The Depp v. Heard trial featured salacious and surprising testimony that riveted the country, but arguably the most surprising aspect of the case was that Ms. Heard’s homeowners policy insurer, Travelers Commercial Insurance (“Travelers”), paid for her defense against Mr. Depp’s claims. A vice president for Travelers was even spotted multiple times in the courthouse with Ms. Heard1. While it is not unusual for a homeowners policy to provide coverage for liability claims against an insured, it is noteworthy that Ms. Heard’s insurer did not rely on the policy’s “intentional damages” exclusion to deny coverage, given the nature of the allegations against her.
Most homeowners policies provide both first-party coverage (coverage for damage to an insured’s property) and third-party or liability coverage (coverage for claims asserted 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 homeowners policy for a defense against Mr. Depp’s defamation claim.
Liability coverage is comprised of two components: 1) the duty to defend; and 2) the duty to indemnify. The duty to defend is triggered if any of the allegations asserted in the lawsuit against the insured present even the mere possibility of coverage. Once triggered, the insurer must provide the insured with a defense against the lawsuit by either hiring an attorney to defend the insured or paying the insured’s legal bills on their behalf. In comparison, the duty 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 the insured’s behalf if the facts established in the lawsuit fall within the scope of coverage provided under the policy.
Most insurance policies have an intentional damages exclusion that excludes coverage for injuries that are intended or expected by the insured. How courts interpret this exclusion is specific to the policy language and the jurisdiction, and different courts will apply different tests to determine whether damage was “intended” or “expected.”2 Notably, while the defamation claims in the Depp v. Heard trial were governed by Virginia law, it is possible that a different state’s law would govern any issues regarding coverage under Ms. Heard’s homeowners policy. This article uses Virginia law, however, as merely an example.
Unfortunately for Ms. Heard, under Virginia law, defamation is commonly 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 has reasoned that where a complaint alleges defamation based solely on common law malice, as opposed to actual or New York Times malice, the intentional acts exclusions bars coverage.5 This is because the former requires ill will or spite, whereas the latter simply requires reckless disregard for the truth.6
While Travelers’ coverage position is not public information, it appears that Travelers recognized the expansive scope of the duty to defend and acknowledged that although Mr. Depp’s complaint alleged intentional damages, some of the allegations against Ms. Heard may have been covered. In situations like this, it is common for an insurer to defend its insured while reserving the right to deny coverage and/or to seek a court order relieving the insurer of its coverage obligations.
Indeed, another insurer for Ms. Heard, 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 duty to defend or indemnify Ms. Heard in connection with Mr. Depp’s claims.7 According to the complaint, the New York Marine insurance policy names Ms. Heard and her corporation, Under the Black Sky, Inc., as insureds. 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 firm withdrew from the case over a year before trial.10
New York Marine now seeks a court order relieving it of all obligations to Ms. Heard. Specifically, New York Marine alleges that California Insurance Code § 533 establishes an implied exclusionary clause which, by statute, is read into all insurance policies.11 Courts have interpreted this implied exclusion to exclude conduct that was “intentionally performed” with knowledge that damage was “substantially certain” to result.12 However the statute does not preclude coverage for “reckless” or “grossly negligent conduct.”13 The jury found Ms. Heard liable for intentional defamation, so barring any modification of that finding on appeal, Ms. Heard’s conduct is arguably excluded under the statute. Therefore, New York Marine may be able to convince a court to relieve it of its duty to indemnify Ms. Heard for the $8 million jury verdict.14
Ms. Heard has appealed the jury verdict against her. If she is successful, then Ms. Heard likely has a claim against New York Marine for not contributing to her defense. If the verdict is affirmed, it will be interesting to see the result of New York Marine’s lawsuit 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.
1 Emily Crane et al., Amber Heard is ‘broke’ due to mounting legal fees, lavish spending: sources (last updated June 22, 2022), available at https://nypost.com/2022/06/02/amber-heard-is-broke-due-to-legal-fees-lavish-spending/
2 See State Farm Fire & Cas. Co. v. Weaver, No. 2:06-CV-01752-PMD, 2008 WL 11349874, at *7 (D.S.C. Mar. 20, 2008) (holding that the intentional acts exclusion precluded coverage for defamation); but see Fuisz v. Selective Ins. Co. of Am., 61 F.3d 238, 243 (4th Cir. 1995) (holding that the policy was ambiguous and must be construed in favor of the insured because it specifically provided coverage for defamation but excluded coverage for intentional acts).
3 See Snead v. Harbough, 241 Va. 524, 527, 404 S.E.2d 53, 55 (1991).
4 John C. Depp, II, v. Amber Laura Heard, No. 2019 02911 (Va. Cir. Ct. March. 1, 2019).
5 Fuisz v. Selective Ins. Co. of Am., 61 F.3d 238, 244 (4th Cir. 1995).
6 See id.
7 Compl. for Declaratory Relief and Demand for Jury Trial, New York Marine and Gen. Ins. Co., v. Amber Heard, No., 2:22-cv-04685, (C.D Cal. Jul. 8, 2022).
8 Id. at ¶¶ 8-9.
9 Id. ¶ 15.
10 Id. at ¶ 16.
11 Specifically, § 533 provides: "An insurer is not liable for a loss caused by the willful act of the insured; but he is not exonerated by the negligence of the insured, or of the insured's agents or others."
12 See Shell Oil Co. v. Winterthur Swiss Ins. Co., 12 Cal. App. 4th 715, 742 (1993).
13 See California Amplifier, Inc. v. RLI Ins. Co., 94 Cal. App. 4th 102, 116 (2001).
14 The jury awarded Mr. Depp $10 million in compensatory damages and Ms. Heard $2 million in compensatory damages. Additionally, the jury awarded Mr. Depp $5 million in punitive damages which were reduced to $350,000 according to Virginia’s statutory cap.