Catch 22- defense and indemnity of fraudulent claims (PA)

The United States District Court for the Eastern District of Pennsylvania recently found that an insurer had a duty to defend but, not a duty to indemnify in a matter involving a claims made policy. The issue was whether, prior to the inception of a policy of insurance, the insured had reason to know that based on its actions a claim could reasonably be anticipated. In the underlying case, the plaintiff alleged that the insured, prior to the inception of the insured’s insurance policy, emailed derogatory and damaging confidential information about plaintiff to a third party.

The insured timely notified the insurer and averred that it did not furnish confidential or damaging information, and that the emails referenced were forged. After defending the insured for over a year, the insurer initiated a declaratory judgment because the alleged conduct occurred prior to the effective date of the policy, and the insured knew of should have known that it would be the basis of a claim. Such knowledge violates an exclusionary provision which disclaims coverage for claims arising from any act or omission the insured had a basis to believe, prior to the policy inception, might reasonably be expected to be the basis of a claim.

The court found that the mere allegation that the insured sent emails disclosing confidential information does not establish that the insured had knowledge that something it did could give rise to a claim against it. Moreover, the policy states that it will provide coverage even for fraudulent claims, so it must do so until the final adjudication of the underlying action. Unfortunately, the only way to determine whether the insured had the requisite knowledge is if the finder of fact determines that the insured disseminated the information. If so, the claim would not be covered under the policy and the insurer would not have to indemnify the insured. Alternatively, if the finder of fact determines that the insured is not liable in the underlying action, there would be nothing to indemnify.

To disclaim or not to disclaim, that is the question…especially when it comes to fraudulent claims remember that when disclaiming on the basis of prior knowledge, an insurer should have some indication, other than the allegations, that speaks to that knowledge. Thanks to Tiffany Davis for his contribution.  Please email Brian Gibbons with any questions.

Possible Foul Called on Syracuse Basketball Coach (NY)

The long running saga of former Syracuse associate men’s basketball coach Bernie Fine continues. According to two former “ball boys” of the team, Fine sexually abused them in the 1980s.  Syracuse stated that it investigated those claims in 2005 but was unable to corroborate them.

In 2011, plaintiffs’ claim became public when ESPN reported on the allegations against Fine. The ESPN story was apparently triggered by the scandal that exploded about the alleged sexual abuse of minors by former Penn State University assistant football coach Jerry Sandusky.  In response to the ESPN story, Syracuse Men’s Head Basketball Coach Jim Boeheim made statements questioning the truthfulness of plaintiffs’ claims of sexual abuse.  In some of his stronger statements, he called the accusers of Fine liars and stated that their allegations were financially motivated.  In response, the plaintiffs commenced a defamation action against Boeheim and Syracuse University claiming that those statements were false and defamatory, causing them economic, emotional and reputational damages.

Like their vaunted and aggressive 2-3 zone defense, Boeheim and the University filed a pre-motion to dismiss arguing that the statements were only “opinions,” which are a form of protected speech. The Syracuse team prevailed in the preliminary rounds but lost in the finals before the Court of Appeals, New York’s highest court. In analyzing the statements, the Court held that they could be considered “factual assertions,” implying that the pair had lied, for financial gain, and had previously made similar statements for the same reason.  The case continues, likely with a full exploration not only of the basis for the statements made by Boeheim but of the truthfulness of the allegations made the plaintiffs and the extent of their damages.

Syracuse may have lost in this pre-season [pre-answer] proceeding but we predict that the regular season [litigation] will be long, costly and exhausting for both sides.

If you have any questions or comments, please email Paul at pclark@wcmlaw.com.

Court Finds Nothing Wrong With: “Not that there’s anything wrong with that,” and Kramer’s Defamation Suit is Dismissed.

Fred Stoller, a former Seinfeld writer and sometimes guest star, wrote a memoir about “The Life of a Perennial TV Guest Star.”  In one chapter, Stoller described an experience on “Kramer Reality Tours,” which provides bus tours of New York City locations portrayed in Seinfeld.  Stoller wrote that while on a tour in Greenwich Village, he heard a tour employee scream, “Not that there’s anything wrong with that,” a direct reference to a line used on the Seinfeld show, referring to members of the gay community.

In Kramer v. Skyhorse Publishing, Inc., Kenny Kramer and Kramer Reality Tours sued Stoller for defamation alleging that the chapter was false and that it accused plaintiffs of taunting the gay community.  The plaintiffs claimed that the chapter damaged their business reputation.  The court however, found that in the chapter, Stoller described the “shtick” where the employees called out several catch phrases from the show.  Although Stoller described the entire exercise as annoying, he did not depict any pointing or “taunting” at members of the gay community.  Accordingly, the court found that when taken in context of the complete chapter, the inference that Kramer was homophobic was not reasonable, and dismissed the complaint.

When it comes to defamation, context is key.  Therefore, when analyzing a defamation claim, it is important to review the entire background (and perhaps watch some Seinfeld episodes), so that the claim can be properly defended.

For questions about this post contact cfuchs@wcmlaw.com.

 

Disgruntled Client Free to Disparage Attorney?

By letter, Gutterman fired Attorney Frechtman, alleging a “belief” that Frechtman had failed to act in Gutterman’s best interest and had committed legal malpractice.  Frechtman, a 60 year practitioner, took offense and sued Gutterman for defamation.  The trial court dismissed the complaint of the unhappy lawyer.  But Frechtman, pro se, appealed the dismissal to the First Department.

Parsing the dismissal letter, the First Department found the alleged defamatory statements constituted “opinions.”  But the challenged statements, the Court found, were also protected by a qualified privilege (i.e. the right of a client to communicate freely with counsel about matter of common interest).  See, Frechtman v. Gutterman (1st Dept., January 23, 2014).

Recently, in Roth v. Tarter Krinsky et al, WCM beat back an attorney’s defamation claim against his former law firm.  Roth alleged that certain defamatory statements had been made about him to attorneys within the firm.  New York City’s Civil Court found that Roth’s pleadings were not sufficiently specific and that the statements were protected by the common interest privilege. Attorneys and partners, the court reasoned, are free to discuss the conduct of lawyers at the firm – – unless the discussion is motivated by pure malice.  The court found that Roth’s sweeping allegation of malice were insufficient to overcome the qualified privilege. Roth’s complaint was dismissed without leave to replead.

Thanks to Alison Weintraub for her contribution to this post.  If you have any questions about defamation and slander lawsuits, please email Dennis Wade at dwade@wcmlaw.com.

 

Calling Someone a “Florida Lawyer” is Not Defamatory.

In Sabharwal & Finkel v. Sorrell, the defendant was interviewed about an ongoing lawsuit.  He made several remarks about the plaintiff’s lawyers in that case.  Some of the statements were, “the two-lawyer firm is based in Florida,” they “specialize in restaurant law,” and they are “lawyers working on a contingency basis.”  In its analysis of the statements, the court noted that there are many respected law firms that are based in Florida, that specialize in restaurant law, and that work on a contingency basis.  As such, even if those statements were false, they were not defamatory.  We’re sure our colleagues in Florida were glad to hear that…

When it comes to defamation, statements that may rub someone the wrong way are not defamatory simply because the person allegedly defamed did not like what was said about them.  Rather, “the statement must be made with reference to a matter of significance and importance for that purpose, rather than a more general reflection upon the plaintiff’s character or qualities.”  When defending a defamation action, it is important to look beyond the truth or falsity of the statements, and delve into the context and effect the statements had on the general public.  Oftentimes, a plaintiff will lack the necessary elements to sustain their claim, and a motion to dismiss can be made.

For more information about this post contact cfuchs@wcmlaw.com