720 F.3d 71
2d Cir.2013Background
- CGS sued by Five Four for trademark infringement over FF stitching; CGS was later added as a defendant.
- CGS asked Charter to defend under the Policy; Charter refused, claiming no coverage.
- CGS settled the underlying action for $250,000 on behalf of CGS and Walmart.
- Policy provides duty to defend any suit seeking damages for advertising injury; outlines exclusions.
- Court found Charter breached its duty to defend but not liable to indemnify or for the settlement, and remanded for further proceedings.
- Web Xtend Endorsement narrowed coverage, changing the policy’s scope; policy terms ultimately controlled on remand.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Charter owe a defense under the policy for the underlying action? | CGS argues the action alleged advertising injury within policy; duty to defend applies. | Charter contends the action falls outside coverage for slogan/title infringement and advertising injury. | Charter owed a defense but not indemnification for settlement. |
| Does the FF stitching constitute a protected ‘slogan’ under the policy? | CGS contends stitching falls within advertising injury as a slogan. | Charter argues stitching is not a slogan under federal/common meaning. | FF stitching is not a slogan; no indemnity or defense obligation for that basis. |
| Does the FF stitching constitute a protected ‘title’ under the policy? | CGS argues possible title infringement under advertising injury. | Charter contends stitching does not constitute title as name/designation. | Title not satisfied; however, duty to defend may still exist if ambiguity remained. |
| Was advertising injury triggered by CGS advertising the jeans? | Allegations included advertising by CGS/Walmart; within policy scope. | Disputes whether CGS advertised the jeans; discovery responses suggested otherwise. | Duty to defend remained based on allegations alleging advertising by CGS. |
| Does the knowing violation exclusion bar coverage for the underlying action? | No; since some claims could be potentially covered, the duty to defend persisted. |
Key Cases Cited
- Hugo Boss Fashions, Inc. v. Federal Insurance Co., 252 F.3d 608 (2d Cir. 2001) (defines slogan; governs duty to defend vs. indemnify)
- Servidone Construction Corp. v. Sec. Ins. Co. of Hartford, 64 N.Y.2d 419 (N.Y. 1985) (insurer breach of defense does not create coverage; indemnity requires a covered loss)
- Town of Massena v. Healthcare Underwriters Mut. Ins. Co., 98 N.Y.2d 435 (N.Y. 2002) (duty to defend persists until coverage ambiguity is resolved)
- BP Air Conditioning Corp. v. One Beacon Ins. Grp., 8 N.Y.3d 708 (N.Y. 2007) (duty to defend broader than indemnity; simultaneous coverage rules)
- Allianz Ins. Co. v. Lerner, 416 F.3d 109 (2d Cir. 2005) (cited on indemnity scope when there is a covered loss)