751 F. Supp. 2d 444
E.D.N.Y2010Background
- CGS Industries, Inc. brings suit against The Charter Oak Fire Insurance Co. seeking declaratory relief and breach of contract for failure to defend CGSI in a trademark suit (Five Four Litigation).
- Charter Oak issued a CGSI general liability policy with a Web Xtend Liability endorsement covering advertising injuries, including infringement of title or slogan, subject to exclusions.
- Five Four Clothing, Inc. and FiveFour Group LLC asserted trademark and trade dress claims against Wal-Mart and CGSI, among others, in the Central District of California.
- CGSI notified Charter Oak of the Five Four Litigation; Charter Oak denied a defense, contending no advertising injury or applicable exclusions existed.
- CGSI moved for partial summary judgment on Charter Oak’s duty to defend; Charter Oak moved for judgment on the pleadings, later treated as cross-motions for summary judgment.
- The court held that CGSI is entitled to a defense under the Web Xtend Policy because there is a potential coverage and the exclusions are not conclusively applicable at this stage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Five Four complaint trigger the Web Xtend duty to defend? | CGSI: infringement of title or slogan may be alleged; advertising in course of advertising implicated. | Charter Oak: no explicit allegation of slogan/title infringement and potential exclusions apply. | Yes; potential coverage exists, supporting a duty to defend. |
| Are exclusions (knowledge of falsity and first publication) dispositive at this stage? | Exclusions do not bar defense where some allegations may fall outside exclusions and coverage is possible. | Exclusions preclude coverage given alleged intentionality and pre-policy publication. | Exclusions do not eliminate the duty to defend at this stage. |
| Does the First Publication Exclusion defeat coverage here? | Pre-policy publication could bar coverage; however, uncertainty remains given conflicting evidence and policy overlaps. | Publication predating the policy period should bar defense. | Not conclusively; the Court finds possible factual basis for coverage requires defense to continue. |
| Should Charter Oak defend CGSI pending resolution of coverage versus indemnity? | Duty to defend is broad; ambiguity favors insured’s defense. | If no duty to defend is present, defense should not be provided. | Charter Oak must defend CGSI until it is definitively resolved that the policy does not apply. |
Key Cases Cited
- Automobile Ins. Co. of Hartford v. Cook, 7 N.Y.3d 131 (N.Y. 2006) (broad duty to defend; defense triggered by reasonable possibility of coverage)
- Village of Brewster v. Virginia Sur. Co., Inc., 70 A.D.3d 1239 (N.Y. App. Div. 2010) (duty to defend broader than indemnity; allegations triggering potential coverage require defense)
- Century 21, Inc. v. Diamond State Ins. Co., 442 F.3d 79 (2d Cir. 2006) (ambiguity in policy terms resolved in insured’s favor; defense obligation when any fact suggests coverage)
- Hugo Boss Fashions, Inc. v. Federal Ins. Co., 252 F.3d 608 (2d Cir. 2001) (ambiguous terms in advertising injury; insurer must defend in doubtful coverage scenarios)
- J.A. Brundage Plumbing & Roto-Rooter, Inc. v. Mass. Bay Ins. Co., 818 F. Supp. 553 (W.D. N.Y. 1993) (infringement of title can include trademark or tradename infringement)
- New York v. Blank, 27 F.3d 783 (2d Cir. 1994) (policy terms may incorporate broader federal meanings)
- Sylvan Beach v. Travelers Indem. Co., 55 F.3d 114 (2d Cir. 1995) (classic articulation of insurer duty to defend when allegations fall within policy)