Uretek (USA), Incorporated v. Continental Casualty
701 F. App'x 343
| 5th Cir. | 2017Background
- Uretek (insured) sought defense from its CGL insurer Continental for a counterclaim filed by competitor Applied alleging misrepresentations about Uretek’s patent and competitive conduct.
- Continental refused to defend; Uretek sued for declaratory relief and breach of contract.
- Policy covers “personal and advertising injury” including publication that "disparages . . . goods, products or services," with exclusions for knowing violations and publications made with knowledge of falsity.
- Applied’s counterclaim alleges Uretek falsely told VDOT, general contractors, and potential customers that Applied’s VDOT I‑664 contract and other work infringed Uretek’s ‘831 patent, resulting in lost contracts and anticompetitive injury.
- District court granted summary judgment for Continental, finding Applied’s allegations did not amount to “disparagement” triggering a duty to defend.
- Fifth Circuit reversed, holding the counterclaim alleged disparaging publications and that exclusions did not bar coverage because the complaint also alleged negligence or lack of knowledge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Applied’s counterclaim allegations fall within policy’s “disparagement” (personal & advertising injury) coverage | Applied alleged Uretek told VDOT and others Applied’s work infringed Uretek’s patent, which by implication disparaged Applied’s services — thus claims fall within coverage | Continental argued complaint did not allege publication that disparaged Applied or its services and cited KLN Steel to deny coverage | Court held allegations that Uretek told customers Applied’s work infringed the patent sufficiently alleged "disparagement" and triggered duty to defend |
| Whether policy exclusions for acts done "with knowledge" or publications "with knowledge of falsity" preclude coverage | Uretek: complaint pleads negligent or should‑have‑known conduct (knew or should have known), so liability could be proven without knowledge of falsity | Continental: allegations show intentional, knowing misrepresentations, so exclusions apply and bar coverage | Court held insurer failed to prove exclusions apply because complaint also alleges negligent or reckless statements (knew or should have known), so exclusions do not eliminate duty to defend |
Key Cases Cited
- Test Masters Educ. Servs., Inc. v. State Farm Lloyds, 791 F.3d 561 (5th Cir. 2015) (articulates the eight‑corners rule for duty to defend)
- Ewing Constr. Co. v. Amerisure Ins. Co., 420 S.W.3d 30 (Tex. 2014) (scope of duty to defend under Texas law)
- Nat’l Union Fire Ins. Co. of Pittsburgh v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139 (Tex. 1997) (pleading facts control duty to defend)
- KLN Steel Prods. Co. v. CNA Ins. Cos., 278 S.W.3d 429 (Tex. App.—San Antonio 2008) (distinguished; required greater specificity to find disparagement)
- Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 227 F.3d 489 (5th Cir. 2000) (Lanham Act liability can be shown without proof of intent)