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A W.R. Berkley Corp. unit is not obligated to indemnify a defamation award against a policyholder because of a “knowledge of falsity” exclusion in its policy, said a federal appeals court in upholding a lower court ruling.
Los Angeles-based Cohen Asset Management Inc., a real estate investment firm, and its founder and CEO, Bradley S. Cohen, had sued Dayton, Nevada-based Northwest Territorial Mint LLC, charging that Northwest had created and published two websites that contained false and defamatory statements about them, according to the underlying opinion by the U.S. District Court in Las Vegas in Bradley Stephen Cohen and Cohen Asset management Inc. v. Berkley National Insurance Co.
The websites created by Northwest, which manufactured commemorative coins and medals and marketed precious metals, compared Mr. Cohen to Bernie Madoff and implied the plaintiffs were “financial fraudsters,” according to the ruling.
A jury awarded Mr. Cohen $38 million in damages in February 2016. Northwest filed a petition for bankruptcy in April 2016.
Berkley National, a unit of Greenwich, Connecticut-based W.R. Berkley Corp. that had issued primary and umbrella liability policies to Northwest, refused to pay the judgment, and the plaintiffs filed suit in the District Court charging breach of contract.
The District Court ruled in Berkley’s favor, dismissing the case. Its ruling was upheld by a unanimous three-judge panel of the 9th U.S. Circuit Court of Appeals in San Francisco in Thursday’s ruling.
“The district court properly ruled that Cohen and (Cohen Asset Management) failed to state a claim for breach of contract,” said the appeals court ruling.
“Two Berkley policies insured Northwest Territorial Mint, LLC against liability for damages for ‘personal and advertising injury.’ The district court correctly concluded that policy exclusions for ‘knowing violation of the rights of another’ and for ‘material published with knowledge of its falsity’ were unambiguous and required that the insured acted with knowledge,” the ruling said.
“Further, considering the underlying complaint and the verdict and judgment, which found that the conduct of Northwest and other defendants amounted to fraud, the ‘knowledge of falsity’ exclusion plainly applied,” said the ruling, in upholding the lower court’s decision.
Attorneys in the case could not immediately be reached for comment.
A federal appeals court upheld a lower court ruling in favor of a Hartford Financial Services Group Inc. unit earlier this month and held a caulking product company competitor’s litigation against the company cannot be considered disparagement or defamation under its coverage and that the insurer was not obligated to defend it.
A Washington state appeals court has overturned a lower court ruling and held a W.R. Berkley Corp. unit’s definition of the word “decay” in denying a roof damage claim was too narrow.