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FIRST SPECIALTY INSURANCE v. CONTINENTAL CASUALTY

March 13, 2003

FIRST SPECIALTY INSURANCE CORPORATION, A MISSOURI CORPORATION, PLAINTIFF/COUNTERCLAIM DEFENDANT,
v.
CONTINENTAL CASUALTY COMPANY, AN ILLINOIS CORPORATION; AND AMERICAN ACADEMY OF DERMATOLOGY, INC., A MINNESOTA NONPROFIT CORPORATION, DEFENDANTS/COUNTERCLAIM PLAINTIFFS.



The opinion of the court was delivered by: John W. Darrah, United States District Judge

MEMORANDUM OPINION AND ORDER

Several causes of' action are involved in the present litigation. The first cause of action is a Complaint for Declaratory Judgment filed by First Specialty Insurance Corporation ("First Specialty"). First Specialty's complaint seeks a declaratory judgment finding that: (1) Continental Casualty Company ("Continental") had a duty to defend the American Academy of Dermatology, Incorporated ("the Academy") with respect to a lawsuit filed against the Academy in the United States District Court for Southern Florida (the "Underlying Lawsuit"); (2) the coverage provided by the Continental policy for attorneys' fees and other costs associated with the defense of the Academy in the Underlying Lawsuit is primary coverage; (3) any coverage under the First Specialty policy for such attorneys' fees and other costs is excess to coverage under the Continental policy for such attorneys' fees and other costs; and (4) First Specialty has no duty to pay such attorneys' fees and costs.

The second cause of action is a counterclaim filed by Continental's counterclaim seeks a declaratory judgment finding that: (1) First Specialty had a primary duty to defend four out of five counts in the Underlying Lawsuit; and (2) First Specialty breached this duty to defend and is, therefore, responsible for all amounts expended in defense of the Academy in the Underlying Lawsuit; or (3) alternatively, First Specialty must reimburse Continental for 4/5ths of the amounts expended for the defense of the Academy in the Underlying Lawsuit.

The third cause of action is a counterclaim filed by the Academy. The Academy's counterclaim alleges that First Specialty has a duty to defend and pay attorneys' fees and other costs associated with the defense of the Academy in the Underlying Lawsuit. The counterclaim further alleges that First Specialty breached these duties and seeks damages as a result of such alleged breaches. Presently before the Court are the parties' Motions/Cross-Motions for Summary Judgment.

BACKGROUND

On or about January 19, 2001, Sorrel S. Resnik ("Resnik") filed a complaint in the United States District Court for the Southern District of Florida against the Academy. (Plaint.'s 56.1(a)(3) Statement ¶ F6).*fn1 The Resnik complaint contained five counts: unlawful attempt to remove Resnik from office, Count I; failure to follow the Academy's election regulations, Count II; use of unfair and otherwise unlawful procedures, Count III; declaratory relief, Count IV; and defamation, Count V. (Def.'s 56.1(a)(3) Statement ¶ C7). Counts I, II, and III sought an injunction and compensatory and punitive damages. (Plaint.'s 56.1(a)(3) Statement ¶¶ F10, F12, F14). Count IV sought a declaratory judgment that the Board of Directors of the Academy had no legal authority for its decision that was the primary basis of the suit. (Id., at ¶ F15). Count V sought compensatory and punitive damages. (Id., at ¶ F16). In his complaint, Resnik alleged that the Academy's Board of Directors wrongfully removed Resnik from the office of President of the Academy. that the Board made "false and defamatory statements" to the members of the Academy and to the news media explaining the basis for that removal and that the Board sent a letter stating that Resnik "violated the Academy's administrative regulations and failed to disclose other pertinent information that was necessary in order to make the letter truthful, accurate, and non-defamatory." (Def.'s 56.1(a)(3) Statement ¶ A4).

Continental had issued a general liability insurance policy to the Academy. (Plaint.'s 56.1(a)(3) Statement ¶ F17). The policy was in effect from February 1, 2000 to February 1, 2001. (Id., at ¶ F19). The Continental policy stated, in part:

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 and advertising injury" to which this insurance applies. We will have the right and the duty to defend the insured against any "suit" seeking those damages.
(Id., at ¶ F20). "Personal and advertising injury" was defined as: "injury, including consequential `bodily injury', arising out of one or more of the following offenses . . . [o]ral 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; [o]ral or written publication that violates a person's right of privacy. . . ." (Id., at ¶ F21).

The Continental policy also contained the following "other insurance" clause:

Other Insurance

If other valid and collectible insurance is available to the insured for a loss we cover under Coverages A and B of this Coverage Part, our obligations are limited as follows:
a. Primary Insurance
This insurance is primary except when b. below applies. If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary. Then we will share with all other insurance ...

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