Duty to Defend for Defamatory Conduct
In Country Mutual Insurance Co. v. Molburg, Country Mutual filed a complaint for declaratory judgment seeking a declaration that Country Mutual had no duty to defend Molburg against claims filed by Molburg’s former employer for purported defamatory conduct. Country Mutual’s complaint named Molburg, Haley Mansion (“the Mansion”), and Jeffrey Bussean (“Bussean”), the owner of the Mansion. Molburg’s personal umbrella policy required Country Mutual to defend her against claims for personal injury or property damage involving alleged libel, slander, defamation of character, or invasion of rights of privacy, but the policy excluded coverage for claims arising out of any “business pursuit of the insured.” Just before voluntarily leaving her employment as general manager on July 30, 2010, Molburg breached her fiduciary duty to her employer by making false statements about her employer’s “vile conduct” with the intent to cause other employees to leave. Specifically, the complaint alleged that on July 30, 2010, Molburg told other employees that Bussean installed hidden surveillance cameras and was secretly taping employees and female guests undressing in the bridal suite of the Mansion. Molburg also allegedly told employees that Bussean repeatedly made sexually graphic and vile statements about each of them. As a result of Molburg’s alleged statements, the employees abruptly quit and the Mansion was unable to host several events that it had booked. The complaint also alleged that after voluntarily leaving her employment on July 30, 2010, Molburg continued her campaign to harm the Mansion and Bussean by making false statements to third parties, including, but not limited to, the Joliet Police Department.
The court addressed the issue of whether the statements made by Molburg would fall under the policy exclusion of claims arising out of any business pursuit of the insured. Molburg’s umbrella policy defines “business” as any gainful employment, trade, occupation or enterprise other than farming. The court reasoned that Molburg’s position as general manager of the Mansion was gainful employment under the terms of the policy and that her employment therefore falls within the concept of business. Next, the court focuses on the term “business pursuit,” which was not defined by the policy. However, courts have continuously defined the term as a continuous or regular activity done for the purpose of earning a profit. In this case, the court determined that the complaint does not allege Molburg made any statement to a third party for the purpose of obtaining her financial profit. Instead, these statements appeared to be motivated by personal insecurity, a desire to keep her employment, and vindictiveness. Absent allegations that Molburg’s statement arose out of a continuous and regular activity, done for the purpose of making a profit, the court could not conclude that purported defamation arose out of Molburg’s own business pursuit as defined by case law.
The court held that the business pursuit exclusion of insurance policy did not apply to relieve insurance company of its duty to defend its insured in a defamation action.
Country Mutual Insurance Co. v. Molburg, 2013 WL 1760594 (Ill.App. 3 Dist.). (This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1)).
