Prolink Holdings Corp. v. Federal Insurance
688 F.3d 828
7th Cir.2012Background
- GPS sued ProLink in 2008 for patent infringement, slander of title, and unfair competition.
- GPS owns U.S. Patent No. 5,438,518 and alleges ProLink claimed ownership via two IP security agreements that encumber GPS’s title.
- Federal Insurance refused to defend ProLink, citing policy exclusions and the definition of personal injury.
- ProLink sought a declaratory judgment that Federal breached its duty to defend; district court granted judgment on the pleadings.
- The policy covers personal injury including libel/slander, but GPS’s claims center on disparagement of the patent (property), not defamation of GPS; implicit defamation theories were rejected.
- The Seventh Circuit affirmed, holding GPS’s allegations do not trigger coverage and thus Federal had no duty to defend; the First Publication Exclusion was not controlling due to record evidence of policy periods.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the underlying complaint implicate covered personal injury? | GPS’s claims imply reputational harm to GPS. | ProLink argues only property disparagement; not covered personal injury. | No; allegations concern disparagement of property, not personal injury. |
| Are disparagement of a property right and implicit defamation within the policy's personal injury? | Implicit defamation could trigger coverage. | Disparagement of property is excluded from personal injury. | No; implicit defamation attempts fail to convert property disparagement into covered personal injury. |
| Does the First Publication Exclusion apply to bar coverage? | Not controlling; record shows policy periods, so exclusion not decisive. | ||
| Do the cited cases compel a different result for implicit defamation under Illinois law? | Nvidia and related authorities support coverage for reputational harm. | Distinguishable facts; GPS did not allege statements about GPS itself. | Distinguishable; not triggered here. |
Key Cases Cited
- Pekin Ins. Co. v. Wilson, 930 N.E.2d 1011 (Ill. 2010) (duty to defend tied to whether allegations fall within policy terms)
- Amerisure Mut. Ins. Co. v. Microplastics, Inc., 622 F.3d 806 (7th Cir. 2010) (liberal construction of policy terms; potential coverage when allegations fall within policy)
- Universal Underwriters Ins. Co. v. LKQ Smart Parts, Inc., 963 N.E.2d 930 (Ill. App. Ct. 2011) (duty to defend depends on whether underlying allegations fall within policy coverage)
- Conn. Indem. Co. v. DER Travel Serv., Inc., 328 F.3d 347 (7th Cir. 2003) (allegations analyzed broadly to determine potential coverage)
- Valley Forge Ins. Co. v. Swiderski Elecs., Inc., 860 N.E.2d 307 (Ill. 2006) (criteria for evaluating insurer’s duty to defend)