When Are Web Site Posts Enough To Trigger Coverage B?
When do statements on an insured’s web site constitute “libel” or disparagement so as to trigger Coverage B? That was the issue before the Wisconsin Court of Appeals in its recent opinion in Acuity v. Community Living Solutions, 2009 AP 2165 (Wis. App. December 28, 2010).
Community Living Solution was sued by a competitor (Hoffman) for deceptive advertising, unfair competition, unfair trade practices and tortious interference with business relationships. Community Living, which had been founded by several of Hoffman’s former employees, had posted information on the “staff experience” page of its web site listing a number of projects that its employees had worked on but failed to specify that those projects were completed while the employees had been working for Hoffman. In its lawsuit, Hoffman claimed that Community’s web site was “untrue, deceptive and/or misleading” and that Community employees had made “untrue, deceptive and misleading statements to Hoffman’s employees, clients and/or potential clients for the purpose of harming Hoffman by trying to adduce Hoffman clients or potential clients to terminate their contractual and business relationships with Hoffman in favor of a relationship with Community.”
Although Acuity agreed to defend under a reservation of rights, it refused to acknowledge coverage, with the result that the insured settled for $300,000 and sued Acuity. In reversing a lower court’s finding of coverage, District III of the Court of Appeals refused to find that the web site postings involved the offenses of “libel” or “disparagement” for purposes of Coverage B.
As to the claim of libel, the Court pointed out that the representations on the web site were not false but merely incomplete as they failed to note that the work of the employees in question had been during the term of their employment with Hoffman, not Community. Nor did the representations harm Hoffman’s reputation as they did not even mention Hoffman. Under the circumstances, the Court found that the web site postings failed to satisfy the common law elements for a cause of action for libel or slander under Wisconsin law.
For similar reasons, the Court found that the claims could not be construed as setting forth a claim for disparagement. As with the discussion of libel, the Court pointed out that the web site did not say anything about Hoffman directly and merely gave the insured’s employees credit for jobs done by another party without specifically attributing those jobs to Hoffman. Under the circumstances, the Court found that it is “difficult to see how the web site could have diminished Hoffman’s esteem, reputation or respect by including information that did not reference Hoffman in any way.”
More significantly, in contrast to the Seventh Circuit’s recent ruling in Santa’s Best, the Court held that the issue of Acuity’s indemnity obligations was not based on mere allegations in the complaint but whether any evidence had been adduced in the course of the case to support a claim for coverage. Accordingly, despite the fact that the underlying complaint had also made reference to various oral statements by Community employees, the Court found that no evidence had been presented to support such claims and therefore limited the scope of its analysis to the web site postings. Notwithstanding the insured’s invitation to the Court to adopt a standard of whether it settled covered claims in “reasonable anticipation of liability” for such claims, the Court held instead that it would constrain its analysis to whether actual facts existed to support a claim of indemnity.
