holding that “purely economic losses” were not covered under a similar commercial general liability policy
How later courts described this case
- holding that “purely economic losses” were not covered under a similar commercial general liability policy
Written by the judges who cited it.
The opinion
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
January 23, 2008
No. 06-61084 Charles R. Fulbruge III
Clerk
NATIONWIDE MUTUAL INSURANCE COMPANY
Plaintiff-Appellee
v.
LAKE CAROLINE, INC.
Defendant-Appellant
Appeal from the United States District Court
for the Southern District of Mississippi
Before KING, BARKSDALE, and DENNIS, Circuit Judges.
DENNIS, Circuit Judge:
This insurance case primarily involves the issue of whether the instant
insurance policy provides coverage for a slander of title claim. The district court
concluded that the policy did not provide such coverage and that the insurer had
no duty to defend the insured against any such claim. For the reasons stated
herein, we affirm.
I. BACKGROUND FACTS
During the 1980's, Lake Caroline, Inc. (“LCI”) constructed the Lake
Caroline subdivision located in Madison County, Mississippi (the subdivision is
hereinafter referred to as “Lake Caroline”). On August 7, 1989, the Madison
County Board of Supervisors (the “Board”) re-zoned Lake Carolina from “A-1
No. 06-61084
Agricultural” to “P-1 Planned Unit Development.” Accordingly, on December 4,
1989, LCI executed a “Declaration of Covenants, Conditions, and Restrictions for
Lake Caroline.” LCI also created the Lake Caroline Planned Unit Development
(“LCI PUD”).
A&F Properties, LLC (“AFP”) was interested in constructing and operating
a golf course in Lake Caroline. On September 27, 1995, LCI and AFP entered
into a “Contract for the Sale and Purchase of Real Properly” (the “Contract”)
under which LCI agreed to give AFP 154 acres of Lake Caroline (hereinafter
referred to as the “Golf Course Lands”) in consideration for AFP building and
maintaining a golf course for a period of not less than ten years, i.e., until
December 31, 2006. The Contract and warranty deed provided that the Golf
Course Lands would be subject to zoning ordinances and other governmental
regulations. AFP constructed and began operating the golf course in 1996.
On February 25, 1998, the Board adopted the 1998 Master Plan for the
LCI PUD. The 1998 Master Plan was, according to LCI, the first plan adopted
for the LCI PUD and reflected the then-existing conditions of Lake Caroline,
including the existence of the golf course.
In 2003, AFP became disillusioned with running the golf course and
instead wanted to residentially develop the Golf Course Lands. AFP twice
petitioned the Board -- in November 2003 and April 2004 -- to re-zone the Golf
Course Lands to allow for residential development. Both attempts were opposed
by LCI, the Lake Caroline Owners’ Association, and hundreds of individual
homeowners. The Board tabled the November 2003 petition as premature
because AFP was contractually obligated to operate the golf course until
December 31, 2006. The Board’s denial of the April 2004 petition on the same
grounds was affirmed on appeal by the Circuit Court of Madison County and
then the Mississippi Supreme Court. See A&F Props., LLC v. Madison County
Bd. of Supervisors, 933 So. 2d 296 (Miss. 2006).
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No. 06-61084
On December 9, 2004, AFP filed suit in state court against LCI alleging
breach of contract, breach of warranty deed, and slander of title claims.
According to the AFP complaint, the Board had initially approved a master plan
for Lake Caroline in 1989. However, the Board lost the only physical copy of the
1989 Master Plan, prompting it to adopt a new master plan in 1998. AFP
alleges that it knew nothing of the 1998 Master Plan because LCI withheld the
fact that it was presenting a new plan to the Board. AFP further alleges that
LCI withheld from the Board that AFP was free to make other use of its property
after the Contract term expired. AFP also claims that LCI repeatedly
misrepresented to the Board that LCI was the only developer within the LCI
PUD, implying that AFP was not a developer and did not have rights to develop
the subject property. AFP characterizes LCI’s conduct as intentional and/or
malicious.
LCI owns an insurance policy (the “Policy”) issued by Nationwide Mutual
Insurance Company (“Nationwide”). On November 17, 2005, Nationwide filed
suit in federal court seeking a declaratory judgment that the allegations in the
AFP complaint do not trigger its duty to defend under the Policy. The relevant
provisions policy are as follows:
Coverage A governs “property damage” and provides, in pertinent part:
We will pay those sums that the insured becomes legally obligated
to pay as damages because of “bodily injury” or “property damage”
to which this insurance applies. We will have the right and duty to
defend the insured against any “suit” seeking those damages.
However, we will have no duty to defend the insured against any
“suit” seeking damages for “bodily injury” or “property damage” to
which this insurance does not apply. We may, at our discretion,
investigate any “occurrence” and settle any claim or “suit” that may
result.
“Property damage” is defined to include:
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No. 06-61084
a. Physical injury to tangible property, including all resulting loss
of use of that property. All such loss of use shall be deemed to occur
at the time of the physical injury that caused it; or
b. Loss of use of tangible property that is not physically injured. All
such loss of use shall be deemed to occur at the time of the
“occurrence” that caused it.
However, coverage is limited to property damage “caused by an ‘occurrence’ that
takes place in the ‘coverage territory.’” An “occurrence” is defined in the Policy
to mean “an accident, including continuous or repeated exposure to substantially
the same general harmful conditions.” Finally, the Policy contains an “expected
or intentional conduct” exclusion. Thus, coverage does not apply to property
damage that is “expected or intended from the standpoint of the insured.”
Coverage B governs “personal and advertising injury” and provides, in
pertinent part:
We will pay those sums that the insured becomes legally obligated
to pay as damages because of “personal and advertising injury” to
which this insurance applies. We will have the right and duty to
defend the insured against any “suit” seeking those damages.
However, we will have no duty to defend the insured against any
“suit” seeking damages for “personal and advertising injury” to
which this insurance does not apply. We may, at our discretion,
investigate any offense and settle any claim or “suit” that may
result.
“Personal and advertising injury” is defined in the Policy to include “[o]ral or
written publication, in any manner, of material that slanders or libels a person
or organization or disparages a person’s or organization’s goods, products or
services.” However, the Policy also contains a “knowledge of falsity” exclusion.
Thus, coverage does not apply to any “‘[p]ersonal and advertising injury’ arising
out of oral or written publication of material, if done by or at the direction of the
insured with knowledge of its falsity.”
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No. 06-61084
On September 28, 2006, the district court entered judgment in favor of
Nationwide on the ground that the AFP complaint alleges only intentional
conduct thereby triggering the “expected or intentional conduct” exclusion under
Coverage A and the “knowledge of falsity” exclusion under Coverage B. Thus,
according to the district court, Nationwide has no duty to defend LCI against the
AFP complaint because the allegations in that complaint do not arguably fall
within the scope of coverage. LCI filed this timely notice of appeal.
II. STANDARD OF REVIEW
We review a district court’s summary judgment ruling de novo, applying
the same standard as the district court. Wyatt v. Hunt Plywood Co., Inc., 297
F.3d 405, 408 (5th Cir. 2002). A party is entitled to summary judgment only if
“the pleadings, the discovery and disclosure materials on file, and any affidavits
show that there is no genuine issue as to any material fact and that the movant
is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). On a motion
for summary judgment, we must view the facts in the light most favorable to the
non-moving party and draw all reasonable inferences in its favor. See Hockman
v. Westward Commc’ns, L.L.C., 407 F.3d 317, 325 (5th Cir. 2004). In reviewing
the evidence, we must therefore “refrain from making credibility determinations
or weighing the evidence.” Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337,
343 (5th Cir. 2007).
Because this is a diversity case, this court applies the substantive law of
Mississippi. Mulberry Square Prods. v. State Farm Fire & Cas. Co., 101 F.3d
414, 420 (5th Cir. 1996) (citing Sentry Ins. v. R.J. Weber Co., 2 F.3d 554, 556 (5th
Cir. 1993)). “The reach of an insurance contract . . . is a matter of law that we
review de novo.” Id. (quoting Sentry, 2 F.3d at 556).
III. ANALYSIS
“Under Mississippi law, an insurer’s duty to defend an action against its
insured is measured, in the first instance, by the allegations in the plaintiff’s
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No. 06-61084
pleadings, and only if the pleadings state facts which bring the injury within the
coverage of the policy is the insured required to defend.” Mulberry, 101 F.3d at
421 (quoting EEOC. v. South. Publ’g Co., 705 F. Supp. 1213, 1215 (S.D. Miss.
1988)); see also J.C. Meng v. Bituminous Cas. Corp., 626 F. Supp. 1237, 1240-41
(S.D. Miss. 1986). An exception to this rule exists when the insurer is “presented
with extrinsic facts, of which the insurer has knowledge or could obtain
knowledge by means of a reasonable investigation, that trigger coverage under
the policy.” Id. at 422 (citing Merchants Co. v. Amer. Motorists Ins. Co., 794 F.
Supp. 611, 617 (S.D. Miss. 1992)).1 In such situations, the duty to defend is
triggered. Id. In evaluating whether a potential for coverage exists, “we look not
to the particular legal theories . . . but to the allegedly tortious conduct
underlying the suit.” Ingalls Shipbuilding v. FIC, 410 F.3d 214, 225 (5th Cir.
2005) (citation omitted). The rules of construction of insurance contracts under
Mississippi law are as follows:
First, where an insurance policy is plain and unambiguous, a court
must construe that instrument, like other contracts, exactly as
written. Second, it reads the policy as a whole, thereby giving effect
to all provisions. Third, it must read an insurance policy more
strongly against the party drafting the policy and most favorably to
the policy holder. Fourth, where it deems the terms of an insurance
policy ambiguous or doubtful, it must interpret them most favorably
to the insured and against the insurer. Fifth, when an insurance
1
We recognize that this statement of Mississippi law is incorrect to the extent that it
implies that an insurer has an absolute duty to conduct a reasonable investigation to
determine the true facts before declining to defend or extend coverage. The Mississippi Court
of Appeals has since clarified that no such duty exists under Mississippi law and that federal
courts interpreting otherwise are wrong. See Terracina Motor Co. v. Universal Underwriters
Ins. Co., Case No. 97-CA-00052, 1998 Miss. App. LEXIS 602, **9-12 (Miss. Ct. App. Jul. 21,
1998). However, that decision was unpublished. In Mississippi, “[o]pinions in cases which
have not been designated for publication shall not be cited, quoted or referred to by any court.”
Miss. R. App. P. 35-B. Thus, it is unclear whether we are free to disregard this court’s
precedent in Mulberry on the basis of an unpublished opinion by the Mississippi Court of
Appeals. Nonetheless, we need not address this issue because even if Nationwide had such a
duty, LCI is unable to articulate any additional facts that would arguably trigger coverage
under the Policy.
6
No. 06-61084
policy is subject to two equally reasonable interpretations, a court
must adopt the one giving the greater indemnity to the insured.
Sixth, where it discerns no practical difficulty in making the
language of an insurance policy free from doubt, it must read any
doubtful provision against the insurer. Seventh, it must interpret
terms of insurance policies, particularly exclusion clauses, favorably
to the insured wherever reasonably possible. Finally, although
ambiguities of an insurance policy are construed against the
insurer, a court must refrain from altering or changing a policy
where terms are unambiguous, despite resulting hardship on the
insured.
Centennial Ins. Co. v. Ryder Truck Rental, Inc., 149 F.3d 378, 382-83 (5th Cir.
1998). With these principles in mind, the first question is whether the
allegations in the AFP complaint trigger coverage under the Policy. If not, the
next question is whether Nationwide knew of facts or could have reasonably
ascertained facts that would have triggered coverage under the Policy. Because
the parties focus almost exclusively on Coverage B, we begin our analysis there.
A. Personal and Advertising Injury - Coverage B
The parties agree that the only possibility for coverage under Coverage B
arises out of subsection d of the definition “personal and advertising injury,”
which includes coverage for injuries arising out of “[o]ral or written publication,
in any manner, of material that slanders or libels a person or organization or
disparages a person’s or organization’s goods, products or services.” Coverage
is excluded, however, if the publication was “done by or at the direction of the
insured with knowledge of its falsity.”
The district court held that because the AFP complaint alleges that LCI’s
conduct was intentional, the “knowledge of falsity” exclusion applies to preclude
coverage. In doing so, the district court erred. The AFP complaint alleges that
LCI’s conduct was intentional and/or malicious. “Malice” in this context does not
require knowledge of falsity. Instead, a party can be deemed to have acted with
malice under Mississippi law upon a showing of a reckless disregard for the
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No. 06-61084
truth. See Eckman v. Cooper Tire & Rubber Co., 893 So. 2d 1049, 1053 (Miss.
2005); Bullock v. City of Pascagoula, 574 So. 2d 637, 642 (Miss. 1990). A reckless
disregard for the truth requires only that “the defendant in fact entertained
serious doubts as to the truth of his publication.” Journal Publ’g Co. v.
McCullough, 743 So. 2d 352, 361 (Miss. 1999) (quoting Harte-Hanks Commc’ns,
Inc. v. Connaughton, 491 U.S. 657, 688 (1989)).
This court has held under Mississippi law that “knowledge of falsity”
exclusions do not apply to conduct constituting a “gross and reckless disregard
of the truth.” EEOC v. South. Publ’g Co., Inc., 894 F.2d 785, 790 (5th Cir. 1990);
see also Am. Home Assur. Co. v. United Space Alliance, LLC, 378 F.3d 482, 488
(5th Cir. 2004) (“[I]f liability can be imposed without proving that the false
statements were made with the knowledge that they were false, the ‘knowledge
of falsity’ exclusion will not apply to preclude coverage.”). Indeed, limiting the
reach of the “knowledge of falsity” exclusion in this regard is consistent with the
principle under Mississippi law that exclusions are to be construed in favor of
the insured whenever reasonable. Centennial, 149 F.3d at 382-83. Thus,
because the AFP complaint alleges that LCI acted with malice, which is defined
to include a reckless disregard for the truth, we conclude that the “knowledge of
falsity” exclusion does not apply to preclude coverage in this case.
However, we affirm the judgment of the district court on other grounds.
See Holtzclaw v. DSC Commc’ns Corp., 255 F.3d 254, 258 (5th Cir. 2001) (“We
may affirm a summary judgment on any ground supported by the record, even
if it is different from that relied on by the district court.”). The parties agree
that the only claim that even arguably creates the possibility for coverage is the
slander of title claim. According to the Mississippi Supreme Court:
“Slander of title” is a phrase commonly employed to describe words
or conduct which bring or tend to bring in question the right or title
of another to particular property, as distinguished from the
disparagement of the property itself. The slander may consist of a
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No. 06-61084
statement in writing, printing, or by word of mouth, and may relate
to personal as well as real property. . . . [T]he general rule of
liability for slander of title is stated as follows: “One who falsely
and maliciously publishes matter which brings in question or
disparages the title to property, thereby causing special damage to
the owner, may be held liable in a civil action for damages.”
...
Words spoken of property are not in themselves actionable. But the
publication of false and malicious statements, disparaging of
plaintiff’s property or the title thereto, when followed, as a natural,
reasonable and proximate result, by special damage to the owner,
are actionable. The false statement may consist of an assertion that
plaintiff has no title to the property of which he is the ostensible
owner, or that his title is defective, or that defendant has an interest
in or lien upon the property. Whatever be the statement, however,
in order for it to form the basis of a right of action it must have been
made, not only falsely, but maliciously.
Walley v. Hunt, 54 So. 2d 393, 396 (Miss. 1951) (internal quotations and citations
omitted). However, the Policy itself expressly limits coverage to the slander of
a person or organization or disparagement of a good, product, or service.
Although Mississippi courts have not yet addressed this issue, other courts are
unanimous in holding that slander of title claims pertain only to real property,
which is not a person, organization, good, product, or service. See, e.g, ABM
Indus., Inc. v. Zurich Am. Ins. Co., No. C05-3480, 2006 WL 2595944, **26-27
(N.D. Cal. Sept. 11, 2006); U.S. Fid. & Guar. Co. v. Saddle Ridge, L.L.C., No.
98CV2565, 1999 WL 1072905, *5 (D. Kan. Sept. 27, 1999); Kickham Group, Inc.
v. Am. Nat’l Fire Ins. Co., No. 3:96CV1823, 1997 WL 600710, **2-3 (N.D. Tex.
Sept. 24, 1997); Etchison v. Westfield Ins. Co., No. 5:05CV99, 2006 U.S. Dist.
LEXIS 71467, **22-29 (N.D.W.V. Sept. 29, 2006); Thompson v. Md. Cas. Co., 84
P.3d 496, 506-07 (Colo. 2004); Wylin v. Auto Owners Ins. Co., No. 255669, 2005
Mich. App. LEXIS 2568, **13-14 (Mich. Ct. App. Oct. 18, 2005); Acme Constr.
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No. 06-61084
Co., Inc. v. Cont’l Nat’l Indem. Co., No. 81402, 2003 WL 194879, **6-7 (Ohio Ct.
App. Jan. 30, 2003); Bank One, N.A. v. Breakers Dev., 559 N.W.2d 911, 912-13
(Wis. Ct. App. 1997). We see no reason why Mississippi courts would rule
differently. Thus, we conclude that Mississippi courts would follow this
unanimous trend and conclude that slander of title claims do not trigger
coverage under policies that limit coverage to the slander of a person or
organization or disparagement of a good, product, or service.
None of the cases cited by LCI compels a different result. Indeed, the
polices at issue in each of those cases provided coverage for slander generally and
did not limit coverage to the slander of a person or organization or
disparagement of a good, product, or service. See, e.g., Valley Improvement Ass’n
v. USF&G, 129 F.3d 1108, 1118 (10th Cir. 1997) (policy covered damages arising
out of “the publication or utterance of a libel or slander or of other defamatory
or disparaging material”); Classic Corp. v. Charter Oak Fire Ins. Co., No.
93CV5655, 1995 WL 295824, *1 (C.D. Cal. Feb. 22, 1995) (same); Royce v.
Citizens Ins. Co., 557 N.W.2d 144, 147 (Mich. App. Ct. 1996) (policy covered
damages arising out of “libel, slander”).
Although we conclude that the policy at issue does not cover slander of
title claims, LCI is correct that this court’s review is not limited to the particular
legal theories alleged in the AFP complaint. See Ingalls, 410 F.3d at 225 (“[W]e
look not to the particular legal theories . . . but to the allegedly tortious conduct
underlying the suit.”); Merchants, 794 F. Supp. at 618 (holding under Mississippi
law that duty to defend is triggered “when there is any basis for potential
liability under the policy. . . . for the allegations raised in the . . . action”);
Employers Reinsurance Corp. v. Martin, Gordon & Jones, Inc., 767 F. Supp.
1355, 1359-60 (S.D. Miss. 1991) (“[I]t is the facts alleged, not the pleader’s legal
conclusions, that are relevant to the insurer’s duty to defend.”); see also Curtis-
Universal, Inc. v. Sheboygan Emergency Med. Servs., 43 F.3d 1119, 1122 (7th
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No. 06-61084
Cir. 1994) (“[F]or example, if the complaint alleges facts that if proved would
show that the insured had infringed the plaintiff’s copyright, the policy kicks in
even if the complaint charges the insured only with fraud or intentional
infliction of emotional distress.”). Thus, as long as the allegations in the AFP
complaint make out some claim that has the possibility of triggering coverage,
Nationwide has a duty to defend even if the complaint does not pursue that
particular legal theory as a basis for relief. As the Seventh Circuit reasoned:
Defamation and disparagement are explicitly covered by the basic
policy, and defamation by the umbrella policy. But neither tort is
named in the counterclaim. No matter. Coverage does not depend
on the characterization of the wrong by the plaintiff . . . . Modern
pleading requires the pleading only of a claim, not of a legal theory;
and so if a specific tort or other legal wrong named in the insurance
policy had to be named in the suit for liability coverage to exist,
insurance protection could be lost as the result of a totally
inconsequential omission by the drafter of the complaint. Such a
rule would also be an invitation to strategic pleading.
Cincinnati Ins. Co. v. E. Atl. Ins. Co., 260 F.3d 742, 745 (7th Cir. 2001).
LCI cites the following allegations that, according to it, serve to trigger
Nationwide’s duty to defend:
[T]he MCBS, at the request of LCI, approved another Master Plan
for the PUD dated February 19, 1998.
When LCI presented the 1998 Master Plan to the MCBS and
requested that it be approved, LCI withheld from the MCBS the
details of the Contract and Warranty Deed.
LCI withheld from [AFP] the fact that it was presenting to the
MCBS, and requesting approval of, the 1998 Master Plan.
As a result of the actions of LCI, the 1998 Master Plan was
approved by the MCBS without [AFP] being given an opportunity
to advise the MCBS of its contract and deed rights.
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No. 06-61084
LCI opposed [AFP]’s request, using as a basis for its opposition, the
1998 Master Plan which LCI had approved by withholding
information from the MCBS and [AFP].
LCI made representations to the MCBS and to the public that it was
the only developer of the PUD indicating that [AFP] was not a
developer and did not have rights to develop the subject property in
accordance with applicable zoning ordinances.
LCI made representations to the MCBS and to the public that [AFP]
was prohibited by the Declaration of Covenants, Conditions and
Restrictions for Lake Caroline from developing the subject property.
LCI has continued to do all it can to prevent [AFP] from exercising
its right to develop the subject property and change its use after
December 31, 2006 as contemplated by the Contract and Warranty
Deed.
According to LCI, these allegations make out a claim for slander of person
or organization or disparagement of goods, products, or services. We disagree.
According to the AFP complaint, LCI stated that “[AFP] did not have rights to
develop the subject property” and that “[AFP] was prohibited by the Declaration
of Covenants . . . from developing the subject property.” Moreover, according to
the AFP complaint, “LCI has continued to do all it can to prevent [AFP] from
exercising its right to develop the subject property and change its use.”
Assuming that these statements are slanderous or disparaging, they do not
slander a person or organization or disparage a good, product, or service. At
best, these alleged statements do nothing more than slander AFP’s title to the
subject property and the Policy does not cover such claims.
Because the allegations in the complaint do not trigger the duty to defend,
this court must next address whether Nationwide knew of facts or could have
reasonably ascertained facts that would have triggered coverage under the
Policy. See Mulberry, 101 F.3d at 422 (citing Merchants Co., 794 F. Supp. at
617). Here, LCI argues that a reasonable investigation would have revealed that
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No. 06-61084
(1) LCI did not make any false statements before the Board, or if any false
statements were made by LCI, LCI did not know they were false; (2) AFP’s
conclusory allegations were unsupported by the evidence; and (3) documents in
the state court suit contradicted or called into serious question the validity of
AFP’s allegations. These additional facts, however, do not trigger coverage or
in any way alter our conclusion that AFP is simply alleging a slander of title
claim, which the Policy does not cover. Accordingly, we conclude that LCI has
not established that the AFP complaint itself -- or any additional facts -- trigger
the duty to defend under Coverage B of the Policy.
B. Property Damage - Coverage A
LCI also argues that there is a possibility of coverage under Coverage A
of the Policy, which covers “property damage” caused by an “occurrence.” We
reject this argument for three independent reasons. First, the Policy only covers
property damage “caused by an ‘occurrence’ that takes place in the ‘coverage
territory.’” Here, there is no suggestion that the alleged slanderous statements
took place in Lake Caroline.
Second, it is doubtful that the allegations in the AFP complaint satisfy the
Policy’s definition of “occurrence,” which limits coverage to property damage
resulting from “an accident.” The Mississippi Supreme Court has cited with
favor the following definition of “accident” for insurance coverage purposes:
An accident is anything that happens or is the result of that which
is unanticipated and takes place without the insured’s foresight or
anticipation. . . . As used in insurance policies it is simply an
undersigned, sudden, and unexpected event, usually of an afflictive
or unfortunate character, and often accompanied by a manifestation
of force, but it does not mean the natural and ordinary consequences
of a negligent act.
Allstate Ins. Co. v. Moulton, 464 So. 2d 507, 509 (Miss. 1985) (quoting 7A
Appleman, Insurance Law and Practice § 4492 (Berdal ed. 1979)). We have
already held that the allegations in the AFP complaint state only a slander of
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No. 06-61084
title claim. Under Mississippi law, such claims require a showing of malice.
Walley, 54 So. 2d at 396. A party can be deemed to have acted with malice under
Mississippi law upon a showing of a reckless disregard for the truth, which
requires sufficient evidence to establish that “the defendant in fact entertained
serious doubts as to the truth of his publication.” McCullough, 743 So.2d at 361
(quoting Harte-Hanks Commc’ns, 491 U.S. at 688). Such conduct hardly
constitutes “an undersigned, sudden, and unexpected event.”
Third, LCI concedes that the subject property was not physically injured.
The only other property damage that is covered under the Policy is the “[l]oss of
use of tangible property.” However, under Mississippi law, injurious falsehood
claims -- such as slander of title -- must include a showing of economic or
pecuniary damages. See Smith v. Magnolia Lady, Inc., 925 So. 2d 898, 906
(Miss. Ct. App. 2006). This court has recognized the abundance of case law
holding that “purely economic losses . . . do not constitute ‘the loss of use of
tangible property.’” Snug Harbor, Ltd. v. Zurich Ins., 968 F.2d 538, 542 & n.13
(5th Cir. 1992); see also Shelter Mut. Ins. Co. v. Brown, 345 F. Supp. 2d 645, 649
(S.D. Miss. 2004) (holding that damages arising out of negligent
misrepresentation not property damages); Audubon Ins. Co. v. Stefancik, 98 F.
Supp. 2d 751, 756 (S.D. Miss. 1999) (holding that damages arising out of
defamation not property damages); State Farm Fire & Cas. Co. v. Brewer, 914
F. Supp. 140, 142 (S.D. Miss. 1996) (“The[] cases are virtually unanimous in
their holdings that damages flowing from misrepresentation and/or fraud have
no basis in property damage; rather, the only cognizable damages from such
torts are economic and contractual in nature and as such do not fall within the
scope of coverage afforded by policies like that of the [Defendant]”); Giddings v.
Indus. Indem., 169 Cal. Rptr. 278, 281 (Cal. Ct. App. 1980) (“To construe the
explicit words ‘tangible property’ to include intangible economic interests and
property rights requires a strained and farfetched interpretation, doing violence
14
No. 06-61084
to the plain language of the policies.”). In short, the subject property itself was
not damaged; if anything, the reputation of AFP’s title to the subject property
was damaged and the resulting injury was purely economic. The distinction is
subtle but important and does not serve to trigger the duty to defend under the
Policy.
Even if this court goes beyond the allegations in the AFP complaint, LCI
does not isolate any additional facts that would trigger coverage or in any way
alter our conclusion that AFP is simply alleging a slander of title claim, which
did not occur in Lake Caroline, does not meet the definition of an “occurrence”
in the Policy, and does not involve damage that would constitute the loss of use
of tangible property as required under the Policy. Accordingly, we conclude that
LCI has not established that the AFP complaint itself -- or any additional facts --
trigger the duty to defend under Coverage A of the Policy.
IV. CONCLUSION
For the foregoing reasons, we affirm the judgment of the district court.
AFFIRMED.
15