J-A32014-15


NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

PEOPLEKEYS, INC., INSTITUTE FOR                       IN THE SUPERIOR COURT OF
MOTIVATIONAL LIVING, INC., AND                              PENNSYLVANIA
SANFORD G. KULKIN,

                            Appellants

                       v.

WESTFIELD INSURANCE COMPANY,

                            Appellee                        No. 100 WDA 2015


                   Appeal from the Order December 16, 2014
              In the Court of Common Pleas of Allegheny County
                     Civil Division at No(s): GD 14-000527


BEFORE: SHOGAN, STABILE, and STRASSBURGER,* JJ.

MEMORANDUM BY SHOGAN, J.:                             FILED FEBRUARY 25, 2016

       This is an appeal from the December 16, 2014 order granting

Westfield Insurance Company’s (“Westfield”) motion for judgment on the

pleadings and dismissing PeopleKeys, Inc., Institute for Motivational Living,

Inc.    (“IML”)    and      Sanford    Kulkin’s,   (collectively,   “PeopleKeys”   or

“Appellants”), 1 complaint with prejudice. After careful review, we affirm.

       PeopleKeys develops, markets, and utilizes behavioral assessments to

match job applicants with prospective employers.                Sanford Kulkin was
____________________________________________


*
    Retired Senior Judge assigned to the Superior Court.
1
   PeopleKeys and IML are affiliated business entities with principal places of
business in Ohio. Both are owned by Sanford Kulkin. Complaint, 1/14/14,
at ¶¶ 1–3.
J-A32014-15


PeopleKeys’ Chief Executive Officer.       On July 1, 2013, Appellants filed a

complaint in the United States District Court for the Northern District of Ohio

against PeopleKeys’ former CEO, Brad Myers, another former employee, and

E-Pysence, the company formed by these two employees, asserting claims

for injunctive relief, copyright infringement, and related allegations. Myers

filed a counterclaim/third-party complaint (the “counterclaim”) asserting a

single count of unfair competition against Appellants. This pleading alleged

that   Appellants   instituted   “sham    litigation”   against   Myers   “with   the

subjective intent of injuring Myers’ ability to be competitive . . . and to

interfere with his business relationships.” Westfield’s Answer, New Matter,

and Counterclaim for Declaratory Judgment, 3/14/14, Exhibit A at ¶¶ 25–26.

Specifically, the counterclaim in the federal lawsuit alleged:

       19. Kulkin, PeopleKeys, and IML are fully aware that Myers does
       not have any of their alleged trade secrets or proprietary
       information, including knowledge of the algorithm for matching
       employers to job seekers and the underlying source code as
       described in the Complaint, particularly since Myers was not
       even aware of any such algorithm having been developed by
       PeopleKeys or IML during his employment with IML.

       20. Nonetheless, because Myers was developing a competitive, if
       not superior, product in the behavioral assessment market,
       PeopleKeys and IML filed, and Kulkin caused to be filed, on July
       1, 2013, the instant lawsuit against Myers to harm his
       competitive position in the marketplace and scare off start-up
       investors and customers by entangling Myers and E-Psyence in a
       federal lawsuit involving misappropriation of trade secrets and
       trademark infringement claims.

                                     ***




                                         -2-
J-A32014-15


      23. On July 1, 2013, PeopleKeys and IML filed, and Kulkin caused
      to be filed, the instant lawsuit against Myers, claiming that Myers
      misappropriated their trade secrets and intellectual property, i.e.,
      an algorithm for matching employers with job seekers, for
      purposes of starting a competitor company called E-Psyence.

      24. The instant lawsuit is objectively baseless for numerous
      reasons, including but not limited to: (1) Myers was not privy to
      (and was not even aware of) PeopleKeys, IML, or Kulkin having
      developed such an algorithm during his employment with IML;
      and (2) the products and services that Myers is marketing
      through the platform E-Psyence are not based upon the DISC
      Theory utilized by PeopleKeys and IML to develop their products
      and services, but rather, Myers’ products and services are
      developed utilizing Dr. Llobet’s copyrighted content library.

      25. PeopleKeys, IML, and Kulkin were aware of the above and
      filed the instant lawsuit with the subjective intent of injuring
      Myers’ ability to be competitive through the E-Psyence platform
      and to interfere with his business relationships.

      26. Said conduct constitutes sham litigation that serves no
      purpose other than to harm a business competitor.

Id. at ¶¶ 19–20, 23–26.      Upon receipt of the counterclaim, PeopleKeys

contacted their insurance company, Westfield, requesting coverage for

defense of the counterclaim and indemnification under the policy issued by

Westfield.

      On August 23, 2013, Westfield sent a letter preliminarily informing

PeopleKeys that coverage was unavailable because of certain exclusionary

language of the policy.   Westfield further advised that it had requested a

formal coverage opinion and, upon receipt of that opinion, it would advise

the insured if there was a determination that a defense was owed on the

claim.   Westfield’s Answer, New Matter, and Counterclaim for Declaratory


                                     -3-
J-A32014-15


Judgment, 3/14/14, at Exhibit C.               Six days later, Westfield informed

PeopleKeys that it was denying coverage because the counterclaim did not

allege a claim for “personal and advertising injury” covered by the policy and

because the factual averments of the unfair competition count fell within the

policy’s exclusion from coverage for “Knowing Violation of the Rights of

Another” and “Material Published with Knowledge of Falsity.” Id. at Exhibit

D.

       On January 14, 2014, PeopleKeys commenced the instant action in

Pennsylvania against Westfield for breach of insurance contract and bad

faith, contending that Westfield wrongfully refused to defend them against

the counterclaim of unfair competition filed in Ohio federal court.            In

response, Westfield filed, inter alia, a counterclaim for declaratory judgment

that it did not have a duty to defend. On July 24, 2014, Westfield filed a

motion for judgment on the pleadings.

       The trial court granted Westfield’s motion for judgment on the

pleadings and dismissed Peoplekeys’ complaint with prejudice on December

16, 2014.     PeopleKeys simultaneously filed an appeal to this Court and a

motion for reconsideration before the trial court on January 14, 2015. The

trial court denied reconsideration of this decision on January 27, 2015.2


____________________________________________


2
   When the trial court entered the order granting Westfield’s motion for
judgment on the pleadings, it did not rule specifically on Westfield’s
(Footnote Continued Next Page)


                                           -4-
J-A32014-15


      PeopleKeys raises three issues on appeal:

      1. Whether the trial court erred in failing to consider evidence
      that Appellee Westfield understood the claim at issue to be
      potentially covered under its Policy?

      2. Whether the trial court erred in reading Ohio tort law
      elements of defamation and malicious prosecution into the Policy
      and reaching beyond a plain English reading of the Policy
      language in order to favor Westfield?

      3. Whether the trial court erred in refusing to examine the
      totality of the pleadings to find coverage?

Appellants’ Brief at 4–5.

             Our standard of review of judgment on the pleadings is
      well-settled. A motion for judgment on the pleadings is similar
      to that of a demurrer in that it may be entered only when there
      are no disputed issues of fact, and the moving party is entitled
      to judgment as a matter of law. Rourke v. Pennsylvania
      National Mutual Casualty Insurance Co., 116 A.3d 87, 91
      (Pa. Super. 2015). Appellate review of an order granting a
      motion for judgment on the pleadings is plenary, and we apply
      the same standard employed by the trial court. Id. We will
      affirm the grant of the motion “only when the moving party’s
      right to succeed is certain and the case is so free from doubt
      that the trial would clearly be a fruitless exercise.” Id. at 91
      (citing Southwestern Energy Production Co. v. Forest
      Resources, LLC, 83 A.3d 177, 185 (Pa. Super. 2013) (citation
      omitted)).


                       _______________________
(Footnote Continued)

counterclaim for declaratory judgment. Thus, the counterclaim remained
pending at the time the appeal was filed. On direction from this Court,
Appellants were ordered to show cause why the appeal should not be
quashed. Both Appellants and Westfield responded by letter asserting that
the order appealed from effectively ended the litigation and disposed of all
claims of all parties.    We accept the parties’ characterization of the
procedural posture; accordingly, we have jurisdiction to decide this appeal.
See Pa.R.A.P. 341(b) (1) (“A final order is any order that . . . disposes of all
claims of all parties.”).



                                            -5-
J-A32014-15


Gongloff Contracting, L.L.C. v. L. Robert Kimball & Associates,

Architects & Engineers, Inc., 119 A.3d 1070, 1075–1076 (Pa. Super.

2015).

       We can readily dispose of PeopleKeys’ first claim that the trial court

should have considered certain of Westfield’s work product notes3 that were

produced in discovery relative to PeopleKeys’ insurance claim. The subject

notes were presented to the trial court during the argument of the motion

for judgment on the pleadings and were attached to PeopleKeys’ motion for

reconsideration of the court’s order granting Westfield’s motion for judgment

on the pleadings, both of which occurred subsequent to the close of the

pleadings in this matter.           In adjudicating judgment on the pleadings

motions, a trial court “must confine its consideration to the pleadings and

relevant documents.          The court must accept as true all well pleaded

statements of fact, admissions, and any documents properly attached to the

pleadings . . . .” Coleman v. Duane Morris, LLP, 58 A.3d 833, 836 (Pa.

Super. 2012). Accordingly, Westfield’s work product notes, produced during
____________________________________________


3
   Westfield’s work product notes reference a reservation of rights letter that
was apparently drafted on August 23, 2013, and approved for mailing on
August 26, 2013. PeopleKeys’ Motion for Reconsideration, 1/14/15, at
Exhibit B (Work Product Notes). However, such letter is not in the record.
The only letters included in the record dated around that time are the letter
from Westfield preliminarily informing PeopleKeys that coverage was
unavailable because of certain exclusionary language and notifying them
that it was seeking a formal coverage opinion, see Westfield’s Answer, New
Matter, and Counterclaim for Declaratory Judgment, 3/14/14, at Exhibit C,
and the letter denying coverage. Id. at Exhibit D.



                                           -6-
J-A32014-15


discovery and attached to a pleading filed subsequent to adjudication of the

motion, could not be considered by the trial court in rendering its decision on

the motion for judgment on the pleadings.

      The parties next join issue over the breadth of Westfield’s duty to

provide PeopleKeys coverage for defense of Myers’ counterclaim alleging

unfair competition.   Westfield claims that personal and advertising injury

liability coverage was not triggered for defense of this claim because the

underlying counterclaim did not facially state a cause of action for an offense

covered by the policy.   PeopleKeys, on the other hand, contends that the

assertions in the counterclaim arguably fall within the definition of covered

personal and advertising injury, i.e., a cause of action in malicious

prosecution and/or an oral or written publication that slandered Myers or

disparaged Myers’ goods, products, or services—injuries that are covered by

the policy.

      The interpretation of an insurance contract is a question of law and our

standard of review is de novo.        Donegal Mutual Insurance Co. v.

Baumhammers, 938 A.2d 286, 290 (Pa. 2007) (quoting Kvaerner Metals

Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 908 A.2d

888, 893 (Pa. 2006)). It is agreed that Ohio law governs this dispute. Trial

Court Opinion, 3/30/15, at 2; Appellants’ Brief at 11; Appellee’s Brief at 16.

      The duty of an insurer to defend an insured is broader than the duty to

indemnify and is absolute when the complaint contains any allegation that


                                     -7-
J-A32014-15


could arguably be covered by the insurance policy. City of Sharonville v.

American Employers Insurance Co., 846 N.E.2d 833, 837 (Ohio 2006).

An exception to the absolute duty exists when all of the claims are each

clearly and indisputably outside of the coverage.     Id. (citation omitted).

“Another way of stating the exception is that the insurer need not provide a

defense if there is no set of facts alleged in the complaint which, if proven

true, would invoke coverage for any claim.”      Granger, et al. v. Auto-

Owners Insurance, et al., 40 N.E.3d 1110, 1115 (Ohio 2015).

           Whether an insurer has a duty to defend is determined
     from the allegations in the complaint. Where the allegations of
     the complaint unequivocally bring the action within the policy
     coverage, the duty to defend may arise from the complaint
     alone. Motorists Mut. Ins. Co. v. Trainor (1973), 33 Ohio
     St.2d 41, 294 N.E.2d 874. However, where the insurer’s duty to
     defend is not clear from the pleadings, or the pleadings do not
     provide sufficient factual information to determine whether an
     insurer had a duty to defend but the allegations state a claim
     which is potentially or arguably within policy coverage, or
     where there is some doubt whether a theory of recovery within
     the policy coverage has been pleaded, the insurer must accept
     the defense of the claim. Willoughby Hills v. Cincinnati Ins.
     Co. (1984), 9 Ohio St.3d 177, 180, 9 OBR 463, 465, 459 N.E.2d
     555, 558.

Great American Insurance Company v. Hartford Insurance, 621

N.E.2d 796, 798 (Ohio Ct. App. 1993) (emphasis in original).

     Westfield’s duty to defend is governed by the following provisions in

the insurance policy:

     COVERAGE B PERSONAL AND ADVERTISING INJURY

     LIABILITY

     1. Insuring Agreement

                                    -8-
J-A32014-15


              a. We will pay those sums that the insured becomes
              legally obligated to pay as damages because of
              “personal and advertising injury” to which this
              insurance applies. We will have the right and duty to
              defend the insured against any “suit” seeking those
              damages. However, we will have no duty to defend
              the insured against any “suit” seeking damages for
              “personal and advertising injury” to which this
              insurance does not apply. We may at our discretion
              investigate any offense and settle any claim or “suit”
              that may result. . . .

Westfield’s    Answer,   New    Matter,   and    Counterclaim   for    Declaratory

Judgment, 3/14/14, at Exhibit B ¶1(a).          The policy defines “Personal and

advertising injury” to mean injury arising out of the following offenses:

      b. Malicious prosecution;

                                     * * *

      d. Oral 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;

Id. at Section V—Definitions ¶14 (b) and (d).

      However, Coverage B also describes certain claims that will be

excluded from coverage:

      2. Exclusions

      This insurance does not apply to:

      a.   Knowing Violation Of Rights of Another

              “Personal and advertising injury” caused by or at the
              direction of the insured with the knowledge that the
              act would violate the rights of another and would
              inflict “personal and advertising injury.”

     b.    Material Published With Knowledge Of Falsity




                                      -9-
J-A32014-15


              “Personal and advertising injury” arising out of oral
              or written publication of material, if done by or at the
              direction of the insured with knowledge of its falsity.

Westfield’s    Answer,   New     Matter,   and   Counterclaim    for     Declaratory

Judgment, 3/14/14, at Exhibit B ¶2 (a) and (b).

      The trial court determined that Westfield did not have a duty to defend

because the unfair competition counterclaim was excluded from coverage.

The trial court reasoned that:

      The employee’s counterclaim alleged unfair competition, a
      matter not within the policy of insurance that had been issued in
      Ohio. Unfair competition is a cause of action that exists in Ohio,
      and differs from causes of action such as slander, libel,
      defamation, disparagement or malicious prosecution, which are
      covered by the insurance policy issued here.

            “The duty to defend (in Ohio) is determined by the scope
      of the allegations in the Complaint.” Ward v. United Foundries,
      129 Ohio St.3d 292, 951 N.E.2d 770, 773 (2011). Where “. . .
      the allegations are clearly and indisputably outside the
      contracted coverage, the insurer need not defend the insured.”
      Ward, 951 N.E.2d at 773.

             The former employee’s counterclaim was for unfair
      competition. In order to establish this claim, “. . . A party must
      show that the legal action is objectively baseless and that the
      opposing party had the subjective intent to injure the party’s
      ability to be competitive.”     American Chemical Society v.
      Leadscope, Inc., 133 Ohio St.3d 366, 978, N.E.2d 832, 843
      (2012). In Navigators Specialty Ins. Co. v. Beltman, No. 11-
      CV-00715-RPM, 2012 WL 5378750 (D. Colo. Nov. 1, 2012), the
      United States District Court For the District of Colorado
      determined that “Personal and advertising injury” coverage did
      not require coverage for assertions that the insured engaged in
      sham litigation to harm a business competitor. See also Holloway
      Sportswear Inc. v. Transportation Ins. Co., 58 Fed. Appx. 172
      (6th Cir. 2003); Westfield Insurance Co. v. Trent, 2010 Ohio
      5897 (Dec. 3, 2010).




                                       - 10 -
J-A32014-15


             It is evident that the former employee’s counterclaim
       against Plaintiffs falls within an exclusion for coverage.
       Accordingly, Defendant had no duty to defend, and the counts
       for breach of contract and bad faith, necessarily, must fail.

Trial Court Opinion, 3/30/15, at 2–3.

       PeopleKeys avers that the trial court erred when it: 1) construed the

ambiguous policy definitions in Westfield’s favor; 2) impliedly defined

“malicious prosecution” and “oral or written declaration” according to Ohio

tort law, rather than ascribing those terms their plain and ordinary meaning

which would mandate a coverage conclusion;4 3) determined that because

unfair competition is a distinct cause of action under Ohio tort law, it was

excluded from the policy definition of “Personal and advertising injury”; and

4) did not consider the entirety of the pleadings in rendering its coverage

decision. PeopleKeys also contends that the trial court’s failure to address a

number of their arguments deprived them of their day in court.

       Westfield counters that Myers’ unfair competition counterclaim was

based upon PeopleKeys filing sham litigation which does not fall within the



____________________________________________


4
   Under Ohio law, a cause of action for “malicious prosecution” requires,
inter alia, the termination of a prior proceeding in the plaintiff’s favor, see
Robb v. Chagrin Lagoons Yacht Club, Inc., 662 N.E.2d 9 (Ohio 1996),
and absence of privilege is a required element for a cognizable cause of
action for defamation in Ohio. McPeek v. Leetonia Italian-American
Club, 882 N.E.2d 450, 453 (Ohio Ct. App. 2007). Significantly, statements
made in a written pleading are absolutely privileged if they are reasonably
related to the judicial proceeding in which they appear. Morrison v. Gugle,
755 N.E.2d 404, 416 (Ohio Ct. App. 2001) (citation omitted).



                                          - 11 -
J-A32014-15


policy’s definition of personal and advertising injury.5   It argues that the

Ohio Supreme Court has specifically recognized this particular cause of

action under Ohio law and has held, “that to successfully establish a claim

for unfair competition based upon a legal action, a party must show that the

legal action is objectively baseless and that the opposing party had the

subjective intent to injure the party’s ability to be competitive.” American

Chemical Society v. Leadscope, Inc., 978 N.E.2d 832, 839 (Ohio 2012).

Westfield asserts that the counterclaim alleges that PeopleKeys filed the

federal lawsuit with the subjective intent of injuring Myers’ ability to be

competitive and to interfere with his business relationships. Westfield also

alleges that PeopleKeys was fully aware that its claim was baseless but

nevertheless instituted sham litigation against Myers.         Thus, argues
____________________________________________


5
   Westfield cites a number of cases for its position that Ohio courts have
repeatedly held that unfair competition claims do not constitute “personal
and advertising” injury within the meaning of a liability insurance policy.
See Motorists Mutual Insurance Co. v. National Dairy Herd
Improvement, 750 N.E.2d 1169 (Ohio Ct. App. 2001), Holloway
Sportswear, Inc. v. Transportation Insurance Co., 58 Fed. Appx. 172
(6th Cir. 2003) (applying Ohio law), and Westfield Insurance Co. v. Trent,
No. E-09-050, 2010 WL 4925817 (Ohio Ct. App. 2010).                     This
characterization of the holdings of these cases is an overstatement. For
example, the underlying claim at issue in Motorists Mutual was an
antitrust complaint; in Holloway, the claim was tortious interference with
economic advantage; and in Trent, the insured claimed that the lawsuit
against it did not include allegations of defamatory or disparaging
statements. While these causes of action imply some elements of a claim of
unfair competition, none of the cases hold outright that such a cause of
action is not covered under “personal and advertising” injury within the
meaning of a liability insurance policy.



                                          - 12 -
J-A32014-15


Westfield, even if a claim for unfair competition did fall within the definition

of “Personal and Advertising Injury,” the exclusions for the “Knowing

Violation of the Rights of Another” and “Material Published with Knowledge of

Falsity” would nonetheless preclude coverage.

       We agree with Westfield that the exclusions language in the policy

nullifies its duty to defend. For this reason, we need not further discuss the

respective arguments of the parties concerning whether the counterclaim

alleges a personal or advertising injury covered under the policy.6

       In their main brief, PeopleKeys conflates their discussion concerning

the applicability of the policy’s exclusions with their argument that the

counterclaim for unfair competition is potentially or arguably covered as a

personal and advertising injury.               In their reply brief, PeopleKeys now

suggests that under Westfield’s interpretation of the exclusion provisions,

“claims of slander, libel, defamation, disparagement or malicious prosecution

could never be covered under its policy, since knowing and intentional

conduct are elements that must be pled to create a viable cause of action.”

Appellants’ Reply Brief at 2.
____________________________________________


6
   We note that, although the trial court determined that the “counterclaim
alleged unfair competition, a matter not within the policy of
insurance . . . [,]” it ultimately concluded that “the counterclaim . . . falls
within an exclusion for coverage.” Trial Court Opinion, 3/30/15, at 2–3. We
may affirm the trial court on any basis.”            Southwestern Energy
Production Co. v. Forest Resources, LLC, 83 A.3d 177, 184–185 (Pa.
Super. 2013) (quoting Richmond v. McHale, 35 A.3d 779, 786 n.2 (Pa.
Super. 2012)).



                                          - 13 -
J-A32014-15


      While PeopleKeys correctly states that inconsistencies in an insurance

contract must be construed favorably to the insured, PeopleKeys overlooks

Ohio case law that contradicts their position that coverage is due.              In

Westfield Companies v. O.K.L. Can Line, 804 N.E.2d 45, 53, (Ohio Ct.

App. 2003), the Ohio Court of Appeals held that a “knowing violation of the

rights of another” exclusion applied to “advertising injuries based upon libel,

slander, disparagement, and invasion of privacy” because “the language of

the exclusion mimicked the language of the libel, slander, disparagement,

and invasion-of-privacy coverage provisions.”           Id.; see also Westfield

Insurance Company v. Factfinder Marketing Research, Inc., 860

N.E.2d 145, 154 (Ohio Ct. App. 2006) (observing that a “knowledge-of-

falsity” exclusion bars coverage for advertising injury arising out of oral or

written publication of material by or at the direction of the insured with

knowledge    of   its   falsity”)   (citation   omitted);   see   also   Burlington

Insurance Co. v. Eden Cryogenics LLC, ___ F.Supp.3d ___, 2015 WL

5145554, at *8 (S.D. Ohio filed September 1, 2015) (applying Ohio law and

concluding that a “Knowing Violation” provision prohibits coverage when jury

determined that actor violated the rights of another knowing his or her

conduct was likely to result in injury).

      As noted, Westfield asserts that the policy exclusions relieve it from its

duty to defend against alleged personal and advertising injury.            The first

exclusion relied upon by Westfield precludes coverage for “injury caused by


                                         - 14 -
J-A32014-15


or at the direction of the insured with the knowledge that the act would

violate the rights of another and would inflict “personal and advertising

injury.” Westfield’s Answer, New Matter, and Counterclaim for Declaratory

Judgment, 3/14/14, Exhibit B, at ¶ 2(a). The other exclusion invoked bars

coverage for any injury “arising out of oral or written publication of material,

if done by or at the direction of the insured with knowledge of its falsity.”

Id. at ¶ 2(b).

      In considering whether the exclusions apply, we review the allegations

of the counterclaim.   Before we undertake this assessment, however, we

must address PeopleKeys’ third issue that the trial court erred when it

confined its analysis to the paragraphs of the counterclaim and refused to

look to the totality of the pleadings in the underlying litigation in rendering

its coverage determination. We conclude, however, that no error occurred in

this regard because under Ohio law, “the duty to defend is determined by

the scope of the allegations of the complaint.” Ward v. United Foundries,

Inc., 951 N.E.2d 770, 773 (Ohio 2001).        “If the allegations state a claim

that potentially or arguably falls within the liability insurance coverage, then

the insurer must defend the insured in the action.”      Id.   However, if “the

claims are clearly and indisputably outside the contracted coverage, the

insurer need not defend the insured.” Id.

      Here, the allegations of the counterclaim, i.e., that PeopleKeys

knowingly filed a sham lawsuit with the intent of harming a business


                                     - 15 -
J-A32014-15


competitor, fall squarely within the plain language of the “Material Published

with Knowledge of Falsity” exclusion. While not binding upon this Court, we

observe that a decision from the United States District Court for the District

of Colorado, in a markedly similar case applying Colorado law, came to the

same conclusion.      In Navigators Specialty Insurance Co. v. Beltman,

No. 11-cv-00715, 2012 WL 5378750 (D.Col. filed Nov. 1, 2012), an insured

corporation, Stratus Consulting,       sought coverage for defense of a claim

that it commenced sham litigation against another corporation, Chevron,

causing damage to Chevron’s reputation. Id. at *1. As in the matter sub

judice,   the    insurance   policy   under    scrutiny    provided    “personal       and

advertising injury” coverage for malicious prosecution and oral or written

publication that slanders or libels . . . [or] disparages a person or

organization’s goods, products, or services. . . .               Id. at *8 (quotation

omitted).       The policy also contained exclusions limiting coverage for

“Knowing Violation of Rights of Another” and “Material Published with

Knowledge of Falsity,” the language of which is virtually identical to that

included in the Westfield policy at issue here.            Id.    In response to the

insured’s claim that the suit filed against it could be understood as alleging

malicious   prosecution      and/or    an     accusation    of     slander,   libel,    or

disparagement, the federal court decided that it was “not necessary to

pursue that legal analysis because coverage is barred by the exclusions” of

the policy. Id. at *10. The Navigators Court concluded that the “Knowing


                                        - 16 -
J-A32014-15


Violation of Rights of Another” exclusion barred coverage because the

Chevron action alleged that the insured “intended to deceive,” made

“deliberate misrepresentations,” and perpetuated “deliberate falsehoods”

about Chevron and did so “knowingly and intentionally.”       Id.   It likewise

concluded that the “knowledge of falsity” language precluded coverage

because the Chevron action “is replete with allegations of intentional

misrepresentations.” Id.

      A similar result is warranted herein.     The counterclaim averred that

PeopleKeys knew that its claims against Myers were baseless, but they

nevertheless instituted sham litigation against him with the subjective intent

of injuring Myers’ ability to be competitive and to interfere with his business

relationships.   Westfield’s Answer, New Matter, and Counterclaim for

Declaratory Judgment, 3/14/14, at Exhibit A ¶¶ 19–20, 23–26.             These

allegations explicitly plead that PeopleKeys knowingly published material

with knowledge of its falsity and Westfield properly relied upon this exclusion

provision in denying coverage to PeopleKeys.

      For the foregoing reasons, we affirm the order granting judgment on

the pleadings in favor of Westfield.

      Order affirmed.




                                       - 17 -
J-A32014-15


Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary



Date: 2/25/2016




                          - 18 -
