Opinion ID: 177020
Heading Depth: 2
Heading Rank: 1

Heading: National Union Umbrella Policy: Coverage B

Text: Coverage B provided umbrella insurance that would pay on behalf of the Insured those sums ... that the Insured bec[a]me[ ] legally obligated to pay as damages by reason of liability imposed by law ... because of ... Property Damage, Personal Injury or Advertising Injury not covered by Scheduled Underlying Insurance. The underlying policy written by Travelers excluded personal injury coverage arising out of [the insured's] business if such business was advertising, ... broadcasting or telecasting done by or for [the insured]. Therefore, the Foundation argues, because Travelers did not cover such personal injury, the umbrella came into effect. National Union's umbrella policy insured against personal injury, defined in relevant part as oral, written or electronic publication of material that slanders or libels a person or organization, or disparages a person's or organization's goods, products or services. We agree that, if the alleged Personal Injury came within the scope of Coverage B and applicability was not otherwise excluded, National Union would have a duty to defend. Because the umbrella policy did not contain an obligation to advance costs, but provided only for the duty to defend, the customary test for assumption of defense is utilizedthat is, we examine the allegations in the complaint, rather than proceeding to the ultimate result of the underlying suit. In this respect, the umbrella differs from the defense cost advancement provisions of the I & O Policy. The District Court held that, because Lorillard's claims sounded in contract rather than tort, Coverage B was not available for protection against allegations of Personal Injury, and, accordingly, National Union had had no duty to defend. [10] 640 F.Supp.2d at 541. The Foundation here asserts that Lorillard charged that the ads amounted to disparagement, libel or slander and so fell within the definition of Personal Injury under Coverage B. Accordingly, National Union had a duty to defend. That argument fails. Lorillard's complaint and counterclaims did not allege that the ads were slanderous, libelous, or disparaging. No challenge to the truthfulness of the ads' contents was before the state courts. The fact of falsity is a predicate for libel, slander or commercial disparagement, and in its absence no cause of action for these torts was claimed, much less established. See, e.g., Neurotron Inc. v. Med. Serv. Ass'n of Pa., 254 F.3d 444 (3d Cir.2001); see also Gannett Co. v. Kanaga, 750 A.2d 1174, 1183 (Del.2000) (plaintiff in libel case had to demonstrate `actual injury,' absent a showing of knowledge of falsity or reckless disregard for the truth). Therefore, the counterclaims failed to set out a tort cause of action. Moreover, Lorillard was specific in its claims for relief. Nowhere in its meticulously drafted counterclaims, numbering 88 paragraphs, did Lorillard seek damages for libel, slander or disparagement of product. The requests for relief were founded on alleged breaches of contract. [11] The ad damnum clauses, specifically directed to each counterclaim, requested declaratory judgments; entry of an order that the Foundation had breached the MSA and directing compliance with it; and injunctive action. Because Lorillard did not allege facts constituting Personal Injury as defined in the Umbrella Policy, a duty to defend under Coverage B was not triggered. We conclude that none of National Union's policies entitle the Foundation to recover expenses incurred in defending the Lorillard claims. The judgment of the District Court will be affirmed.