Crum & Foster Speciality Insurance Co. v. Willowood USA, LLC
696 F. App'x 276
9th Cir.2017Background
- Willowood USA, LLC distributed Repar’s TEBU-CON product and was sued by Repar alleging misuse of the TEBUCON name and related claims; Willowood settled.
- Three insurers denied coverage for defense and indemnity; district court granted summary judgment for insurers twice.
- Insurers’ policies covered injury “arising out of the use of another’s advertising idea in your ‘advertisement’.”
- Policies also excluded injuries “arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights.”
- Repar’s second amended complaint alleged harm from Willowood’s use of Repar’s advertising idea (the TEBUCON name); Willowood submitted declarations asserting the settlement was at least partly for breach of implied contract (a potentially covered claim).
- Ninth Circuit reversed the denial of a duty to defend and remanded the indemnity issue for trial to determine whether the settlement was for a covered claim; one judge dissented, arguing the claims were grounded in trademark infringement and therefore excluded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to defend | Repar’s complaint alleges injury from use of Repar’s advertising idea (TEBUCON), which falls within policy coverage for advertising-idea injuries | Insurers: claims arise from trademark/infringement and are excluded as intellectual property claims | Reversed district court; duty to defend was triggered because complaint alleged use of an advertising idea, putting insurers on notice |
| Scope of “arising out of” | Broadly interpreted to require coverage if complaint may impose liability for covered conduct | Insurers: “arising out of” includes causal nexus but here the gravamen is trademark infringement, thus excluded | Court applied Oregon’s broad interpretation; allegation sufficient to trigger defense obligation |
| Application of IP exclusion | Willowood: complaint alleges advertising-idea injury separate from IP infringement; settlement evidence suggests covered breach-of-implied-contract portion | Insurers: claims’ gravamen is misuse of trademark (TEBUCON) so IP exclusion bars coverage | Majority: issue is factual for indemnity; remanded to determine whether settlement was for covered claims; dissent would apply exclusion and affirm no coverage |
| Duty to indemnify | Willowood proffered counsel and CEO declarations indicating settlement included covered claims (breach of implied contract) | Insurers: pleadings show only excluded IP-based claims so no duty to indemnify | Remanded for trial to determine the facts underpinning the settlement and whether those facts establish coverage |
Key Cases Cited
- Ferguson v. Birmingham Fire Ins. Co., 254 Or. 496, 460 P.2d 342 (1969) (insurer duty to defend triggered when complaint may impose liability for covered conduct)
- Ristine ex rel. Ristine v. Hartford Ins. Co. of Mid., 195 Or. App. 226, 97 P.3d 1206 (2004) (Oregon courts interpret “arising out of” broadly)
- Bresee Homes, Inc. v. Farmers Ins. Exch., 353 Or. 112, 293 P.3d 1036 (2012) (standard for duty to defend under Oregon law)
- Ledford v. Gutoski, 319 Or. 397, 877 P.2d 80 (1994) (indemnity depends on the facts that form the basis for the settlement)
- Sport Supply Grp., Inc. v. Columbia Cas. Co., 335 F.3d 453 (5th Cir. 2003) (distinguishing trademarks from advertising ideas)
- Rocky Mountain Farmers Union v. Corey, 730 F.3d 1070 (9th Cir. 2013) (standard of review for insurance coverage questions)
- Jarvis v. Indem. Ins. Co. of N. Am., 227 Or. 508, 363 P.2d 740 (1961) (pleadings taking a case out of coverage negate duty to indemnify)