Green4All Energy Solutions, Inc. v. State Farm Fire & Casualty Company
2017 Ill. App. LEXIS 393
| Ill. App. Ct. | 2017Background
- State Farm issued a CGL policy to Green4All effective Sept 21, 2014–Sept 21, 2015, covering "personal and advertising injury," defined to include publication that "disparages a person’s or organization’s goods, products or services."
- Flow Dynamics sued Green4All (Feb 2015) asserting patent-infringement claims and a separate Count IV alleging "false marking": Green4All allegedly labeled its H2MinusO® as "patent pending," when the patent application allegedly belonged to Flow; Flow alleged this harmed it commercially by tending to persuade customers Green4All’s product was superior.
- Green4All tendered defense to State Farm (Apr 2015); State Farm refused (May 2015). The underlying case settled (Sept 2015).
- Green4All then sued State Farm (Oct 2015) for breach of contract and a violation of 215 ILCS 5/155 (bad-faith refusal), seeking a declaration that State Farm had a duty to defend based on the advertising-injury/disparagement provision.
- The trial court granted summary judgment for State Farm, holding the underlying complaint did not allege disparagement because Green4All’s "patent pending" marking was a neutral statement about its own product and did not criticize or compare Flow’s product.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether State Farm owed a duty to defend under the policy’s "disparagement" advertising-injury clause | Flow’s Count IV allegations (false "patent pending" marking) alleged advertising injury because the marking tended to persuade customers Green4All’s product was superior, thus disparaging Flow’s product | The complaint did not allege any statement criticizing or comparing Flow’s product; "patent pending" is neutral and not disparaging, so no covered advertising injury | No duty to defend: allegations lacked the required disparaging statement about a competitor’s goods or services |
| Whether State Farm violated 215 ILCS 5/155 by refusing to defend | State Farm’s refusal was vexatious and deprived Green4All of funds; thus statutory bad faith | No duty to defend existed, so no breach and no statutory violation | Dismissal: because no duty to defend, there was no violation of section 155 |
Key Cases Cited
- Lexmark International, Inc. v. Transportation Ins. Co., 327 Ill. App. 3d 128 (2001) (defines "disparagement" as words criticizing quality of another’s goods and explains required elements)
- Pekin Ins. Co. v. Phelan, 343 Ill. App. 3d 1216 (2003) (articulates three-element test for disparagement: about competitor’s goods, untrue or misleading, intended to influence buyers)
- Valley Forge Ins. Co. v. Swiderski Electronics, Inc., 223 Ill. 2d 352 (1996) (insurance-policy interpretation principles; duty-to-defend standard)
- Heritage Mut. Ins. Co. v. Advanced Polymer Tech., Inc., 97 F. Supp. 2d 913 (S.D. Ind. 2000) (holding "patent pending" advertising that did not reference a competitor is not disparagement; persuasive authority)
- JAR Laboratories LLC v. Great American E&S Ins. Co., 945 F. Supp. 2d 937 (N.D. Ill. 2013) (contrast: underlying complaint alleged comparative statements identifying a competing prescription brand)
- Acme United Corp. v. St. Paul Fire & Marine Ins. Co., [citation="214 Fed. App'x 596"] (7th Cir. 2007) (contrast: advertisements alleged to compare insured’s products to stainless steel products, supporting disparagement theory)