Two partners in a bridal store had a falling out which culminated, on at least two occasions, in accusations by one in the presence of other people that the other was dishonest and had altered invoices. The accused woman sued her partner on various claims, including slander. The partner settled the lawsuit and sued the store's general liability insurer, which had declined to defend, for her defense costs. The insurer appealed judgment in her favor.

The insurer argued that the policy was not applicable because of the definition of "insured" and the scope of coverage for alleged personal injury. The policy provided that, if the insured is designated as a partnership, "your members, your partners, and their spouses are also insureds, but only with respect to the conduct of your business." Personal injury, including slander, was covered if caused by an offense "arising out of the conduct of your business."

The appeal court distinguished between the purchase and selling of goods, store rental, financing, employee hiring and the like on the one hand and disputes between partners on the other. The former could give rise to liabilities between the partnership and third parties, to which the insurance would be applicable. The latter involved only liabilities of one partner to another, to which it was not.

The judgment of the trial court was reversed and remanded with instructions to grant the insurance company's motion for summary judgment.

(WINTHER, Respondent v. VALLEY INSURANCE COMPANY, Appellant. Oregon Court of Appeals. Nos. 9401-00704, CA A86743. May 1, 1996. CCH 1996 Fire and Casualty Cases, Paragraph 5841.)