Jar Laboratories LLC v. Great American E & S Insurance
2013 U.S. Dist. LEXIS 67516
| N.D. Ill. | 2013Background
- JAR Laboratories sought a declaration that Great American E&S Insurance owed a defense in TPU's underlying suit and damages for breach of contract and vexatious denial.
- GAIC issued two liability policies to JAR (primary and excess) effective Dec 1, 2011–Dec 1, 2012, including personal and advertising injury coverage with an IP Exclusion and a Quality of Goods Exclusion.
- TPU alleges JAR made false/misleading statements comparing LidoPatch to Lidoderm, claiming LidoPatch is equivalent to the prescription Lidoderm and unsafe practices in marketing.
- JAR tendered defense in March 2012; GAIC initially denied defense, later agreed under reservation, then again denied relying on IP Exclusion and other exclusions.
- TPU amended its complaint in Sept. 2012 adding state and federal claims; GAIC maintained no duty to defend or indemnify.
- The court analyzes whether TPU's claims potentially fall within 'personal and advertising injury' for disparagement and whether exclusions bar coverage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does GAIC owe a duty to defend TPU's claims? | TPU claims statements disparaged Lidoderm and triggered policy coverage. | IP Exclusion and Quality of Goods Exclusion bar coverage for alleged IP and product-relations claims. | Yes; GAIC owes a duty to defend unless exclusions apply. |
| Do the IP Exclusion and Quality of Goods Exclusion apply to bar defense? | IP Exclusion should not bar coverage because statements target Lidoderm, an IP-rights context; statements about Lidoderm can be covered. | IP Exclusion and Quality of Goods Exclusion bar claims arising from false advertising and goods' performance. | Exclusions do not apply to bar defense; coverage for disparagement remains. |
| Does the Prior Publication Exclusion defeat coverage for the amended complaint? | Amended allegations within policy period create ongoing coverage; prior publications do not preclude the claim. | Amended statements are republications of pre-period misconduct and thus excluded. | No; Prior Publication Exclusion does not defeat the duty to defend here. |
Key Cases Cited
- BASF AG v. Great American Assur. Co., 522 F.3d 813 (7th Cir. 2008) (disparagement reading requires false statement about plaintiff; BASF analyzed under Illinois law)
- Acme United Corp. v. St. Paul Fire & Marine Ins. Co., 214 F.App'x 596 (7th Cir. 2007) (false or misleading advertisements can disparage a competitor)
- Skylink Technologies, Inc. v. Assurance Co. of America, 400 F.3d 982 (7th Cir. 2005) (distinguishes disparagement from product misfunction/external compromise)
- Harleysville Mut. Ins. Co. v. Buzz Off Insect Shield, LLC, 364 N.C. 1, 692 S.E.2d 605 (N.C. 2010) (quality of goods exclusion applicable to false statements about insured products)
- Ringler Associates Inc. v. Maryland Cas. Co., 80 Cal.App.4th 1165 (Cal. App. Ct. 2000) (distinguishes ongoing defamatory scheme from pre-policy statements; republications)
- Pekin Ins. Co. v. Tovar Snow Professionals, Inc., 970 N.E.2d 534 (Ill. App. Ct. 2012) (heading captions cannot alter textual policy exclusions)
- Align Technology, Inc. v. Federal Ins. Co., 673 F. Supp. 2d 957 (N.D. Cal. 2009) (interpretation of exclusions within IP context; narrow application)