Business-Related Slander Not Covered

An insured under a personal umbrella liability policy sent his insurer a summons and complaint, requesting that it defend and represent him in a lawsuit filed by the general partners of a real estate syndicate in which he was a limited partner. The insurer denied coverage.

The insurer’s reasoning was based on the policy’s exclusion for loss involving "personal injury…arising out of…any business pursuits." The insured then sued the insurer. The trial court upheld the insurer's denial of liability, and the policyholder appealed the decision.

Under the partnership agreement, limited partners lacked control over the business's operations and had no authority to act on behalf of or bind the partnership. The active general partners initiated the slander lawsuit after the insured objected to their plans to sell the business's property and subsequently dissolve the partnership.

The defendant reached out to other limited partners to oppose the plans. The general partners claimed damages of $500,000, alleging that the insured had accused them in oral communications of "phonying and doctoring" the books and of "getting away with murder" in their management of the business.

The appellate court observed that the insured was president of a plumbing supply company, to which he dedicated most of his working hours. It also determined that the term "business pursuits" was not defined in the personal umbrella liability policy under which the claim was filed. The court stated [the defendant’s]: “primary means of livelihood consisted of activities other than his investment in this real estate syndicate. However, for purposes of the ‘business pursuits’ exclusion, the ‘business' engaged in by him need not necessarily be limited to his sole occupation or employment."

The higher court ruled that the "business pursuits" exclusion applied. As a result, the policy did not provide the insured with coverage or defense in the slander case. The trial court's ruling in favor of the insurance company was affirmed.

Shapiro, Appellant v. Glens Falls Insurance Company, Respondent. New York Supreme Court, Appellate Division, Second Department. No. 147 E. March 31, 1975. CCH 1975 Fire and Casualty Cases 759