Summary
reversing that portion of the decision below which held that the insured's activity was a business pursuit
Summary of this case from Ploen v. Aetna Casualty & Surety Co.Opinion
Argued February 10, 1976
Decided April 6, 1976
Appeal from the Appellate Division of the Supreme Court in the Second Judicial Department, ALBERT S. McGROVER, J.
Joseph Delman for appellant.
John M. Cunneen for respondent.
MEMORANDUM. The order of the Appellate Division should be affirmed, without costs.
Alexander Shapiro, president and stockholder of a plumbing supply business, became, for investment purposes, a limited partner in a real estate syndicate. Suit was brought against him by the two general partners alleging a cause of action in slander. The complaint in that action set forth allegations that Shapiro maliciously spoke of the plaintiffs to one or more of the limited partners in false and defamatory words, asserting that the plaintiffs were "phoneying and doctoring the books and records of the Irving Place Realty Co., that they were flim flamming, cheating and stealing from the investors of the partnership" and, that the words so spoken were false and defamatory, were known to said defendant to be false and defamatory and were spoken willfully and maliciously with intent to injure and damage the plaintiffs and their good name, reputation and credit.
Shapiro's insurer, Glens Falls Insurance Company, was called upon to defend, but refused, asserting that the personal excess liability policy it issued did not apply to claims arising out of business pursuits. Shapiro then commenced this action seeking, inter alia, a declaration of the insurer's obligation to defend and to pay any judgment arising out of the slander action. In its answer the insurer asserted that the complaint failed to state a cause of action, repeated its "business pursuits" defense and, in addition, alleged that the policy's amendatory endorsement eliminated coverage for personal injury caused "intentionally by or at the direction of the Insured."
While the "business pursuits" exclusion is not applicable and thus could not serve to defeat appellant's claim, said claim must fail under the intentional torts exclusion. Although the cover page of the policy indicates in its General Summary of Coverage that "[s]uch perils as libel, slander, personal injury and contractual liability are included", it is also there stated that the summary "is not your contract, and it does not grant coverage. These benefits are subject to conditions and exclusions which are clearly stated in the contract."
Section 2.2 of the policy provides that respondent "will indemnify the Insured * * * for all sums which the Insured shall become legally obligated to pay as damages, because of personal injury * * * caused by such an occurrence". In its definitional section "occurrence" is stated to mean "an accident, including injurious exposure to conditions, which results, during the policy period, in personal injury * * * neither expected nor intended from the standpoint of the Insured." Although "personal injury" is defined to include "libel, slander, defamation of character or reputation, invasion of rights or privacy, humiliation or mental anguish", an endorsement to the policy specifically provides that with respect to the definition of "personal injury", "such insurance as is afforded by the policy does not apply * * * to any personal injury * * * caused intentionally by or at the direction of the Insured."
Since appellant seeks coverage for an action in which it was alleged that he spoke falsely, willfully and maliciously with intent to injure, the exclusionary endorsement applies and respondent owes no duty to defend therein or to pay a judgment arising therefrom.
The appellant, Alexander Shapiro, holds a personal excess liability policy which is represented to provide excess coverage for various perils including libel and slander as well as personal and contractual liability. This action was instituted by Shapiro after the respondent disclaimed the obligation to defend him in a defamation action. Shapiro contends that the insurance company is obligated to defend him since the policy extends to actions for slander. Appellant points to section 5.9 of the policy which defines personal injury as extending coverage to various intentional torts including specifically "libel, slander, defamation of character or reputation." In addition, policy section 2.3 requires the insurance company to defend any suit against the insured within the coverage of the policy "even if any of the allegations of such suit are groundless, false or fraudulent."
The respondent disclaims any duty to defend arguing that the policy does not extend coverage to intentional torts. They base their position on the inclusion of a standard amendatory endorsement which excludes those personal injuries "caused intentionally by or at the direction of the Insured." In light of familiar rules of construction and the principle that the duty to defend is greater than the duty to pay, it is my view that the respondent's position is devoid of merit and since the insurance company has failed to meet its burden of proof the matter should be reversed.
The initial focus here should be whether or not the exclusion for personal injuries caused intentionally will relieve the insurance company of its duty to defend in an action for slander, despite the specific inclusion of slander in the definition of personal injuries covered.
According to settled principles of construction the policy and the endorsement are accorded equal weight and should be construed in a harmonious manner (see Thompson-Starrett Co. v American Mut. Liab. Ins. Co., 276 N.Y. 266; Birnbaum v Jamestown Mut. Ins. Co., 298 N.Y. 305; see, also, 13A Appleman, Insurance Law and Practice, § 7537). However, where an ambiguity exists the language of the entire contract should be construed against the insurer whose experts on insurance draftsmanship and attorneys selected the language and should have clearly excluded the risk if there was any doubt. Here the policy includes an extensive explicit list of intentional torts within its coverage, while the endorsement excludes those injuries caused intentionally. Clearly these provisions are somewhat inconsistent and unclear. Therefore it is incumbent on the court to resolve the ambiguity against the insurer whose experts have drafted the policy. Consequently the respondent's contention that coverage for all intentional torts is avoided by the endorsement is patently untenable. Certainly, the intentional torts listed are covered by the policy; what is uncertain is the effect, if any, of the exclusionary provision of the endorsement.
In my view, the endorsement excluding injuries caused intentionally should be construed to refer to those acts which are intentional in the sense that the insured deliberately desired to inflict injury, as opposed to merely desiring the natural consequences of his volitional acts. Although Shapiro may have spoken the allegedly defamatory words intentionally, the exclusion would apply only if the insurance company can establish that he spoke with the intent to commit a tort. The burden of proving that a particular incident and claim fall within the exclusions of a policy rests with the party claiming the exclusion (International Paper Co. v Continental Cas. Co., 35 N.Y.2d 322). If an injured party states facts which bring the injury within the coverage, the policy requires the insurer to defend irrespective of the insured's ultimate liability, provided there is no specific exclusion. Thus in International Paper (supra), we held that a defendant insurer, which issued a general liability policy excluding injuries covered by workmen's compensation, was obligated to defend a suit in negligence brought against its insured by the insured's employee for injuries ultimately found to have arisen out of the employment relationship and hence excluded. The pivotal question in that case was whether or not the negligence complaint alleged facts sufficient on its face to raise the policy exclusion. We ruled that it did not. We distinguished Lionel Freedman, Inc. v Glens Falls Ins. Co. ( 27 N.Y.2d 364) which involved an action patently within a specific exclusion for injuries incurred in the use of the elevator. The International Paper court went on to say that this type of liability insurance may also be called (p 326) "litigation insurance" and requires the insurance company to defend against even those complaints which may be based on debatable or untenable theories. Only where the court determines that no basis for recovery within the policy is stated may it sustain an insurance company's refusal to defend. Here the respondent is obligated to defend because there is nothing aside from the bare allegation of slander to establish whether or not the tort was committed intentionally, or for that matter, whether the slander action is totally groundless. Thus the sound reasoning of International Paper (supra) compels a reversal in this case.
Accordingly, I dissent and would reverse.
Chief Judge BREITEL and Judges JASEN, GABRIELLI and JONES concur in memorandum; Judge WACHTLER dissents and votes to reverse in a separate opinion in which Judges FUCHSBERG and COOKE concur.
Order affirmed.