On June 15, 2010, a Federal Court in Pennsylvania considered whether an insurance policy for professional negligence will cover a related claim for defamation. In Post v. St. Paul Travelers Ins. Co., __F.Supp.2d__, 2010 WL 2490750 (E.D.Pa.), the Court held it would not.
In that matter, the insurance company that issued the professional negligence policy, St. Paul, argued that there was no basis for awarding attorneys’ fees for legal work performed in defending a defamation action against the insured. While it admitted that the claim against its insured for professional negligence was covered, the claim for defamation was not because “the general rule is that related matters pled in the same action are generally covered, while matters that are separate from the original action are not covered.”
The Court agreed, holding that one has to show that the two lawsuits were “inextricably intertwined” which “is a higher standard to meet. To meet the standard, the two actions should be so related that it is difficult to separate the work completed for each, or to argue that the work done on the collateral litigation was not necessary to the defense of the litigation as a whole. …” The defamation action “was too separate and distinct to be considered inextricably intertwined with” the professional negligence action.