Memorial Women's Care, PLLC v. the Hanover Casualty CompanyMemorial Women's Care, PLLC v. the Hanover Casualty Company
In this permissive appeal from the trial court’s order denying an insured’s motion for partial summary judgment and denying the insurer’s cross-motion for summary judgment, we conclude that the summary-judgment evidence proves as a matter of law that the insurer had no duty to defend the insured against a third-party lawsuit. We reverse the order to the extent the trial court denied the cross-motion, and we render judgment dismissing with prejudice each of the insured’s claims to the extent that the insured seeks relief based on an alleged breach of the
I. FACTUAL AND PROCEDURAL BACKGROUND
In October 2022 Mina K. Sinacori, M.D., M.P.H., P.A. dba Memorial Women’s Specialists (“MWS”) filed suit against appellant/cross-appellee/plaintiff Memorial Women’s Care, PLLC (“Memorial”) in the 270th District Court of Harris County, asserting claims for trademark infringement and unfair competition under Texas common law and for injury to business reputation and dilution of mark under Texas Business and Commerce Code section 16.103 (“Underlying Suit”). MWS also sought a temporary and permanent injunction against Memorial.
Appellee/cross-appellant/defendant The Hanover Casualty Company (“Hanover”) issued Memorial a commercial general liability policy for the period September 1, 2021 through September 1, 2022 (“Policy”), and an umbrella policy.1 The Policy provides that Hanover “will pay those sums [Memorial] becomes legally obligated to pay as damages because of . . . “personal and advertising injury” to which this insurance applies.” Memorial claimed that MWS’s petition in the Underlying Suit alleges facts establishing potential coverage under Offense (f) of the “personal and advertising injury” coverage of the Policy and that Hanover owed Memorial a duty to defend. Memorial gave Hanover notice of MWS’s petition in the Underlying Suit and demanded a defense and indemnity. Hanover denied coverage, concluding that MWS’s petition did not allege potentially covered “personal and advertising injury” and that coverage was barred by the Knowing Violation, Infringement of Trademark, and Unauthorized Use exclusions.
In June 2023 Memorial filed suit against Hanover in the trial court below
Memorial filed a motion for partial summary judgment (the “Motion”), seeking a judgment declaring that Hanover is obligated to defend Memorial in the Underlying Suit and pay all reasonable defense fees incurred since Memorial gave notice of the suit. Hanover filed a response to the Motion as well as a cross-motion for partial summary judgment (the “Cross-Motion”), asserting that Hanover has no duty to defend Memorial in the Underlying Suit because (1) the allegations in MWS’s petition in the Underlying Suit do not trigger coverage under the Policy; and (2) even if these allegations did trigger coverage, coverage is precluded by the Knowing Violation, Infringement of Trademark, and Unauthorized Use exclusions.
The trial court denied both the Motion and the Cross-Motion and permitted the parties to file an interlocutory appeal from its order under section 51.014(d) of the Civil Practice and Remedies Code. See
II. ISSUES AND ANALYSIS
Memorial has appealed the trial court’s order, asserting under a single issue that the trial court erred in denying its Motion because Hanover breached its contractual obligation to defend Memorial from MWC’s claims of “advertising
Hanover has asserted a cross-appeal. In its first cross-issue, Hanover asserts that MWC did not meet its burden to show potential “advertising injury” in the Underlying Suit under the Policy’s insuring agreement. In its second cross-issue, Hanover asserts that even if MWC satisfied its burden to show potential “advertising injury” under the Policy’s insuring agreement, one or more of the following exclusions in the Policy precluded coverage: the Knowing Violation exclusion, the Infringement of Trademark exclusion, and the Unauthorized Use exclusion.
In a traditional motion for summary judgment, if the movant’s motion and summary-judgment evidence facially establish its right to judgment as a matter of law, the burden shifts to the nonmovant to raise a genuine, material fact issue sufficient to defeat summary judgment. M.D. Anderson Hosp. & Tumor Inst. v. Willrich, 28 S.W.3d 22, 23 (Tex. 2000). In our de novo review of a trial court’s summary-judgment order, we consider all the evidence in the light most favorable to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not. Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006). The evidence raises a genuine issue of fact if reasonable and fair-minded jurors could differ in their conclusions in light of all of the summary-judgment evidence. Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex. 2007). When, as in this case, the order denying summary judgment does not specify the grounds upon which the trial court relied, we must affirm the summary judgment if any of the independent
Does the summary-judgment evidence prove as a matter of law that Hanover has no duty to defend Memorial in the Underlying Suit?
The duty to defend is distinct from, and broader than, the duty to indemnify. Zurich Am. Ins. Co. v. Nokia, Inc., 268 S.W.3d 487, 490 (Tex. 2008). An insurer must defend its insured if a plaintiff’s factual allegations potentially support a covered claim, while the facts actually established in the underlying suit determine whether the insurer must indemnify its insured. See id. Thus, an insurer may have a duty to defend but, in the long run, no obligation to indemnify. See id. at 490–91.
The Supreme Court of Texas held long ago that “the duty to defend depends not ‘on what the facts are or what might finally be determined to be the facts,’ but ‘only on what the facts are alleged to be.’” Pharr-San Juan-Alamo Indep. Sch. Dist. v. Texas Political Subdivisions Prop./Cas. Joint Self Ins. Fund, 642 S.W.3d 466, 471 (Tex. 2022) (quoting Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 25 (Tex. 1965)). Under the eight-corners rule, to determine whether the duty to defend exists, courts consider only the allegations made in the petition in the underlying lawsuit and the terms of the insurance policy, “‘without reference to the truth or falsity of such allegations and without reference to what the parties know or believe the true facts to be, or without reference to a legal determination thereof.’” Pharr-San Juan-Alamo Indep. Sch. Dist., 642 S.W.3d at 471 (quoting Heyden Newport Chem. Corp., 387 S.W.2d at 24). Under this “eight-corners” or “complaint-allegation” rule, the insurer has a duty to defend if the underlying petition alleges facts that fall within the scope of the insurance policy’s coverage. Pharr-San Juan-Alamo Indep. Sch. Dist., 642 S.W.3d at 472. The Supreme Court of Texas has applied this rule somewhat liberally in favor of the insured by resolving all doubts regarding the duty to defend in favor of the duty
The high court has recognized a narrow exception to the eight-corners rule that allows courts to consider evidence that the insured colluded with the plaintiff in the underlying suit to fraudulently create coverage that otherwise would not exist. Pharr-San Juan-Alamo Indep. Sch. Dist., 642 S.W.3d at 472. The Supreme Court has approved a second exception to the eight-corners rule under which courts may consider extrinsic evidence, in addition to the policy and the underlying petition,
if the underlying petition states a claim that could trigger the duty to defend, and the application of the eight-corners rule, due to a gap in the plaintiff’s pleading, is not determinative of whether coverage exists, . . . provided the evidence (1) goes solely to an issue of coverage and does not overlap with the merits of liability, (2) does not contradict facts alleged in the pleading, and (3) conclusively establishes the coverage fact to be proved.
Id. (quoting Monroe v. BITCO, 640 S.W.3d 195, 198 (Tex. 2022)). There is no evidence that either exception to the eight-corners rule applies in today’s case, and neither party asserts that an exception applies. Therefore, we apply the eight-corners rule.
The duty to defend is not affected by facts ascertained before suit or developed in the course of litigation, or by the ultimate outcome of the suit. See Nokia, Inc., 268 S.W.3d at 491. In applying the eight-corners rule, courts may not read facts into the pleadings or look outside the pleadings; but, the eight-corners rule does not require the court to ignore the inferences that logically flow from the facts alleged in the petition. See id. If a petition potentially includes a covered claim, the insurer must defend the entire suit. See id. With this legal standard in
Policy Language
Under the Policy Hanover promises to pay those sums that Memorial becomes legally obligated to pay as damages because of “personal and advertising injury” to which the insurance in the Policy applies. Hanover has the right and duty to defend against any suit seeking those damages. However, Hanover has no duty to defend the insured against any suit seeking damages for “personal and advertising injury,” to which the insurance in the Policy does not apply. As used in the Policy, “personal and advertising injury” means “injury . . . arising out of one or more of the following offenses:
d. Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services
. . .
f. the use of another’s advertising idea in your “advertisement”; or
g. Infringing upon another’s copyright, trade dress or slogan in your “advertisement.”
The Policy defines “advertisement” as follows:
“Advertisement” means a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters. For the purpose of this definition:
(a) Notices that are published include material placed on the Internet or on similar electronic means of communication; and
(b) Regarding websites, only that part of a website that is about your goods, products or services for the purposes of attracting customers or supporters is considered an advertisement.
a. Knowing Violation of Rights of Another
“Personal and advertising injury” caused by or at the direction of [Memorial] with the knowledge that the act would violate the rights of another and would inflict “personal and advertising injury.”
. . .
m. Infringement of Copyright, Patent, Trademark or Trade Secret
“Personal and advertising injury” arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. Under this exclusion, such other intellectual property rights do not include the use of another’s advertising idea in your “advertisement.”
However, this exclusion does not apply to infringement, in your “advertisement,” of copyright, trade dress or slogan.
n. Unauthorized Use of Another’s Name or Product
“Personal and advertising injury” arising out of the unauthorized use of another’s name or product in your e-mail address, domain name or metatags, or any other similar tactics to mislead another’s potential customers.
Allegations in the Underlying Suit
In the Underlying Suit, MWS alleged that it is a locally owned and operated obstetrics and gynecology (“OBGYN”) medical practice in Houston, Texas that has existed since 2002, and has used the name and mark Memorial Women‘s Specialists since 2008. MWS prides itself on providing quality medical care at its location on Gessner Road. According to MWS, because of the skill and care of its staff, MWS has established itself as a well-respected medical practice in the greater Houston community for the past fourteen years.
MWS alleged that on June 19, 2008, it filed for its “Memorial Women’s Specialists” assumed name with the State of Texas. MWS contends that it owns
MWS alleged that it has worked hard over the years and has established itself as a reputable medical practice in the greater Houston area. MWS asserted that it has deservedly earned loyal patients, nurses, and medical staff, including staff from Memorial Hermann Memorial City Hospital and Houston metroplex healthcare practices, who continuously refer individuals to MWS because of its high-quality care. MWS claimed that patients and other individuals who frequently interact with MWS, such as nurses and doctors, often truncate the business’s name to “Memorial Women’s” when speaking to or about MWS.
MWS contends that through continuous and prominent use before Memorial started to infringe, the name “Memorial Women’s” had become well-recognized by the public as indicating MWS’s OBGYN medical practice and has acquired secondary meaning. MWS also claims that the continuous use of “Memorial Women’s” had resulted in the development of significant goodwill by MWS.
In late 2021 MWS discovered the existence of a new OBGYN business in the Houston community: “Memorial Women’s Care, PLLC.” Memorial was formed on February 5, 2021, as a Texas Professional Limited Liability Company, and is owned and operated by Dr. Alexander Wainwright and Dr. Jonathan Faro. MWS alleges that despite Memorial’s use of MWS’s “Memorial Women’s” mark in the name of its newly formed entity, the registration of a name does not authorize the use of such name in violation of another’s rights under (i) the Trademark Act of 1946, (ii) Chapter 16 or 71 of the Texas Business & Commerce
MWS contends that Memorial’s practice is located on the same street and the same medical campus as MWS’s. According to MWS, the two businesses are approximately a five-minute walk away from each other, and they each provide OBGYN care to patients in the same rooms at the same hospital. MWS claims that Memorial provides the same medical services as MWS and is a direct competitor to MWS in the OBGYN medical practice business. MWS asserts that because Memorial is located on the same medical campus and works in the same facilities as MWS, it is logical to assume that Memorial is targeting the same clientele and hospital that MWS has worked tirelessly to develop strong relationships with over the past fourteen years. Memorial also advertises its location in the Memorial Hermann Memorial City medical center on its website. MWS attached screenshots of Memorial’s website to MWS’s petition.
MWS claims that Memorial had access to and was familiar with MWS’s name. MWS alleges that Memorial and MWS undoubtedly receive patients and referrals from the Memorial Hermann Memorial City medical center, patients, and surrounding referring providers. According to MWS, Memorial, like MWS, heavily promotes its business through website advertising, and Memorial uses a very similar website layout as MWS. MWS contends that Memorial’s marketing and usage of the term “Memorial Women’s” will cause substantial injury to MWS.
MWS alleges that because Memorial’s infringing business name is confusingly similar to MWS’s business name, and because the two parties are located in the same medical center and offer the same medical services with similar websites, patients and medical providers are not likely to be able to
MWS claims that this inability to distinguish between Memorial and MWS is particularly troublesome in the medical field because shipments of important supplies or patient documents may be sent to the wrong medical practice, and patients may accidentally go to or be referred to the wrong practice during a life-threatening situation.
MWS contends that in December 2021, it sent a cease and desist letter to Memorial demanding that Memorial stop using and infringing on MWS’s mark. Rather than comply with MWS’s cease and desist demand, Memorial rushed to file a trademark application utilizing MWS’s Name and Mark. MWS alleges that Memorial, acting in bad faith, filed a federal trademark application covering “medical services” with first use dates of September 30, 2021 for the mark (the “Infringing Application”). When MWS filed suit against Memorial this application had not yet been examined by the United States Patent and Trademark Office. MWS asserts that despite its demand, Memorial has failed and refused to cease use of the infringing name.
In its petition MWS asserted a claim for trademark infringement under Texas common law. MWS alleges that it is the owner of common law rights in Texas for the Name and Mark by virtue of its good faith and extensive promotion of its business. According to MWS, its common law rights in the Name and Mark in Texas are senior to any rights Memorial has in the trademark in Texas, because MWS has existed for over a decade longer than Memorial.
MWS claims that Memorial’s unauthorized use of the Name and Mark is
MWS alleges that Memorial willfully and intentionally appropriated the Name and Mark with the intent of causing confusion, mistake, and deception as to the source of its services, improperly trading upon MWS’s enviable reputation and goodwill and impairing MWS’s valuable rights in and to the Name and Mark.
MWS alleged a claim for unfair competition under Texas common law, and Memorial argues that the allegation of this claim triggered Hanover’s duty to defend Memorial. MWS contends that Memorial’s aforementioned unauthorized activities damage MWS’s business by palming off Memorial’s goods and services as those of MWS. MWS alleges that Memorial’s activities injure MWS’s business and reputation by using a confusingly similar mark that causes the public to believe that Memorial’s goods and services are those of MWS, in violation of the Texas common law of unfair competition. MWS asserts that “[Memorial’s] actions were done willfully with: (i) full knowledge of [MWS’s] enviable reputation and goodwill; and (ii) the express intent to trade on the value and goodwill in [MWS’s] Name and Mark to cause confusion, palm their goods and services off as those of [MWS], and mislead and deceive the public.” According to MWS, by reason of Memorial’s acts, MWS has suffered and will continue to suffer damage and injury to its business, reputation, and goodwill, and will sustain serious loss of revenue and profits.
MWS also alleged a claim for injury to business reputation or mark under section 16.103 of the Texas Business and Commerce Code. MWS asserts that it is
A Claim that Allegedly Falls within the Policy’s Insuring Agreements
Hanover argues under its first issue that the factual allegations in MWS’s petition do not potentially support a covered claim under the Policy. Memorial argues that these factual allegations potentially support a claim by MWS for damages because of “personal and advertising injury,” specifically a claim by MWS for damages because of “injury . . . arising out of . . . [t]he use of another’s advertising idea in your ‘advertisement’” (“Advertising Idea Claim”). MWS never states in its petition that it suffered an injury arising out of Memorial’s use of MWS’s advertising idea in Memorial’s advertisement. Nonetheless, Memorial argues that MWS’s factual allegations potentially support an Advertising Idea Claim in which the advertising idea is MWS’s website layout. According to Memorial, MWS’s allegation that Memorial used a “very similar website layout as [MWS]” as a means by which Memorial “heavily promotes its business” potentially supports an Advertising Idea Claim. We presume, without deciding, that this is so, and that these allegations potentially support an Advertising Idea Claim that falls within the Policy’s insuring agreements.
If an insurer relies on an exclusion in an insurance policy, the insurer bears the burden of showing that the exclusion applies. See Shipside Crating Co. v. Trinity Universal Ins. Co., No. 14-06-00229-CV, 2006 WL 3360499, at *2 (Tex. App.—Houston [14th Dist.] Nov. 21, 2006, pet. denied) (mem. op.). If we conclude that the language of an exclusion is ambiguous, then we must resolve the uncertainty by adopting the construction that most favors the insured, and we must do so even if the insurer’s construction appears to be more reasonable or a more accurate reflection of the parties’ intent. See Mankoff, 733 S.W.3d at 4. If the language of an exclusion is unambiguous, then we give effect to the unambiguous text. See id. at 4–9.
We now address whether Hanover has satisfied its burden of establishing that an exclusion applies that negates any duty to defend. See Shipside Crating Co., 2006 WL 3360499, at *2.
The Knowing Violation Exclusion
The Policy does not apply to personal and advertising injury caused by or at the direction of Memorial with the knowledge that the act would violate the rights of another and would inflict personal and advertising injury (“Knowing Violation Exclusion”). See Great Am. Ins. Co. v. Beyond Gravity Media, Inc., 560 F.Supp.3d 1024, 1035 (S.D. Tex. 2021) (applying Texas law). We conclude that the language of the Knowing Violation Exclusion is unambiguous. See Mankoff, 733 S.W.3d at 4–9.
Hanover argues that the following allegations in MWS’s petition implicate this exclusion because they allege that Memorial knowingly violated MWS’s rights:
- Memorial filed the Infringing Application in bad faith.
- Memorial intentionally appropriated the Name and Mark with the intent of causing confusion, mistake, and deception as to the source of its services. By this infringing conduct, Memorial is improperly trading upon MWS’s enviable reputation and goodwill and impairing MWS’s valuable rights in and to the Name and Mark.
- Memorial’s infringing conduct constitutes willful and intentional acts of infringement of the Name and Mark.2
- Memorial’s actions were done willfully with: (i) full knowledge of MWS’s enviable reputation and goodwill; and (ii) the express intent to trade on the value and goodwill in MWS’s Name and Mark to cause confusion, palm their goods and services off as those of MWS, and mislead and deceive the public.3
- Memorial’s wrongful acts were done with knowledge of MWS’s mark and were committed in bad faith.4
MWS does not allege in the alternative that Memorial committed the alleged
Memorial asserts that though Hanover relies on the Beyond Gravity case, the Armadillo Distributing case is better-reasoned and should be followed in today’s case. We conclude that the Armadillo Distributing case is not on point because in that case, the facts alleged in the underlying lawsuit did not show that the insured had actual knowledge of all of the trademarks at issue. See Allied Prop. & Cas. Ins. Co. v. Armadillo Distrib. Enterps., Inc., No. 4:21-CV-00617-ALM, 2022 WL 3568482, at *9–10 (E.D. Tex. Aug. 18, 2022) (applying Texas law). Likewise, the Sentinel case, also relied upon by Memorial, is not on point because in that case the pleading in the underlying suit did not allege that the insured committed intentional copyright infringement. See Sentinel Ins. Co. v. Choice! Energy Servs. Retail LP, 640 F.Supp.3d 734, 743 (S.D. Tex. 2022) (applying Texas law).
Memorial also relies on Atlantic Mut. Ins. Co. v. J. Lamb, Inc., 100 Cal. App. 4th 1017, 1023–45, 123 Cal. Rptr.2d 256, 261–77 (2002). J. Lamb is not on point because (1) it applies California law; (2) the insurer in that case did not assert that any “knowing violation” exclusion applied; and (3) the court does not mention that the policies at issue had a “knowing violation” exclusion. See id.
Memorial asserts that this court must strictly construe the Knowing Violation Exclusion against Hanover, but exclusions are only strictly construed if
Memorial also relies on the Lipscomb case, but that case is not on point because the pleading in the underlying case there expressly alleged a negligence claim with supporting factual allegations. See Lipscomb Ins. Group v. Hartford Lloyds Ins. Co., No. 3:09-CV-2047-O, 2010 WL 11475236 at *7–8 (N.D. Tex. Nov. 29, 2010) (applying Texas law).
We conclude that the facts alleged by MWS fall within the Knowing Violation Exclusion and do not establish potential coverage under the Policy.5 See Beyond Gravity Media, Inc., 560 F.Supp.3d at 1034–36; Chartis Specialty Ins. Co., 2015 WL 4378366, at *3; Burlington Ins. Co., 783 F.Supp.2d at 963–65. The summary-judgment evidence establishes as a matter of law that Hanover did not have a duty to defend in the Underlying Suit. See Beyond Gravity Media, Inc., 560 F.Supp.3d at 1034–36; Chartis Specialty Ins. Co., 2015 WL 4378366, at *3; Burlington Ins. Co., 783 F.Supp.2d at 963–65.
III. CONCLUSION
In the Cross-Motion Hanover did not state a summary-judgment ground challenging the duty to indemnify, and the summary-judgment evidence does not address the “facts actually established in the underlying suit” which control the duty to indemnify. See Pharr-San Juan-Alamo Indep. Sch. Dist., 642 S.W.3d at 471. Instead Hanover sought summary judgment as to the duty to defend. In its petition, Memorial seeks a judgment declaring that MWS’s petition alleges facts establishing potential coverage for the Advertising Idea Claim, that no exclusion bars Hanover’s duty to defend, and that Hanover has a duty to defend and indemnify Memorial. Memorial’s three other claims are based in part on an alleged breach by Hanover of its duty to defend. The summary-judgment evidence establishes as a matter of law that Hanover did not have a duty to defend in the Underlying Suit; therefore, the trial court did not err in denying Memorial’s summary-judgment motion but did err in denying the Cross-Motion. We overrule Memorial’s sole issue, sustain Hanover’s second cross-issue to the extent it seeks relief based on the absence of a duty to defend, and overrule the remainder of the second cross-issue.6
In the prayer of its appellate brief, Hanover requests that this court grant declaratory relief in its favor. Hanover did not assert a claim in the trial court seeking declaratory relief, and we conclude that Hanover may not obtain declaratory relief based on the Cross-Motion. Headington Royalty, Inc. v. Finley Res., Inc., 623 S.W.3d 480, 498–99 (Tex. App.—Dallas 2021), aff’d on other grounds, 672 S.W.3d 332 (Tex. 2023); Hot-Hed, Inc. v. Safehouse Habitats (Scotland), Ltd., 333 S.W.3d 719, 732–33 (Tex. App.—Houston [1st Dist.] 2010, pet. denied). We affirm the trial court’s order to the extent the trial court denied the Motion. We reverse the order to the extent the trial court denied the Cross-Motion, and we render judgment dismissing with prejudice each of Memorial’s claims to the extent that Memorial seeks relief or recovery based on an alleged breach of the duty to defend by Hanover. We do not dismiss any of Memorial’s claims to the extent that they are based on an alleged breach of the duty to indemnify or
/s/ Randy Wilson
Justice
Panel consists of Justices Wilson, Hart, and McLaughlin.