July 11, 2022 by Tom Roberts, Esq.
Insurance Liability & Duty to Defend
Defamation is a personal injury — any assertion to the contrary is frivolous.
Under Virginia law, knowing defamation subsumes negligent defamation.
If a complaint, however ambiguous, may be read as premising liability on alternative grounds, and either ground states liability potentially or arguably covered by the policy, the insured is entitled to a defense. Donnelly v. Transp. Ins. Co., 589 F.2d 761, 767 (4th Cir. 1978). Accordingly, an insurer is excused from its duty to defend the insured only where the complaint against the insured clearly demonstrates no basis upon which the insurer could be required to indemnify the insured under the policy. Reisen v. Aetna Life and Casualty Co., 225 Va. 327, 302 S.E.2d 529, 531 (Va. 1983).Fuisz v. Selective Ins. Co. of Am., 61 F.3d 238, 242 (4th Cir. 1995) Many policies exclude coverage for personal injury “[a]rising out of oral, written or electronic publication of material, if done by or at the direction of an ‘insured’ with knowledge of its falsity.” Even if the defendant escapes liability for defaming the plaintiff with actual knowledge, the defendant potentially still faces liability for defaming Plaintiff for conscious disregard of the truth—a standard more akin to recklessness or negligence. See Travelers Cas. & Sur. Co. v. Schur, 146 F. Supp. 3d 795, 801-02 (E.D. Va. 2015) A jury in a Circuit Court in Virginia proceeding will be instructed on Defendant’s knowing defamation or Defendant’s reckless or negligent defamation, subjecting Defendant to alternative theories of liability, in accordance with the Complaint filed in the case, many which specifically includes a negligence claim. See Fuisz v. Selective Ins. Co. of Am., 61 F.3d 238, 244 (4th Cir. 1995) (“If the evidence at trial fails to establish that Fuisz intentionally harmed Terex, the complaint permits Terex nonetheless to prevail on its claims by proving Fuisz . . . acted with reckless disregard for the falsity of his statements.”). Accordingly, because Defendant potentially faces liability on alternative theories of defamation—at least one of which would fall within the risk covered by the policy—the knowledge of falsity exclusion will not clearly and unambiguously apply. See CACI Int’l, Inc., 566 F.3d at 155; Va. Elec. & Power Co., 252 Va. at 265.
Duty of Good Faith by Insurance Company
In the often cited case of A & E Supply Co. v. Nationwide Mut. Fire Ins. Co., 798 F.2d 669, 676 (4th Cir. 1986), the court stated that all contracting parties owe each other the duty to act in good faith in the performance of the contract. Id. (citing Restatement (Second) of Contracts § 205 (1981)). Whether a party acted in good faith or bad faith is therefore a contractual issue. In addition to the contract, Virginia law provides a remedy when an insurance company acts in bad faith to its insured resulting in damage or excess liability. This remedy, provided by Va Code § 38.2-807, is predicated on the insurance company’s being liable on the underlying contract. See Id. (“in any civil case in which an insured individual sues his insurer to determine what coverage, if any, exists under his present policy or fidelity bond or the extent to which his insurer is liable for compensating a covered loss.”) (emphasis added).
§ 38.2-807. Attorney fees.
A. In any action against an unlicensed insurer upon an insurance contract issued or delivered in this Commonwealth to a resident of this Commonwealth or to a corporation authorized to do business in this Commonwealth, the court may allow the plaintiff a reasonable attorney fee if (i) the insurer has failed to make payment in accordance with the terms of the contract for 30 days after demand prior to the commencement of the action and (ii) the court concludes that the refusal was vexatious and without reasonable cause. The fee shall not exceed 33 ⅓ percent of the amount that the court or jury finds the plaintiff is entitled to recover against the insurer, but shall be at least $200.
B. Failure of the insurer to defend the action shall be deemed prima facie evidence that its failure to make payment was vexatious and without reasonable cause.
NOTHING CONTAINED HEREIN SHALL BE DEEMED TO CREATE AN ATTORNEY CLIENT RELATIONSHIP. NOTHING HEREIN SHALL BE DEEMED TO BE LEGAL ADVICE TO YOUR PARTICULAR CIRCUMSTANCES! EVERY PERSON APPEARING OR FILING ANYTHING IN COURT MAY BE SUBJECT TO SANCTIONS UNDER VA CODE § 8.01-271.1
Thomas H. Roberts, Esq.
Thomas H. Roberts & Associates, PC
105 S 1st Street
Richmond, VA 23219
Category General | Tags: bad faith insurance, Defamation, defamation in va, defamation in virginia, defamation is a personal injury, duty to defend, insurance bad faith, insurance bad faith in virgiinia, insurance liability for defamation in virginia, va defamation, virginia defamation
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