HANEY v. CONTINENTAL CAS. CO. (S.D. Miss. Jan. 15, 2010)

In 2006, plaintiff Haney entered into an agency contract with United American Insurance Company, according to which he would sell UAIC Insurance products. The agency contract also included a non-compete provision which prohibited Haney during the term of the contract and for two years thereafter from disclosing UAIC’s confidential information, selling competitors’ products, or attempting to induce UAIC’s other agents to terminate their relationship with UAIC or sell insurance for another insurance company.

In January 2008, UAIC filed a complaint against Haney alleging breach of the agency agreement and asserting claims for injunctive relief, breach of contract, tortious interference with contract, and tortious interference with business relationships. Haney then sought coverage under a professional liability policy issued by defendant, Continental Casualty Company. Coverage was denied resulting in the instant declaratory judgment action.

In determining the duty to defend, the court compared the various causes of action asserted in the complaint to the scope of coverage available under the policy. Haney conceded that an exclusion precluded any coverage for losses arising under the Mississippi Trade Secrets Act as well as any claims to the extent they were based on solicitation of UAIC’s customers. Accordingly, the court held there was no duty to defend Haney for these causes of action.

Moreover, the court noted that coverage exists for losses arising out of wrongful acts, which does not include intentional conduct. Therefore, there was no duty to provide coverage in response to the tortious interference claims as such claims require intentional and willful conduct. Finally, this left only UAIC’s breach of contract claim.

With respect to this claim, the court noted that the policy provides coverage for wrongful acts that occur while rendering or failing to render professional services. Given that soliciting agents was clearly distinct from selling or servicing policies, the court concluded that the breach of the non-solicitation agreement was not a covered event. Accordingly, the insurer was not required to provide coverage.

Impact: This case is novel in that the court declared there was no duty to defend the policyholder. In this particular case, the underlying complaint was fashioned to plead only causes of action that were outside the scope of the policy. It must be expected, generally, that plaintiffs will always include a negligence action, if only to trigger coverage. That said, there are times when only intentional acts are pleaded, and such causes of action are generally insufficient to trigger coverage. Note the distinction between this case and Berenyi above, here the insurer was able to demonstrate that all of the claims were outside the scope of the policy.

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