State Auto Property and Cas. v. Trav. Indem. Co.

• Decision Date: 04 September 2003
• Docket Number: No. 02-2069.,02-2069.
• Citation: 343 F.3d 249
• Parties: STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY, Plaintiff-Appellant, v. TRAVELERS INDEMNITY COMPANY OF AMERICA; Farmington Casualty Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

343 F.3d 249

STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY, Plaintiff-Appellant, v. TRAVELERS INDEMNITY COMPANY OF AMERICA; Farmington Casualty Company, Defendants-Appellees.

No. 02-2069.

United States Court of Appeals, Fourth Circuit.

Argued: May 8, 2003.

Decided: September 4, 2003.

COPYRIGHT MATERIAL OMITTED

ARGUED: Patricia Pursell Kerner, Bailey & Dixon, L.L.P., Raleigh, North Carolina, for Appellant. Laura Anne Brady, Drinker, Biddle & Reath, L.L.P., Florham Park, New Jersey, for Appellees. ON BRIEF: Gavin B. Parsons, Bailey & Dixon, L.L.P., Raleigh, North Carolina, for Appellant. William T. Corbett, Jr., Mark D. Sheridan, Drinker, Biddle & Reath, L.L.P., Florham Park, New Jersey; Mark A. Davis, Douglas W. Hanna, Womble, Carlyle, Sandridge & Rice, Raleigh, North Carolina, for Appellees.

Before WILKINSON, NIEMEYER, and KING, Circuit Judges.

Vacated and remanded by published opinion. Judge KING wrote the opinion, in which Judge WILKINSON and Judge NIEMEYER joined.

OPINION

KING, Circuit Judge:

This appeal arises out of an insurance coverage dispute. In 2001, State Auto Property and Casualty Insurance Company ("State Auto") sued Travelers Indemnity Company of America and Farmington Casualty Company (collectively, "Travelers"),¹ seeking a declaration that Travelers was obligated to participate in the defense of Nissan Computer Corporation ("NCC") in a California civil action. On cross motions for summary judgment, the district court concluded that Travelers was not obligated to defend NCC. The court awarded summary judgment to Travelers, and State Auto appeals. State Auto Prop. & Cas. Ins. Co. v. Travelers Indem. Co. of Am., CA-01-73-F, Order (E.D.N.C. Aug. 15, 2002) (the "Order"). For the reasons explained below, we vacate and remand.

I.

A.

NCC, a North Carolina corporation owned by Mr. Uzi Nissan, is engaged in the business of computer sales and services. On December 9, 1999, Nissan Motor Company, Ltd., and Nissan North America, Inc. (collectively, "Nissan"),² filed suit against NCC in the Central District of California. In its complaint (the "Nissan Complaint"), Nissan alleges several causes of action, each asserting NCC's wrongful utilization of the NISSAN trademark.³

Nissan contends that NCC, knowing that Nissan owned the NISSAN trademark, nonetheless registered the domain name⁴ "www.nissan.com" in 1994 and the domain name "www.nissan.net" in 1996. Nissan Complaint ¶ 20. Nissan further alleges that "a domain name incorporating a company's trademark is a valuable asset that allows potential consumers to communicate with a particular company." Id. ¶ 17. According to the Nissan Complaint, NCC ultimately received between 150,000 and 200,000 visits per month to its websites from consumers searching for Nissan. Id. ¶ 20.

In 1999, Nissan learned that NCC was selling advertising space on its "www.nissan.com" website to automobile and other merchandising companies. Nissan alleges that, in so doing, NCC "intended to confuse consumers into thinking that these ads and links were ... some-how affiliated with Nissan." Id. ¶ 22. According to the Nissan Complaint, NCC's efforts at confusion included the utilization of a logo (bearing the Nissan name) that "closely resemble[d] Nissan's logo, including the same highly distinctive typeface." Id. ¶ 23.

With respect to the "www.nissan.net" website, Nissan alleges that NCC utilized the NISSAN trademark in registering the domain name, and that NCC designed the website to "maximize confusion and trade off of Nissan's identity and goodwill." Id. ¶ 26. According to the Nissan Complaint, NCC sought to profit from this confusion by offering Internet access, hosting, and networking capabilities to visitors of the "www.nissan.net" website. Id. ¶ 25.

B.

During the three-year period from July of 1993 until December of 1996, NCC was insured under an insurance policy issued by State Auto (the "State Auto Policy"). For the next three years, from December of 1996 until December of 1999, NCC was insured under four policies issued by Travelers (collectively, the "Travelers Policy").⁵ The Travelers Policy provides coverage⁶ for any "`[a]dvertising injury' caused by an offense committed in the course of advertising [NCC's] goods, products or services." J.A. 77. It defines "advertising injury" to include, among other things, harm caused by NCC's "[m]isappropriation of advertising ideas or style of doing business." Id. at 84.⁷

The Travelers Policy contains several provisions that limit Travelers's duty to provide coverage to NCC. Three of those provisions are relevant to the present controversy. First, the Travelers Policy excludes coverage for any advertising injury "[a]rising out of oral or written publication of material, if done by or at the direction of the `insured' with knowledge of its falsity" (the "Falsity Exclusion"). Id. at 78. Second, it excludes coverage for advertising injuries arising out of an "offense committed by an `insured' whose business is advertising" (the "Business of Advertising Exclusion"). Id. Finally, the Travelers Policy provides that NCC must, "as soon as practicable," notify Travelers "of an `occurrence' or an offense which may result in a claim" (the "Notice Provision"). Id. at 81.

C.

The Nissan Complaint was filed on December 9, 1999. Four days later, on December 13, 1999, NCC notified Travelers thereof. Travelers then refused to defend NCC, maintaining that the Travelers Policy did not provide coverage for the claims asserted in the Nissan Complaint. State Auto, by contrast, agreed to defend NCC on the Nissan Complaint, though it did so under a reservation of rights.⁸

In January of 2001, State Auto filed this declaratory judgment action in the Eastern District of North Carolina, invoking the court's diversity jurisdiction and seeking a declaration that Travelers is obligated to participate in NCC's defense. State Auto contends that the Nissan Complaint alleges an "advertising injury," as that term is defined in the Travelers Policy, and that Travelers is thus contractually bound to defend NCC.

At the close of discovery, State Auto and Travelers filed cross motions for summary judgment. After briefing on the motions, the district court ruled in favor of Travelers, concluding that the Nissan Complaint did not allege an "advertising injury," and that, in any event, Nissan's alleged injuries were not the result of NCC's advertisement of NCC's own goods, products, or services, as required under the Travelers Policy. Order at 15. Accordingly, the court denied State Auto's motion for summary judgment and awarded summary judgment to Travelers. Id. State Auto thereafter filed a motion to alter or amend the judgment, which was denied. State Auto Prop. & Cas. Ins. Co. v. Travelers Indem. Co. of Am., CA-01-73-F, Order (E.D.N.C. Oct. 9, 2002). State Auto has appealed, and we possess jurisdiction pursuant to 28 U.S.C. § 1291.

II.

We review de novo a district court's award of summary judgment. See Felty v. Graves-Humphreys Co., 818 F.2d 1126, 1127-28 (4th Cir. 1987). At the summary judgment stage, we construe the underlying facts in the light most favorable to the non-moving party. Lone Star Steakhouse & Saloon, Inc. v. Alpha of Va., Inc., 43 F.3d 922, 928 (4th Cir.1995). We may uphold an award of summary judgment only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).

III.

State Auto contends that the Nissan Complaint alleges an "advertising injury," as that term is defined in the Travelers Policy, and that Travelers is thus obligated to participate in NCC's defense. Travelers, by contrast, maintains that the Nissan Complaint fails to allege an "advertising injury." In the alternative, Travelers contends that the Falsity Exclusion and the Business of Advertising Exclusion apply, and that it is thus not obligated to provide coverage. Moreover, Travelers asserts that NCC failed to comply with the Notice Provision, and that it thereby forfeited its right to a defense. In order to determine whether Travelers is obligated to participate in NCC's defense, we first review some basic principles of North Carolina insurance law.

A.

An insurance policy is a contract, and its provisions govern the rights and duties of the parties thereto. Fid. Bankers Life Ins. Co. v. Dortch, 318 N.C. 378, 348 S.E.2d 794, 796 (1986). Pursuant to North Carolina law, the interpretation of an insurance policy is a question of law that is appropriate for resolution on summary judgment. See generally Royal Ins. Co. of Am. v. Cato Corp., 125 N.C.App. 544, 481 S.E.2d 383 (App.1997). Further, provisions in a policy "which extend coverage to the insured must be construed liberally so as to afford coverage whenever possible by reasonable construction." N.C. Farm Bureau Mut. Ins. Co. v. Stox, 330 N.C. 697, 412 S.E.2d 318, 321 (1992).

Any ambiguity as to the meaning of a policy term "must be resolved in favor of the policyholder, or the beneficiary, and against the company." Wachovia Bank & Trust Co. v. Westchester Fire Ins. Co., 276 N.C. 348, 172 S.E.2d 518, 522 (1970). An ambiguity exists where "the language of the policy is fairly and reasonably susceptible to either of the constructions for which the parties contend." Waste Mgmt. of Carolinas, Inc. v. Peerless Ins. Co., 315 N.C. 688, 340 S.E.2d 374, 379 (1986). A "difference of judicial opinion regarding proper construction of policy language is some evidence" that a policy provision is ambiguous. Brown v. Lumbermens Mut. Cas. Co., 326 N.C. 387, 390 S.E.2d 150, 153 (1990); see also Maddox v. Colonial Life & Acc. Ins. Co., 303 N.C. 648, 280 S.E.2d 907, 910 (1981) ("We feel the fact that the courts of other jurisdictions have reached conflicting interpretations emphasizes the ambiguity inherent in the [policy...