The opinion of the court was delivered by: BARTELS
This is a controversy among several insurance companies concerning coverage of their insured. Plaintiff Federal Insurance Company (Federal) brought this action under the Federal Declaratory Judgment Act, 29 U.S.C. § 2201, for a declaration of the rights and liabilities of the various insurance companies providing liability coverage to defendant Cablevision Systems Development Co., its affiliates and several officers and employees (collectively Cablevision), in connection with a law suit brought against Cablevision by, one of its competitors, James Nishimura. Currently before the Court are motions for summary judgment brought by Federal and another of Cablevision's insurers, American Employers Insurance Co. (American), which seek, in effect, to determine the liability of a third insurer, Liberty Mutual Insurance Co. (Liberty), to contribute to the defense costs incurred by Cablevision in the underlying action. Liberty, in cross-motion for summary judgment on its claims, asserts that as a matter of law, its policy provides no coverage for any of the claims in the underlying complaint against its insured, and therefore it has no duty to defend. This claim is predicated on provisions in the Liberty policy limiting or excluding coverage where the insured acted knowingly or with intent to cause injury. The background of this action follows.
The present action has its roots in an earlier suit filed January 11, 1983, against Cablevision by a small, competing cable television company, Huntington TV Cable Corporation (HTVC), and several affiliates, controlled by James Nishimura which operated in Huntington, Long Island. Nishimura, et al. v. Dolan, et al., 83 CIV 85 (JRB)(the Nishimura action). The bulk of the Nishimura complaint charged Cablevision with various violations of the federal antitrust laws, and also included pendant state antitrust and common law tort claims. the relevant portions of which are discussed below. In addition to the Cablevision defendants, the Nishimura complaint named as defendants several New York City area sports teams (Teams)
charging that exclusive cablecasting agreements between Cablevision and the Teams violated antitrust laws as well. Cablevision filed counter-claims against plaintiffs and the parties engaged in extensive discovery, involving disputes which, on several occasions, necessitated a series of hearings before this Court.
On October 19, 1984, some 18 months after the Nishimura suit was filed, the Court granted summary judgment dismissing all claims against the Teams on the ground, inter alia, that plaintiffs were without standing to challenge the exclusivity of the agreements between Cablevision and the Teams. Nishimura v. Dolan, 599 F. Supp. 484 (E.D.N.Y. 1984). In the Nishimura action, there remain pending the federal antitrust and pendant state law claims against Cablevision alone. However, no further proceedings have occurred before this Court in the Nishirmura action since the October 1984 decision. In the proceedings just described, Cablevision apparently has incurred in excess of $2,000,000 in legal expenses. The liability of Cablevision's various insurers for this sum, as well as possible future defense costs, is the subject of the declaratory action before this Court.
In January 1985, Federal filed the present declaratory action against Cablevision, its insured, and three other insurers who have provided coverage to Cablevision at various times - American, Liberty, and National Union Insurance Company of Pittsburgh, Pennsylvania (National Union) - to determine the various insurers' obligations, if any, to defend or indemnify Cablevision with respect to the claims asserted against it in the Nishimura action. Defendant Cablevision subsequently impleaded a fifth insurer, Mission Insurance Company (Mission), overlooked in the Federal Complaint, which had also provided potential liability coverage. Federal subsequently was granted permission to assert claims directly against Mission. Three of these insurers - Federal, American and Liberty - issued to Cablevision policies providing virtually identical coverage, although effective during different time periods. Liberty, whose policy is at issue in these motions, issued to Cablevision a policy of Comprehensive General and Broad Form Comprehensive General Liability insurance covering the period September 1, 1979 to September 1, 1980.
Generally, the Comprehensive General Liability portion of the Liberty policy covers Cablevision for liabilities Cablevision incurs as a result of an "occurrence" during the policy period causing "bodily injury" or "property damage" as those terms are defined in the policy and subject to various exclusions discussed in more detail below. The Broad Form Comprehensive General Liability Endorsement provides further coverage to Cablevision for liabilities Cablevision incurs because of "personal injury" as defined in the policy, also subject to certain exclusions. Although the Broad Form Endorsement appears to provide Cablevision with coverage for "advertising injury" as well, a separate "Amendatory Endorsement" explicitly excludes advertiser's liability from the policy. In addition to the indemnity coverage just described, Liberty's policy also obligates it to defend or reimburse defense costs of any action against Cablevision in which any claim is asserted that may be covered by Liberty's policy "even if any of the allegations of the suit are groundless, false or fraudulent." The policies issued by Federal and American are virtually identical to Liberty's except that unlike Liberty, they also provide coverage for advertising injury.
Following commencement of the Nishimura action in January 1983, and after Cablevision had retained as its attorneys Sullivan & Cromwell to defend that action, Cablevision, through its insurance brokers, notified its insurers of the suit and provided them with copies of the Nishimura summons and complaint. American, by letter dated July 13, 1983, informed Cablevision of possible coverage under the American policy of a number of the claims in the Nishimura complaint concerning allegations of instigation of customer dissatisfaction, disparagement through false and misleading statements and interference with plaintiffs' relationship with customers, although the policy would not cover the antitrust claims. Therefore, American stated, "the company will defend the entire action and will indemnify the insured if it develops that the plaintiff offers proof of a covered claim not subject to any exclusions." (American Appendix [Amer. App.] Exh C). Similarly, Federal, by letter. dated September 1, 1983, informed Cablevision that, while the bulk of the Nishimura complaint involved claims for which there was no coverage, it believed that the "allegations contained in [Counts 10, 11, 13 - 17] present issues as to whether coverage will be provided under the terms of the policy," and therefore Federal, "while standing ready to defend you in this litigation, agrees to allow your own attorneys to continue to defend you, at your own expense and we will contribute to the attorneys' fees generated by such defense." (Amer. App. Exh B). Liberty, however, has consistently denied coverage, despite several requests by Cablevision that it reconsider its decision in light of American's and Federal's decision to cover Cablevision. (Amer. App. Exh D., Federal App. Exh C).
Following the commencement of this action by Federal, all the other insurers cross-claimed against each other and against Cablevision, and counterclaimed against Federal, each denying its own liability under various theories and asserting the liability of Federal alone, or alternatively demanding apportionment of liability among all the insurers. In the motions now before the Court, American and Federal seek summary judgment on their claims against Liberty for a declaration that Liberty is liable to contribute to the costs of Cablevision's defense in the Nishimura action.
Liberty, in turn, seeks summary judgment on its claim for a declaration that it is not obligated to defend Cablevision or to contribute with the other insurers to Cablevision's defense, costs, to which motion Cablevision has responded.
The general principles of law governing an insurer's duty to defend are well known. Under New York law
an insurer's duty to defend, under a policy such as Liberty's, is broader than its duty to indemnify, Goldberg v. Lumber Mutual Casualty Ins. Co., 297 N.Y. 148, 154, 77 N.E.2d 131 (1948), and is determined by comparing the allegations of the complaint with the terms of the policy in question. See Servidone Construction Corp. v. Security Insurance Co., 64 N.Y.2d 419, 424, 488 N.Y.S.2d 139, 142, 477 N.E.2d 441 (1985). If the allegations of the complaint, liberally construed, arguably fall within a risk covered by the policy, then the insurer is required to defend regardless of how groundless, false or baseless the suit may be. International Paper Co. v. Continental Casualty Co., 35 N.Y.2d 322, 325-326, 361 N.Y.S.2d 873, 875-876, 320 N.E.2d 619 (1974). This is so even if the language of the complaint does not state all the facts requisite to establish coverage since "a policy protects against poorly or incompletely pleaded cases as well as those artfully drafted." Ruder & Finn, Inc. v. Seaboard Surety Co., 52 N.Y.2d 663, 670, 439 N.Y.S.2d 858, 861, 422 N.E.2d 518 (1981). Thus, the insurer is obliged to defend even though the complaint contains ambiguous or incomplete allegations and does not state facts sufficient to bring the case clearly within or without coverage, as long as there is potentially a case within the policy's coverage. See American Home Assurance Co. v. Port Authority, 66 A.D.2d 269., 278, 412 N.Y.S.2d 605, 610 (1st Dep't 1979),. Commercial Pipe & Supply Corp. v. Allstate Insurance Co., 36 A.D.2d 412, 415, 321 N.Y.S.2d 219, 221 (4th Dep't 1971), aff'd, 30 N.Y.2d 619, 331 N.Y.S.2d 42, 282 N.E.2d 128 (1972).
The insurer may be declared without obligation to defend "only if it could be concluded as a matter of law that there is no possible factual or legal basis on which [the insurer] might eventually be held to be obligated to indemnify [its insured] under any provision of the insurance policy", Spoor-Lasher Co. v. Aetna Casualty & Surety Co., 39 N.Y.2d 875, 876, 386 N.Y.S.2d 221, 222, 352 N.E.2d 139 (1976), or the insurer can show that "the allegations of the complaint cast that pleading solely and entirely within the policy exclusions, and, further, that the allegations, in toto, are subject to no other interpretation." International Paper Co. v. Continental Casualty Co., 35 N.Y.2d at 325, 361 N.Y.S.2d at 875 (1974). On the other hand, if the complaint against the insured asserts a single claim within the policy's coverage, the insurer must defend the entire action, even though the complaint asserts additional claims or alternative theories clearly falling outside the policy's coverage. Seaboard Surety Co. v. Gillette Co., 64 N.Y.2d 304, 310, 486 N.Y.S.2d 873, 876, 476 N.E.2d 272 (1984).
A. The Liberty Insurance Policy
The only two aspects of Liberty's coverage arguably
implicated by the Nishimura complaint are the coverage for injuries arising out of "property damage" and injuries arising out of "libel or slander or other defamatory or disparaging material" under Liberty's Personal Injury coverage.
In denying coverage, Liberty points out that its policy provides no coverage for property damage caused by the insured's intentional conduct, and excludes coverage for personal injury caused by disparaging statements which were made with knowledge of their falsity. Liberty asserts that the Nishimura complaint clearly alleges only knowing, intentional wrongdoing on the part of Cablevision and is not reasonably subject to any other construction.
The relevant provisions of Liberty's policy, which must be compared to the allegations of the Nishimura complaint, are as follows.
Under the Comprehensive General Liability portion of the policy, Liberty will pay on behalf of the insured [Cablevision] all sums which the insured shall become legally obligated to pay as damages because of Coverage A. bodily injury or Coverage B. property damage to which this policy applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent ... . [Emphasis added].
The term "occurrence" is defined as
an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured[.] [Emphasis added].
"Property damage" is defined as
(1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period.
The Broad Form Comprehensive Liability Endorsement extends coverage to Cablevision for "personal injury" and "advertising injury" although, as noted above, advertising injury is excluded by a separate endorsement. Under the Broad Form Endorsement, Liberty again commits itself "to defend any suit against the insured seeking damages on account of such ...