Liability Policies Listing Specific Wrongs: Cover Will Not Extend to a Related but Unlisted Delict

In General Star Indemnity Co. v. Toy Quest Ltd, the United States District Court for the District of Minnesota held that a commercial general liability (“CGL”) insurer owed no duty to defend its insureds against a claim for “abuse of process” where the policy’s personal injury coverage enumerated specific offences – including malicious prosecution – but did not list abuse of process among them. The court concluded that a reasonable insured would not understand a policy affording cover for specific, enumerated offences to extend to a different, unlisted offence merely because the two offences are legally similar.

Background

The dispute arose out of a long-running attempt by a third party, ASI Inc., to collect on a default judgement of some $8.5 million that it had obtained years earlier against a company unconnected to the insured. Having been unable to collect on that judgement, ASI commenced proceedings against the insured and others, alleging that they had conspired to help avoid payment of the judgement, and asserting claims that included allegations of racketeering, fraud, and abuse of process. It was the abuse of process claim alone that was in issue in the coverage dispute before the court.

The insured’s CGL policy afforded cover for personal and advertising injury arising from a list of specifically enumerated offences, which included false arrest, malicious prosecution, wrongful eviction from private occupancy, defamatory publication, and violation of the right to privacy, among others. Abuse of process was not among the offences expressly listed in the policy.

The insurer had been defending the insured in the underlying action under a reservation of rights, but brought separate proceedings seeking a declaration that it had no duty to defend or indemnify the insured against the abuse of process claim. The insured and ASI contended that the claim was nonetheless covered as a personal injury arising from malicious prosecution. The insurer maintained that abuse of process is a legally distinct tort (delict) from malicious prosecution and therefore fell outside the policy’s enumerated cover. The District Court granted judgement on the pleadings in the insurer’s favour.

The Court’s Analysis

The court interpreted the policy’s terms according to their plain and ordinary meaning, assessed from the perspective of an average lay insured rather than an industry expert. An insurance term is ambiguous only where it is reasonably susceptible to more than one interpretation, in which case the ambiguity is resolved in favour of cover; otherwise, the term must be given its plain, unambiguous meaning. The determinative question was therefore whether a reasonable insured would have understood the term “malicious prosecution” to also encompass abuse of process.

The court noted that, although abuse of process and malicious prosecution share some similarities, they are recognised under the applicable law as distinct torts. Because the parties had chosen to list specific, enumerated offences in the policy – including malicious prosecution, but not abuse of process – the court held that it would not be reasonable for an average insured to understand a policy affording cover for specifically enumerated claims to also extend to an additional, unstated claim, even one that is legally similar. Applying this reasoning, the court found that malicious prosecution was unambiguous and meant only malicious prosecution, such that the abuse of process claim was not even arguably covered and the duty to defend was never triggered.

Having found that the claim was not even arguably within the scope of the enumerated cover, the court had no need to consider, and did not address, any argument that the underlying facts might independently support a different, covered claim. Nor did the court need to reach the question of indemnity, since the duty to indemnify is narrower than the duty to defend, and the broader duty to defend had already failed at the first hurdle.

Takeaway

The decision reinforces the principle that where a liability policy provides cover for specifically enumerated offences, the insured cannot extend that cover to a distinct, unlisted wrong simply because the unlisted wrong is factually or conceptually related to one that appears on the list. The enumeration of particular offences is to be treated as establishing a closed set, and insurers are entitled to hold insureds to the boundaries of what the parties agreed to cover.