United States Court of Appeals
For the First Circuit
No. 06-1857
GREAT AMERICAN INSURANCE COMPANY,
GREAT AMERICAN INSURANCE COMPANY OF NEW YORK,
GREAT AMERICAN ALLIANCE INSURANCE COMPANY,
GREAT AMERICAN ASSURANCE COMPANY,
Plaintiffs, Appellees,
v.
RISO, INC.,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. George A. O'Toole, Jr., U.S. District Judge]
Before
Boudin, Chief Judge,
Lipez, Circuit Judge,
and Shadur,* Senior District Judge.
Martin C. Pentz with whom Jeremy A. M. Evans and Foley Hoag
LLP were on brief for appellant.
Richard H. Nicolaides, Jr. with whom Mary F. Licari, Sarah E.
Eversman, Bates & Carey LLP, A. Hugh Scott, Robert A. Kole and
Choate, Hall & Stewart LLP were on brief for appellees.
March 8, 2007
*
Of the Northern District of Illinois, sitting by designation.
BOUDIN, Chief Judge. This diversity case involves a
dispute between Riso, Inc.--a distributor of digital duplicating
machines and related parts and supplies--and its insurer GAIC,1 as
to whether GAIC had duties to defend and indemnify Riso in an
antitrust suit filed against Riso by several California school
districts, Modesto City Schs. v. Riso Kagaku Corp., No. Civ. S-99-
2214 (E.D. Cal., filed Nov. 5, 1999). The factual background is
easy to recount; the legal issue is more difficult.
The Modesto complaint alleged that Riso had engaged in
unlawful restraint of trade to ensure that owners of Riso machines-
-such as the school districts--would use only Riso supplies and
service providers. The means included refusing to sell replacement
parts to independent service providers, territorial restraints on
its own dealers, tying machine sales to use of Riso parts, and
disparaging competitors in the supplies market as "supply pirates"
whose products could "cause serious damage"–-not covered by Riso's
warranty--to the machine.
Riso was protected during the period pertinent to the
Modesto suit by primary and umbrella commercial general liability
policies issued to it by GAIC between 1991 and 2000. The policies
provided that GAIC would "pay those sums that [Riso] becomes
1
We use "GAIC" to refer collectively to Great American
Insurance Company, Great American Insurance Company of New York,
Great American Assurance Company, and Great American Alliance
Insurance Company.
-2-
legally obligated to pay as damages because of 'personal injury'
. . . to which this insurance applies" and that GAIC had "the right
and duty to defend [Riso] against any 'suit' seeking those damages
for 'personal injury.'"
When the Modesto complaint was filed, Riso gave notice of
the suit to GAIC, asserting coverage under these policies. It
relied on the allegations of disparagement in the antitrust
complaint as triggering the "personal injury" coverage of its GAIC
policies. The policies defined "personal injury" as "injury, other
than 'bodily injury,' arising out of one or more of the following
offenses," namely, malicious prosecution, false arrest, wrongful
eviction, invasion of privacy, and--pertinent here--
d. [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 . . . .
GAIC refused to defend and the Modesto suit settled in
November 2003. In October 2004, Riso sought a declaratory judgment
in Massachusetts state court that GAIC had been obligated to defend
and indemnify Riso in connection with the Modesto suit. GAIC
countered with a declaratory judgment action in federal court and
removed Riso's suit. The parties cross-moved, Riso for partial
summary judgment that GAIC had a duty to defend, and GAIC for
summary judgment that it had no duty to defend or indemnify.
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In March 2006, the district court denied Riso's motion
and granted GAIC's motion. The court reasoned that the policy
covered only suits alleging the tort of product disparagement, and
that GAIC therefore had no duty to defend suits alleging
disparagement of parties other than the underlying plaintiffs.
Alternatively it said that the Modesto plaintiffs' injuries did not
"arise out of" Riso's disparagement of competitors' products
because the disparagement did not "materially contribute" to those
injuries.
This appeal followed and our review on summary judgment
is de novo. OneBeacon Ins. Co. v. Georgia-Pacific Corp., 474 F.3d
6, 7 (1st Cir. 2007). Massachusetts law, which governs in this
case, provides that an insurer's duty to defend against a third-
party suit is broader than its duty to indemnify, taking account of
the uncertainty as to what may be proved. In determining whether
the duty to defend has been triggered, the complaint is to be
construed broadly:
It is settled in this jurisdiction . . . that
the question of the initial duty of a liability
insurer to defend third-party actions against
the insured is decided by matching the third-
party complaint with the policy provisions: if
the allegations of the complaint are 'reasonably
susceptible' of an interpretation that they
state or adumbrate a claim covered by the policy
terms, the insurer must undertake the defense.
Otherwise stated, the process is one of
envisaging what kinds of losses may be proved as
lying within the range of the allegations of the
complaint, and then seeing whether any such loss
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fits the expectation of protective insurance
reasonably generated by the terms of the policy.2
By contrast, the duty to indemnify is triggered only
"when a judgment within the policy coverage is rendered against
[the] insured." Boston Symphony Orchestra, Inc. v. Commercial
Union Ins. Co., 545 N.E.2d 1156, 1158 (Mass. 1989) ("BSO"). In
resolving both duty questions, we focus (as the parties have done)
on the duty to defend. As to it, the Modesto complaint is
reasonably straightforward and there is little doubt that it
alleged disparagement as one of the acts directed by Riso against
its competitors.
Nevertheless, the allegations made by the Modesto
complaint seem at first blush to fall outside the ambit of the
policies' express coverage. The pertinent policy language requires
that the injury in the underlying case "aris[e] out of" one of "the
[listed] offenses"--and the pertinent listed offenses appear to be
the torts of libel, slander, and commercial disparagement. The
Modesto suit, a garden-variety antitrust suit, fits none of these
"offense" categories.
Specifically, the Modesto complaint does not allege that
either the Modesto plaintiffs or their "goods, products or
services" were ever disparaged by Riso. Thus the Modesto
2
Sterilite Corp. v. Cont'l Cas. Co., 458 N.E.2d 338, 340-41
(Mass. App. Ct. 1983) (Kaplan, J.) (internal citations omitted);
see also Cont'l Cas. Co. v. Gilbane Bldg. Co., 461 N.E.2d 209, 212
(Mass. 1984).
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plaintiffs could not themselves maintain a defamation or commercial
disaragement action under California law; defamatory or disparaging
statements must be "of and concerning" the plaintiff. Blatty v.
New York Times Co., 728 P.2d 1177, 1186-87 (Cal. 1986), cert.
denied, 485 U.S. 934 (1988). A number of courts have therefore
dismissed policy-coverage claims quite similar to that asserted by
Riso in the present case.3
But the Massachusetts Supreme Judicial Court ("SJC")
chose a different path in BSO. There the SJC found that the
insurer had a duty to defend the BSO in a breach of contract suit
brought by Vanessa Redgrave following the BSO's cancellation of her
scheduled performances. Redgrave alleged that the BSO's
cancellation had "led others to refrain from hiring [her] for
professional engagements" by damaging her reputation, and sought
consequential damages "analogous to damages for defamation." BSO,
545 N.E.2d at 1158 & n.4.
The policy language in BSO covered inter alia injuries
arising from "offenses" including "the publication or utterance
. . . of other defamatory [or] disparaging material." 545 N.E.2d
at 1158-59. Although Redgrave's complaint did not describe an
3
See, e.g., Microsoft Corp. v. Zurich Am. Ins. Co., 2001 WL
765871, at *6 (W.D. Wash. 2001) (applying Washington law); QSP,
Inc. v. Aetna Cas. & Sur. Co., 773 A.2d 906, 916, 918 (Conn. 2001)
(applying Connecticut law); Motorists Mut. Ins. Co. v. Nat'l Dairy
Herd Improvement Ass'n, Inc., 750 N.E.2d 1169, 1175 (Ohio Ct. App.
2001) (applying Ohio insurance law).
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"offense" of libel or slander or commercial disparagement, the SJC
nonetheless held that the insurer had a duty to defend. Noting
that ambiguities in the policy should be resolved against the
insurer, the SJC (id. at 1159) gave "disparagement" its ordinary
meaning--"to speak slightingly of"--and reasoned that
[t]he essence of Redgrave's claim . . . was
that the BSO's breach of contract somehow
spoke slightingly about her and damaged her
reputation.
Riso argues that BSO governs in this case because the
Modesto complaint charged disparagement in the lay sense--
specifically, by Riso of its competitors' products--and the
underlying plaintiffs' injuries allegedly "arose out of" this
disparagement. That other wrongs were also alleged does not
matter, since the duty to defend is normally triggered where any of
the plaintiff's allegations invoke coverage. 1 B. Ostrager & T.
Newman, Handbook on Insurance Coverage Disputes § 5.02[a](11th ed.
2002). GAIC responds that BSO should not be extended to an
antitrust claim so fundamentally remote from its defamation and
disparagement policy coverage.
The language of Riso's policy differs from BSO's policy
and perhaps more strongly suggests an intent to limit coverage to
the torts of libel, slander, and commercial disparagement.4 But,
4
Riso's policy covers injuries resulting from "material that
. . . disparages a person's or organization's goods, products or
services"; by contrast, BSO's policy referred simply to "other
. . . disparaging material." While both phrases extend coverage to
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given the "construe against" canon relied upon in BSO, 545 N.E.2d
at 1159, possibly the SJC would reject such a literal reading of
the Riso policy, just as it did in BSO itself. But even if the SJC
treated the policies as similar, the complaints in the two cases
are quite different.
The complaint in the BSO case, generously construed,
could be viewed as something closely related to a classic
defamation claim. Although formally one for breach of contract, it
arguably involved representations (implied by the BSO's
cancellation of the contract) damaging to the character of the
plaintiff, directly impacting the plaintiff's reputation as an
actress and causing damage to the plaintiff's earning capacity.
Id. at 1158. The suit could be seen, by a stretch, as one for
defamation sailing under a foreign flag.
It would be hard to say the same about the Modesto
antitrust complaint. Riso did not even arguably defame the Modesto
plaintiffs or their educational services; the disparagement, if it
occurred, was directed toward other commercial entities competing
with Riso; and the damages to the Modesto plaintiffs, if any
occurred, were due to the higher costs caused by Riso's higher
prices, rather than any injury to the plaintiffs' reputations.
injuries beyond those resulting from common law libel or slander,
the scope of Riso's coverage is narrower and focused on the
elements of commercial disparagement.
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BSO can be read modestly or for all it could be worth.
We think that the right course is the modest reading, which
certainly excludes coverage for an antitrust complaint like this
one. BSO itself is a step beyond where most courts have gone; and,
mechanically read, it could be extended indefinitely. Imagine a
securities fraud action in which the false boosting of the seller's
stock involved (or implied) disparagement of a competing stock that
the buyer was considering.
Admittedly, one federal court in another circuit has
followed BSO's logic into new territory.5 But we think it more
telling that the Massachusetts Appeals Court has declined to read
BSO expansively. New England Tea & Coffee Co. v. Fireman's Fund
Ins. Co., 763 N.E.2d 103, 104 (Mass. App. Ct. 2002). The complaint
in BSO was arguably close to classic defamation-–a view reflected
in the BSO decision's own language. 545 N.E.2d at 1158 n.4, 1159.
If BSO is to be extended, it should by done by the SJC.
Riso argues that the policy language refers to "material
. . . that disparages a person's or organization's goods, products
or services" (emphasis added). The indefinite article "a," says
Riso, indicates that the disparaged party need not be the same as
the underlying plaintiff, so long as the latter's injuries are
5
Knoll Pharm. Co. v. Auto. Ins. Co. of Hartford, 152 F. Supp.
2d 1026, 1034 (N.D. Ill. 2001). But see QSP, 773 A.2d at 925-30;
Purdue Frederick Co. v. Steadfast Ins. Co., 801 N.Y.S.2d 781 (N.Y.
Sup. Ct. 2005) (table), 2005 WL 1662028 at *7.
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causally connected to covered conduct. Cf. Knoll, 152 F. Supp. 2d
at 1034. And, Riso reminds us, ambiguities in policy language are
to be construed against the insurer. BSO, 545 N.E.2d at 1159.
The ambiguities canon applies only where the policy can
reasonably be read two ways, and the touchstone of coverage is
"expectation of protective insurance reasonably generated by the
terms of the policy," Herbert A. Sullivan, Inc. v. Utica Mut. Ins.
Co., 788 N.E.2d 522, 531 (Mass. 2003) (quoting Sterilite, 458
N.E.2d at 340-41). Whatever the explanation for using "a," the
relevant core coverage in Riso policies is for defamation and
commercial disparagement, and we think it unlikely in the extreme
that the policy drafter or purchaser intended coverage for the
antitrust offense framed in the complaint.
We hold that the district court correctly ruled that the
insurer did not have a duty to defend Riso against the antitrust
complaint--a complaint brought by plaintiffs who never themselves
suffered any reputational injury and whose allegations of
disparagement instead concerned anticompetitive conduct directed
against others not party to the suit. On the present facts, this
conclusion also negates any apparent basis for a duty to indemnify.
Affirmed.
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