The Depp v. understood The trial featured salacious and startling testimony that fascinated the country, but perhaps the most startling aspect of the case was that the insurer of Mrs. Heard’s home insurance policy, Travelers Commercial Insurance (“Travelers” ), has paid its defense against Mr. Depp’s claims. A vice-president of travelers was even spotted several times at the courthouse with Ms. Heard1. While it is not unusual for a home insurance policy to provide coverage for liability claims against an insured, it should be noted that Ms. Heard’s insurer did not rely on the exclusion of “intentional acts” by the police to deny coverage, given the nature of the allegations against her. .
Most home insurance policies provide both first party coverage (coverage for damage to an insured’s property) and third party liability coverage (coverage for claims made against the insured by a third party). In Ms. Heard’s case, she was able to rely on the liability coverage provided by Travelers in her home insurance policy to defend against Mr. Depp’s defamation suit.
Liability coverage has two components: 1) the duty to defend; and 2) the obligation to indemnify. The duty to defend is triggered if any of the allegations made in the lawsuit against the insured present even a mere possibility of coverage. Once triggered, the insurer must provide the insured with a defense against the lawsuit by hiring an attorney to defend the insured or by paying the insured’s legal fees on their behalf. In contrast, the obligation to indemnify is triggered by the entry of a final judgment or settlement in the lawsuit. The insurer must pay the judgment or settlement on behalf of the insured if the facts established in the lawsuit fall within the scope of the coverage provided by the policy.
Most insurance policies have an intentional acts exclusion that excludes coverage for injury intentional or expected by the insured. How courts interpret this exclusion is policy language and jurisdiction specific, and different courts will apply different tests to determine whether an act was “intentional” or “expected”.2 In particular, while defamation claims in the Depp v. understood were governed by Virginia law, it is possible that the law of another state governs any matters regarding coverage under Ms. Heard’s homeowners policy. This article uses Virginia law, however, as an example.
Unfortunately for Ms. Heard, under Virginia law, defamation is generally classified as an “intentional tort.”3 To make matters worse, Mr. Depp’s complaint exclusively alleged defamation based on common law malice.4 The Fourth Circuit held that, where a complaint alleges defamation based solely on common law malice, as opposed to actual or New York Times malicious intent, intentional act exclusions exclude coverage.5 This is because the former requires ill will or grudge, while the latter simply requires a reckless disregard for the truth.6
Although Travelers’ coverage position is not public information, it appears that Travelers acknowledged the broad scope of the duty to defend and acknowledged that while Mr. Depp’s complaint alleged intentional acts, some of the allegations against Mrs. Heard could have been covered. In such situations, it is common for an insurer to defend its insured while reserving the right to refuse coverage and/or seek a court order releasing it from its coverage obligations.
Indeed, another of Ms. Heard’s insurers, New York Marine and General Insurance Co. (“New York Marine”), recently filed a lawsuit in the Central District of California seeking a declaration that it has no obligation to defend or indemnify Ms. Heard. in connection with Mr. Depp’s claims.seven According to the complaint, the New York Marine insurance policy names Ms. Heard and her company, Under the Black Sky, Inc., as insured. The complaint also confirms that the policy provides personal liability coverage to Ms. Heard.8 New York Marine initially agreed to honor its defense obligations and paid one of the law firms representing Ms Heard.9 However, New York Marine stopped making payments after that company pulled out of the case more than a year before the trial.ten
New York Marine is now seeking a court order releasing it from all obligations to Ms. Heard. Specifically, New York Marine alleges that California Insurance Code § 533 establishes an implied exclusion clause which, by law, is read into all insurance policies.11 Courts have interpreted this implied exclusion as excluding conduct that was “intentionally performed” in the knowledge that it was “substantially certain” that harm would result.12 However, the law does not exclude coverage for “reckless driving” or “gross negligence”.13 The jury found Ms. Heard liable for willful defamation, so unless that finding is changed on appeal, Ms. Heard’s conduct is arguably excluded under the law. Therefore, New York Marine may be able to convince a court to release it from its obligation to compensate Ms. Heard for the jury’s verdict of $8 million.14
Ms Heard appealed the jury’s verdict against her. If she is successful, then Ms. Heard likely has a claim against New York Marine for failing to assist in her defense. If the verdict is upheld, it will be interesting to see the outcome of the New York Marine trial and whether Travelers implements the same strategy after initially defending Ms. Heard. The bottom line is that the litigation involving Mr. Depp, Ms. Heard and Ms. Heard’s insurers is far from over.