559 F. App'x 15
2d Cir.2014Background
- Bridge Metal purchased a commercial general liability policy from Travelers for Oct 2007–Oct 2008 that covered certain “advertising injury,” including "infringement of copyright, title or slogan."
- National Lighting sued Bridge Metal in separate New York federal and New Jersey state suits alleging trade dress infringement, misappropriation, false advertising, breach of a 2005 confidentiality agreement, and related claims based on Bridge Metal’s production and marketing of fixtures allegedly similar to National’s designs.
- Bridge Metal sought a declaratory judgment that Travelers had a duty to defend its defense costs in the underlying lawsuits; Travelers denied coverage and relied on policy exclusions.
- The district court granted summary judgment for Bridge Metal, holding Travelers had a duty to defend; Travelers appealed to the Second Circuit.
- The Second Circuit reviewed de novo, focusing on (1) whether the complaints alleged an "advertising injury" under the policy and (2) whether exclusions (breach-of-contract and knowing-violation) precluded coverage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Travelers had a duty to defend underlying suits alleging trade dress and related claims | Bridge Metal: complaints alleged advertising/marketing of infringing fixtures, so allegations fall within policy's "advertising injury" triggering duty to defend | Travelers: "title" in policy is not broad enough to cover trade dress; advertising injury not alleged | Held: Duty to defend exists because doctrinal uncertainty about "title"/trade dress created a reasonable possibility of coverage and complaints alleged marketing/advertising conduct |
| Whether the policy’s breach-of-contract exclusion bars coverage | Bridge Metal: alleged injury arises from trade dress infringement independent of the confidentiality agreement | Travelers: injury arises from breach of the confidentiality agreement, so exclusion applies | Held: Exclusion inapplicable — but-for causation is not established because trade dress rights preexisted the contract; plausible interpretation favors coverage |
| Whether the "knowing violation" exclusion bars coverage | Bridge Metal: some underlying claims (e.g., Lanham Act §43(a), conversion) do not require intent, so duty to defend remains | Travelers: underlying allegations charge knowing or intentional infringement so exclusion applies | Held: Exclusion inapplicable — at least one alleged claim did not require intent; insurer must defend entire action |
| Standard for duty to defend when complaints may be groundless | Bridge Metal: raising a reasonable possibility of covered liability suffices to require defense | Travelers: insurer should not be forced to defend absent clear coverage | Held: Court reiterated that duty to defend is broad — any reasonable possibility of coverage requires defense; strained readings to avoid defense are disallowed |
Key Cases Cited
- CGS Indus., Inc. v. Charter Oak Fire Ins. Co., 720 F.3d 71 (2d Cir. 2013) (held prior doctrinal uncertainty about "title" created a temporary duty to defend)
- Hugo Boss Fashions, Inc. v. Federal Ins. Co., 252 F.3d 608 (2d Cir. 2001) (ambiguities in policy language construed for insured; breach-of-contract exclusion requires but-for causation)
- Century 21, Inc. v. Diamond State Ins. Co., 442 F.3d 79 (2d Cir. 2006) (insurer's duty to defend cannot be avoided by strained readings; must examine possible bases for coverage)
- Louis Vuitton Malletier v. Dooney & Bourke, Inc., 454 F.3d 108 (2d Cir. 2006) (definition of trade dress as overall composition and design)
- R.C. Bigelow, Inc. v. Liberty Mut. Ins. Co., 287 F.3d 242 (2d Cir. 2002) (for advertising-injury coverage, advertising must materially contribute to the alleged injury)