Exclusion of Defamatory Or Disparaging Statements Made With Knowledge Of Their Falsity Effective
Post 5007
Liability Insurance is Limited to Unintentional Conduct
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The main issue presented to the Tenth Circuit Court of Appeals was whether the insurance policies’ exclusions, which deny coverage for defamatory or disparaging statements made with knowledge of their falsity, apply. The District Court held that the exclusions do apply, as the underlying complaint alleged that the insureds knowingly published false statements.
In New Hampshire Insurance Company; National Union Fire Insurance Company Of Pittsburgh v. TSG Ski & Golf, LLC; The Peaks Owners Association, Inc.; Peak Hotel, LLC; H. Curtis Brunjes, No. 23-1248, United States Court of Appeals, Tenth Circuit (February 24, 2025) the Tenth Circuit affirmed.
BACKGROUND
TSG Ski & Golf, LLC (TSG) was insured under commercial general-liability insurance policies issued by New Hampshire Insurance Company and National Union Fire Insurance Company of Pittsburgh. The policies provided coverage for personal and advertising injury but excluded coverage for injury arising from the publication of material known to be false.
In late 2018 the TSG Parties began implementing a three-part scheme to coerce the Underlying Plaintiffs into paying annual assessments that the TSG Parties knew were not owed. First, the TSG Parties commissioned a “sham” audit of the annual assessments paid by Telluride between 2009 and mid-2015. They manipulated the audit to overlook payments made by Telluride through the True-Up Process, guaranteeing that TSG’s accountant would erroneously conclude that Telluride had failed to pay any assessments during the relevant time period.
The underlying lawsuit was filed by Telluride Resort & Spa, LLC and its principals against TSG and other parties, alleging that they knowingly published false statements to coerce the plaintiffs into paying assessments that were not owed. The jury returned a verdict for the Underlying Plaintiffs on all claims that proceeded to trial. It awarded the Underlying Plaintiffs $225,000 in compensatory damages but declined to award punitive damages. The court awarded the Underlying Plaintiffs $2,298,225 in statutory attorney fees and $328,510.53 in costs.
THE ISSUES AT THE TENTH CIRCUIT
The insurers sought a declaratory judgment that they had no duty to defend or indemnify the TSG parties in the underlying lawsuit. The District Court granted summary judgment in favor of the insurers, concluding that the knowledge-of-falsity exclusions precluded coverage.
The TSG parties appealed.
DISCUSSION
An insurer need not defend its insured when an exclusion in the insurance policy precludes coverage. To avoid the duty to defend, the insurer must establish that the allegations in the complaint are solely and entirely within the exclusions in the insurance policy; that is, that there is no factual or legal basis on which the insurer might eventually owe coverage.
Because the knowledge-of-falsity exclusions precluded coverage, the Insurers had no duty to defend the TSG Parties in the underlying lawsuit.
The duty to indemnify relates to the insurer’s duty to satisfy a judgment entered against the insured. Unlike the duty to defend, the duty to indemnify arises only when the policy actually covers the harm and typically cannot be determined until the resolution of the underlying claims.
At trial the uncontroverted testimony of TSG and POA officers (all of whom sat on the POA board and approved the debt-collection letter) established that the TSG Parties knew the statements in the debt-collection letter were false when the letter was published. The testimony of multiple witnesses established that the liability imposed against the TSG Parties was precluded from indemnification under the knowledge-of-falsity exclusions. The Tenth Circuit concluded, therefore, that the Insurers owed no duty to indemnify the TSG Parties for their losses in the underlying lawsuit.
BAD FAITH
It is settled law in Colorado that a bad faith claim must fail if coverage was properly denied and the plaintiff’s only claimed damages flowed from the denial of coverage.
The Tenth Circuit affirmed the district court’s decision, holding that the insurers had no duty to defend or indemnify the TSG parties. The district court’s grant of summary judgment on all claims was affirmed.
ZALMA OPINION
Liability insurance is designed to protect the persons or entities insured against claims or suits that they cause damage to third parties from an accidental or fortuitous cause. Since intentional acts are not accidental nor fortuitous there can never be coverage for defense or indemnity of intentional acts. The insurers did not rely on lack of fortuity by including in the policy wording a clear and unambiguous exclusion for claims of defamation if the insured had knowledge-of-the-falsity of the statements when made and were deprived of defense or indemnity.
(c) 2025 Barry Zalma & ClaimSchool, Inc.
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Post 5010
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A jury convicted Defendant Jeffrey Young-Bey on twelve counts related to a mortgage-fraud scheme he perpetrated in the District of Columbia. Young-Bey moved for a judgment of acquittal and for a new trial. The USDC, in United States Of America v. Jeffrey M. Young-Bey, Criminal Action No. 21-661 (CKK), United States District Court, District of Columbia (February 28, 2025) found the verdict was based on convincing evidence and denied his motion.
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Post 5009
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Lakeside Evangelical Congregational Church sued Church Mutual Insurance Company (CMIC), for Breach of Contract and for Bad Faith stemming from CMIC’s alleged failure to provide insurance payments for roof damage caused by hail. CMIC moved to dismiss Count II (the Bad Faith count of its suit).
In Lakeside Evangelical Congregational Church v. Church Mutual Insurance Company, No. 2:24-CV-00859-MJH, United States District Court, W.D. Pennsylvania, Pittsburgh (March 3, 2025) the District Court applied the rule that an insurer relying on an expert report is not acting in bad faith when it denies a claim.
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Post 5008
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In Tyanna Dodson, Doctor of Chiropractic v. ExamWorks, L.L.C., No. 24-50248, the United States Court of Appeals, Fifth Circuit (on February 28, 2025) Dodson contended that the IME's she conducted to help insurers defeat attempted insurance fraud were billed by ExamWorks fraudulently overcharging he insurer clients. She sued EamWorks for half of the excessive billing and damages because she faced discipline and charges of ...
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Post 5003
Posted on February 25, 2025 by Barry Zalma
See the full video at and at
Adjusting liability insurance claims requires skill, patience, knowledge of insurance, basic knowledge of tort and contract law, and knowledge and experience as an investigator. The liability claims adjuster is faced with the following basic obligations:
- To understand the law of torts as applied in the state where the adjuster works.
- To understand the law of contracts as applied in the state where the adjuster works.
- To understand sufficient medical terminology to be able to evaluate claims of injury.
- To understand the costs to repair or replace damaged real or personal property.
- To understand how to read and apply the terms and conditions of a liability insurance policy.
- To understand how to thoroughly investigate all claims assigned.
- To conduct an investigation of every claim ...
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Insurance fraud continually takes more money each year than it did the last from the insurance buying public. There is no certain number. No one knows the amount that is taken by insurance fraud because most attempts at insurance fraud succeed. Estimates of the extent of insurance fraud in the United States range from $87 billion to more than $300 billion every year. The only certainty is that it is a serious crime that bleeds the insurance industry sufficiently to have states compel insurers to create special investigative units (SIU’s) to investigate, deter and defeat insurance fraud to assist the state in its efforts to prosecute the crime.
Insurers and government backed pseudo-insurers can only estimate the extent they lose to fraudulent claims. Lack of sufficient investigation and prosecution of insurance ...
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Deterring Insurance Fraud
A New Book on Insurance Fraud and How the DOJ Deters and Defeats Insurance Fraud.
INSURANCE FRAUD IS EPIDEMIC
Insurance fraud continually takes more money each year than it did the last from the insurance buying public. There is no certain number. No one knows the amount that is taken by insurance fraud because most attempts at insurance fraud succeed. Estimates of the extent of insurance fraud in the United States range from $87 billion to more than $300 billion every year. The only certainty is that it is a serious crime that bleeds the insurance industry sufficiently to have states compel insurers to create special investigative units (SIU’s) to investigate, deter and defeat insurance fraud to assist the state in its efforts to prosecute the crime.
Insurers and government backed pseudo-insurers can only estimate the extent they lose to fraudulent claims. Lack of sufficient investigation and prosecution of insurance ...
