39 Fla. L. Weekly D2534e
Insurance — Commercial general liability — Duty to defend or indemnify —
Officers and directors of insured professional service organization — Insurer
owed officers and directors duty of defense on third-party complaint filed by
former officer alleging defamation based on statements made by third-party
defendants during their systematic plan to take control of organization and oust
third-party plaintiff from power — Provision of policy providing coverage for
personal injury caused by an offense arising out of insured’s business,
including oral or written publication of material that slanders or libels a
person, does not conflict with provision excluding coverage for
employment-related practices such as defamation, as a defamatory utterance might
arise out of a company’s business while not being employment-related — Coverage
— Trial court’s determination that insurer did not have duty to indemnify
third-party defendants was premature
Officers and directors of insured professional service organization — Insurer
owed officers and directors duty of defense on third-party complaint filed by
former officer alleging defamation based on statements made by third-party
defendants during their systematic plan to take control of organization and oust
third-party plaintiff from power — Provision of policy providing coverage for
personal injury caused by an offense arising out of insured’s business,
including oral or written publication of material that slanders or libels a
person, does not conflict with provision excluding coverage for
employment-related practices such as defamation, as a defamatory utterance might
arise out of a company’s business while not being employment-related — Coverage
— Trial court’s determination that insurer did not have duty to indemnify
third-party defendants was premature
YAZAN KHATIB, VAQAR ALI, YOUSSEF AL-SAGHIR, and SUMANT LAMBA, Appellants, v.
OLD DOMINION INSURANCE COMPANY and MAJDI ASHCHI, individually, Appellees. 1st
District. Case No. 1D13-4652. Opinion filed December 5, 2014. An appeal from the
Circuit Court for Duval County. Karen K. Cole, Judge. Counsel: Charles P.
Pillans, III, and Patrick P. Coll of Bedell, Dittmar, DeVault, Pillans &
Coxe, P.A., Jacksonville, for Appellants. Hinda Klein and Elizabeth A. Izquierdo
of Conroy, Simberg, Ganon, Krevans, Abel, Lurvey, Morrow, & Schefer, P.A.,
Hollywood, for Appellees.
OLD DOMINION INSURANCE COMPANY and MAJDI ASHCHI, individually, Appellees. 1st
District. Case No. 1D13-4652. Opinion filed December 5, 2014. An appeal from the
Circuit Court for Duval County. Karen K. Cole, Judge. Counsel: Charles P.
Pillans, III, and Patrick P. Coll of Bedell, Dittmar, DeVault, Pillans &
Coxe, P.A., Jacksonville, for Appellants. Hinda Klein and Elizabeth A. Izquierdo
of Conroy, Simberg, Ganon, Krevans, Abel, Lurvey, Morrow, & Schefer, P.A.,
Hollywood, for Appellees.
(SHEPHERD, FRANK A., ASSOCIATE JUDGE.) The issue in this case is whether Old
Dominion Insurance Company has a duty to defend and indemnify four doctors who
are defendants in a third-party defamation claim, appended to a multi-faceted
action for fraud, conversion, civil conspiracy, breach of contract, and other
causes of action, being prosecuted by them against the president and founder of
a medical practice they all once enjoyed together. It is not seriously
questioned that the doctors are insureds under the policy and that the insuring
clause of the insurance policy would afford coverage to the doctors. The
dispositive question is whether coverage is precluded by a policy exclusion. The
trial court so found, but we disagree. On de novo review, we conclude that Old
Dominion has an obligation to afford a defense to the third-party doctor
defendants on the defamation claim filed against them, but we demur on the issue
of indemnity.
Dominion Insurance Company has a duty to defend and indemnify four doctors who
are defendants in a third-party defamation claim, appended to a multi-faceted
action for fraud, conversion, civil conspiracy, breach of contract, and other
causes of action, being prosecuted by them against the president and founder of
a medical practice they all once enjoyed together. It is not seriously
questioned that the doctors are insureds under the policy and that the insuring
clause of the insurance policy would afford coverage to the doctors. The
dispositive question is whether coverage is precluded by a policy exclusion. The
trial court so found, but we disagree. On de novo review, we conclude that Old
Dominion has an obligation to afford a defense to the third-party doctor
defendants on the defamation claim filed against them, but we demur on the issue
of indemnity.
A. BACKGROUND
This case stems from a dispute between Dr. Majdi Ashchi and the appellants,
Drs. Yazan Khatib, Vaqar Ali, Youssef Al-Saghir, and Sumant Lamba. Dr. Ashchi
was the president and founder of First Coast Cardiovascular Institute (“FCCI”),
a professional service organization that treats heart and cardiovascular
disease. Appellants are FCCI’s other officers and directors. After wresting
control of FCCI from Dr. Ashchi, appellants, acting through FCCI, sued Dr.
Ashchi and others for fraud, negligently supplying false information, breach of
contract, reformation, unjust enrichment, breach of fiduciary duty, and
conspiracy. Dr. Ashchi denied all allegations and upped the ante by joining his
former colleagues in the action individually, through a third-party defamation
complaint.
Drs. Yazan Khatib, Vaqar Ali, Youssef Al-Saghir, and Sumant Lamba. Dr. Ashchi
was the president and founder of First Coast Cardiovascular Institute (“FCCI”),
a professional service organization that treats heart and cardiovascular
disease. Appellants are FCCI’s other officers and directors. After wresting
control of FCCI from Dr. Ashchi, appellants, acting through FCCI, sued Dr.
Ashchi and others for fraud, negligently supplying false information, breach of
contract, reformation, unjust enrichment, breach of fiduciary duty, and
conspiracy. Dr. Ashchi denied all allegations and upped the ante by joining his
former colleagues in the action individually, through a third-party defamation
complaint.
The third-party complaint alleges, inter alia, that appellants
launched a systematic plan to take control of FCCI and oust Dr. Ashchi from
power. The complaint further alleges that as part of the plan, Dr. Khatib made
baseless allegations against Dr. Ashchi at an FCCI shareholders meeting and that
each of the appellants published defamatory statements about Dr. Ashchi to third
parties. The complaint also alleges appellants “knew or should have known” that
the defamatory statements they made about Dr. Ashchi were false.
launched a systematic plan to take control of FCCI and oust Dr. Ashchi from
power. The complaint further alleges that as part of the plan, Dr. Khatib made
baseless allegations against Dr. Ashchi at an FCCI shareholders meeting and that
each of the appellants published defamatory statements about Dr. Ashchi to third
parties. The complaint also alleges appellants “knew or should have known” that
the defamatory statements they made about Dr. Ashchi were false.
The insurance policy in this case is a commercial general liability insurance
policy. FCCI is the named insured on the policy. The policy also insures FCCI’s
“ ‘executive officers’ and directors . . . but only with respect to their duties
as officers and directors.” The third-party doctor defendants are executive
officers or directors of FCCI, and in some cases both. It is alleged that at a
shareholders meeting, Dr. Khatib wrongfully accused Dr. Ashchi of stealing money
from FCCI to pay for improvements to his home, intentionally overcharging FCCI
millions of dollars in rent through his real estate affiliates, and engaging in
other acts of embezzlement. It further is alleged that Dr. Khatib and each of
the third-party defendants published the same or similar statements to FCCI
staff members, referring physicians, and patients.
policy. FCCI is the named insured on the policy. The policy also insures FCCI’s
“ ‘executive officers’ and directors . . . but only with respect to their duties
as officers and directors.” The third-party doctor defendants are executive
officers or directors of FCCI, and in some cases both. It is alleged that at a
shareholders meeting, Dr. Khatib wrongfully accused Dr. Ashchi of stealing money
from FCCI to pay for improvements to his home, intentionally overcharging FCCI
millions of dollars in rent through his real estate affiliates, and engaging in
other acts of embezzlement. It further is alleged that Dr. Khatib and each of
the third-party defendants published the same or similar statements to FCCI
staff members, referring physicians, and patients.
B. ANALYSIS
We have little difficulty in concluding that at least some of these alleged
wrongs were performed by the third-party defendant doctors “with respect to
their duties as officers and directors.” Some, if not all, of the wrongs alleged
occurred while the third-party doctor defendants were either discharging their
obligation at a shareholders meeting or executing other official duties.
wrongs were performed by the third-party defendant doctors “with respect to
their duties as officers and directors.” Some, if not all, of the wrongs alleged
occurred while the third-party doctor defendants were either discharging their
obligation at a shareholders meeting or executing other official duties.
We also find on de novo review that “Coverage B” of the policy insuring
agreement affords the third-party defendant doctors coverage in this case,
subject, of course, to the workings of any policy exclusion. This insuring
clause provides:
agreement affords the third-party defendant doctors coverage in this case,
subject, of course, to the workings of any policy exclusion. This insuring
clause provides:
COVERAGE B. PERSONAL AND ADVERTISING INJURY LIABILITY
1. Insuring Agreement
a. We will pay those sums that the insured becomes legally obligated
to pay as damages because of “personal injury” or “advertising injury” to which
this insurance applies. We will have the right and duty to defend any “suit”
seeking those damages. However, we will have no duty to defend the insured
against any “suit” seeking damages for “personal injury” or “advertising injury”
to which this insurance does not apply. We may, at our discretion investigate
any “occurrence” or offense and settle any claim or “suit” that may result . . .
.
b. This insurance applies to:
(1) “Personal injury” caused by an offense arising out of your
business . . . .
“Personal injury” is defined in the policy to include “injury, other than
‘bodily injury,’ arising out of one or more of the following offenses: . . . (d)
Oral or written publication of material that slanders or libels a person or
organization or disparages a person’s or organization’s goods, products or
services.” It matters not under the policy that the alleged defamation is
uttered against another insured or occurs during the course of a family feud.
Old Dominion easily could have excepted coverage for defamation among insureds
if it so desired. It also is incontestable that the allegations of the
third-party complaint — in fact of the entire lawsuit — “arise[ ] out of [the]
business” conducted by the parties. We therefore turn to the exclusions from
coverage.
‘bodily injury,’ arising out of one or more of the following offenses: . . . (d)
Oral or written publication of material that slanders or libels a person or
organization or disparages a person’s or organization’s goods, products or
services.” It matters not under the policy that the alleged defamation is
uttered against another insured or occurs during the course of a family feud.
Old Dominion easily could have excepted coverage for defamation among insureds
if it so desired. It also is incontestable that the allegations of the
third-party complaint — in fact of the entire lawsuit — “arise[ ] out of [the]
business” conducted by the parties. We therefore turn to the exclusions from
coverage.
Old Dominion argues that the employment-related practices exclusion found in
one of the endorsements to the insurance policy excuses it from any coverage
obligation in this case. This exclusion reads in pertinent part:
one of the endorsements to the insurance policy excuses it from any coverage
obligation in this case. This exclusion reads in pertinent part:
This insurance does not apply to:
“Personal injury” to:
(1) A person arising out of any
(a) Refusal to employ that person;
(b) Termination of that person’s employment; or
(c) Employment-related practices, policies, acts or
omissions, such as coercion, demotion, evaluation, reassignment,
discipline, defamation, harassment, humiliation or discrimination
directed at that person . . . .
(emphasis added).
The exclusion goes on to specify that it applies:
(1) Whether the insured may be liable as an employer or in any other
capacity . . . .
This exclusion, by its terms, excludes from coverage any claim for damages
for “ ‘[p]ersonal injury’ caused by an offense arising out of [an insured’s]
business” where the “personal injury” also “aris[es] out of any . . . (c)
[e]mployment-related practices . . . such as . . . defamation.” (emphasis
added). The third-party defendant doctors argue that the emphasized language
found in subsection (1)(c) of the employment-related practices exclusion is
ambiguous as a matter of law because it negates the coverage afforded under
Coverage B, subsection 1.b, which affords coverage for “ ‘personal injury’
caused by an offense “arising out of [the insured’s] business.” The third-party
defendant doctors are correct on the law but wrong on the interpretive facts.
for “ ‘[p]ersonal injury’ caused by an offense arising out of [an insured’s]
business” where the “personal injury” also “aris[es] out of any . . . (c)
[e]mployment-related practices . . . such as . . . defamation.” (emphasis
added). The third-party defendant doctors argue that the emphasized language
found in subsection (1)(c) of the employment-related practices exclusion is
ambiguous as a matter of law because it negates the coverage afforded under
Coverage B, subsection 1.b, which affords coverage for “ ‘personal injury’
caused by an offense “arising out of [the insured’s] business.” The third-party
defendant doctors are correct on the law but wrong on the interpretive facts.
It is true that an insurance policy cannot, with impunity, grant a right in
one paragraph, then retract the very same right in an exclusion. See
Tire Kingdom, Inc. v. First S. Ins. Co., 573 So. 2d 885, 887 (Fla. 3d DCA
1990) (concluding that conflicting provisions create an ambiguity concerning the
question of coverage). It also is true that ambiguities thus created are
“construed against the insurer and in favor of coverage.” See Acosta,
Inc. v. Nat’l Union Fire Ins. Co., 39 So. 3d 565, 573 (Fla. 1st DCA 2010)
(quoting Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So. 2d
528, 532 (Fla. 2005)). Unfortunately for the third-party doctor defendants,
however, a cursory consideration of the two clauses on which they place their
reliance for this argument reveals the provisions do not conflict.
one paragraph, then retract the very same right in an exclusion. See
Tire Kingdom, Inc. v. First S. Ins. Co., 573 So. 2d 885, 887 (Fla. 3d DCA
1990) (concluding that conflicting provisions create an ambiguity concerning the
question of coverage). It also is true that ambiguities thus created are
“construed against the insurer and in favor of coverage.” See Acosta,
Inc. v. Nat’l Union Fire Ins. Co., 39 So. 3d 565, 573 (Fla. 1st DCA 2010)
(quoting Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So. 2d
528, 532 (Fla. 2005)). Unfortunately for the third-party doctor defendants,
however, a cursory consideration of the two clauses on which they place their
reliance for this argument reveals the provisions do not conflict.
Contrary to the argument of the third-party doctor defendants, a defamatory
utterance might easily “arise out of [a company’s] business” while being not at
all “employment related.” Case law from around the country supports this
conclusion. See HS Servs., Inc, v, Nationwide Mut. Ins. Co., 109
F.3d 642, 646-47 (9th Cir. 1997) (holding that for an act or omission to be
“employment related,” the relationship to employment must be direct and
proximate); Golden Eagle Ins. Corp. v. Rocky Cola Café, Inc., 114 Cal.
Rptr. 2d 16 (Ct. App. 2001) (adopting the narrow interpretation of “employment
related” by Ninth Circuit in HS Servs.); Waffle House, Inc. v.
Nationwide Mut. Ins. Co., 114 S.W. 3d 601, 610 (Tex. Ct. App. 2003) (finding
that the context of defamatory statements was not clearly employment related
where the statements arose out of a company’s attempt to prevent employees from
leaving and not out of a former employee’s termination). This interpretation
also is consistent with our canon of construction providing that when a drafter
uses two different phrases in the same context when he might have used one, it
is presumed the drafter meant two different things. See Universal
Prop. & Cas. Ins. Co. v. Johnson, 114 So. 3d 1031, 1036 (Fla. 1st DCA
2013) (“A contract is not to be read so as to make one section superfluous, and
so ‘[a]ll the various provisions of a contract must be so construed . . . as to
give effect to each.’ ” (quoting Univ. of Miami v. Frank, 920 So. 2d 81,
87 (Fla. 3d DCA 2009))).
utterance might easily “arise out of [a company’s] business” while being not at
all “employment related.” Case law from around the country supports this
conclusion. See HS Servs., Inc, v, Nationwide Mut. Ins. Co., 109
F.3d 642, 646-47 (9th Cir. 1997) (holding that for an act or omission to be
“employment related,” the relationship to employment must be direct and
proximate); Golden Eagle Ins. Corp. v. Rocky Cola Café, Inc., 114 Cal.
Rptr. 2d 16 (Ct. App. 2001) (adopting the narrow interpretation of “employment
related” by Ninth Circuit in HS Servs.); Waffle House, Inc. v.
Nationwide Mut. Ins. Co., 114 S.W. 3d 601, 610 (Tex. Ct. App. 2003) (finding
that the context of defamatory statements was not clearly employment related
where the statements arose out of a company’s attempt to prevent employees from
leaving and not out of a former employee’s termination). This interpretation
also is consistent with our canon of construction providing that when a drafter
uses two different phrases in the same context when he might have used one, it
is presumed the drafter meant two different things. See Universal
Prop. & Cas. Ins. Co. v. Johnson, 114 So. 3d 1031, 1036 (Fla. 1st DCA
2013) (“A contract is not to be read so as to make one section superfluous, and
so ‘[a]ll the various provisions of a contract must be so construed . . . as to
give effect to each.’ ” (quoting Univ. of Miami v. Frank, 920 So. 2d 81,
87 (Fla. 3d DCA 2009))).
However, our task is not yet at an end. It is further axiomatic in the law of
insurance coverage in Florida that if a complaint alleges some facts within and
some facts outside of coverage under an insurance policy, the insurer must
nevertheless defend the entire suit. Grissom v. Commercial Union Ins.
Co., 610 So. 2d 1299, 1307 (Fla. 1st DCA 1992) (citations omitted). In this
regard, the third-party complaint contains the following “examples” of
defamatory statements allegedly made about Dr. Ashchi by the third-party doctor
defendants to their staff members, referring physicians, and patients:
insurance coverage in Florida that if a complaint alleges some facts within and
some facts outside of coverage under an insurance policy, the insurer must
nevertheless defend the entire suit. Grissom v. Commercial Union Ins.
Co., 610 So. 2d 1299, 1307 (Fla. 1st DCA 1992) (citations omitted). In this
regard, the third-party complaint contains the following “examples” of
defamatory statements allegedly made about Dr. Ashchi by the third-party doctor
defendants to their staff members, referring physicians, and patients:
a. Dr. Khatib told Dr. Imran Sheikh that Dr. Ashchi had embezzled
from FCCI;
b. Dr. Khatib told Dr. Jessica Barbare that Dr. Ashchi was guilty of
financial improprieties;
c. Dr. Khatib told Victoria Kozel that Dr. Ashchi was due to be
prosecuted for his conduct at FCCI;
d. Dr. Khatib told Dr. Juzar Lokhandwala that Dr. Ashchi orders
unnecessary procedures; and
e. Dr. Al-Saghir told Dr. David Grech that Dr. Ashchi was a
thief.
There is no indication in the third-party complaint that these allegedly
defamatory statements were “employment related” at all. It is quite possible,
for example, that these utterances were made at a business-related conference or
business-related social event, therefore “arising out of [the insureds’]
business” for insuring agreement purposes, while at the same time not being
“employment related” in any of the narrow senses discussed above. Moreover,
“[i]f the allegations of the complaint leave any doubt regarding the duty to
defend, the question must be resolved in favor of the insured requiring the
insurer to defend.” Baron Oil Co. v. Nationwide Mut. Fire Ins. Co., 470
So. 2d 810, 814 (Fla. 1st DCA 1985) (citing New Amsterdam Cas. Co. v.
Knowles, 95 So. 2d 413 (Fla. 1957); 7C Appleman, Ins. Law &
Practice, § 4683, p. 58 (Berdal Ed. 1979)). Our study of the third-party
complaint in this case leaves us with sufficient doubt.
defamatory statements were “employment related” at all. It is quite possible,
for example, that these utterances were made at a business-related conference or
business-related social event, therefore “arising out of [the insureds’]
business” for insuring agreement purposes, while at the same time not being
“employment related” in any of the narrow senses discussed above. Moreover,
“[i]f the allegations of the complaint leave any doubt regarding the duty to
defend, the question must be resolved in favor of the insured requiring the
insurer to defend.” Baron Oil Co. v. Nationwide Mut. Fire Ins. Co., 470
So. 2d 810, 814 (Fla. 1st DCA 1985) (citing New Amsterdam Cas. Co. v.
Knowles, 95 So. 2d 413 (Fla. 1957); 7C Appleman, Ins. Law &
Practice, § 4683, p. 58 (Berdal Ed. 1979)). Our study of the third-party
complaint in this case leaves us with sufficient doubt.
C. CONCLUSION
For the reasons stated, we find that Old Dominion Insurance Company owes the
third-party defendant doctors a duty of defense on the allegations of the
third-party complaint. At the same time, we hold that the decision of the trial
court exonerating Old Dominion Insurance Company from a duty to indemnify the
third-party defendant doctors is premature. A liability insurer’s duty to
indemnify is narrower than the duty to defend. E.g., U.S. Fire Ins.
Co. v. Hayden Bonded Storage Co., 930 So. 2d 686, 691 (Fla. 4th DCA 2006)
(citation omitted). The duty to indemnify is thus often dependent upon further
factual development through discovery or at trial. Id. We find that to be
so in this case. Accordingly, we reverse and remand for further proceedings on
Dr. Ashchi’s claim for indemnity.
third-party defendant doctors a duty of defense on the allegations of the
third-party complaint. At the same time, we hold that the decision of the trial
court exonerating Old Dominion Insurance Company from a duty to indemnify the
third-party defendant doctors is premature. A liability insurer’s duty to
indemnify is narrower than the duty to defend. E.g., U.S. Fire Ins.
Co. v. Hayden Bonded Storage Co., 930 So. 2d 686, 691 (Fla. 4th DCA 2006)
(citation omitted). The duty to indemnify is thus often dependent upon further
factual development through discovery or at trial. Id. We find that to be
so in this case. Accordingly, we reverse and remand for further proceedings on
Dr. Ashchi’s claim for indemnity.
Reversed and remanded with directions. (MAKAR and OSTERHAUS, JJ., CONCUR.)
* * *