MEMORANDUM AND ORDER
Hartford Fire Insurance seeks a declaratory judgment that it had no duty to defend or to indemnify its insured, Vita Craft Corporation, for claims which Thermal Solutions, Inc. asserted against Vita Craft in underlying litigation. Vita Craft brings counterclaims for declaratory judgment, breach of contract and breach of the duty of good faith and fair dealing. This matter is before the Court on Vita Craft Corporation’s Motion For Summary Judgment (Doe. #51) and [Hartford,’s] Motion For Summary Judgment (Doc. # 53), both filed May 18, 2012. For reasons set forth below, the Court finds that Vita Craft’s motion should be sustained in part and that Hartford’s motion must be overruled.
Summary Judgment Standards
Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. See Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc.,
The moving party bears the initial burden of showing the absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323,
The Court must view the record in a light most favorable to the party opposing a motion for summary judgment. Deepwater Invs., Ltd. v. Jackson Hole Ski Corp.,
The following facts are uncdntroverted or deemed admitted. Where disputed, each party’s factual contention is stated.
I. Underlying Lawsuit
Thermal Solutions, Inc. (“TSI”) innovates and patents new products, then contracts with others to manufacture its patented products, or licenses to others the right to do so. TSI licensed to Imura International U.S.A., Inc. (“II-USA”) the exclusive right to distribute and sell certain cookware that incorporated Radio Frequency Identification (“RFID”) technology. Vita Craft is a wholly-owned subsidiary of II-USA. Mamoru Imura is CEO and president of Vita Craft.
On May 9, 2008, TSI filed suit against II-USA, Vita Craft and Imura. See Thermal Solutions, Inc. v. Imura Int’l U.S.A, Inc., Vita Craft Corp. & Mamoru Imura, Case No. 08-cv-2220-JWL (the “underlying lawsuit” or the “TSI lawsuit”). On July 11, 2008, TSI filed a first amended complaint (the “underlying complaint”) which asserted seven counts.
On August 20, 2010, the Honorable John W. Lungstrum granted summary judgment to all defendants on TSI’s claims for unfair competition, misappropriation of trade secrets and breach of contract.
On July 20, 2012, Judge Lungstrum granted TSI leave to assert a claim against II-USA and Vita Craft for specific performance of one provision of two contracts between the parties. The parties tried that claim to Judge Lungstrum on September 11 and 12, 2012. On September 28, 2012, Judge Lungstrum awarded TSI judgment on the claim for. specific performance and ordered II-USA and Vita Craft to return specific confidential information to TSI on or before October 26, 2012.
II. The Insurance Policies
Effective December 31, 2003 through December 31, 2007, Hartford issued suc
The policies required Hartford to defend and indemnify third-party claims for “personal and advertising injury” against Vita Craft as follows:
[Hartford] will pay those sums that the insured becomes legally obligated to pay as damages because of “personal and advertising injury” to which this insurance applies. [Hartford] will have the right and duty to defend the insured against any “suit” seeking those damages .5
Doc. # 52, Ex. A. The policies define “personal and advertising injury” to include
injury ... arising out of one or more of the following offenses:
d. oral, written or electronic publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services;
Id. The policies exclude liability for breach of contract and infringement of intellectual property rights, as follows:
2. Exclusions
This insurance does not apply to:
f. Breach Of Contract
“Personal and advertising injury” arising out of a breach of contract, except an implied contract to use another’s “advertising idea” in your “advertisement” or on “your web site”;
I. Infringement Of Intellectual Property Rights
“Personal and advertising injury” arising out of any violation of any intellectual property rights such as copyright, patent, trademark, trade name, trade secret, service mark or other designation of origin or authenticity. However, this exclusion does not apply to infringement, in your “advertisement” or on “your web site”, of:
(1) copyright;
(2) slogan, unless the slogan is also a trademark, trade name, service mark or other designation of origin or authenticity; or
(3) title of any literary or artistic work.
Id.
Hartford’s umbrella policies incorporate the definition of “personal and advertising injury” contained in the primary policies, and provide as follows:
A. Umbrella Liability Insurance
We will pay those sums that the “insured” becomes legally obligated to pay as “damages” in excess of the “underlying insurance,” or of the “self-insured retention” when no “underlying insurance” applies, because of “bodily injury,” “property damage,” or “personal and advertising injury” to which this insurance applies caused by an “occurrence”.
B. Exclusions
This policy does not apply to:
* * *
4. Personal And Advertising Injury This policy does not apply to “personal and advertising injury”.
EXCEPTION
This exclusion does not apply if “underlying insurance” is applicable to “personal and advertising injury” and to claims arising out of that “personal and advertising injury”.
Doc. # 55, Exs. P, Q, R, S.
Effective December 31, 2005 through December 31, 2006, Executive Risk Indemnity, Inc. (“Chubb”) issued a Directors and Officers (“D & 0”) liability insurance policy to Vita Craft with a limit of $2,000,000 inclusive of defense costs (the “Chubb Policy”). Doe. # 52, Ex. C. The Chubb Policy provided coverage for individual officers of Vita Craft but did not provide entity coverage for Vita Craft.
Effective December 31, 2007 to December 31, 2008, Travelers Indemnity Company of Connecticut (“Travelers”) issued a general liability policy to Vita Craft as named insured. Doc. # 52, Ex. F.
III. Vita Craft’s Tenders and Hartford’s Responses
On August 7, 2008, Vita Craft and Imura tendered the underlying amended complaint to Hartford and demanded that Hartford defend and indemnify them in the TSI lawsuit. On August 20, 2008, Hartford claim consultant Julie Dengler sent an email to Vita Craft attorney Kimberly Winter stating as follows:
A cursory review indicates the allegations do not meet the definition of a “bodily injury” or “property damage” arising from an “occurrence.” The allegations do not appear to meet the definition of a “personal and advertising injury” arising out of any of the enumerated offenses.... We will prepare a more detailed analysis and advise you of our position.
Doc. # 54-2, Ex. L. (“Dengler email”). Dengler also stated that exclusions for patent infringement, trademark and other intellectual property violations might apply.
On August 21, 2008, Winter asked Dengler to review the unfair competition count — in case she had overlooked it — and pointed out that it
incorporates, among other things, paragraphs 21 and 22 of the complaint, which allege interference with business relationships and disparagement which falls within the personal and advertising injury provision of the policies.
Doc. # 54-2, Ex. L (“Winter email”). On August 22, 2008, Hartford stated that it would take a look at the unfair competition allegations.
On September 23 and again on September 26, 2008, Vita Craft emailed Hartford, asking when it could expect Hartford’s coverage opinion. On October 10, 2008, Winter wrote Hartford to again request a coverage opinion.
On October 17, 2008, Hartford apologized for the delay and stated that Vita Craft would receive its coverage opinion no later than October 21, 2008. On October 30, Vita Craft requested a coverage opinion.
On November 11, 2008, Hartford denied coverage under all of its policies. Among other things, Hartford stated that the policies provided no coverage for personal and advertising injury because the underlying complaint “allege[d] no Claims, that fall under Offenses a. through h. that are enumerated in the ‘personal and advertising injury’ definition.” Doc. # 54-2, Ex. L at 12.
On February 16, 2010, Vita Craft objected to the denial of coverage and asserted that Hartford had overlooked the provision
On July 19, 2010, Vita Craft sent a letter which restated its demand that Hartford defend and indemnify.
On November 5, 2010, Vita Craft accepted Hartford’s offer of defense but objected to the reservation of rights and Hart-fords’s attempt to impose hourly rate limitations on defense counsel. Vita Craft also asserted that Hartford had no valid basis for limiting its defense to the period after July 30, 2010.
IV. Defense Costs Incurred by Vita Craft and Amounts Previously Paid by Insurers
On or about August 12, 2008, Chubb accepted defense of the TSI Lawsuit for Imura only. Át all relevant times, Lathrop & Gage LLP provided joint representation to Imura and Vita Craft in the TSI lawsuit. Although it only owed defense costs to Imura, Chubb ultimately agreed to pay 80 per cent of the joint defense costs. Chubb also agreed to pay the rates which Lathrop & Gage charged for Vita Craft’s defense. In May of 2010, however, Chubb’s liability was exhausted through payment of defense costs.
Travelers agreed to defend Vita Craft and Imura from July 30, 2010 (the date when it received Ablah’s deposition) but only at rates of up to $260 per hour for partners, $190 per hour for associates and $75 per hour for paralegals. Hartford and Travelers agreed to equally share defense costs at reduced rates from July 30, 2010.
Vita Craft asserts that through January 31, 2012, the total amount incurred in joint defense of Vita Craft and Imura is $3,797,638.55. Lathrop & Gage charged Vita Craft the following rates for work performed by primary timekeepers, partners Brian Fields and Brad Leitch, associate Jason Parks and paralegal Keenan Barker:
Leitch $315 $335 $350 $350 $360
Fields $285 $295 $310 $310 $330
Parks $210 $230 $250 $250 $260
Barker $160 $175 $180 $180 $180
See Doc. # 54.
On November 23, 2010, Hartford filed this action, seeking a declaration that it did not owe Vita Craft or Imura a duty to defend or indemnify the claims in the TSI action.
ANALYSIS
A federal court sitting in diversity applies the choice of law rules of the state in which it sits. Klaxon Co. v. Stentor Elec. Mfg. Co.,
I. Duty To Defend
A. Standards
Under Kansas law, an insurer has a duty to defend if there is any potential for liability under a policy of insurance. City of Salina, Kan. v. Md. Cas. Co., 856
F.Supp. 1467, 1480 (D.Kan.1994); Spruill Motors, Inc. v. Universal Underwriters Ins. Co.,
The interpretation of an insurance policy, like other contracts, is a question of law. See AMCO Ins. Co. v. Beck,
B. Policy Language Interpretation
The parties dispute whether the allegations against Vita Craft in the underlying complaint established the potential for coverage and thus triggered Hartford’s duty to defend. See Spruill Motors,
Vita Craft argues that these allegations created the potential for coverage for “personal and advertising injury,” including “injury ... arising out of .,. oral, written or electronic publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.” Vita Craft contends that TSI sought and could potentially recover damages which it suffered as a result of Imura’s defamatory statements and/or disparagement (i.e. false rumors) about TSI’s licensee, CookTek. Hartford contends that it had no duty to defend because the underlying complaint and extrinsic evidence did not set out an actionable claim for personal and advertising injury.
Although the Court does not specifically address each of the parties’ arguments and authorities, it has considered all of them in determining the fundamental issue: whether the allegations of the underlying complaint established a possibility that Vita Craft could be legally obligated to pay damages for injury arising out of oral, written or electronic publication of material that slandered or libeled a person or organization or disparaged the person’s or organization’s goods, products or services. See Am. Fid. Ins. Co. v. Emp’r Mut. Cas. Co.,
1. Potential Coverage For Personal And Advertising Injury
Hartford asserts that the policy defines “personal arid advertising injury” in terms of enumerated “offenses,” i.e. slander, libel and disparagement, which Kansas law recognizes as specifically defined torts, and that the policy only covers those specific torts in fully embodied and alleged form. See Lapeka, Inc. v. Sec. Nat’l Ins. Co., Inc.,
In Bankwest v. Fidelity & Deposit Co. of Maryland,
Hartford correctly notes that the policy language in Bankwest differs from that in the instant case. There, the policy contained a “catch-all” phrase for damages arising from publication of “other defamatory or disparaging material”; here, the policies cover “injury” arising out of certain “offenses,” including the publication of material that slanders or libels another or disparages its goods, products or services. Consequently, Hartford argues that its policy language only covers discrete freestanding claims for libel, slander or disparagement. See Doc. # 57 at 22. Hartford’s argument, however, overlooks the fact that its policies define “personal and advertising injury” to include injury arising out of “oral, written or electronic publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or service.” In dicta since Bankwest, the Tenth Circuit has stated that the exact policy language at issue here is broad enough to include a tortious interference claim. See Freightquote.com, Inc. v. Hartford Cas. Ins. Co.,
Hartford’s policy language clearly obligated it to defend where the underlying plaintiff alleged that it suffered damages “arising out of’ the insured’s publication of material which slandered or libeled a person or organization or which disparaged the good, products or services of a person or organization. Garrison v. State Farm Mut. Auto. Ins. Co.,
Hartford argues that the policy does not provide coverage because under Kansas law, the common law tort of unfair competition cannot be based on a theory of slander, libel or disparagement, but rather only includes traditional intellectual property infringement, as well as misappropriation of trade secrets and other confidential information. Doc. # 57 at 20; see Accessible Tech., Inc. v. Paxton Auto. Corp., No. 01-2407-CM,
As noted, Hartford argues that it had no duty to defend because the underlying lawsuit did not assert a viable claim against Vita Craft for defamation or disparagement. Under Kansas law, the elements of a cause of action for defamation, including slander and libel, include (1) false and defamatory words; (2) communicated to a third person; (3) which result in harm to the reputation of the person defamed. Hall v. Kan. Farm Bureau,
Although sparse, the complaint alleges that Vita Craft and Imura “engaged in and orchestrated a scheme to damage and injure TSI by spreading false rumors regarding one of TSI’s licensees.” Further, in its response to a motion'for summary judgment, TSI alleged that “[i]n a series of email messages on September 25, 2005, Imura wrote to BH Lee, Mr. Martin, and several of his other Vita Craft employees: ‘Don’t trust CookTek! ! ! ! They are fraud.” Though the complaint and response to summary judgment both asserted false and defamatory statements about CookTek, they also asserted that TSI suffered damages on that account because CookTek is a TSI licensee.
The policies did not limit libel or slander coverage to claims by persons claiming to have been directly slandered or libeled, as opposed to persons claiming to have suffered by virtue of slander or libel of their licensees. See Ex. A (coverage for publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services). Construed in favor of the insured, as Kansas law requires, the policy potentially covered injury to the underlying plaintiff for defamation or disparagement of a third party. Further, the lawsuit and reasonably discoverable facts alleged that TSI suffered harm from Vita Craft’s defamation of a TSI licensee.
2. Policy Exclusions
Hartford argues that even if Vita Craft established a potential for coverage
a) Intellectual Property Exclusion
Each policy excluded liability for personal and advertising injury “arising out of’ any violation of intellectual property rights such as copyright, patent, trademark, trade name, trade secret, service mark or other designation of origin or authenticity. Hartford argues that all claims in the underlying lawsuit arose out of violation of intellectual property rights. Citing Black’s Law Dictionary, Hartford notes that the term “intellectual property” is a broad concept which includes “rights against unfair competition.” Doc. # 55 at 53. Hartford also relies on Garrison v. State Farm Mutual Auto. Insurance Co.,
Hartford notes that of the six counts directed against Vita Craft, all but one was for breach of contract, patent infringement or misappropriation of trade secrets. It argues that the remaining claim — for common law unfair competition — fell within the intellectual property exclusion because in Kansas unfair competition is limited to traditional intellectual property infringement, i.e. patent, copyright, trade mark, misuse of trade secrets or misuse of confidential business information. See Marvin J. Perry, Inc. v. Hartford Cas. Ins. Co.,
b. Breach Of Contract Exclusion
In the alternative, Hartford also argues that the policy exclusion for breach of contract excluded coverage for the underlying lawsuit. Hartford again argues that under Kansas law, the Court must broadly interpret the phrase “arising out of,” but the Court has rejected that argu
C. Summary
In summary, the Court finds that Vita Craft is entitled to summary judgment on its claim that Hartford owed a duty to defend Vita Craft in the underlying lawsuit. The parties’ motions for summary judgment on the issue of indemnification are moot because TSI did not recover any damages in the underlying lawsuit.
II. Vita Craft’s Claims For Breach of Contract
Vita Craft asserts that it is entitled to summary judgment on its claim that Hartford breached its contractual duty by (1) refusing to pay defense costs from July 11, 2008 (the date of the amended complaint) to July 30, 2010 and (2) refusing to pay the hourly rates which Vita Craft counsel billed throughout the underlying lawsuit. As set forth above, Hartford had a duty to defend Vita Craft as of July 11, 2008 (the date of the amended complaint in the TSI lawsuit). Hartford breached that duty by its belated decision to defend Vita Craft under a reservation of rights beginning July 30, 2010. Vita Craft is therefore entitled to recover damages for Hartford’s breach, i.e. its refusal to pay the reasonable attorneys’ fees which Vita Craft incurred in defending the TSI lawsuit.
Vita Craft contends that Hartford must pay the full amount of defense fees which it incurred: $709,340.07 for defense costs through July 20, 2010, $235,272.44 for underpayment of costs incurred from July 21, 2010 through January 31, 2012, and an unspecified amount for additional costs incurred since January 31, 2012.
An appropriate attorneys’ fee for defending an insured in underlying litigation is based on the standard of reasonableness which exists in the community. Spruill Motors,
Hartford complains that Vita Craft relies on Lathrop & Gage charges to establish market rates, and argues that Vita Craft has not presented sufficient evidence to establish the reasonableness of those rates. See Lucero v. City of Trinidad,
In the pretrial order, Hartford asserts that Vita Craft invoices include entries that did not involve work in the TSI lawsuit. First, Hartford contends that Vita Craft is not entitled to reimbursement for billing entries for “the Wichita matter,” which relate to a lawsuit which TSI filed against Vita Craft in Sedgwick County, Kansas. Second, Hartford contends that its duty to defend does not extend to Vita Craft counterclaims against TSI for breach of contract and tortious interference. Hartford does not mention these issues, however, in its response to Vita Craft's motion for summary judgment. Accordingly, it has waived any such objections.
Furthermore, TSI filed the Sedgwick County case on November 24, 2010, alleging three claims for breach of contract. On August 10, 2011, the Sedgwick County District Court granted summary judgment to Vita Craft, finding that TSI’s suit in this court barred its claims in Sedgwick County under “compulsory counterclaim rule, res judicata, claim splitting and concurrent jurisdiction doctrines.” See Sedgwick County Journal Entry, at 20 ¶ 1, Exhibit V. Because TSI’s claims in the Wichita matter should have been brought
As to whether Hartford must pay attorneys’ fees for Vita Craft’s pursuit of counterclaims in the TSI suit, Vita Craft points to authority finding that an insurer must pay the insured for defense of its counterclaims when either (1) the counterclaims reach the same or similar issues as the underlying plaintiffs claims so that the claims are intertwined; or (2) the counterclaims are part of the insured’s defensive strategy to reduce its liability. Smart Style Indus., Inc. v. Pa. Gen. Ins. Co.,
The Court finds that Hartford must pay the unreimbursed attorneys’ fees which Vita Craft incurred in the underlying litigation, including $709,340.07 for costs through July 20, 2010, $235,272.44 for underpayment of costs incurred from July 21, 2010 through January 31, 2012, and additional costs incurred in the underlying litigation since January 31, 2012 (not yet calculated when briefing in this case began).
III. Recovery of Attorneys’ Fees Under K.S.A. § 40-256
Both sides also seek summary judgment on Vita Craft’s claim for attorneys’ fees incurred in this action under K.S.A. § 40-256, which provides in pertinent part as follows:
[I]n all actions hereafter commenced, in which judgment is rendered against any insurance company, ... if it appears from the evidence that such company ... has refused without just cause or excuse to pay the full amount of such loss, the court in rendering such judgment shall allow the plaintiff a reasonable sum as an attorney’s fee for services in such action....
K.S.A. § 40-256. Under this statute, Vita Craft can recover reasonable attorneys’ fees expended in this lawsuit if Hartford failed without just cause or excuse to defend the underlying lawsuit. Container Supply Co. v. Fireman’s Fund Ins. Co.,
Under Kansas law, an insurance company has a duty to investigate a claim to determine whether it has a duty to defend. See Miller v. Westport Ins. Corp.,
For reasons set out in the Court’s discussion of Hartford’s duty to defend, the Court finds that Hartford’s reasons for refusing to defend Vita Craft in the underlying lawsuit were without just cause or excuse. The current record, however, does not provide the Court an adequate basis to determine the amount of fees allowable under Section 40-256.
To expedite the resolution of this case and hopefully narrow the issues for trial, the Court directs the parties to consult and attempt to resolve (a) the remaining attorneys’ fees which Vita Craft incurred in defending the underlying lawsuit from January 31, 2012, to its conclusion and (b) the reasonable amount of attorneys’ fees due under K.S.A. § 40-256. If the parties cannot reach agreement on these, no later than December 7, 2012, they shall file a “statement of consultation” and supportive memorandum. See D. Kan. Rule 54.2.
IT IS THEREFORE ORDERED that Vita Craft Corporation’s Motion For Summary Judgment (Doc. # 51) filed May 18, 2012, be and hereby is SUSTAINED in part.
IT IS FURTHER ORDERED that [Hartford’s] Motion For Summary Judgment (Doc. #53), filed May 18, 2012, be and hereby is OVERRULED.
IT IS FURTHER ORDERED that the parties shall consult and attempt to resolve all remaining fee issues. If the parties cannot reach agreement on these issues, they shall file a “statement of consultation” and supportive memorandum no later than December 10, 2012.
Notes
. The underlying complaint alleged in relevant part as follows:
TSI is a leading inventor of products utilizing magnetic induction heating and RFID technology. [In 2003 and 2004] TSI entered into two License Agreements with Imura International that gave Imura International the right to use several of TSI’s patents and related RFID technology in conjunction with the distribution and sale of Cookware and Charging Units for household use.
During the term of the License Agreements, Imura International and Vita Craft "engaged in conduct that constituted a wholesale disregard for TSI’s intellectual property rights and the rights granted in the License Agreements.” Mamoru Imura obtained or sought to obtain patent rights in TSI's trade secrets and other Confidential Information without TSI’s authorization or consent.
On April 29, 2004, Mamoru Imura filed U.S. Patent Application No. 10/833,356, entitled Radio Frequency Identification Controlled Heatable Objects. This application disclosed Confidential Information that far exceeded the limited approval TSI gave him to disclose such information and claimed inventions that Mamoru Imura did not invent.
Mamoru Imura assigned U.S. Patent Application No. 10/833,356 to Imura International on May 10, 2004. The application issued as U.S. Patent No. 7,157,675 (hereafter the ‘"675 Patent”) on January 2, 2007. Mamoru Imura also filed U.S. Patent Application No. 11/148,802, U.S. Patent Application No. 11/266,148, U.S. Patent Application No. 11/266,104, U.S. Patent Application No. 11/561,415, and U.S. Patent Application No. 11/617,407. These applications disclosed Confidential Information that far exceeded the limited approval TSI gave Mamoru Imura to disclose such information and claimed inventions that Mamoru Imura did not invent.
The issuance of the '675 Patent and potential issuance of patents on the other applications prevent TSI from practicing its patents and using its related RFID technology. Imura International and Vita Craft, through the conduct of their officer, Mamoru Imura, threatened TSI’s licensees and other third parties with which TSI had a business relationship, in turn disrupting and/or severing some of those relationships.
Imura International and Vita Craft, through the conduct of their officer Mamoru Imura, also engaged in and orchestrated a scheme to damage and injure TSI by spreading false rumors regarding one of TSI’s licensees. [Paragraph 22].
By letters dated January 7, 2006. TSI notified Imura International and Vita Craft that it considered them to be in breach of the License Agreements and had 30 days to remedy their breaches.
Because Imura International and Vita Craft failed to remedy their breaches within the 30-day cure period, by email dated February 9, 2006, TSI notified them that the License Agreements were terminated.
Doc. # 28 in Case No. 08-2220. The underlying complaint sought declaratory relief, an injunction, specific performance of the License Agreements, compensatory damages and disgorgement of profits in excess of
.Count II alleged that II-USA and Vita Craft breached the License Agreements between TSI and II-USA by entering unauthorized contracts with third parties, disclosing confidential information of TSI, attempting to transfer TSI patents and technology to third parties and failing to pay royalties to TSI.
Count III alleged that after TSI terminated the License Agreements, II-USA and Vita Craft continued to disclose and use TSI patents, RFID technology and other confidential information without TSI consent. Count III alleged that such conduct unjustly enriched defendants and caused TSI irreparable injuiy and damage.
Count VII alleged that Imura breached his agreement to compensate TSI in the event that Panasonic disclosed TSI’s boiling detection algorithm to unauthorized third parties.
. Specifically, Count V alleged that despite the License Agreements’ requirement that trade secrets be kept confidential, defendants disclosed 15 trade secrets.
. Judge Lungstrum found that TSI could not prove its unfair competition and misappropriation claims because TSI had not submitted evidence which linked its alleged damages to conduct by defendants after the termination of the License Agreements. Judge Lungstrum further held that TSI could not prove its breach of contract claims because it had failed to submit evidence which linked its alleged damages to any post-termination breach of contract and the alleged lost profits were impermissibly speculative.
. In the primary policies, the insuring agreement language for "Coverage B Personal and Advertising Injury Liability” is substantially the same.
. The letter stated that on December 18, 2009, defendants had deposed Amil Ablah, TSI vice president and secretary, and that his deposition testimony supported coverage. Specifically, Vita Craft stated as follows:
As discussed in our February 16, 2010 correspondence, paragraph 22 of the Complaint alleges that Mr. Imura and Vita Craft "engaged in and orchestrated a scheme to damage and injure [TSI] by spreading false rumors...."
Brian Fields, [Mr. Imura and Vita Craft's joint defense counsel], deposed Thermal Solutions' co-founder and Vice President, Amil Ablah regarding his allegations that Mr. Imura and Vita Craft spread false information about |TSI] and [TSI’s] products. When asked if [TSI] has been damaged by Mr. Imura’s statements, Mr. Ablah stated that [TSI] has been damaged by Mr. Imura's statements [and] that [TSI’s] patents have been made useless because of Mr. Imura and Vita Craft’s alleged lies. Amil Ablah Depo. 57:20, 68:2-5, 113:17-21. Mr. Ablah also said Mr. Imura was "dishonest” in that Mr. Imura allegedly failed to provide [customers] with “truthful statements” about [TSI's] products. Amil Ablah Depo. 67:18-20; 113:17-21. Indeed, in its summary judgment papers, [TSI] claims that Mr. Imura and Vita Craft's “improper conduct” has "resulted in plaintiff's inability to find a new licensee, despite a diligent search, for plaintiff's intellectual property portfolio for the manufacture and sale of cookware products.” These allegations fall squarely within the “personal injury” offense of “oral, written publication or electronic publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services ...” covered by the policy.
Doc. # 56, Ex. H. In addition to the Ablah deposition, the letter referred to TSI’s summary judgment papers. In its response to a motion for summary judgment, TSI alleged that "[i]n a series of email messages on September 25, 2005, Imura wrote to BH Lee, Mr. Martin, and several of his other Vita Craft employees: 'Don’t trust CookTek! ! ! ! They are fraud.’ ” Doc. # 52, Ex. H at ¶ 40. Hartford did not have information about Imura's emails until Vita Craft produced TSI’s response to the motion on March 8, 2012 — the day before Judge Lungstrum entered summary judgment in favor of Vita Craft and Imura as to all remaining claims by TSI. See Doc. #57, Ex. 1.
On July 30, 2010, Hartford obtained a transcript of Ablah's deposition testimony. In relevant part, Ablah testified as follows: Imura told TSI that he was going to give Regal Ware (a cookware company) a sub-license to manufacture and sell patented cookware and asked TSI to give him a list of TSI patents. Imura told Regal Ware that he owned TSI and its patents. Imura told Ablah that he owned a portion of Regal Ware, even though he did not. Doc. # 55-4 at 16. Imura took a patented product to Regal Ware, and Regal Ware said that it wanted a certain model of it. Imura had some models built, but they did not include a display which TSI wanted. Imura told TSI that the models were built that way at Regal Ware’s request. A Regal Ware representative later told Ablah that Regal Ware had never asked Imura to build the product without a display. Doc. # 55-4 at 16-19. Ablah essentially stated that he could not put a figure on how much damage Imura caused to TSI, but that "it has been a huge disaster because of [Imura's] lies.” Doc. # 55-4 at 19. As a result of lies that Imura told all of his contacts, the patents for residential products were rendered useless. Id. at 16. Ablah stated that Imura had gone to different companies and was "not telling them truthful statements from what we've got.” Ablah did not specify what the phrase "what we’ve got” meant.
Although Ablah's testimony is not always completely clear, Hartford interpreted it as potentially triggering coverage. Kirsten
Because the Court finds that Hartford owed Vita Craft a duty to defend based on the underlying complaint, it does not attempt to parse the parties’ competing and confusing interpretations of Ablah’s deposition testimony-
.Specifically, the letter stated in relevant part as follows.
[The amended complaint] does not allege "oral, written or electronic publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.” Although the TSI Complaint alleges that ... Vita Craft spread "false rumors regarding one of TSI’s licensees,” this allegation does not constitute libel, slander or disparagement of goods, products or services. Libel, slander and disparagement each require more than a mere false statement.
Doc. 54-2 at 35.
. For certain invoices beginning around May of 2011, Hartford paid defense fees based on the rates charged by Vita Craft counsel, Lathrop & Gage.
. Leitch has been practicing law since 1991, Fields since 1996 and Parks since 2004. Barker has been a paralegal since 1987.
. On May 20, 2011, Hartford voluntarily dismissed Imura from this action.
. More specifically, Hartford contends that (1) Kansas law does not recognize an "unfair competition" claim based on a theory of defa
Hartford argues that the policies cover only the "offenses” of the common law torts of defamation and disparagement, that TSI did not allege each element of a claim for defamation or disparagement, and that even if TSI did allege defamation, it was only as to a TSI licensee. The Court notes, however, that TSI claims that it suffered injury because defendants defamed its licensee.
. Hartford also argues that it had no duty to defend because Kansas does not recognize the tort of product disparagement, and that even if it did, Vita Craft has not shown that the underlying lawsuit set out a claim for disparagement.
Kansas courts have not recognized the tort of product disparagement. St. Catherine Hosp. v. Rodriguez,
. Specifically, the Court in Garrison addressed the following question:
Does the accidental discharge of a shotgun, the cause of which is unknown, occurring while a gun is being unloaded from a car during a hunting trip, arise out of or result from the ownership, use, and maintenance of an automobile so that the resulting injuries are covered by an automobile insurance policy?
Garrison,
. From the beginning, Vita Craft advised Hartford that the Wichita matter was comprised of claims that should have been brought in the TSI Lawsuit.
. Due to the scheduled trial on January 7, 2013, expedited briefing is necessary for the Court to address the parties' issues and hopefully narrow or eliminate the matters for trial.