Gauntlett on Intellectual Property/Antritrust Insurance : Insurance Policyholder Advocate & Attorney David Gauntlett : Gauntlett Law Firm : Insurance Recovery, Policy Interpretation : Irvine, Orange County, California

Finding that it did not represent a material change in governing law, the court's prior finding was unaffected. A de-publication request is pending as to Total Call. It had concluded implicit disparagement based on allegations that E.piphany (Infor's predecessor) “falsely stated that it was the ‘only’ producer of ‘all Java’ and ‘fully J2EE’ software solutions, which was an ‘important differentiator’ between competing products, even though some competitors offered products with these exact features.” In Total Call, the policyholder did not provide the service it promised in its advertisements, which by itself “carrie[d] no implication” that the one company's phone cards cost more or less than another’s.

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Addressing an issue on certification from the Eleventh Circuit that deals with a standard form ISO 2001 policy covering the offense of “oral or written publication of material that violates a person's right of privacy,” the court affirmed that a defense arose for TCPA “blast fax claims.”

The Supreme Court of Florida determined that plain meaning alone was sufficient to rule in the insured’s favor, in effect rejecting the Seventh Circuit’s contrary views as to the meaning of this policy language not even sufficient colorable to suggest a need for ambiguity, i.e,. that construction was not reasonable. See Am. States Ins. Co. v. Capital Assocs. of Jackson County, Inc., 392 F.3d 939, 941 (7th Cir. 2004).

A plethora of decisions that had questioned the narrow analytic focus of Capital Associates, which presumed that only a secrecy, not seclusion right, could be implicated by the recipient’s objection to the receipt of unsolicited facsimile communications which violated statutory provisions of the Telephone Consumer Protection Act (“TCPA”) 47 U.S.C.A. § 227 (2001).

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Magistrate Judge Lauck found no duty to defend various trademark infringement claims under Travelers’ Web Xtend Endorsement.

Applying conservative Virginia law, which the court conceded did not have a plethora of authority on point, the court misstated the causal nexus requirement by misconstruing applicable authority on these points.

“Infringement of copyright, title or slogan, provided that claim is made or ‘suit’ is brought by a person or organization claiming ownership of such copyright, title or slogan.”

Id. at *2.

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Finding that Judge Coar’s decision that a blast fax sent without permission of the insured did not constitute property damage because “ ‘[l]oss of paper and toner is a normal, expected outcome that falls under the policy's exclusion for “expected or intended injury.” ’ . . . New Century Mortgage Corp. v. Great N. Ins. Co., No. 05-C-2370, 2006 WL 2088198, at * 4 (N.D. Ill. 2006).”

The court focused on the “advertising injury” coverage issue. Although Judge Coar reached a negative ruling on that matter, that pre-dated the Illinois Supreme

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At issue was an alleged violation of noncompete and confidentiality provisions of a prior employee, Yuriy Osyka, and his former employer ICS. A two-year noncompetition agreement and prohibition against disclosure of ICS’s proprietary information or trade secrets was incorporated.

In 2005 it was contended that Osyka deleted important business documents from ICS’s computers and took that information with him prior to leaving the company in October 2005. This precipitated lawsuits filed in 2007 when Osyka went to work for Indel, a newly formed company that also repairs electronics.

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Answering a certified question from a federal district court, the Supreme Court of South Carolina found that a trademark infringement lawsuit could implicate potential coverage under the offense of “misappropriation of advertising ideas” or “style of doing business” as well as “infringement of copyright, title or slogan,” “use of another’s advertising idea in your ‘advertisement’” and “infringing upon another’s copyright, trade dress or slogan in your ‘advertisement.’ ”

Notably, the court found that alleged trademark infringement was only in the first certified question, but not the remaining three.

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In another blast fax case under the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, the Seventh Circuit found no duty to defend. Reversing the trial court, the decision by a panel including Justices Easterbrook as chief judge, Cudahy and Sykes, and authored by Sykes, reached a conclusion inconsistent with a number of cases including that by the Supreme Court of Illinois in Valley Forge Ins. Co. v. Swiderski Elec., Inc., 223 Ill. 2d 352 (Ill. 2006).

The act of wrongful conduct included sending an unsolicited fax advertisement to a dental office from one Websolv Computing, Inc., the insured seeking a defense obligation from its carrier.

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The court reversed the finding in favor of St. Paul Mercury. The court agreed that there was a personal injury offense implicated because “AOL had made known to any person or organization material that violated a person’s right of privacy.” It reasoned:

Although the underlying claims against AOL were not traditional breach of privacy claims, given that coverage provisions are broadly construed, . . . the underlying complaints sufficiently alleged that AOL had intercepted and internally disseminated private online communications. While some cases have stated that coverage is triggered by a disclosure to a third party, they do so in dicta while deciding whether the personal injury clause covers invasion of “seclusion privacy” claims. See, e.g., ACS Sys., Inc. v. St. Paul Fire & Marine Ins. Co., 53 Cal.Rptr.3d 786, 795-96 (Cal.Ct.App.2007).

Id. at *1.

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The trial court’s finding of no coverage found an exclusion barred potential coverage for claims under Massachusetts state law for unfair competition, tortious interference with business relations, and unfair competition under federal law asserted by StorageTek vis-à-vis disputes over the rights to service and maintain StorageTek equipment.

Custom Hardware sent false and misleading marketing materials to customers and potential customers which misrepresented intentionally that Custom Hardware had a license to use StorageTek's copyright protected maintenance code in order to service StorageTek equipment.

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The court denoted that the issue of address was a small part of a large and contentious litigation spanning over a number of years and that all claims asserted in the case, except those at bar, had been settled.

The underlying suit was won against the City of Jacksonville, brought as a class action alleging excessive exposure to elevated levels of toxic heavy metal such as lead, mercury, arsenic, dioxin and furnas, carcinogenic polycyclic aromatic hydrocarbons (PAHs), hazardous polychlorinated biphenyls (PCBs), and other toxic contaminants. Id. at *1.

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Affirming the district court’s denial of coverage, the Fifth Circuit, analyzing a 1998 ISO policy, found that a suit by the AARP against Mailers alleging a fraudulent scheme to sell financial services to older America’s that falsely claimed endorsement by the AARP did not fall within the policy’s potential coverage. The key to the decision was a regressive application of the eight-corners rule under Texas law. GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W. 3d 305, 307 (Tex. 2006). The insured urged that the false advertising claims alleging misrepresentation should be characterized as trade dress claims specifically falling within the offense “infringing upon another’s . . . trade dress. . . injury in ‘your advertisement.’”

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The court observed:

Plaintiff's primary advertising campaign is entitled “the truth®.” Plaintiff claims that a “key component” of its mission is to “build a world where young people reject tobacco and anyone can quit.” . . . Plaintiff describes “the truth®” campaign's broadcast spots as “blunt, hard-edged, fast-paced, and sometimes humorous, designed to capture and hold the attention of the target teen audience.” (Id.)

Id. at *2.

At issue is the “Dog Walker” ad launched by plaintiff in a radio ad where an actor

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At issue were False Claims Act assertions against a healthcare insurance program by a former nurse. The court affirmed the district court’s finding of no defense. At issue was the alleged exposition of thousands of false charges Momence submitted to Medicare and Medicaid, which allegedly “failed to meet ‘professionally recognized standards of healthcare.’ 42 U.S.C. § 1320c-5(a)(2).”

The court denied any potential coverage under the CGL policy’s “property damage” and “bodily injury” provisions. Momence asserted that any damages that might result from counts one and two are “because of” the “bodily injury” suffered by

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No reasonable excuse for giving late notice was offered by the insured and that it was technically late under New York law. The excuse that advertising injury was an amorphous concept in the court’s view did not excuse delaying notice because “if ‘advertising injury’ is difficult to define, it argues for giving notice at the first moment when a claim that might qualify is asserted.

The fact that a trade dress infringement claim might qualify as ‘advertising injury’ (which is the fair import of New York law on the subject) suggests, not that notice could

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Following remand for discovery respecting publications that might have precluded coverage under the first publication exclusion, the malicious prosecution coverage otherwise implicated by the fact assertions triggered a defense.

In New Jersey malicious prosecution is described as malicious use of process in a civil context. Only the third action filed in this series of underlying cases is alleged to

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In this coverage case, analyzing the TCPA case, the court aligned itself with the majority views expressed by a number of courts including the Illinois Supreme Court in Valley Forge Ins. Co. v. Swiderski Elec., Inc., 223 Ill. 2d 352, 366 (2006) which criticized Am. States Ins. Co. v. Captain Assoc. of Jackson City, Inc., 392 F.3d 939, 941 (7th Cir. (Ill.) 2005) was not in accord with applicable Illinois law. The case reached a contrary result under St. Paul’s distinct policy language were distinguished on the grounds that different language required different results. It reasoned, “[a]s the Eleventh Circuit recognized in Hooters of Augusta, Inc. v. Amer. Global Ins. Co. (C.A.11 2005), 157 Fed. Appx. 201, this tighter wording of the policies” “ ‘making known’ to any person or organization written or spoken material that violated a person's right of privacy.”

The significant fact in the court’s decision as “ ‘oral or written publication’ does not suggest the same focus on secrecy that ‘making known’ does. Id. at 208.” Id. at *3.

Although there was no suggestion that faxes contained any objectionable content, the court found the point of no moment because one of the stated purposes of

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Century Surety Co. v. Robin Singh Educational Services, Inc., Case No. CV-06-8066-CAS (Ex) (Central Dist. (Cal. Western Div.) April 14, 2008)

Judge Snyder found rescission appropriate as against Testmasters for alleged failure to properly answer a policy application question requiring disclosure of claims within the proceeding five years. Nevertheless, even though conceding that such a policy was eviscerated ab initio. The court challenged whether the insurer, Century Surety, was capable of receiving reimbursement for monies expended through appointed counsel, where an issue was raised at to whether the insured was entitled to independent counsel as it had sought. If so there may not be any value created by appointed counsel’s legal services, even assuming the services were otherwise reasonable and the amounts charged appropriate.

Finding a fact issue posed, the court sent this issue to trial. The court observed that LA Sound USA, Inc. v. St. Paul Fire & Marine Ins. Co., 156 Cal. App. 4th 1259, 1266 (2007) provided that:

The consequence of rescission is not only the termination of further liability, but also the restoration of the parties to their former positions by requiring each to return whatever consideration has been received. . . The policy would be ‘extinguished’ ab initio, as though it had never existed.” Id. at 184. “A policy void ab initio . . . cannot be breached.” Continue Reading...

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Hartford Underwriters Ins. Co. v. Foundation Health Services, Inc., ___ F.3d ___, 2008 WL 946080 (5th Cir. (Miss.) 2008)

Affirming the district court decision, the court determined that Mississippi law permits appointment of “independent counsel” which, under Mississippi law, includes the requirement that the insurer reimburse an insured for the cost of independently retained counsel. Where the underlying suit was pending in Mississippi, its law applied under Mississippi choice-of-law rules even though insurance policy negotiations and contracting likely occurred in Louisiana.

In its analysis of the restatement §8-188, the place of Hartford’s relevant performance, Mississippi, was significant. The court found the close relationship between Hartford’s performance and Mississippi’s substantial interest in avoiding conflict of interest in its state’s court was implicated by the appointment of independent counsel.

We emphasize that we are only determining the law applicable to this narrow issue, and other disputes arising out of these insurance policies may be governed by the law of another state. See Boardman, 470 So.2d at 1031 (“We apply the center of gravity test to each question presented, recognizing that the answer produced in some instances may be that the law of this state applies and on other questions in the same case the substantive law of another state may be enforceable.”).Id. *9.

The court was able to make short shrift of the argument that independent counsel was not appropriate under Mississippi law because Continue Reading...

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Two distinct decisions, one applying North Carolina the other Illinois law, both found false advertising claims fell within standard advertising injury coverage where initiated by competitors.

Granutec, Inc. v. St. Paul Fire & Marine Ins. Co., No. 5:96-CV-489-BO(2), 2008 WL 312146 (E.D.N.C. Jan. 16, 2008)

Granutec, Inc. (“Granutec”) is a North Carolina corporation that manufactures and sells generic, over-the-counter (“OTC”), pharmaceutical products. Following an initial agreement with Johnson & Johnson in 1989 to employ a color scheme for generic caplets different from that of the Tylenol Gelcaps, in February 1994 Granutec changed the color scheme to mimic the Tylenol Gelcaps. This conduct precipitated a suit against it for Lanham Act claims under 15 U.S.C. § 1125(a) and 43(a)(2) for false and deceptive advertising, as well as trademark trade/trade dress infringement.

Following issuance of a preliminary injunction against Granutec on December 21, 1995, Granutec agreed to market its OTC product in a color scheme that was conspicuously different from that used by McNeil, a Johnson & Johnson subsidiary, after incurring $500,000.00 in defense fees. Two policy forms were in effect from June 30, 1994 to July 31, 1994, a 1986 ISO form covering as “advertising injury” “misappropriation of advertising ideas or style of doing business”, and from August 1, 1994 to August 1, 1995, a St. Paul variant of an ISO 2001 policy form covering as “advertising injury” “unauthorized taking or use of any advertising material, slogan or title of others” the later policy included intellectual property exclusion.

Focusing on the express unfair competition claim pursuant to NCGS § 75-1.1 et seq., which prohibits “[u]nfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce,” the court found a defense owed. It noted under the earlier 1986 ISO policy issued by Aetna:

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Although the general rule is that facts, not labels of causes of action, trigger a defense under offense-based policies, as well as those looking to wrongful acts such as Directors & Officers policies, mere reference to terms that might otherwise trigger a defense, such as disparagement or misrepresentation, were deemed insufficient in and of themselves to show that the conduct fell within potential coverage.

Greektown Casino, LLC v. Zurich Am. Ins. Co., No. 07-CV-13583, 2008 WL 597814 (E.D. Mich. Feb. 29, 2008)

At issue were claims for tortious interference with contract and business relations causing Greektown to breach its agreement with plaintiffs. The court observed:
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Two cases looked at the 1986 ISO policy provision offering “advertising injury” coverage for misappropriation of “advertising ideas or style of doing business”, the later, the 1998 ISO CGL “advertising injury” provision for “use of another’s advertising idea in your advertisement.” Each found a defense in a series of distinct scenarios.

General Cas Co. of Wisconsin v. Wozniak Travel, Inc. No. 07-3515 RHK/AJB, 2008 WL 440747 (D. Minn. Feb. 14, 2008)

The court determined there was a split of authority between an unpublished court of appeal decision – Williamson v. N. Star Cos., No. C3-96-1139, 1997 WL 53029 (Minn. Ct. App. Feb. 11, 1997), review denied (Apr. 15, 1997), and the Eighth Circuit Court of Appeal applying Minnesota law in Callas Enters., Inc. v. Travelers Indem. Co. of Am., 193 F.3d 952 (8th Cir. (Minn.) 1999). The court certified to the Minnesota Supreme Court the issues of: Continue Reading...

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BASF AG v. Great Am. Assur. Co., ___ F.3d___, 2008 WL 1701864 (7th Cir. (Ill.) 2008)

This case might better be described as a tale of two courts. Since the inconsistency between the analytic approach of the Seventh Circuit applying Illinois law to that of the Supreme Court of Illinois has been deepened by this new decision.

The court reversed the district court and questioned the Illinois District Court decision on which the district court had relied, Knoll Pharm. Co. v. Automobile Ins. Co., 210 F. Supp. 2d 1017, 1025-28 (N.D. Ill. 2002). That earlier case had resolved following appellate argument on appeal. The judge who was to have authored the opinion for that panel, Judge Kanne, authored the opinion on the BASF Seventh Circuit decision.

Applying Illinois law, the court found that the phrase “arising out of” did not expand the potential plaintiff to a class who could raise potential coverage claims under otherwise uncovered antitrust allegations so long as disparagement formed a basis for the potential coverage. The court rejected the argument that the consumer plaintiff class implicitly advanced a disparagement claim by pleading that Boots violated the Illinois Consumer Fraud and Deceptive Business Practices Act (CFA), 815 ILCS 505/1 et seq.

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