August 23, 2016

A federal district judge in Houston recently examined a homeowner’s policy’s “business activities” and “malicious act” exclusions and held it excluded all claims against a dentist that wrote phony negative reviews of a competitor.  In Anton v. Nat'l Sur. Corp., No. CV H-16-267, 2016 WL 4363406, at *1 (S.D. Tex. Aug. 16, 2016), the insureds, a married couple Michael J. Anton (“Anton”) and Magi Crofcheck (“Crofcheck”) were seeking coverage under their homeowners policy for fake reviews Crofcheck  posted on a competing dentist’s Yelp review page and this coverage dispute arose.

Robert Devoll and his dental practice, Clear Lake Periodontics, sued the insureds in state court. Anton and Crofcheck are both dentists in the same locale as Dr. Devoll. The allegations set forth in the Devoll lawsuit stem from a phony review of Dr. Devoll's dental practice that Dr. Crofcheck admitted to posting on Dr. Anton's Yelp account. In the Yelp review, Dr. Crofcheck represented to be a patient of Dr. Devoll and accused him of unprofessional and reprehensible dental care. Dr. Devoll's petition asserted multiple causes of action including violations of Texas Civil Practice and Remedies Code § 143.001; negligence per se; fraud; negligence and gross negligence business disparagement; and intentional infliction of emotional distress. The insureds timely notified National Surety of the lawsuit on more than one occasion and requested defense and indemnity coverage under their Homeowners' Policy. NSC formally denied the insureds requests. The insureds then filed this lawsuit and NSC moved for judgment on the pleadings.

The case turned on whether the claims in the underlying lawsuit fell within two exclusions under the homeowner’s policy. Exclusion 1 excludes coverage for damages arising out of “[a]ny criminal, willful, malicious or other act or omission that is reasonably expected or intended by any insured to cause damage. Exclusion 7 excludes coverage for damages arising out of “[b]usiness activities or business property of any insured.”

The court reasoned that because the phony reviews were intentional and meant to cause harm and because both Plaintiffs are competing dentists, the court found that all causes of action were unambiguously excluded by exclusions 1 or 7. Accordingly, the court granted the motion for judgment on the pleadings dismissing all claims.