Carrier Must Defend Website Defamation Claim

An insurance company has a duty to defend tort and defamation claims filed against the Franklin Center for Government and Public Integrity under a “Businessowners Policy,” in a suit alleging damage from two articles posted in FCGPI’s “Watchdog.org” website; an Alexandria U.S. District Court says posting content online does not mean the Center is in the “publishing” business and excluded from coverage.

The carrier says the tort claims at issue do not fall under the policy protection for “personal and advertising injury.” The defamation and intentional interference with business claims filed by GreenTech Automotive Inc. are all based on alleged “oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s organization’s goods, products or services.” GreenTech’s claims against FCGFI thus squarely fall within the coverage for “personal and advertising injury.” The court finds and concludes that subject to any applicable exclusions, the policy provides for coverage of both of GreenTech’s claims in the underlying action under clear and unambiguous provisions, as both claims arise from allegedly libelous statements published by FCGPI.

The court turns now to whether any of the exclusions in Section II – Exclusions Para. 17 apply to the otherwise covered claims.

Paragraph 17(a) excludes coverage for personal and advertising injury caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict personal and advertising injury. GreenTech’s allegations in support of its theory of recovery do not necessarily require knowledge, and it is possible that if GreenTech recovered on this claim, its recovery may or may not be based on FCGFI’s knowledge required for this exclusion to apply. State Farm thus has a duty to defend the claims in count I. On the other hand, the court cannot say as a matter of law whether State Farm will or will not have an obligation of indemnification with respect to this claim.

In count III, GreenTech alleges the tort of intentional interference with business and prospective business relations, as the direct and express result of the articles published by FCGFI. The issue is whether these allegations allege injury caused by or at the direction of FCGFI with the knowledge that the act would violate the rights of another and would inflict personal and advertising injury. It is not at all clear how the language of this exclusion applies or is to be applied to the allegations of count III. In any event, there is no clear allegation in count III that FDCFI caused the alleged injury “with knowledge” that its “act,” presumably the articles posted on its website, would violate GreenTech’s “rights.” Assuming FCGFI would have had such knowledge had it known of the articles’ falsity, there is no allegation in count III that FCGFI knew that the articles were false, nor can such an allegation be necessarily inferred from the allegations that were made. The court concludes Para. 17(a) does not “clearly” and “unambiguously” apply to count III and State Farm has a duty to defend.

An additional exclusion cited by the carrier applies to an insured “whose business is publishing.” The policy does not define the term “publishing” or the phrase “an insured whose business is … publishing.” Putting aside content, FCGFI’s “publishing” activities would appear to be no different than that of any organization that posts informational content on a website it maintains to promote or accomplish its underlying organizational purposes or objectives. It is true that, given FCGFI’s purpose, the nature of that content posted on its website may have greater potential for generating defamation claims and more claims under the policy than other organizations; but the content of its postings does not relate to whether its business “is” publishing. State Farm’s exclusion fails to place an insured on fair notice as to when and under what circumstances the exclusion applies to defamation or other claims that are otherwise covered, but which arise out of an insured’s postings on its website.

Finding no other exclusions applicable, the court grants summary judgment to FCGFI as to State Farm’s duty to defend.

State Farm Fire & Casualty Co. v. Franklin Center for Gov’t and Public Integrity (Trenga) No. 1:13cv957, April 4, 2014; USDC at Alexandria, Va. VLW 014-3-195, 15 pp.