On appeal from the Superior Court of New Jersey, Law Division, Camden County.
King, Deighan and Havey. The opinion of the court was delivered by King, P.J.A.D.
The issue here is whether a libel claim qualifies as "bodily injury" and creates a duty to defend under the comprehensive general liability coverage of a homeowner's insurance policy. We agree with Judge Hyland of the Law Division that it does not and affirm. A cause of action for defamation does not, without more, allege physical or emotional injury to the person defamed within the meaning of the standard homeowner's policy.
This is the factual background leading to this claim. Dr. Ari Kiev is a practicing psychiatrist with his office and related teaching responsibilities in New York City. He had a professional and personal interest in sports medicine; this generated his interest in the health club industry. He eventually met Kenneth Dion who was involved with health clubs and programs known as Club Nautilus. Together with other professionals who were his friends, Dr. Kiev established several Club Nautilus centers. The investors set up individual corporations for each operation, and Dr. Kiev was made president of each. In light of his active psychiatric practice, he was unable to participate in the daily management of the clubs so a management contract was executed with a company, Total Management, operated by Dion. Not only was an initial investment made, but Dr. Kiev advanced other monies and also personally guaranteed certain obligations of the business. He also solicited customers and additional investors while the corporations were still viable. He wanted to emphasize the sports medicine aspect of the club and attempted to steer the marketing and advertising in that direction. However, he was unable to
convince Dion to change the advertising theme which generally focused on Dion's stunning wife.
The clubs were eventually unsuccessful and closed. Dr. Kiev suffered a loss of about $160,000. At about that time, a reporter from the Philadelphia Inquirer called Dr. Kiev for his comments in regard to Dion and the closing of the businesses. During this interview Dr. Kiev made the allegedly defamatory statements pertaining to Dion, which were the basis of an action instituted in the federal court in Pennsylvania in 1983 against Kiev. That action eventually was settled for $45,000 by plaintiff Lumbermen's Mutual Casualty Company, Dr. Kiev's personal liability insurance carrier.
The allegedly defamatory article was an account of the financial difficulties of Club Nautilus. The reporter attributed Club Nautilus' collapse to "the unwieldiness of the club's 35 checking accounts, the differing opinions of 47 investors and Dion's ambitious dreams." The reporter also said that Dion was "an artful promoter who nonetheless lacked the management skills to make the clubs financially successful." The article drew support from quotations from several investors. It quoted Kiev as follows: "He was running it like a big business like a Jack LaLanne, but he didn't have the assets of a Jack LaLanne. . . . I think he is just incompetent." Another investor, Leo Goldner, was quoted as saying that the clubs "were totally mismanaged." Both Goldner's and Kiev's quotes were cited as the basis for Dion's federal court defamation action.
Upon the filing of the January 1983 defamation suit in the United States District Court in Philadelphia against Kiev and Goldner, in which Dion alleged defamation in comments made to the reporter for the Philadelphia Inquirer, which were published in the story of October 31, 1982, Kiev asked each of his liability insurance carriers to defend him: United Services Automobile Association (USAA), pursuant to a homeowner's policy, and Lumbermen's Mutual Casualty Co., pursuant to a personal liability policy. USAA disclaimed; Lumbermen's agreed to
defend, and settled for the $45,000 which it paid to plaintiff in the federal action.
Lumbermen's then brought this action in the Law Division seeking a declaration that USAA indeed had owed Kiev a duty to defend the federal suit and for a judgment compelling USAA to indemnify Lumbermen's for the $45,000 settlement payment on Kiev's behalf, and for its litigation expenses. In its answer USAA asserted that no coverage was provided under the terms of its homeowners insurance policy.
After trial at which Kiev was the sole witness Judge Hyland issued a written opinion in favor of USAA. He ruled that (1) the policy's coverage for "bodily injury" did not include a defamation action; and, in the alternative, (2) coverage was excluded by the policy's ...