Burgett, Inc. v. American Zurich Insurance
830 F. Supp. 2d 953
E.D. Cal.2011Background
- Burgett, a California corporation, faced Persis International Inc. and Edward F. Richards in an underlying action involving alleged misrepresentations of ownership of the SOHMER trademark.
- Zurich Insurance issued Burgett a general liability policy for May 9, 2003–May 9, 2004, obligating defense of suits potentially seeking personal or advertising injury.
- Persis alleged Burgett’s statements to Samick about possessing valid rights to the SOHMER trademark, seeking damages and asserting liability for infringement/unfair competition.
- Burgett tendered defense to Zurich on November 3, 2010; Zurich declined to defend or indemnify on December 13, 2010, asserting no applicable personal and advertising injury and a trademark exclusion.
- The court granted Burgett’s partial summary judgment, finding a duty to defend and allowing briefing on the amount of attorneys’ fees; prejudgment interest was denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to defend whether Persis triggers policy | Burgett argues the Persis complaint presents potential defenses under defamation or disparagement. | Zurich contends no defamation or disparagement claim is alleged and the trademark exclusion applies. | Duty to defend found for Burgett; coverage potentially triggered by disparagement analysis. |
| Defamation vs. disparagement coverage | Complaint could support defamation or disparagement liability. | Defamation claim not alleged; disparagement not sufficiently evidenced by explicit references. | Defamation not triggered; disparagement by implication found potentially covered. |
| Trademark exclusion applicability | Facts could be amended to state a covered disparagement claim despite explicit causes. | Trademark exclusion precludes coverage for all Persis claims. | Trademark exclusion does not bar coverage; facts could support a covered disparagement claim. |
| Attorneys’ fees and prejudgment interest | Breach of duty to defend warrants attorneys’ fees and prejudgment interest. | Fees may be awarded; prejudgment interest depends on damages certainty. | Plaintiff entitled to reasonable attorneys’ fees; amount to be briefed; prejudgment interest denied at this time. |
Key Cases Cited
- Horace Mann Ins. Co. v. Barbara B., 4 Cal.4th 1076 (Cal. 1993) (duty to defend broader than indemnity; defend against potential claims)
- Montrose Chem. Corp. v. Superior Court, 6 Cal.4th 287 (Cal. 1993) (insurer must show no potential coverage to avoid duty to defend)
- Gray v. Zurich Ins. Co., 65 Cal.2d 263 (Cal. 1966) (duty to defend fixed by complaint and extrinsic evidence; resolve in insured’s favor)
- CNA Cas. of Cal. v. Seaboard Sur. Co., 176 Cal.App.3d 598 (Cal. App. 1986) (duty to defend extends beyond face of the complaint; remote facts can trigger coverage)
- Scottsdale Ins. Co. v. MV Transp., 36 Cal.4th 643 (Cal. 2005) (duty to defend may arise from facts that could be amended to state a covered claim)
- Total Call Int’l Inc. v. Peerless Ins. Co., 181 Cal.App.4th 161 (Cal. App. 2010) (disparagement framework; liability for statements harming market/sales)
- Knoll Pharmaceutical Co. v. Automobile Ins. Co. of Hartford, 152 F.Supp.2d 1026 (N.D. Ill. 2001) (disparagement by implication; competitor claims support potential coverage)