Wade Clark Mulcahy LLP

<p style="text-align: justify;">While the Covid-19 pandemic remains the focus of the insurance industry, with potentially billions of dollars at stake, other litigation continues to shape the coverage landscape.  One of these interesting cases is <em><a href="https://www.wcmlaw.com/wp-content/uploads/2020/07/Time-Inc.-et.-al-v.-Mutual-Insurance-Company-Limited.pdf">Time, Inc., et. al v. Mutual Insurance Company Limited</a></em>, where the Southern District of New York is set to decide whether Mutual Insurance Company is liable for over $7 million in defense and indemnity costs incurred by its insured, Time, Inc.  In 2016, Time was sued in a class action alleging that Time violated California consumer protection laws for, in part, failing to disclose that initial, discounted subscriptions were subject to automatic renewals at higher prices.  Time eventually settled these claims and now seeks indemnification for the $4.98 million settlement as well as $2.18 million in defense costs.  After discovery, the parties recently submitted their motions for summary judgment.</p>
<p style="text-align: justify;">Mutual’s Global Media Liability Policy issued to Time required that Mutual indemnify Time for damages arising out of “negligence, including any actual or alleged error, omission, misstatement, or misleading statement of the Insured.”  The policy also contained an Unfair Business Practices Exclusion and a False Advertising Exclusion.  As an “indemnity-only” policy, Mutual only has a duty to reimburse covered Loss and Defense Expenses, but not a duty to defend.  Thus, unlike regular “duty to defend” cases, the issue is not whether the allegations in the underlying complaint alleged conduct that suggested a “reasonable possibility” of coverage, but whether the conduct was actually covered by the policy.</p>
<p style="text-align: justify;">Nonetheless, the focus of the briefs is on the allegations in the class action complaints, with the issue being whether Time acted negligently, which would result in coverage, or whether Time’s actions were purely intentional, which would result in no coverage.  The question of whether it can be adduced that Time acted intentionally based simply on the pleadings is an interesting one.  Normally, if a cause of action can be proven without intentional conduct (a common fact pattern involving Lanham Act violations), then an insurer cannot escape a duty to defend based on an intentional exclusion.  However, even in these cases, an insurer need not cover the claim if the facts alleged in the underlying pleading describe exclusively intentional conduct.  Mutual thus asserts that the facts <em>as plead</em> make it impossible for Time to have been found to have acted negligently.  The Court will thus need to ascertain whether the allegations, which include Time’s involvement in investigations brought by 23 state Attorneys General and that Time’s conduct “was undertaken … knowingly, willfully, and with oppression, fraud, and/or malice” can still include negligent conduct.</p>
<p style="text-align: justify;">Mutual also alleges that the Unfair Business Practices and False Advertising Exclusions apply because the claims at issue were brought under statutes forbidding unfair business practices based on allegations that Time and Synapse had engaged in false or deceptive advertising about their own products or services.  In response, Time notes that the Unfair Business Practices Exclusion must be limited by the more specific terms within that exclusion, such as “anti-trust,” “racketeering,” and “restraint of trade,” which are not alleged by the underlying plaintiffs.  Time also avers that False Advertising exclusion applies only to Time’s “intentional” conduct.  Thus, for the same reasons there is coverage in the first instance, Time argues that this exclusion does not apply.  It remains to be seen how the court will hash through these issues, but the case presents interesting questions of law to be decided.</p>
<p style="text-align: justify;">Thanks to Douglas Giombarrese for his contribution to this post.  Please email <a href="mailto:gcoats@wcmlaw.com">Georgia Coats</a> with any questions.</p>