Opinion ID: 57522
Heading Depth: 2
Heading Rank: 1

Heading: Personal and Advertising InjuryCoverage B

Text: The parties agree that the only possibility for coverage under Coverage B arises out of subsection d of the definition personal and advertising injury, which includes coverage for injuries arising out of [o]ral 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. Coverage is excluded, however, if the publication was done by or at the direction of the insured with knowledge of its falsity. The district court held that because the AFP complaint alleges that LCI's conduct was intentional, the knowledge of falsity exclusion applies to preclude coverage. In doing so, the district court erred. The AFP complaint alleges that LCI's conduct was intentional and/ or malicious. Malice in this context does not require knowledge of falsity. Instead, a party can be deemed to have acted with malice under Mississippi law upon a showing of a reckless disregard for the truth. See Eckman v. Cooper Tire & Rubber Co., 893 So.2d 1049, 1053 (Miss.2005); Bulloch v. City of Pascagoula, 574 So.2d 637, 642 (Miss.1990). A reckless disregard for the truth requires only that the defendant in fact entertained serious doubts as to the truth of his publication. Journal Publ'g Co. v. McCullough, 743 So.2d 352, 361 (Miss.1999) (quoting Harte-Hanks Commc'ns, Inc. v. Connaughton, 491 U.S. 657, 688, 109 S.Ct. 2678, 105 L.Ed.2d 562 (1989)). This court has held under Mississippi law that knowledge of falsity exclusions do not apply to conduct constituting a gross and reckless disregard of the truth. EEOC v. South, Publ'g Co., Inc., 894 F.2d 785, 790 (5th Cir.1990); see also Am. Home Assur. Co. v. United Space Alliance, LLC, 378 F.3d 482, 488 (5th Cir. 2004) ([I]f liability can be imposed without proving that the false statements were made with the knowledge that they were false, the `knowledge of falsity' exclusion will not apply to preclude coverage.). Indeed, limiting the reach of the knowledge of falsity exclusion in this regard is consistent with the principle under Mississippi law that exclusions are to be construed in favor of the insured whenever reasonable. Centennial, 149 F.3d at 382-83. Thus, because the AFT complaint alleges that LCI acted with malice, which is defined to include a reckless disregard for the truth, we conclude that the knowledge of falsity exclusion does not apply to preclude coverage in this case. However, we affirm the judgment of the district court on other grounds. See Holtzclaw v. DSC Commc'ns Corp., 255 F.3d 254, 258 (5th Cir.2001) (We may affirm a summary judgment on any ground supported by the record, even if it is different from that relied on by the district court.). The parties agree that the only claim that even arguably creates the possibility for coverage is the slander of title claim. According to the Mississippi Supreme Court: Slander of title is a phrase commonly employed to describe words or conduct which bring or tend to bring in question the right or title of another to particular property, as distinguished from the disparagement of the property itself. The slander may consist of a statement in writing, printing, or by word of mouth, and may relate to personal as well as real property. . . . [T]he general rule of liability for slander of title is stated as follows: One who falsely and maliciously publishes matter which brings in question or disparages the title to property, thereby causing special damage to the owner, may be held liable in a civil action for damages. . . . Words spoken of property are not in themselves actionable. But the publication of false and malicious statements, disparaging of plaintiff's property or the title thereto, when followed, as a natural, reasonable and proximate result, by special damage to the owner, are actionable. The false statement may consist of an assertion that plaintiff has no title to the property of which he is the ostensible owner, or that his title is defective, or that defendant has an interest in or lien upon the property. Whatever be the statement, however, in order for it to form the basis of a right of action it must have been made, not only falsely, but maliciously. Walley v. Hunt, 212 Miss. 294, 54 So.2d 393, 396 (1951) (internal quotations and citations omitted). However, the Policy itself expressly limits coverage to the slander of a person or organization or disparagement of a good, product, or service. Although Mississippi courts have not yet addressed this issue, other courts are unanimous in holding that slander of title claims pertain only to real property, which is not a person, organization, good, product, or service. See, e.g., ABM Indus., Inc. v. Zurich Am. Ins. Co., No. C05-3480, 2006 WL 2595944, -27 (N.D.Cal. Sept. 11, 2006); U.S . Fid. & Guar. Co. v. Saddle Ridge, L.L.C., No. 98CV2565, 1999 WL 1072905,  (D.Kan. Sept. 27, 1999); Kickham Group, Inc. v. Am. Nat'l Fire Ins. Co., No. 3:96CV1823, 1997 WL 600710, -3 (N.D.Tex. Sept. 24, 1997); Etchison v. Westfield Ins. Co., No. 5:05CV99, 2006 WL 2796658, 2006 U.S. Dist. LEXIS 71467, -29 (N.D.W.V. Sept. 29, 2006); Thompson v. Md. Cas. Co., 84 P.3d 496, 506-07 (Colo.2004); Wylin v. Auto Owners Ins. Co., No. 255669, 2005 WL 2656642, , 2005 Mich.App. LEXIS 2568, -14 (Mich.Ct.App. Oct. 18, 2005); Acme Constr. Co., Inc. v. Conn Nat'l Indem. Co., No. 81402, 2003 WL 194879, -7 (Ohio Ct.App. Jan. 30, 2003); Bank One, N.A. v. Breakers Dev., 208 Wis.2d 230, 559 N.W.2d 911, 912-13 (1997). We see no reason why Mississippi courts would rule differently. Thus, we conclude that Mississippi courts would follow this unanimous trend and conclude that slander of title claims do not trigger coverage under policies that limit coverage to the slander of a person or organization or disparagement of a good, product, or service. None of the cases cited by LCI compels a different result. Indeed, the polices at issue in each of those cases provided coverage for slander generally and did not limit coverage to the slander of a person or organization or disparagement of a good, product, or service. See, e.g., Valley Improvement Ass'n v. USF&G, 129 F.3d 1108, 1118 (10th Cir.1997) (policy covered damages arising out of the publication or utterance of a libel or slander or of other defamatory or disparaging material); Classic Corp. v. Charter Oak Fire Ins. Co., No. 93CV5655, 1995 WL 295824,  (C.D.Cal. Feb. 22, 1995) (same); Royce v. Citizens Ins. Co., 219 Mich.App. 537, 557 N.W.2d 144, 147 (1996) (policy covered damages arising out of libel, slander). Although we conclude that the policy at issue does not cover slander of title claims, LCI is correct that this court's review is not limited to the particular legal theories alleged in the AFP complaint. See Ingalls, 410 F.3d at 225 ([W]e look not to the particular legal theories . . . but to the allegedly tortious conduct underlying the suit.); Merchants, 794 F.Supp. at 618 (holding under Mississippi law that duty to defend is triggered when there is any basis for potential liability under the policy . . . for the allegations raised in the . . . action); Employers Reinsurance Corp. v. Martin, Gordon & Jones, Inc., 767 F.Supp. 1355, 1359-60 (S.D.Miss.1991) ([I]t is the facts alleged, not the pleader's legal conclusions, that are relevant to the insurer's duty to defend.); see also Curtis-Universal Inc. V. Sheboygan Emergency Med. Servs., 43 F.3d 1119, 1122 (7th Cir.1994) ([F]or example, if the complaint alleges facts that if proved would show that the insured had infringed the plaintiffs copyright, the policy kicks in even if the complaint charges the insured only with fraud or intentional infliction of emotional distress.). Thus, as long as the allegations in the AFP complaint make out some claim that has the possibility of triggering coverage, Nationwide has a duty to defend even if the complaint does not pursue that particular legal theory as a basis for relief. As the Seventh Circuit reasoned: Defamation and disparagement are explicitly covered by the basic policy, and defamation by the umbrella policy. But neither tort is named in the counterclaim. No matter. Coverage does not depend on the characterization of the wrong by the plaintiff. . . . Modern pleading requires the pleading only of a claim, not of a legal theory; and so if a specific tort or other legal wrong named in the insurance policy had to be named in the suit for liability coverage to exist, insurance protection could be lost as the result of a totally inconsequential omission by the drafter of the complaint. Such a rule would also be an invitation to strategic pleading. Cincinnati Ins. Co. v. E. Att Ins. Co., 260 F.3d 742, 745 (7th Cir.2001). LCI cites the following allegations that, according to it, serve to trigger Nationwide's duty to defend: [T]he MCBS, at the request of LCI, approved another Master Plan for the PUD dated February 19, 1998. When LCI presented the 1998 Master Plan to the MCBS and requested that it be approved, LCI withheld from the MCBS the details of the Contract and Warranty Deed. LCI withheld from [AFP] the fact that it was presenting to the MCBS, and requesting approval of, the 1998 Master Plan. As a result of the actions of LCI, the 1998 Master Plan was approved by the MCBS without [AFP] being given an opportunity to advise the MCBS of its contract and deed rights. LCI opposed [AFP]'s request, using as a basis for its opposition, the 1998 Master Plan which LCI had approved by withholding information from the MCBS and [AFP]. LCI made representations to the MCBS and to the public that it was the only developer of the PUD indicating that [AFP] was not a developer and did not have rights to develop the subject property in accordance with applicable zoning ordinances. LCI made representations to the MCBS and to the public that [AFP] was prohibited by the Declaration of Covenants, Conditions and Restrictions for Lake Caroline from developing the subject property. LCI has continued to do all it can to prevent [AFP] from exercising its right to develop the subject property and change its use after December 31, 2006 as contemplated by the Contract and Warranty Deed. According to LCI, these allegations make out a claim for slander of person or organization or disparagement of goods, products, or services. We disagree. According to the AFP complaint, LCI stated that [AFP] did not have rights to develop the subject property and that [AFP] was prohibited by the Declaration of Covenants . . . from developing the subject property. Moreover, according to the AFP complaint, LCI has continued to do all it can to prevent [AFP] from exercising its right to develop the subject property and change its use. Assuming that these statements are slanderous or disparaging, they do not slander a person or organization or disparage a good, product, or service. At best, these alleged statements do nothing more than slander AFP's title to the subject property and the Policy does not cover such claims. Because the allegations in the complaint do not trigger the duty to defend, this court must next address whether Nationwide knew of facts or could have reasonably ascertained facts that would have triggered coverage under the Policy. See Mulberry, 101 F.3d at 422 (citing Merchants. Co., 794 F.Supp. at 617). Here, LCI argues that a reasonable investigation would have revealed that (1) LCI did not make any false statements before the Board, or if any false statements were made by LCI, LCI did not know they were false; (2) AFP's conclusory allegations were unsupported by the evidence; and (3) documents in the state court suit contradicted or called into serious question the validity of AFP's allegations. These additional facts, however, do not trigger coverage or in any way alter our conclusion that AFP is simply alleging a slander of title claim, which the Policy does not cover. Accordingly, we conclude that LCI has not established that the AFP complaint itselfor any additional factstrigger the duty to defend under Coverage B of the Policy.