Antitrust Exclusion Precludes Duty to Defend

The New York Supreme Court for the County of New York, applying Michigan law, has held that an antitrust exclusion bars coverage for an antitrust lawsuit despite limited allegations of covered disparagement.  Carfax, Inc. v. Ill. Nat’l Ins. Co., No. 655198/2016 (N.Y Sup. Ct. May 16, 2017).

The insurer issued a policy that required the insurer to defend against “defamation, libel, slander, product disparagement, or other tort related to disparagement.”  The policy also contained an exclusion barring coverage for claims alleging antitrust violations, including violations of the Sherman Act or Clayton Act.  A number of auto dealers sued the insured alleging that the insured had unlawfully monopolized the sale of vehicle history reports.  The insurer denied coverage for the action, asserting that the antitrust exclusion applied.

The court granted the insurer’s motion to dismiss the declaratory judgment action, reasoning that while the complaint made “limited, sporadic references to ‘stigmatization’ and ‘disparagement,’” these allegations were made within the context of pleading antitrust violations.  The court observed that there was no separate theory of recovery based on a tort related to disparagement, and the complaint did not “plead facts that support a reasonable inference that the plaintiff auto-dealers sustained damages due to disparagement . . . as opposed to damages for anticompetitive injury.”  The court therefore held that the insurer had no duty to defend the action.