Green4All Energy Solutions, Inc. v. State Farm Fire & Casualty Co.
2017 IL App (1st) 162499
| Ill. App. Ct. | 2017Background
- State Farm issued a commercial liability policy to Green4All (9/21/2014–9/21/2015) that covered "personal and advertising injury," including publication that disparages a person’s or organization’s goods, products or services, and defined "advertisement."
- Flow Dynamics sued Green4All in federal court alleging patent infringement and, in Count IV, false marking: that Green4All’s commercial literature marked H2MinusO® "patent pending" though the application belonged to Flow and that the marking harmed Flow by tending to persuade customers that H2MinusO® was superior.
- Green4All tendered defense to State Farm in April 2015; State Farm refused in May 2015, saying the underlying complaint alleged no "personal and advertising injury."
- The underlying case settled in September 2015. Green4All then sued State Farm in Illinois state court for breach of contract and a 215 ILCS 5/155 claim for unreasonably refusing to defend.
- The trial court granted State Farm’s summary judgment, finding the underlying complaint did not allege disparagement because marking a product "patent pending" is a neutral statement about the insured’s 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 Green4All for the Flow complaint | Flow’s Count IV (false marking) alleges an "advertising injury"—Green4All’s "patent pending" marking tended to persuade customers its product was superior (disparagement) | The complaint does not allege disparagement; "patent pending" is a neutral, noncomparative statement and thus not a covered disparaging publication | No duty to defend: the complaint failed to allege disparagement and therefore fell outside the policy’s advertising-injury coverage |
| Whether insurer’s refusal violated 215 ILCS 5/155 | State Farm’s refusal was wrongful because coverage existed and defense was owed | No violation because no coverage duty existed | No violation: without coverage duty, no 155 liability |
Key Cases Cited
- Valley Forge Ins. Co. v. Swiderski Electronics, Inc., 223 Ill. 2d 352 (2006) (insurer’s and insured’s intent is as expressed in policy language; unambiguous policy terms control)
- Virginia Surety Co. v. Northern Ins. Co. of New York, 224 Ill. 2d 550 (2007) (summary judgment standard)
- Founders Ins. Co. v. Munoz, 237 Ill. 2d 424 (2010) (cross-motions for summary judgment resolve legal issues where no material facts are disputed)
- Pekin Ins. Co. v. Roszak/ADC, LLC, 402 Ill. App. 3d 1055 (2010) (duty-to-defend determined by alleged conduct, not claim labels)
- Lexmark Int’l, Inc. v. Transp. Ins. Co., 327 Ill. App. 3d 128 (2001) (definition of disparagement: statements criticizing quality of competitor’s goods; must be untrue/misleading and intended to influence public)
- Pekin Ins. Co. v. Phelan, 343 Ill. App. 3d 1216 (2003) (three-element test for disparagement: about competitor’s goods, untrue/misleading, intended to influence buyers)
- Greenwich Ins. Co. v. RPS Prods., Inc., 379 Ill. App. 3d 78 (2008) (statements about an insured’s own product, absent comparative language, do not constitute disparagement)