Michael Taylor Designs, Inc. v. Travelers Property Casualty Co. of America
761 F. Supp. 2d 904
N.D. Cal.2011Background
- MTD faced underlying suit from Rosequist claiming trade dress infringement and misrepresentation via promotional materials showing Rosequist’s furniture.
- MTD tendered defense to Travelers; Travelers initially declined coverage citing Web Xtend endorsement deletion of Coverage B.
- Rosequist amended complaint adding a disparagement claim (Slander of Goods) but the endorsement already governs coverage.
- Web Xtend Liability endorsement deletes body-coverage; coverage hinges on whether original pleadings could support disparagement.
- In December 2009 Travelers agreed to defend the Rosequist action subject to a rights reservation; Ropers firm later handled defense starting January 12, 2010.
- Court addresses whether duty to defend arose from the original complaint, and related fee-reimbursement and enforceability issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the original Rosequist complaint create a potential disparagement claim under Web Xtend? | MTD: yes, allegations implied disparagement. | Travelers: no, trade dress alone cannot imply disparagement. | Yes; original allegations could reveal a disparagement claim. |
| Is the Web Xtend Liability endorsement enforceable given notice about coverage changes? | MTD: endorsement should be enforceable; parties accepted package. | Travelers: endorsement valid; deletes Coverage B. | Endorsement enforceable; did not render unenforceable as a matter of law. |
| Can Travelers rely on §2860 to limit defense-fee reimbursement after defense began? | MTD: §2860 should apply only after defense starts; seek broader recovery. | Travelers: §2860 applies to post-tender independent-counsel fees. | Travelers may rely on §2860 for post-Oct 21, 2009 fees, not earlier. |
| Should MTD obtain attorney-fee reimbursement for pre-October 21, 2009 period? | MTD: yes, due to duty to defend from original complaint. | Travelers disputes entitlement; fees must be reasonable and necessary. | Yes, reimbursement for reasonable, necessary fees from tender to Oct 21, 2009. |
Key Cases Cited
- Horace Mann Ins. Co. v. Barbara B., 4 Cal.4th 1076 (Cal. 1993) (broad duty to defend against potential indemnity)
- Montrose Chemical Corp. v. Superior Court, 6 Cal.4th 287 (Cal. 1993) (duty to defend broader than indemnity; potential coverage suffices)
- Lomes v. Hartford Fin. Svcs. Group, Inc., 88 Cal. App. 4th 127 (Cal. App. 2001) (duty to defend depends on potential for coverage; not labels matter)
- Atlantic Mutual Ins. Co. v. J. Lamb, Inc., 100 Cal. App. 4th 1017 (Cal. App. 2002) (duty to defend based on allegations and policy terms)
- Homedics, Inc. v. Valley Forge Ins. Co., 315 F.3d 1135 (9th Cir. 2003) (imitation may not preclude disparagement when misrepresentation present)