Nationwide Mutual Insurance Co. v. Gum Tree Prop. Management, LLC

Finding that the specific allegations made in a plaintiff’s civil petition filed against an insurance policy holder did not meet the specifications of the insured’s policy, the U.S. Court of Appeals for the Fifth Circuit upheld a declaratory summary judgment of no duty to defend in favor of the insurance provider under Mississippi Law.  Nationwide Mutual Insurance Co. v. Gum Tree Prop. Management, LLC, Case No. 14-60302 (5th Cir., Jan. 14, 2015) (per curiam).

At the district court, the insurance company, Nationwide, sought a declaratory judgment of no duty to defend after corporate policy holders, Gum Tree and Southern Group, were sued by a competitor after one of the policy holders hired a competitor’s ex-employee.  The competitor’s ex-employee had signed a non-compete agreement effective for one year and a confidential non-disclosure agreement.  The competitor alleged that the ex-employee wrongly used the competitor’s information to solicit customers for the policy holders.  Based on those facts, the competitor asserted 13 causes of action against the policy holders.  The policy holders requested that the insurance company defend them in their lawsuit under nine separate policies.  For purposes of the case, the 5th Circuit found that the relevant provisions of the individual policies were substantially the same.

Reviewing the grant of summary judgment de novo, the 5th Circuit compared the allegations contained in the competitor’s petition to the text of the insurance policies to determine whether the duty to defend had been triggered.  The 5th Circuit rejected the policy holders’ assertion that a denial of an allegation of intentional conduct made in the competitor’s petition established a “true fact” sufficient to trigger the duty to defend.  Instead, the 5th Circuit held that a denial of an allegation was only an assertion.

The 5th Circuit similarly rejected the policy holders’ arguments that the insurance company’s duty to defend was triggered by allegations of personal injury.  Each of the policies provided coverage for “personal injury” or “personal and advertising injury” as those terms were further defined in the policy.  Per the relevant policies, “personal injury” only occurred in instances where a plaintiff alleges either disparagement or invasion of privacy.  Reviewing common dictionary definitions of those terms, the 5th Circuit found that there was no specific allegation by the competitor of either occurrence, and further, that the competitor was not a “person” within the meaning of the policy.  As to the policies covering allegations of “personal and advertising injury,” the 5th Circuit also found that the district court had properly concluded that there was no demonstrable connection between any advertising and an alleged advertising injury.  Instead, the 5th Circuit concluded that alleged injury resulted from the alleged misappropriation of trade secrets and that the tort claim could have been brought in the absence of any advertising.