Why it matters

A commercial general liability policy included coverage for intentional torts such as defamation, the Tenth U.S. Circuit Court of Appeals determined, ordering an insurer to chip in for the defense costs for a surgeon accused of defamation. Finding the insurer’s argument that coverage for intentional torts violates public policy unpersuasive, the federal appellate panel said the insurer messed up. The policy at issue explicitly precluded coverage for intentional conduct resulting in bodily injury or property damage, the three-judge panel noted – but failed to exclude intentional wrongdoing resulting in personal injury.

Detailed Discussion

A dispute between two Oklahoma cardiothoracic surgeons devolved into an insurance dispute between two insurers. Dr. Arshad Yousuf filed suit against Dr. George Cohlmia and his employer, Cardiovascular Surgical Specialists Corp. (CVSS), alleging that Cohlmia made a series of false statements to the local media and in a letter to a local hospital where both doctors had privileges. Yousuf sought damages for defamation and tortious interference with business relations or contract, among other causes of action.

CVSS sought coverage under two commercial general liability policies with American National Property and Casualty Company (ANPAC) and Physicians Liability Insurance Company (PLICO) that named Cohlmia as an additional insured. PLICO defended the suit under a reservation of rights; ANPAC refused to participate in the defense.

A jury awarded Yousuf $5 million. Although the verdict was later reversed on appeal, the two insurers continued to argue over responsibility for defense costs. While PLICO sought a contribution, ANPAC asserted that it had no duty to defend Cohlmia because its policy excluded coverage for intentional acts.

The panel focused on the definition of “personal injury” in the ANPAC policy, which included “the publication or utterance of a libel or slander or of other defamatory or disparaging material, or a publication or utterance in violation of an individual’s right of privacy,” which it found fit the allegations in the underlying complaint.

The definition “is broad enough to encompass the tort of intentional interference with business relations,” the court said.

Public policy considerations did not lead the Tenth Circuit to a different conclusion. The policy itself “specifically provide[s] coverage, in no uncertain terms, for injuries arising from conduct that constitutes several intentional torts,” the court wrote, and while ANPAC’s policy precluded coverage for other intentional conduct (resulting in bodily injury or property damage), “they do not exclude intentional wrongdoing that results in ‘personal injury.’ ”

The court also distinguished authority in support of the insurer’s position as addressing the indemnification of an insured for intentional tortious conduct. The cases “do not stand for the proposition that it is against public policy for an insurer to defend an insured against allegations of intentional acts when its policy specifically provides coverage,” the panel said. “In contrast to a general rule condemning indemnification for intentional wrongdoing, the case law addressing an insurer’s duty to defend makes clear that it is not against public policy to defend an insured against claims for intentional or reckless conduct.”

Even assuming a general rule against providing a defense to an insured for intentional conduct existed, “the instant matter presents a strong case for allowing an exception to that general rule,” the panel added. The policy specifically provided for such coverage “and there is no evidence that the availability of insurance coverage induced Dr. Cohlmia to engage in intentional misconduct. Furthermore, the interest in compensating an innocent third party, Dr. Yousuf, outweighs the concern that Dr. Cohlmia would unjustly benefit from this coverage.”

ANPAC breached its contract by electing not to participate in the defense of Cohlmia, the court concluded, and PLICO was allowed to step into his shoes to recover one-half of its defense costs under a theory of subrogation.

To read the decision in Yousuf v. Cohlmia, click here.