United States District Court, E.D. North Carolina, Western Division
TERRENCE W. BOYLE CHIEF UNITED STATES DISTRICT JUDGE
matter is before the Court on the parties' cross-motions
for summary judgment. [DE 17, 20]. Both motions have been
fully briefed and are ripe for disposition. For the reasons
that follow, plaintiffs motion for summary judgment [DE 17]
is denied without prejudice and defendant's motion for
summary judgment [DE 20] is granted in part and denied
without prejudice in part.
is an Ohio insurance company, licensed to operate in North
Carolina. [DE 2, ¶ 2]. Defendant is a Nevada limited
liability company. Id. ¶ 5. In February 2018,
plaintiff issued an insurance policy to Memento Mori LLC in
North Carolina. Id. ¶¶ 8-9. In March 2018,
defendant was added to the insurance policy as an additional
named insured. Id. ¶ 10.
insurance policy provides that plaintiff will "pay those
sums that the insured becomes legally obligated to pay as
damages because of 'personal and advertising injury,
'" and that plaintiff "will have the right and
duty to defend the insured against any 'suit' seeking
those damages." Id. ¶ 12; DE 2-1, p. 140.
The policy further provides, however, that plaintiff will
have no duty to defend in such suits if the policy is
otherwise inapplicable. Id. Two exclusions are
therefore relevant. First, the insurance policy does not
apply to '"[p]ersonal and advertising injury'
caused by or at the direction of the insured with the
knowledge that the act would violate the rights of another
and would inflict 'personal and advertising'
injury." Id. This is the "Knowing
Violation of Rights of Another" exclusion. Id.
Second, the insurance policy does not apply to
'"[p]ersonal and advertising injury' arising out
of oral or written publication, in any manner, of material,
if done by or at the direction of the insured with knowledge
of its falsity." Id. This is the "Material
Published With Knowledge of Falsity" exclusion.
September 2018, two plaintiffs initiated an action against
defendant in the Eighth Judicial District Court in Clark
County, Nevada. [DE 2, ¶ 13; DE 2-2]. The Nevada
plaintiffs allege that defendant, in connection with an
attempt to obtain financing for its acquisition of hotel
property in Nevada, published a five-page document that
included "numerous false and defamatory statements"
about the Nevada plaintiffs. [DE 2, ¶ 15; DE 2-2,
¶¶ 14-19]. The Nevada plaintiffs alleged that
defendant published the statements "with reckless
disregard for the truth of the statements." [DE 2-2,
¶ 24]. The Nevada plaintiffs asserted a cause of action
against defendant for business disparagement under Nevada
law, which both parties agree alleges a "personal and
advertising injury" that would seem to fall within the
scope of the insurance policy. [DE 2, ¶ 16].
issue is whether either of the two exclusions-Knowing
Violation of Rights of Another or Material Published With
Knowledge of Falsity-relieves plaintiff of its obligation to
defend and indemnify defendant in the Nevada action.
Plaintiff brought this declaratory judgment action in
November 2018, asking this Court to declare that it is not
obligated to defend or indemnify defendant in the Nevada
action. Id. ¶¶ 32-37. In May 2019,
plaintiff moved for summary judgment, arguing that both
exclusions apply and that it need not defend or indemnify
defendant in the Nevada action. [DE 17]. Defendant also moved
for summary judgment, asking the Court to declare that the
exclusions do not apply. [DE 20]. Defendant has since
recognized that summary judgment in its favor as to whether
plaintiff has a duty to defend, given that the issue of
indemnification cannot be settled until the Nevada action has
been resolved. [DE 26, p. 3].
motion for summary judgment may not be granted unless there
are no genuine issues of material fact and the movant is
entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a).
The moving party bears the initial burden of demonstrating
the absence of a genuine issue of material fact. Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). If that
burden has been met, the non-moving party must then come
forward and establish the specific material facts in dispute
to survive summary judgment. Matsushita Elec. Indus. Co.,
Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986).
In determining whether a genuine issue of material fact
exists, a court must view the evidence and the inferences in
the light most favorable to the nonmoving party. Scott v.
Harris, 550 U.S. 372, 378 (2007). However, "[t]he
mere existence of a scintilla of evidence" in support of
the nonmoving party's position is not sufficient to
defeat a motion for summary judgment; "there must be
evidence on which the [fact finder] could reasonably find for
the [nonmoving party]." Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 252 (1986). And "the mere
existence of some alleged factual dispute between
the parties will not defeat an otherwise properly supported
motion for summary judgment; the requirement is that there be
no genuine issue of material fact."
Id. at 247-48 (emphasis in original). Speculative or
conclusory allegations will not suffice. Thompson v.
Potomac Elec. Power Co., 312 F.3d 645, 649 (4th Cir.
outset, the Court is persuaded that there are no genuine
issues of material fact such that summary judgment is not
appropriate. At this stage, the dispute between the parties
on the issue of priority is purely legal. To the very limited
extent that plaintiff objects to defendant's statement of
undisputed facts, the Court finds that the dispute is not
material to resolution of the underlying legal dispute.
only question before the Court is whether the two relevant
exclusions-Knowing Violation of Rights of Another and
Material Published With Knowledge of Falsity-are applicable
to the Nevada action such that plaintiff is not obligated to
either defend or indemnity defendant in that action. The
Nevada action involves conduct that allegedly caused a
"personal and advertising injury" to the Nevada
plaintiffs and, because the Nevada seek damages on their
business disparagement claim, the insurance policy would seem
to be applicable. Plaintiff now argues, however, that at
least one of the two exclusions is applicable to the business
insurance policy at issue in this case was delivered in North
Carolina and, as such, North Carolina law governs it. See
Fortune Ins. Co. v. Owens, 351 N.C. 424, 428, 526 S.E.2d
463 ( N.C. 2000) ("the substantive law of the state
where the last act to make a binding contract occurred,
usually delivery of the policy, controls the interpretation
of the contract"). To determine whether an insurer has a
duty to defend, North Carolina courts "apply the
'comparison test' which requires that the
insured's policy and the complaint be read side-by-side
to determine whether the events alleged are covered or
excluded by the policy." Plum Props., LLC v. N. C
Bureau Mut. Ins. Co., 802 S.E.2d 173, 175 ( N.C. 2017).
"[T]he duty to defend arises whenever there is a
potential or possible liability to pay based on the
allegations in the complaint and is not dependent on the
probable liability to pay based on the facts ascertained
through trial." Auto-Owners Ins. Co. v. Potter,
242 Fed.Appx. 94, 99-100 (4th Cir. 2007) (quotations and
citations omitted). "The duty to defend is excused only
if the facts alleged in the complaint do not even arguably
fall within the policy coverage and an independent
investigation reveals no extrinsic facts demonstrating
coverage." Id. (quotations and citation
Court, then, must turn to the Nevada complaint and compare it
to the insurance policy.
prevail on a claim for business disparagement under Nevada