The 7th Circuit Court of Appeals affirmed the grant of summary judgment to an insurance company against two Martinsville Texas Corral restaurants when it found the companies insurance endorsement agreement did not cover a complaint filed by DirecTV.
William and Victor Spina co-own Martinsville Corral, Inc., which owns two Indiana Texas Corral restaurants. MCI’s insurance provider, Society Insurance, provided it with general business liability coverage, as well as additional coverage under an “Employment-Related Practices Liability Endorsement.” That endorsement required Society to cover MCI for damages resulting from a “wrongful act” to which the policy applies, including libel, slander, invasion of privacy, defamation and humiliation.
In January 2015, DirecTV filed two lawsuits against MCI alleging the owners failed to pay the higher commercial subscription rate on its restaurant televisions that displayed DirecTV programs. Instead, the they paid a cheaper residential subscription fee. MCI requested that Society defend the suit and provide indemnification, but Society denied coverage and refused MCI’s request. DirecTV ultimately dismissed its suit, but not before MCI incurred over $75,000 in expenses defending against it.
MCI then filed suit against Society for breach of contract, and the insurer responded with a counter-claim for declaratory judgment that there was no coverage. Both parties filed cross-motions for summary judgment, and the district court ultimately ruled in favor of Society.
On appeal, MCI argued Society was required to cover its costs and expenses for the DirecTV action because DirecTV claimed damages that fell within the scope of the endorsement’s coverage for libel, slander and defamation claims. Specifically, MCI relied heavily on Ind. Ins. Co. v. N. Vermillion Cmty. Sch. Corp., 665 N.E.2d 630, 635 (Ind. Ct. App. 1996) to defend its argument.
But the 7th Circuit Court denied MCI’s claim, finding that unlike in Vermillion, there was “no reasonable interpretation of the DirecTV complaint where it could arguably fall within the category of libel, slander or defamation.”
“DirecTV’s complaint alleged that MCI damaged DirecTV’s goodwill by showing its programming without paying the correct subscription fee,” Circuit Judge William Bauer wrote for the court. “In DirecTV’s complaints, there are no allegations that MCI made any false, defamatory statement about DirecTV. DirecTV’s actions did not include allegations that MCI made any kind of statement at all.”
Therefore, the 7th Circuit Court affirmed the grant of summary judgment in favor of Society, concluding the endorsement did not provide coverage for the DirecTV action.
The case is Martinsville Corral, Inc., dba Martinsville Texas Corral, et al. v. Society Insurance, 18-1945.