, and the insurance companies provided coverage against these claims. They were not responding to the sexual-harassment charge. Indeed, one of the policies excludes acts of sexual harassment.     There is one exclusion in the umbrella insurance policy that is particularly relevant to the Jones lawsuit: the exclusion for intentional acts. The policy excludes an act committed or directed by a covered person with intent to cause personal injury. If the lawsuit alleges that the act was intended to cause injury, then this exclusion would apply. But if the lawsuit is silent on intent or equivocal, then insurance companies, in most cases, will believe they have an obligation to defend. Id. at 25. We find it unnecessary to determine whether Mr. Giller or Mr. Mooney has the better of the argument. The very existence of an evidently bona fide dispute regarding coverage between two specialists in the field refutes Flocco's purportedly factual assertion that Clinton and Bennett knew that Ms. Jones' claim was not covered. In assessing Flocco's allegations, it is our obligation to pierce through the pleadings and their adroit craftsmanship to get at the substance of the claim. United Nat'l Ins. Co. v. Tunnel, Inc., 988 F.2d 351, 354 (2d Cir.1993). While, for the purpose of a motion to dismiss, facts well pleaded must be taken as true, unsupported conclusions of the pleader may be disregarded. Oppenheim v. Sterling, 368 F.2d 516, 519 (10th Cir.1966), cert. denied, 386 U.S. 1011, 87 S.Ct. 1357, 18 L.Ed.2d 441 (1967). We should not accept as true allegations that are in conflict with facts judicially known to the court. Blackburn v. Fisk Univ., 443 F.2d 121, 123 (6th Cir. 1971). Because we know judicially that the dispute over coverage presents an unsettled question of law, we need not, and indeed cannot, credit Flocco's allegation in Count I that Clinton and Bennett knew that they were not entitled to the money paid to them by State Farm Fire. Stripped of this critical allegation, the claims against the President and his attorney fail to state a claim upon which relief may be granted. If, as we have concluded, the question of coverage was in doubt, then defendants Clinton and Bennett had the right to file a claim under the policy. We agree with the trial judge that the subsequent acceptance by these defendants of money which State Farm Fire voluntarily turned over to them in response to that claim could not constitute conversion, regardless of Flocco's criticism of the amount paid. Flocco asserts that even if Count I failed to state a claim for conversion, he should have been permitted to amend his complaint to allege some other tort. [17] But even if we were to assume that Flocco has preserved this point for appeala dubious assumption [18] he has failed to identify in any of his numerous filings a claim in tort which he could have filed in the name of State Farm Fire and which could have survived the excision from his complaint of the allegation that Clinton and Bennett knew that they were not entitled to coverage. We likewise know of no such tort. Accordingly, we conclude that the trial judge did not err by dismissing Count I with prejudice.