Between the Lines

A Discussion of Case Law and Statutory Law Affecting Commercial Lines of Insurance


Retaliation is “Inherently Willful,” and Therefore Excluded, Court Rules

An Insurer’s Duty to Defend a Town Ended When the Suit Against the Town Over an Airport Permit Was Reduced to an Excluded Retaliation Claim.

Frustrated when the Norwood Airport Commission tabled discussion of its application to expand its operations at the municipal airport, a helicopter flight service sued the town and the commission, alleging breach of contract, promissory estoppel, antitrust violations and civil rights violations.  A federal District Court judge dismissed all of the claims except a federal civil rights claim alleging that the commission’s failure to act on the application was in retaliation for the applicant’s exercise of its First Amendment rights by filing a complaint with the FAA, publicly litigating the dispute in the press, and filing a public records dispute.

The commission required the applicant to make a substantial capital investment in support of its permit application, and the applicant rented space at the airport and erected a hangar and fuel farm facility.  When a dispute arose over the refusal to provide the applicant with necessary ramp space, which the applicant saw as favoring the airport’s current exclusive fuel supplier, the applicant served public records requests, filed the FAA complaint, and eventually brought the District Court suit.

The town’s insurer under an Aviation Commercial General Liability Policy defended the commission against the applicant’s lawsuit under a reservation of rights.  Soon after the court reduced the suit to the single retaliation claim, the insurer filed a separate suit for a declaration that the remaining claim was not covered.

The town and the insurer cross-moved for summary judgment.  The town asserted that the suit was potentially covered under the policy’s “personal and advertising injury” coverage.  Although the one remaining count alleged retaliation, the town argued, the court was required to look beyond the cause of action asserted to the complaint’s factual allegations, which it claimed were consistent with wrongful eviction and disparagement, which fell within the policy’s definition of  covered personal and advertising injury offenses.  Further, the town argued, whether it intended to cause these injuries to the applicant was a factual issue in the underlying case, and the exclusion for injury caused by the insured with the knowledge that its conduct would violate the rights of another and inflict personal and advertising injury therefore did not bar coverage.

The District Court disagreed with the town, holding that conduct encompassed by a First Amendment retaliation claim was inherently willful, requiring intentionality and the deliberate infliction of injury.  “I can easily imagine an intentional act undertaken without any intent to cause injury,” the court stated, but “retaliation is not one of those imaginings.”  As a result, the exclusion applied and the insurer was relieved of its duty to defend.

The weakness in the town’s position was its assertion, in essence, that until the applicant proved intent to cause harm, it was entitled to a defense.  While there are insurance policy exclusions that explicitly require the insurer to defend until there is an adjudication of intentional misconduct, the “knowing violation of rights of another” exclusion did not contain this language.  Because the only remaining count alleged retaliation, and because retaliation requires intent to harm, the court concluded that there was no potential that a judgment against the town would be covered, and the insurer had no duty to defend.

The case is National Union Fire Ins. Co. v. Town of Norwood, United States District Court for the District of Massachusetts Civil Action No. 16-11978-RGC (Memorandum and Order on Cross Motions for Summary Judgment, July 26
, 2017, Stearns, J.)

photo by: vic15

About the Author

Harvey Nosowitz – Counsel

Harvey helps clients with commercial litigation, in particular insurance coverage, personal injury and products liability cases.

Please contact him with any questions:
(617) 621-6555.

Posted In: Intentional Conduct

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