812 F. Supp. 2d 527
S.D.N.Y.2011Background
- Bridge Metal, Messa, and Fredella sought declaratory judgment that Travelers must reimburse defense costs for two National Lighting actions and defend them in the NJ Action under the policy.
- NY Action (Mar. 28, 2008) alleged National trade dress infringement, dilution, false advertising, and related claims against Bridge Metal and others; Judge Buchwald later dismissed federal claims with prejudice and state claims were voluntarily dismissed.
- NJ Action (June 25, 2009) raised similar claims under New Jersey law, including breach of contract and misappropriation, with dismissal for lack of personal jurisdiction later on (June 30, 2010).
- Policy No. I-680-5390W931-IND-07 covered October 19, 2007 to October 19, 2008 and included endorsements modifying advertising injury coverage and defining property damage and occurrence.
- Travelers denied defense in both actions on grounds that there was no advertising injury or property damage, and due to exclusions (breach of contract and knowing violation).
- The Court held that Travelers had a duty to defend under the advertising injury coverage, declined coverage under the property damage provision, and granted summary judgment for plaintiffs on reimbursements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did National's complaints trigger the duty to defend under advertising injury? | Bridge Metal; National's trade dress infringement claims fall within 'infringement of title' under the policy. | Trades dress/infringement not within enumerated advertising injury; potential exclusions apply. | Yes; there was a potential advertising injury triggering defense duty. |
| Is trade dress infringement covered as 'infringement of title' in advertising injury? | Trade dress can constitute title infringement; thus within advertising injury. | Title requires traditional definitions; trade dress not clearly covered; ambiguity resolved in insured's favor. | There was uncertainty; duty to defend triggered. |
| Was the advertising injury caused by Bridge Metal in the course of advertising? | Allegations show marketing, showing, and promotion of infringing products aimed at the public. | Infringing manufacturing and selling, not advertising, and no causal link to advertising in the complaints. | Yes; allegations show injury connected to advertising activities. |
| Do breach-of-contract or knowing-violation exclusions bar coverage? | IP rights arise independently; exclusion should not defeat defense across all claims. | Trade dress claims arising from breach of confidentiality could be excluded by the 'breach of contract' or 'knowing violation' exclusions. | Exclusions did not extinguish the duty to defend the entire actions. |
| Does the policy provide coverage for property damage? | Loss of use of tangible property could be covered if caused by an occurrence. | National alleged intangible losses; no loss of use of tangible property under policy. | Not under property damage; but defense obligation remains due to advertising injury. |
Key Cases Cited
- Hugo Boss Fashions, Inc. v. Fed. Ins. Co., 252 F.3d 608 (2d Cir. 2001) (duty to defend despite lack of unambiguous indemnity or uncertain coverage)
- Century 21, Inc. v. Diamond State Ins. Co., 442 F.3d 79 (2d Cir. 2006) (duty to defend broader than indemnity; look to underlying allegations)
- Seaboard Sur. Co. v. Gillette Co., 64 N.Y.2d 304 (N.Y.1984) (insurer must defend if allegations create reasonable possibility of covered claim)
- A. Meyers & Sons Corp. v. Zurich Am. Ins. Grp., 74 N.Y.2d 298 (N.Y.1989) (test for triggering duty to defend under policy language)
- R.C. Bigelow, Inc. v. Liberty Mut. Ins. Co., 287 F.3d 242 (2d Cir. 2002) (causal nexus between advertising and injury; coverage focus on advertising injury)