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

or should have been delayed, but that notice should have been given as soon as EZB raised the possibility of trade dress infringement-which, on this record, was back in 1996! [six years prior to the actual notice provided on April 25, 2002 when the trade dress infringement claims were defined with greater precision, leading to notice 94 days later, on July 29, 2002.]” Id. at *7.

The 94-day delay in and of itself was unreasonable and would preclude all coverage benefits under applicable New York law.

Once knowledge suggests the possibility of a covered claim, New York law provides that notice be given promptly; even periods of delay as short as two months have been found to be unreasonable as a matter of law. . . . Technaoro Inc. v. U.S. Fidelity & Guar. Co., 2006 WL 3230299, at *7 (S.D.N.Y. Nov.7, 2006) (five month delay unreasonable in advertising injury case).

Id. at *6.

The authorities cited by the court, except for Technaoro, look to cases dealing with notification of a loss, a tangible, known event, typically arising in the context of first-party coverage, or an adjudication of liability. The rationale for these cases is of no moment in an advertising injury context.

The fuzziness of the advertising injury elements of the trade dress claim unavailing to permit delay in notice because ultimately the 94-day delay itself, from the time it was evident that an amendment was contemplated, was, in the court’s view, too long.

The court presumes that the mere assertion of a trade dress claim would be sufficient to trigger advertising injury coverage without any evidence the trade dress at issue would involve advertising conduct. The court seems to intimate that all trade dress claims would involve advertising without expressly so stating. The court also ignores the fact that the clarification as to the ability of the claimant to assert a trade dress claim that was advertising-based did not occur until July 5, 2002 and nearly three weeks later, on July 23, 2002, the claimant reversed its position. It was only six days after the July 23 reversal that notice was given when it was evident that there was to be an asserted claim of advertising-based trade dress after all.

The court thus makes short shrift of the argument that the claimant’s evident abandonment of its advertising-based trade dress claim to the last minute was of any benefit to the insured in establishing potential coverage.

The court recited the pertinent elements:

Defendant's first allegation of “actual notice” involves a conversation in late 2001 or early 2002 between Richard Dickson, who at the time was an agent of Zeiter-Dickson, and James Liggett, who was serving as defendant's president. Liggett states that he told Dickson that defendant was involved in a defamation suit and that the current D & O carrier would not cover the suit. He then asked Dickson whether defendant would have coverage under the Zeiter-Dickson policy. Dickson allegedly responded probably not. The second allegation of “actual notice” involves a conversation in late 2002 between Liggett and Joel Ottosen, another agent of Zeiter-Dickson. Liggett stated that this conversation was very similar to the one he had with Dickson in that he inquired as to whether the policy would provide coverage. Ottosen denies that this conversation ever occurred. The third and fourth allegations of “actual notice” involve two conference calls in 2001 and 2002 between Liggett, Ottosen and Daniel Kramer, who at the time was serving as defendant's in-house counsel. During the alleged calls Liggett again inquired as to whether defendant would have any coverage under the policy. No notes or confirming correspondence exist memorializing these conversations. Ottosen also denies that either of these conversations ever took place. The fifth and sixth instances of claimed “actual notice” occurred during defendant's Board of Directors meetings on September 16, 2002, and November 18, 2002. Dickson was present at both of these meetings. According to the minutes of the meetings, Liggett disclosed to the board that defendant had been sued for defamatory comments made by Wiegmann. He also disclosed the parties to the litigation and that there were some additional legal expenses involved with the lawsuit.

Id. at *2.

Written notice, 27 months after the suit was filed, before the matter was scheduled for trial, does not comply with the policy’s notice provision.

In Country Mutual Insurance Co. v. Livorsi Marine, Inc., 222 Ill. 2d 303, 856 N.E.2d 338 (2006), it was determined that the insurer did not receive reasonable notice of an occurrence or lawsuit, and the insured could not recover, regardless of whether the lack of reasonable notice prejudiced the insurer. County Mutual, 222 Ill. 2d at 311-12, 856 N.E.2d at 342-43. Since written notice was required as soon as practicable, oral notice was of no moment.

The court found that actual notice did not trump the policy’s technical language.

The court characterized the meaning of Cincinnati v. Western American Ins. Co., 183 Ill. 2d 317, 701 N.E.2d 499 (1998) re its discussion of actual notice. It stated:

While Cincinnati does in fact stand for the proposition that the duty to defend arises when the insurer has “actual notice” of a suit pending against its insured, it appears clear that an insurer can be absolved of this duty by obtaining a declaratory judgment that it has no obligation to defend or indemnify under the actual terms of the policy.

Id. at *7.

Because the suit was initiated by the insured against the insurer for coverage, it was the actual language of the notice provision of the policy, not actual notice as discussed in Cincinnati, that was germane.

No sanctions under section 155 were appropriate as the actual notice provision was not satisfied.
 

"[N]o reasonable jury could find that Great Northern was not prejudiced by Guaranty Bank's inexplicable failure to give prompt notice [until over 90% of the defense fees were incurred and the preliminary injunction motion had been lost]. RTE Corp. v. Maryland Casualty Co., 74 Wis.2d 614, 247 N.W.2d 171, 178-79 (Wis.1976), and cases cited there; Sanderfoot v. Sherry Motors, Inc., 33 Wis.2d 301, 147 N.W.2d 255, 259 (Wis.1967)."

Id. at *2.

The court also noted that the leniency towards insureds demonstrated by the Wisconsin legislature and Supreme Court were to individuals, not substantial commercial enterprises. The court noted, however, that the contra proferentum rule has been exercised for the benefit of large corporations as well as individuals as the Supreme Court of Wisconsin had not spoken on topic.

Guaranty Bank argued in effect that there was no harm, no foul, because the insurer would have denied on grounds other than late notice. The court elected to analyze whether a duty of defense arose to determine if that would conclusively bar policy benefits even if notice was found appropriate. The court found no arguable coverage evidence on the face of the complaint.

The court noted:

"There is an express exclusion for advertising injury to 'any intellectual property law or right' 'other than one described in the definition of advertising injury' – that is, other than (so far as relates to this case) a registered trademark. So unless Midwest Guaranty Bank was suing for infringement of a registered trademark, any damages it obtained would not be covered by Great Northern's policy."

Id. at *4.

The court found it was clear that the suit was for infringement of an unregistered trademark. The court found it significant that the suit was for a common law claim of trademark infringement and unfair competition under Michigan common law. The court noted:

"There is no such animal as a registered common law trademark. Dana Shilling, Essentials of Trademark and Unfair Competition 4 (2002); Richard Raysman et al., Intellectual Property Licensing: Forms and Analysis § 4.02[4], p. 4-10 (1999). If it is registered, it is registered pursuant to a statute, either the Lanham Act or a state statute. Michigan has a trademark registration statute, Mich. Comp. Laws §§ 422.34, 429.33, .35, .42, and it is not preempted by the Lanham Act because it does not limit federal rights. Attrezzi, LLC v. Maytag Corp., 436 F.3d 32, 41-42 (1st Cir.2006); 3 McCarthy on Trademarks and Unfair Competition § 22:2, p. 22-3 (4th ed.2004). But Guaranty Bank did not sue under the statute, and so far as appears never registered its mark under any law."

Id. at *5.

The court also noted there was no trademark number referenced on the Civil Cover Sheet, which is a contemporaneous publicly filed document even though it is not part of the complaint. Id. at *5.