## Facts

- Metropolitan Life Insurance Company filed multiple lawsuits in several states alleging Liberty Life Insurance Company orchestrated a scheme to harm Metropolitan’s business by recruiting Metropolitan agents, disparaging Metropolitan policies, and taking customer lists and trade secrets.
- The complaints asserted varied causes of action, including unfair competition, tortious interference, misappropriation of trade secrets/confidential information, breach of loyalty, commercial disparagement, and state and federal antitrust claims.
- Liberty held liability policies from several insurers that generally covered damages caused by an unintentional “occurrence” resulting in covered injury; some policies also included “advertising injury” coverage for specified torts committed in the course of advertising activities.
- Liberty tendered defense of the Metropolitan suits to its insurers; each insurer refused, asserting the complaints alleged intentional misconduct outside coverage and not constituting an “occurrence,” and not within any advertising-injury provisions.
- Liberty sued in federal district court seeking declarations of the insurers’ duties to defend and indemnify and recovery of defense costs already incurred.
- The district court granted summary judgment to all insurers, concluding the underlying allegations were intentionally wrongful and therefore not covered.
- Two underlying suits did not name Liberty as a defendant (only agents/officers), raising a dispute over Liberty’s ability to recover defense costs for those actions.

## Issues

1. Whether summary judgment was proper on the insurers’ duty to defend when the underlying complaints, though framed as intentional misconduct, included theories and allegations that could potentially fall within policy coverage, including advertising-injury provisions.
2. Whether it was premature to adjudicate the insurers’ duty to indemnify before resolution of the underlying lawsuits and development of the facts relevant to coverage (including intent and the nature of alleged injury).
3. Whether Liberty could recover defense costs for underlying suits in which Liberty was not named as a defendant.

## Decision

- The Fourth Circuit vacated the district court’s grant of summary judgment for the insurers and remanded for further proceedings.
- The court held it was premature to dismiss any insurer at the summary-judgment stage because the record did not eliminate the possibility that the underlying allegations could trigger a duty to defend under one or more policies.
- The court indicated that deciding the duty to indemnify was generally premature while the underlying suits remained pending and factual issues relevant to coverage were unresolved.
- The court declined to decide, and left for the district court on remand, whether Liberty could recover defense costs for suits in which Liberty was not named.

## Legal Principles

- An insurer’s duty to defend is broader than its duty to indemnify and is triggered when the underlying complaint alleges facts that could possibly result in covered liability under the policy.
- Summary judgment denying a duty to defend is improper if the insurer has not shown the absence of any potential for coverage based on the pleadings and policy terms.
- Where intent and the characterization of conduct or injury are fact-dependent and the underlying litigation is unresolved, definitive no-coverage rulings—particularly on indemnity—are often premature.
- Allegations such as disparagement and unfair competition may implicate advertising-injury coverage depending on policy wording and the factual development of whether the conduct occurred in the course of advertising activities.

## Conclusion

The Fourth Circuit vacated summary judgment because the insurers had not established that the underlying multi-state suits could not potentially trigger coverage, and because final determinations on indemnity were premature while the underlying actions and key factual questions remained unresolved.


Liberty Life Ins. Co. v. Com. Union Ins. Co., 857 F.2d 945 (4th Cir. 1988)