Argued April 4, 2014.
Appeal from the Circuit Court for Frederick County, Maryland. Civil No. 10-C-12-001638, pursuant to certiorari to the Court of Special, G. Edward Dwyer, Jr., JUDGE.
ARGUED BY Leah C. Montesano (Arent Fox, LLP of Washington, DC on brief FOR APPELLANT.
ARGUED BY Thomas Patrick Ryan (Amy Leete Leone, McCarthy Wilson, LLP of Rockville, MD) on brief FOR APPELLEE.
ARGUED BEFORE: Barbera, C.J., Harrell, Battaglia, Greene, Adkins, McDonald, and Watts, JJ. Opinion by Battaglia, J.
[439 Md. 144] Battaglia, J.
This appeal arises out of an action filed in the Circuit Court for Frederick County by David Springer, Appellant, against Erie Insurance Exchange, Appellee (" Erie" ), in which Mr. Springer sought declaratory relief and damages for breach of contract, after Erie refused to provide him with a legal defense when he was sued by a third party, J.G. Wentworth Originations, LLC (" J.G. Wentworth" ), for, inter alia, defamation [439 Md. 145] and false light. Mr. Springer claimed that, under the personal injury liability coverage provisions of his Erie homeowner's insurance policy, Erie had a duty to provide him with a legal defense in the J.G. Wentworth lawsuit. Erie refused and filed a counterclaim for declaratory relief on its own behalf, arguing that the J.G. Wentworth lawsuit was triggered by Mr. Springer's business interests and that his insurance policy included a " business pursuits" exclusion, which specifically barred claims based on the insured's business pursuits.
After the Circuit Court heard oral arguments on cross motions for summary judgment, it issued a declaratory judgment and summary judgment in favor of Erie, declaring, in part, that " Erie Insurance Exchange did not have a duty to defend or indemnify David Springer" and that Erie was not obligated " to pay for the costs of that defense or this action." Mr. Springer noted an appeal to the Court of Special Appeals, and before the intermediate appellate court could decide the case, we issued a writ of certiorari on our own initiative, 433 Md. 513, 72 A.3d 172, to consider whether an insurer can rely solely on allegations contained within a complaint filed by a third party when denying an insured's claim for coverage under the insurance policy's " business pursuits" exclusion. [439 Md. 146] We shall hold that in order to determine
if a third party complaint triggers the " business pursuits" exclusion in a homeowner's liability insurance policy, an insurer must consider the continuity of the insured's alleged business interests and the insured's profit motive.
J.G. Wentworth brought suit in 2011 against David Springer and the Sovereign Funding Group in the Circuit Court for Frederick County, alleging that they had used two websites, jgw-sucks.com and jgwentworth-scam.com, to spread defamatory and false light information in an attempt to lure customers away from J.G. Wentworth. Mr. Springer then contacted Erie, his insurer, for the first time to request that Erie provide him with a legal defense in the J.G. Wentworth action, because he asserted that, under the terms of his " Ultracover HomeProtector" insurance policy, Erie had a duty to defend him. When Erie refused to provide him with a defense, [439 Md. 147] stating that his claim was precluded by, inter alia, the " business pursuits" exclusion in his policy, Mr. Springer retained his own lawyer, thereafter instituting this suit against Erie, in which he sought a declaratory judgment that Erie was obligated to defend him and that Erie had breached its duty by failing to do so.
In his complaint against Erie, Mr. Springer cited numerous provisions of his " Ultracover HomeProtector" insurance policy issued by Erie, effective in July 2009 and renewed annually thereafter. Section II of the policy described the " Home and Family Liability Protection" offered under the policy and explained that " Personal Liability Coverage includes Bodily Injury Liability Coverage, Property Damage Liability Coverage and Personal Injury Liability Coverage." " Personal injury" was defined as:
" personal injury" means injury arising out of:
1. libel, slander or defamation of character;
2. false arrest, wrongful detention or imprisonment, malicious prosecution, racial or religious discrimination, wrongful entry or eviction, invasion of privacy, or humiliation caused by any of these.
The policy also contained the following assurance:
PERSONAL INJURY LIABILITY COVERAGE
We will pay all sums up to the amount shown on the Declarations which anyone we protect becomes legally obligated to pay as damages because of personal injury caused by an offense committed during the policy period. We will pay for only personal injury covered by this policy.
We may investigate or settle any claim or suit for damages against anyone we protect, at our expense. If anyone we protect is sued for damages because of personal injury covered by this policy, we will provide a defense with a lawyer we choose, even if the allegations are not true. We [439 Md. 148] are not obligated to pay any claim or judgment or defend any suit if we have already used up the amount of insurance by paying a judgment or settlement.
Erie defended against Mr. Springer's action, and as its own basis for declaratory relief, argued that Mr. Springer's claim for coverage was precluded by the policy's exclusions, which were detailed in a section of the policy entitled, " What We Do Not Cover--Exclusions." Specifically, the " business pursuits" exclusion provided:
We do not cover under ... Personal Injury Liability Coverage . . . :
2. ...personal injury [439 Md. 149] arising out of business pursuits of anyone we protect.
The policy defined " business" as " any full-time, part-time or occasional activity engaged in as a trade, profession or occupation, including farming."
In its counterclaim, Erie also cited another portion of its policy Erie asserted precluded Mr. Springer's claim:
19. The policy further excludes from the Personal Injury Liability Coverage " Bodily injury or personal injury arising out of business pursuits of anyone we protect, other than business pursuits covered by this policy.
* * *
21. The policy further excludes from the Personal Injury Liability Coverage " Suits for libel, slander or defamation of character made against anyone we protect if the publication or statement" a. took place before the effective date of this insurance or; b. was knowingly untrue."
The basis for Mr. Springer's claim, and Erie's claim of exclusion, was the action brought against Mr. Springer by J.G. Wentworth. J.G. Wentworth, a business specializing in purchasing structured settlements and annuities from individuals, sued Mr. Springer and Sovereign Funding Group, a company allegedly specializing in purchasing structured settlements and annuities, in the Circuit Court for Frederick County, alleging that Mr. Springer and the Sovereign Funding Group had engaged in false and misleading advertising in violation of Section 1125 of Title 15 of the United States Code, entitled the " Lanham Act," unfair and deceptive trade practices under Section 13-303 of the Commercial Law Article, Maryland Code (1975, 2013 Repl. Vol.) entitled " Practices generally prohibited" under the Maryland Consumer Protection Act, defamation per se, injurious falsehood, false light, tortious interference
with prospective business advantage, and tortious interference with contractual relations.
Specifically, J.G. Wentworth alleged in the complaint that Mr. Springer and the Sovereign Funding Group had created, maintained, and publicized two websites that disseminated false and defamatory information regarding J.G. Wentworth, specifically that Mr. Springer and the Sovereign Funding Group had sought, through the websites, " to mislead and [439 Md. 150] misrepresent facts to the public, unfairly and deceptively compete, defame, disparage, and tortuously interfere with the business interests of J.G. Wentworth." The scheme was defined as follows:
2. Upon information and belief, Defendants intentionally and maliciously use or used the websites jgw-sucks.com (" jgw-sucks site" ) and jgwentworth-scam.com (" jgw-scam site" ) to deliver web content to J.G. Wentworth's customers and potential customers that Defendants know contains false and misleading statements about J.G. Wentworth. The Defendants also intentionally and maliciously link J.G. Wentworth's name with the word " scam" in a large number of bogus Internet articles for the sole purpose of creating a false belief on the part of customers and potential customers that J.G. Wentworth's business is a " scam" when Defendants know that J.G. Wentworth is, in fact, a legitimate business and not a scam. Defendants personally instructed, and continue to instruct, a large number of potential customers, through direct telephone communication, to visit the jgw-scam site and the jgw-sucks site, while misrepresenting to the potential customers that these are independent sites not controlled by the Defendants. Defendants, in fact, control these sites.
3. Defendants, through their scheme, attempted to conceal their role and avoid attribution by using Internet practices designed to keep their true identities, and tortious, anti-competitive purpose, hidden from potential customers. The Defendants intended to thereby endow their untrue, defamatory, and anti-competitive statements with a false aura of credibility. The Defendants know that if they claimed authorship of the jgw-sucks site, the jgw-scam-site, and the larger number of feeder sites and bogus articles containing reference to " jgwentworth" and " scam," then potential customers would have given these materials the credence they deserved: none. Defendants' unlawful conduct is ongoing and continuing.
4. Defendants, through direct, personal contact with potential customers, use these websites, domains, and bogus [439 Md. 151] articles to distribute negative content about J.G. Wentworth to actual and potential customers, as well as to the public at large, in order to purposefully and dramatically damage J.G. Wentworth's online brand and business reputation and discourage customers from doing business with J.G. Wentworth. Defendants engage in this conduct know that their conduct is misleading, unfair, and unlawful.
Although the complaint contained numerous counts and factual allegations, the two counts, " defamation per se " and " false light," with which we are concerned, contained the following:
93. Defendants published false and defamatory statements concerning J.G. Wentworth on websites that they operated, including the jgw-scam site, the ...