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Ninth Circuit:
Agricultural Giant Not Entitled to Coverage for Defamation
Opinion Says Jury’s Finding of Defamation Per Se Indicates ‘Willful Act’ Which Insurance Doesn’t Cover
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals held yesterday that The Wonderful Company—founded by billionaire couple Stewart and Lynda Resnick and identified by Forbes as the “largest agricultural company in the world”—may not recover under a liability insurance policy for a judgment entered against it on a defamation per se claim by a former employee accusing a related company of spreading lies about his character.
At issue is Insurance Code §533, which provides that “[a]n insurer is not liable for a loss caused by the wilful [sic] act of the insured; but he is not exonerated by the negligence of the insured, or of the insured’s agents or others.” Finding that a defamation claim involves an intentional, wrongful act that is inherently harmful, the court was not persuaded that the company did not cause the harm willfully.
In November 2022, the company—which produces the popular POM Wonderful and FIJI Water drinks—filed a complaint against Starr Indemnity and Liability Company for indemnification of a $4.9 million dollar judgment entered against a related entity in a defamation and wrongful termination action filed by James Jordan.
Allegation of Theft
Jordan’s complaint alleges that the Central Valley ranch supervisor was “blindsided” when he was terminated in 2017 by Wonderful Citrus Packing LLC and asserts that “[o]n or about October 28, 2017, Defendant and its employees and agents, made defamatory statements regarding the Plaintiff,” in specific, telling “numerous individuals…that Plaintiff James K. Jordan was engaged in criminal activities and was stealing from Wonderful.”
A jury returned a verdict in Jordan’s favor on the defamation per se claim. The verdict form included a special finding that the company had acted with malice.
Starr filed a motion to dismiss, citing §533. District Court Judge Fernando L. Aenlle-Rocha of the Central District of California granted the request, without leave to amend, concluding that the defamatory conduct was inherently harmful and constituted a willful act under §533.
Ninth Circuit Judge Roopali Desai, Ninth Circuit Senior Judge Andrew D. Hurwitz, and Second Circuit Judge Barrington D. Parker, sitting by designation, signed yesterday’s memorandum opinion affirming the judgment.
Willful Act
An act may qualify as willful under the section if it is deliberately done for the express purpose of causing damage, an intentional act that is inherently harmful, or intentionally performed with knowledge that damage is highly probable.
The plaintiff asserts that because an intention to cause harm is not an element of defamation per se, successful claims do not automatically trigger Section 533. Unpersuaded, the judges wrote:
“[A] ‘preconceived design to inflict harm’ is not required under § 533 ‘when the insured seeks coverage for an intentional and wrongful act if the harm is inherent in the act itself.’….‘[T]he question is not whether the insured subjectively intended to cause harm, but whether the conduct was intentional and inherently harmful.’ ”
They continued:
“Defamation is an intentional tort. And defamation per se is inherently harmful because it ‘has a natural tendency to injure,’…and thus the mere ‘utterance of such words is actionable without proof of special damage.’….The jury’s finding of defamation per se thus establishes a willful act under § 533.”
Malice Finding
The jurists also found that the jury’s special finding of malice provided additional support for the finding that the section barred indemnification. They said:
“The verdict form in the defamation action asked whether Wonderful had acted either ‘with hatred or ill will toward’ the plaintiff employee when it made the statements at issue or with ‘no reasonable grounds for believing the truth of the statements.’ The jury’s affirmative answer established actual malice….Because actual malice ‘necessarily involves the process of the mind and its thinking,’ such a finding ‘imports willfulness’ and ‘is a ‘willful act’ within the meaning of section 533.’ ”
The judges “decline[d] Wonderful’s suggestion that we certify the questions presented to the California Supreme Court,” saying that “[w]e normally engage in certification only when ‘state law issues are unclear,’…and that is not the case here.”
The case is The Wonderful Company LLC v. Starr Indemnity and Liability Company, 23-3527.
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