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Insurance Law No. 02-01-298-CV, 7/17/2003. Click here for the full text of this decision FACTS: This is a suit to enforce two insurance companies’ obligations under a general liability policy and an umbrella insurance policy, respectively. The trial court granted summary judgment for the insurers, stating that exclusions in the policies applied to bar the claims against the insured from coverage. HOLDING: Affirmed in part, reversed and rendered partial summary judgment in part, and remanded. Waffle House argues in its fourth issue that because the employee-related exclusion does not apply and because Scribner’s and Resource’s injuries arise out of the defamatory statements, Travelers has a duty to indemnify Waffle House for Scribner’s and Resource’s damages caused by the tortious interference with Resource’s contract with Grandy’s and the defamation of Scribner. Waffle House also argues that Travelers’ duty to indemnify Waffle House includes the obligation to pay the punitive damages. Waffle House raised the indemnity issue in its supplemental motion for partial summary judgment. An insurer’s duty to indemnify is separate and distinct from the insurer’s duty to defend. Facts established at trial that fall within the purview of the policy invoke an insurer’s duty to indemnify its insured. The duty only rises after the insured has been adjudicated to be legally responsible for damages in a lawsuit. Travelers’ policy provides that Travelers “will pay those sums that the insured becomes legally obligated to pay as damages because of ‘personal injury.’ ” The policy further defines personal injury to mean injury “ arising out of . . . [o]ral or written publication of material that slanders or libels a person.” Thus, the policy provides coverage for defamatory statements that are not excluded by another provision in the policy. The court turns to the question of whether any of the district court’s findings fall within the coverage of Travelers’ policy. The court awarded damages relevant to this case totaling $1,293,192. The district court found that Waffle House tortiously interfered with Resource’s contract with Grandy’s and awarded Resource $24,188 in lost income. He concluded “that the only reasonthat Grandy’s terminated its contract with Resource Recruiters was the malicious conduct and lies of Waffle House’s Skip Nau and Dave Theobold.” Resource’s claim that Waffle House tortiously interfered with Resource’s contract with Grandy’s “arose out of” or “resulted from” the defamatory comments of Nau and Theobold. The court holds that Travelers has a duty to indemnify Waffle House for Resource’s lost profits caused by Waffle House’s tortious interference with the Grandy’s contract. The district court also awarded Scribner $119,500 for the mental anguish she suffered as a result of the defamation. The court holds that these damages “arose out of” or “resulted from” the defamatory statements and are covered by the policy; thus, Travelers has a duty to indemnify Waffle House for the mental anguish damages. Finally, the district court awarded punitive damages for the contractual interference and defamation causes of action. Concluding that the circumstances surrounding both of the causes are identical and the punishment of Waffle House for its defamation of Scribner would have the same purpose as the punishment of Waffle House for its tortious interference with the Grandy’s agreement, the district court issued a joint award to Scribner and Resource for punitive damages. The court holds that the punitive damages “arose out of” or “resulted from” Waffle House’s defamatory statements and Travelers has a duty to indemnify Waffle House for those damages. Waffle House argues in its sixth issue, among other things, that Federal has a duty to indemnify Waffle House. Waffle House raised the issue in its second supplemental motion for partial summary judgment by arguing that Federal owed Waffle House a duty of indemnification. Because the court holds that Travelers owes Waffle House a duty of indemnification, the employee-related exclusion does not apply, and Federal’s policy does not exclude coverage for Scribner’s and Resource’s damages for lost profits, the court holds that Federal has a duty to indemnify Waffle House but only to the extent that the limits of the Travelers policy are exhausted. OPINION: Dauphinot, J.; Dauphinot, Holman and Walker, JJ.

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