An appellate court in New York, affirming a trial court's decision, has ruled that Carfax, Inc., was not entitled to a defense from its insurance carrier for a lawsuit alleging that it had engaged in an anticompetitive scheme, notwithstanding some "passing references" in the complaint to disparagement.
The Case
A lawsuit filed against Carfax, Inc., alleged, broadly, that Carfax had acquired and maintained its 90 percent market share of vehicle history report ("VHR") sales by engaging in an anticompetitive scheme.
Carfax contended that its insurance carrier, Illinois National Insurance Company, owed it a defense in the lawsuit because the suit alleged disparagement, which the policy covered. Carfax relied on the following allegations:
By contractually committing these two websites to include hyperlinks to Carfax VHRs and to exclude VHRs of any other provider, Carfax has stigmatized any listing without such a link in the eyes of consumers who infer that the absence means that the car has a blemished history.
Carfax also utilizes its inflated revenues to disparage and falsely malign dealers in order to mislead consumers into believing its VHRs are necessary and accurate.
Carfax sued Illinois National. The New York trial court granted the insurer's motion to dismiss the complaint and for a declaration that it did not have a duty to defend Carfax in the underlying federal antitrust lawsuit.
Carfax appealed.
The Illinois National Policy
The Illinois National policy covered loss:
resulting from a Claim alleging a Wrongful Act
, defined as:
any act, error, omission, … misstatement or misleading statement by an Insured … that results solely in … defamation, libel, slander, product disparagement or trade libel or other tort related to disparagement or harm to character or reputation; including, without limitation, unfair competition.
(Emphasis added.)
The policy excluded from coverage claims alleging antitrust violations.
The Appellate Court's Decision
The appellate court agreed with the trial court that Illinois National had no duty to defend Carfax.
In its decision, the appellate court explained that the "passing references to disparagement" in the complaint against Carfax did not allege a "Wrongful Act" within the meaning of the Illinois National insurance policy.
In the appellate court's opinion, they were made "only in the context of the anti-trust claims, i.e., as legal jargon pertinent to anti-trust and not as a means of even arguably alleging a separate claim for libel, slander or product disparagement."
In any event, the appellate court concluded, coverage under the policy was barred by the antitrust exclusion.
The case is Carfax, Inc. v. Illinois National Ins. Co., No. 5877 655198/16 (N.Y. App.Div. 1st Dep't March 1, 2018). Attorneys involved include: Blank Rome LLP, New York (James R. Murray of counsel), for appellant. Carlton Fields Jorden Burt, P.A., New York (J. Robert MacAneney of counsel), and Maddin, Hauser, Roth & Heller P.C., Southfield, MI (Harvey R. Heller of the bar of the State of Michigan, admitted pro hac vice, of counsel), for respondent.