## Facts

- Bankwest allegedly agreed orally to extend borrowers Harlan Dale House and Cora House an $800,000 line of credit in exchange for a $1,000,000 deed of trust on Colorado property, and allegedly agreed not to interfere with the borrowers’ other credit lines.
- The property already secured three prior deeds of trust held by other banks.
- About 60 days after negotiations, Bankwest’s president sent letters to the other banks stating they were “estopped from making any future advancements” to the borrowers.
- The borrowers alleged Bankwest later refused to honor the promised line of credit and that Bankwest’s conduct harmed their reputation and creditworthiness and interfered with their credit relationships.
- The borrowers sued Bankwest in Kansas state court for damages.
- Bankwest held a liability policy issued by Fidelity that covered “personal injury,” including injury arising out of “libel, slander, defamation,” or publication/utterance of “other defamatory or disparaging material.”
- Bankwest tendered the defense to Fidelity; Fidelity denied coverage and refused to defend.
- Bankwest settled the borrowers’ suit and then sued Fidelity in federal court for breach of contract, seeking defense and indemnity costs.

## Issues

1. Under Kansas law and the policy language, did the underlying allegations and known facts create a potential for coverage under the “personal injury” clause (defamatory or disparaging material), triggering Fidelity’s duty to defend?
2. After reversal on the duty-to-defend ruling, what further proceedings were required regarding indemnity for the settlement?

## Decision

- The Tenth Circuit reversed the district court’s summary judgment for Fidelity and remanded.
- The court held Fidelity had a duty to defend because the allegations and reasonably ascertainable facts created at least a possibility that the claims fell within the policy’s “personal injury” coverage for defamatory or disparaging material.
- The court did not finally resolve the duty to indemnify; it remanded for further proceedings consistent with its duty-to-defend holding.

## Legal Principles

- Under Kansas law, an insurer must defend whenever there is a “potential of liability” under the policy—i.e., a possibility the insured could be obligated to pay damages for a covered risk.
- The duty-to-defend analysis considers not only the complaint’s allegations but also additional facts made known to the insurer.
- “Personal injury” coverage for “defamatory or disparaging material” may be potentially implicated by communications to third parties that could be understood as negatively reflecting on a person’s creditworthiness or financial reliability, even if the pleading does not label the theory as defamation or disparagement.
- Any ambiguity in coverage language is construed in favor of the insured when determining whether a defense is owed.
- The duty to defend is broader than the duty to indemnify; indemnity turns on the facts as ultimately established by final resolution (including settlement).

## Conclusion

The court required the insurer to defend because the borrowers’ allegations and known facts allowed a reasonable possibility that Bankwest’s letters to other lenders constituted “defamatory or disparaging material” within the policy’s personal-injury coverage, warranting reversal of summary judgment and remand for further proceedings.


Bankwest v. Fid. & Deposit Co. of Md., 63 F.3d 974 (10th Cir. 1995)