Defamation Suit Against Insured Does Not Allege “Occurrence” Under Homeowners Policy

The California Court of Appeal has held that a defamation suit against an insured did not suggest the possibility of an “occurrence,” or “accident,” within the meaning of a standard homeowners policy. ( Stellar v. State Farm General Insurance Company (2007) 69 Cal.Rptr.3d 350)

Facts

Richard Stellar filed a complaint against his brother, Philip, alleging causes of action for defamation, intentional infliction of emotional distress and intentional interference with contract. The allegations related to written and verbal statements made by Philip during the sale of their mother’s home.

Philip cross-complained against Richard and Richard’s son, Miles, alleging causes of action for slander per se, libel and intentional infliction of emotional distress. In his cross-complaint, Philip essentially alleged that Richard and Miles had told various third parties that Philip was a child molester and a drug user. Philip further alleged that Richard and Miles had made these statements maliciously, willfully and with the intent to harm Philip. Philip alleged that, as a result of Richard’s and Miles’ statements, Philip suffered damage to his reputation, shame and mortification, along with emotional and physical distress.

Richard and Miles tendered defense of the cross-complaint to Richard’s homeowners insurer, State Farm General Insurance Company. State Farm declined the tender the on grounds that Philip’s cross-complaint against Richard and Miles failed to allege either an “occurrence” or “bodily injury” as those terms were defined in the State Farm policy.

Richard and Miles later filed a suit against State Farm for breach of contract and bad faith, alleging that State Farm had wrongfully failed to defend them against Philip’s cross-complaint in the underlying litigation. However, the trial court ruled that Philip’s cross-complaint against Richard and Miles was not potentially covered under the State Farm homeowners policy, and thus entered summary judgment in favor of State Farm.

Holding

The Court of Appeal upheld the summary judgment in favor of State Farm. In support of its holding, the Court of Appeal relied on Allstate Insurance Co. v. LaPore (N.D. Cal. 1988) 762 F.Supp. 268, in which a federal district court held since defamation is an intentional tort that requires proof of intent to publish, an insured’s alleged act of defamation is not an “occurrence,” or “accident.” The Court of Appeal held that where, as here, the claimant alleges only that an insured acted willfully and intentionally, and the insured presents no evidence that the acts were negligent or unintentional, there is no “occurrence,” or “accident.” Since it was clear that there was no “occurrence,” the Court of Appeal declined to address whether the Philip’s claims against Richard and Miles in the underlying action constituted claims for “bodily injury” within the meaning of the State Farm policy.

Comment

Most homeowners policies limit coverage to “bodily injury” or “property damage” caused by an “occurrence,” which is defined as an “accident.” Thus, since it is difficult to see how one can “accidentally” utter an allegedly defamatory statement, the typical homeowners insurer should generally have no duty to defend an insured in a defamation action.

Keep in mind, however, that a few homeowners policies, and many personal umbrella policies, will also provide coverage for specified “personal injury” offenses, including “defamation.”  Generally, such “personal injury” coverage is not dependent on an “accident.” Thus, a homeowners insurer or personal umbrella insurer that has issued a policy providing “personal injury” coverage might in fact have a duty to defend an insured who is sued for defamation.