929 F.3d 1
1st Cir.2019Background
- Sterngold Dental purchased a commercial general liability Policy from HDI covering "personal and advertising injury" for 2016.
- Intra-Lock sued Sterngold in Florida alleging trademark infringement of its OSSEAN mark (Count 3) based on Sterngold's use of OSSEO/OSSEOs in internet advertising.
- Sterngold demanded defense and indemnification from HDI; HDI denied coverage relying on the Policy's intellectual property (IP) exclusion.
- Sterngold settled the Intra-Lock suit and sued HDI in Massachusetts federal court for breach of duty to defend and indemnify; the district court dismissed under Rule 12(b)(6).
- On appeal, the First Circuit assumed, favorably to Sterngold, that Intra-Lock alleged an "advertising injury" but considered whether that injury nonetheless "arose out of" trademark infringement excluded by the IP exclusion.
- The court concluded the alleged advertising injury flowed from trademark infringement and that the Policy's IP exclusion (with a limited slogan carve-out not invoked here) barred coverage; judgment affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HDI had a duty to defend/indemnify Sterngold for Intra-Lock's claim | Sterngold: Intra-Lock alleged an advertising injury (use of another's advertising idea in internet ads), which is covered under the Policy | HDI: The IP exclusion bars coverage because the alleged injury arose out of trademark infringement | Held: No duty — even assuming an advertising injury, it arose out of trademark infringement and is excluded |
| Whether the IP exclusion's "use of another's advertising idea" exception saves coverage | Sterngold: The second sentence excepts use of another's advertising idea, so the claim fits within coverage | HDI: The exception applies only to the catchall "other intellectual property rights," not to the listed items like trademark infringement | Held: Exception does not apply to trademark infringement claims; plain syntax isolates the exemption to the catchall phrase |
| Whether the slogan carve-out in the exclusion covers the claim | Sterngold: OSSEAN operated as a slogan, so slogan-infringement carve-out applies | HDI: OSSEAN was alleged and used as a trademark/source-identifier, not a slogan; complaint contains no slogan claim | Held: Carve-out inapplicable; no plausible slogan allegation in complaint |
| Standard of interpretation/gaps in policy language | Sterngold: Policy should be construed in insured's favor if ambiguous | HDI: Language is unambiguous; exclusion clearly encompasses trademark-based advertising injuries | Held: No real ambiguity; ordinary contract/policy construction resolves the provision against Sterngold's reading |
Key Cases Cited
- Holyoke Mut. Ins. Co. v. Vibram USA, Inc., 106 N.E.3d 573 (Mass. 2018) (clarifies when taking an "advertising idea" constitutes advertising injury)
- Brazas Sporting Arms, Inc. v. Am. Empire Surplus Lines Ins. Co., 220 F.3d 1 (1st Cir. 2000) ("arising out of" denotes broad causation for exclusion analysis)
- Sanders v. Phoenix Ins. Co., 843 F.3d 37 (1st Cir. 2016) (insurer's duties to defend/indemnify and interpretive principles under Massachusetts law)
- Alicea v. Machete Music, 744 F.3d 773 (1st Cir. 2014) (contracts must be construed to give reasonable effect to each provision)
- Billings v. Commerce Ins. Co., 936 N.E.2d 408 (Mass. 2010) (duty to defend arises when complaint facts create a possibility of coverage)