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Ruder & Finn, Inc. v. Seaboard Sur. Co.

Ruder & Finn, Inc. v. Seaboard Sur. Co.

Court of Appeals of New York

March 25, 1981, Argued ; May 12, 1981, Decided

No Number in Original

Opinion

 [*666]  [**519]  [***859]    OPINION OF THE COURT

Plaintiff Ruder & Finn, a public relations firm and the insured under a so-called "Libel Policy", 1 seeks to recover for the attorneys' fees and disbursements it incurred in the successful defense of two suits which its insurer, defendant Seaboard Surety Company, disclaiming coverage, refused to defend. The issue boils down to whether the allegations of fact or legal theory in each of the two actions brought the claims they asserted sufficiently within the embrace of "defamation" or "unfair competition", two of the kinds of claims against which the insuring agreement undertook to  [*667]  defend and, if necessary, indemnify. 2 The carrier's agreement  [**520]   [***860]  to defend, cast in language commonly employed in liability policies, called for a defense "'even if such suit is groundless, false or fraudulent'" (see Goldberg v Lumber Mut. Cas. Ins. Co. of N. Y., 297 [****9]  NY 148, 151).

 [****10]  This clause was first invoked by plaintiff when it was served with a summons and complaint issued out of the Federal District Court for the Southern District of New York at the behest of ATI, Inc. (Aerosol Technique), a manufacturer and packager of aerosol products. That complaint alleged that the insured had conspired with others to coerce ATI into retaining it to combat adverse publicity that the fluorocarbon propellants found in aerosol products endangered the earth's ozone layer. Most pointedly for our purposes, it went on to state that the publicity "unfavorably and falsely desparaged [sic] * * * ATI's aerosol products."

According to the pleader, the issuing source of the antiaerosol publicity was a codefendant, PIPR, Inc. (Public Interest Public Relations), presumably a nonprofit organization, founded by William Ruder, president of Ruder & Finn, to serve public interest groups and causes. 3 Ruder and two other individuals associated with both Ruder & Finn and PIPR completed the role of defendants ATI had joined. In this instance, PIPR is alleged to have entered the picture at the request of the Natural Resources Defense Council, an environmental organization. In [****11]  essence, the  [*668]  coercion was said to derive from the dual relationship between Ruder & Finn's people and PIPR, most particularly William Ruder's concomitant ability to act as intermediary between the Defense Council and ATI.

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52 N.Y.2d 663 *; 422 N.E.2d 518 **; 439 N.Y.S.2d 858 ***; 1981 N.Y. LEXIS 2404 ****; 7 Media L. Rep. 1833

Ruder & Finn Incorporated, Appellant-Respondent, v. Seaboard Surety Company, Respondent-Appellant

Prior History:  [****1]  Cross Appeals by permission of the Appellate Division of the Supreme Court in the First Judicial Department, from an order of said court, entered December 4, 1979, which modified, on the law, and, as modified, affirmed an order and judgment of the Supreme Court at Special Term (Thomas J. Hughes, J.), entered in New York County, granting defendant's motion for summary judgment to the extent of declaring that it had no duty to defend plaintiff in either of two underlying actions and is therefore not obligated to reimburse plaintiff for any of the legal expenses incurred therein. The modification consisted of declaring that (1) defendant was required to defend the Federal District Court action, (2) plaintiff is entitled to recover damages for legal expenses and disbursements incurred in the Federal District Court action, and by (3) directing an assessment of damages in that matter. The following question was certified by the Appellate Division: "Was the order of this Court, which modified the order of the Supreme Court, properly made?"

Plaintiff Ruder & Finn, a public relations firm and the insured under a "libel policy", sought to recover for the attorneys' fees and disbursements [****2]  it incurred in the successful defense of two suits which its insurer, defendant Seaboard Surety Company, disclaiming coverage, refused to defend. The issue was whether the allegations of fact or legal theory in each of the two actions brought the claims they asserted sufficiently within the embrace of "defamation" or "unfair competition", two of the kinds of claims against which the insuring agreement undertook to defend and, if necessary, indemnify. The clause was first invoked by plaintiff when it was served with a summons and complaint issued out of the Federal District Court for the Southern District of New York at the behest of ATI, Inc., a manufacturer and packager of aerosol products. The complaint alleged that the insured had conspired to coerce ATI into retaining it to combat adverse publicity that the fluorocarbon propellants found in aerosol products endangered the earth's ozone layer, and that the publicity unfavorably and falsely disparaged ATI's areosol products. Ruder & Finn, through engaged counsel of its own choice, subsequently obtained its dismissal of the suit for lack of subject matter jurisdiction. Three weeks later, ATI sued in the New York Supreme Court,  [****3]  alleging that the insured had conspired to disseminate antiaerosol publicity which, if successful, would drive ATI out of business, that the adverse publicity thus promulgated caused substantial injury to ATI by inducing the public to boycott areosol products, and that the conduct in furtherance of the conspiracy was intentional and malicious. The insured, once more compelled to retain its own counsel, again won a dismissal for ATI's failure to state a cause of action.

The Court of Appeals affirmed the order of the Appellate Division and answered the question certified in the affirmative, holding, in an opinion by Judge Fuchsberg, that Ruder & Finn was entitled to recover attorneys' fees and disbursements incurred in the defense of the Federal suit, since the pleading alleged sufficient facts as to product disparagement to come within the policy's coverage for defamation, and that Ruder & Finn was not entitled to recover such fees incurred in the State action since a fair reading of the complaint showed an attempt to state a cause of action for prima facie tort, which would not trigger the duty to defend inasmuch as the insurer had agreed to defend claims for defamation or unfair [****4]  competition.

 Ruder & Finn v Seaboard Sur. Co., 71 AD2d 216.

Disposition: Order affirmed, without costs. Question certified answered in the affirmative.

CORE TERMS

insured, unfair competition, aerosol, disparagement, defamation, cause of action, products, pleaded

Civil Procedure, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Insurance Law, Liability & Performance Standards, Good Faith & Fair Dealing, Duty to Defend, Business Insurance, Commercial General Liability Insurance, Torts, Intentional Torts, Defamation, General Overview, Business Torts, Trade Libel