Phelps Relieves Scottsdale Insurance Company of Duty to Defend Insured in False Advertising Suits

August 28, 2020

Phelps secured summary judgment for Scottsdale Insurance Company in a coverage dispute over two underlying false advertising lawsuits. U.S. Bankruptcy Judge for the Southern District of Florida, the Honorable Paul Hyman, ruled that Scottsdale has no duty to defend or indemnify its insured, American Resource Management Group (ARMG), in relation to the suits.

In 2018, Wyndham and Bluegreen entities filed separate lawsuits against ARMG. Each asserted claims related to ARMG’s advertisements that it could help Wyndham and Bluegreen timeshare owners exit their timeshare agreements.

ARMG sought coverage for the claims under commercial general liability policies issued by Scottsdale. Scottsdale disclaimed coverage, and ARMG ultimately filed for bankruptcy. The bankruptcy trustee then sued Scottsdale, seeking coverage for both underlying lawsuits on behalf of ARMG.

The coverage dispute hinged on whether the claims made and damages sought in the underlying lawsuits satisfied the policies’ definition of “personal and advertising injury” by constituting “[o]ral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.”

Scottsdale argued that the underlying complaints failed to allege any slanderous, libelous or disparaging material about Wyndham or Bluegreen in ARMG’s advertisements. The court agreed, finding that “[n]othing in the Wyndham or Bluegreen Complaints indicates reputational injury to either Wyndham or Bluegreen based upon criticism, disrespectful language, comparison of the products offered, or any other means.” The court ultimately held, “Therefore, under the terms of the insurance policies, [Scottsdale] did not have a duty to defend [ARMG] from the allegations in either the Wyndham Complaint or the Bluegreen Complaint.”

Tampa partner Patricia McLean and associate Mallory Thomas served as counsel of record for Scottsdale and handled the briefing for this case.

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