Court refuses to stay coverage or underlying lawsuit in Bill Cosby litigation

I posted here about the lawsuit filed by AIG, Bill Cosby's homeowner's insurer, seeking a declaration that it has no duty to defend him in the defamation suit against him alleging that he lied when he denied allegations of rape.

The AIG policies provide coverage for defamation, libel or slander, but exclude claims "arising out of any actual, alleged or threatened . . . sexual molestation, misconduct or harassment." 

As I predicted in my earlier post, Cosby sought to stall.  He  moved to dismiss on abstention grounds or, in the alternative, to stay the action pending resolution of the underlying litigation.  AIG  moved to stay the underlying litigation pending resolution of the coverage action.

In AIG Property & Casualty Co. v. Green, __ F. Supp. 3d __, 2015 WL 8779732 (D. Mass.), the United Stated District Court for the District of Massachusetts denied the motions of both parties. 

Cosby's abstention argument is that the federal court should abstain from exercising jurisdiction over the insurance action while the underlying action is proceeding.  The court rejected that argument because the abstention doctrine applies when the underlying action is in state court, but the underlying Cosby lawsuit is in the same federal court as the insurance lawsuit.  It rejected Cosby's argument that the doctrine should be extended to when the other action is pending in federal court. 

The court rejected Cosby's motion to stay because a determination of insurance coverage issues would not resolve any of the factual issues at stake in the underlying litigation.  The duty to defend is determined by allegations of the complaint, not by facts proven at trial.  Additionally, the coverage issue does not concern questions of facts that are disputed in the underlying case; the only question is whether the claims for defamation arise out of sexual misconduct. 

AIG moved to stay the underlying litigation until the insurance issue is resolved.  It argued that the underlying parties would not be prejudiced because the stay would be short and because the events alleged took place so long ago. 

The court rejected AIG's motion as "procedurally improper.  AIG may not request a stay of another action by filing its motion here, nor may it seek a stay of a case in which it is not a party."  Rather, AIG can only seek a stay of the underlying action by moving to intervene as a party in that action. 

The court also ruled that the facts that the insurance coverage suit can be resolved quickly and the events alleged in the underlying suit occurred long ago militate against, not for, staying the underlying litigation. 

In a later decision, the court held that a subsequently added plaintiff in the underlying litigation was a necessary but not indispensable party, so that her addition to that litigation did not destroy the court's diversity jurisdiction over the coverage litigation.  AIG Property Casualty Co. v. Green, __ F. Supp. 3d __, 2016 WL 1228571 (D. Mass.)

Declaratory judgment action filed on Bill Cosby defamation lawsuit

My favorite Boston news source, Universal Hub, has posted about a declaratory judgment complaint filed by Bill Cosby's insurer with respect to the defamation allegations against him. 


As is well-known, the plaintiffs in the underlying suit allege that Cosby gave them roofies and then raped them while they were unconscious.  Because the statute of limitations has expired on the sexual assault charges themselves, the underlying plaintiffs have alleged that Cosby defamed them by denying their allegations. 


Cosby's homeowners' policies and excess policy, all issued by AIG, provide coverage for personal injury, which includes defamation.


In the lawsuit just filed, AIG, seeks a declaration that coverage is excluded because the defamation claims were claims for personal injury "arising out of" actual, alleged or threatened sexual misconduct, molestation or harassment. 


It is well-settled under Massachusetts law that "arising out of" denotes an intermediate causation, more than causation-in-fact but less than proximate cause. 


The complaint does not say whether AIG is currently defending Cosby under a reservation of rights.  If it is, one can expect that the strategy from Cosby's attorneys will be to stall on the declaratory judgment lawsuit, because if the eventual ruling finds no coverage the longer it takes to make that decision the more of Cosby's attorney's fees in the underlying suit get paid by AIG.  Even if AIG is not currently defending the underlying claim, Cosby's side is unlikely to be in a rush to have the DJ action decided.  Unlike most people, Cosby is presumably in a financial position to pay whatever attorneys' fees are incurred in defending the underlying suit; if he wins the declaratory judgment action he will be reimbursed for those fees.  If he files a counterclaim for breach of contract he'll get interest on those fees as well.