819 F. Supp. 2d 247
S.D.N.Y.2011Background
- FLG sues Liberty for failing to defend Hyman in an underlying Van Cleef action alleging trade dress and copyright infringement and requests breach of contract, unfair insurance practices, and deceit/fraud claims.
- The Liberty policy requires defense for personal and advertising injury, but exclusions apply to intellectual property injuries not tied to advertising; the policy is issued in Pennsylvania and lists Hyman as the insured.
- Van Cleef alleged Hyman produced jewelry resembling Van Cleef’s Alhambra trade dress; Hyman’s advertising materials and distribution were at issue.
- Liberty denied defense in 2010 based on the claim that underlying allegations did not arise from advertising and that extrinsic facts could not be considered; FLG assignee seeks coverage.
- The court later applies Pennsylvania law (choice-of-law) due to domicile of the insured and contract formation, and denies reconsideration while allowing amendment of certain claims.
- Liberty moves to dismiss all counts for failure to state a claim; court grants dismissal with leave to amend for two claims that may be plausibly pled with additional facts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to defend under Pennsylvania law | PA four-corners rule governs; allegations potentially within policy. | Policy narrowly defined advertising injury; underlying claims not within coverage. | Duty to defend not triggered; dismissal granted. |
| Choice of law for contract interpretation | New York law should apply because underlying action occurred there; broader defense duties. | PA law applies due to insured’s domicile and policy issuance; strict four-corners rule. | Pennsylvania law applies; contracts interpreted under PA standards. |
| Unfair insurance practices claim viability | UTPCPL-like and deceptive practices under both states; misrepresentation alleged. | No private right of action under PA unfair insurance practices; fraud elements not pled with specificity. | Claims dismissed for lack of particularity and absence of valid statutory basis. |
| Common law deceit and fraud claim viability | Liberty misrepresented policy terms and coverage; intentional deception alleged. | Lack of specificity; failure to plead speaker, date, and place; claims fail Rule 9(b). | Dismissed for lack of particularized pleading. |
Key Cases Cited
- R.C. Bigelow, Inc. v. Liberty Mut. Ins. Co., 287 F.3d 242 (2d Cir. 2002) (duty to defend varies by state law; extrinsic knowledge may affect coverage)
- Cat Internet Services, Inc. v. Providence Washington Ins. Co., 333 F.3d 138 (3d Cir. 2003) (advertising injury scope under Pennsylvania law; misappropriation cases)
- Frog, Switch & Mfg. Co., Inc. v. Travelers Ins. Co., 20 F.Supp.2d 798 (M.D. Pa. 1998) (definition of advertising injury and its relation to misappropriation of advertising ideas)
- Cincinnati Ins. Cos. v. Pestco, Inc., 374 F.Supp.2d 451 (W.D. Pa. 2004) (advertising injury framework in Pennsylvania-related coverage disputes)
- Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 589 Pa. 317, 908 A.2d 888 (Pa. 2006) (choice-of-law framework and application in insurance disputes)