Advance Watch Co., Ltd. v. Kemper Nat. Ins. Co., 94-CV-71918-DT.

• Decision Date: 28 February 1995
• Docket Number: No. 94-CV-71918-DT.,94-CV-71918-DT.
• Citation: 878 F. Supp. 1034
• Parties: ADVANCE WATCH CO., LTD., Plaintiff, v. KEMPER NATIONAL INSURANCE CO. and Travelers Insurance Companies, Defendants.
• Court: U.S. District Court — Eastern District of Michigan

878 F. Supp. 1034

ADVANCE WATCH CO., LTD., Plaintiff, v. KEMPER NATIONAL INSURANCE CO. and Travelers Insurance Companies, Defendants.

No. 94-CV-71918-DT.

United States District Court, E.D. Michigan, Southern Division.

February 28, 1995.

Mark Cantor and Maria Franek, Southfield, MI, for plaintiff.

Peter B. Kupelian, Matthew W. Schlegel, Southfield, MI, Thomas Holden, and William C. Morison-Knox, San Francisco, CA, for Travelers Ins.

George E. Petersmark, and Richard West, Detroit, MI, for Kemper Nat. Ins.

ORDER

JULIAN ABELE COOK, Jr., Chief Judge.

This is an action to compel insurance coverage, in which the Plaintiff, Advance Watch Company (Advance), and the two Defendants, Kemper National Insurance Company (Kemper) and Travelers Insurance Companies, Inc. (Travelers), filed motions for summary judgment, Fed.R.Civ.P. 56, on October 12, 1994.¹

For the reasons that have been set forth below, Kemper's motion will be granted, Travelers' motion must be denied, and Advance's motions are granted in part and denied in part.

I

In December 1992, Advance offered its writing pens in retail outlets across the United States on the basis of a contract with P.S.A./Pierre Cardin of Switzerland. This agreement granted Advance the exclusive right to use the Pierre Cardin trademark, as well as the stylized "PC" logo, on its pens. In late 1992 and early 1993, Advance created and published advertising material, including a sales catalog which contained pictures of its products.

On January 26, 1994, A.T. Cross Company and ATX International, Inc. (collectively "Cross") filed a lawsuit in this federal court, in which they charged Advance and Pierre Cardin² with trade dress, trademark, and common law trademark infringement, as well as unfair competition and dilution.³

Advance had standard form Commercial General Liability (CGL) insurance policies with Kemper, covering the period between August 25, 1993 to August 25, 1994, and Travelers,⁴ which was in effect from August 25, 1992 through August 25, 1993. These two policies required Kemper and Travelers to "pay those sums that the insured becomes legally obligated to pay as damages because of ... `advertising injury' to which this coverage part applies." Policy at § I, coverage B(1)(a). Moreover, the insurers "have the right and duty to defend any `suit' seeking those damages." Id. Section V of the policy defines an "advertising injury" as one which "arises out of among other things the misappropriation of advertising ideas or style of doing business."

In February 1994, Advance informed Travelers and Kemper of the Cross lawsuit and requested insurance coverage under their respective insurance policies. On March 10, 1994, Kemper advised Advance that it would neither provide any defense nor assume any indemnification costs arising out of the Cross litigation. Travelers adopted the same position on April 5, 1994. On May 17, 1994, Advance initiated this lawsuit against Travelers and Kemper, alleging breach of contract and bad faith in its denial of insurance coverage.

II

The primary question before this Court is whether the claims in the Cross Complaint constitute "advertising injury" which is covered by Kemper or Travelers. In order to find that Travelers or Kemper is obligated to defend Advance in the Cross action, the Court must conclude that (1) the underlying suit describes an injury which occurred in the course of advertising, (2) the "misappropriation of advertising ideas or style of doing business" encompasses Cross's claims against Advance, and (3) the policy was in effect at the time that the injury occurred.

In support of its position, Advance contends that Cross's claims for trademark and trade dress infringement fall within the rubric of "misappropriation of advertising ideas or style of doing business." Travelers counters that misappropriation only exists as a common law tort in the absence of a property right which is protected by traditional trademark or trade dress law. Moreover, it maintains that Cross's claims against Advance include, inter alia, trademark and trade dress infringement, neither of which are covered by the policy. It is Kemper's position that Cross's claims for injunctive relief, punitive damages, and exemplary damages are not covered by the policy. Kemper also avers that the conduct about which Advance complains occurred outside of the policy coverage dates and is, therefore, excluded.

III

A. Standard of Review

Under Rule 56 of the Federal Rules of Civil Procedure, a party against whom a claim, counterclaim, or cross-claim is asserted may "at any time, move with or without supporting affidavits for a summary judgment in the party's favor as to all or any part thereof." Fed.R.Civ.P. 56(b). A summary judgment shall be entered if the moving party demonstrates that there is no genuine issue as to any material fact, and if the evidence is such that a reasonable jury could find only for the moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986). The failure of a party to make a showing that is "sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial ..." will mandate the entry of summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 322-323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). This "burden on the moving party may be discharged by ... pointing out to the district court ... that there is an absence of evidence to support the non-moving party's case." Celotex, 477 U.S. at 325, 106 S.Ct. at 2553. In making this evaluation, the court is authorized to examine any documents (e.g., pleadings, depositions, answers to interrogatories, admissions, and affidavits) in a light that is most favorable to the non-moving party. See Boyd v. Ford Motor Company, 948 F.2d 283, 285 (6th Cir.1991).

Whenever the jurisdiction of a federal district court is based upon the diverse citizenship of the parties, as it is here, the choice of law rules of the state in which the court sits must be applied. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941); Colonial Refrigerated Transportation, Inc. v. Worsham, 705 F.2d 821, 825 (6th Cir.1983); Mahne v. Ford Motor Co., 900 F.2d 83, 85 (6th Cir.), cert. denied, 498 U.S. 941, 111 S.Ct. 349, 112 L.Ed.2d 313 (1990). In the State of Michigan, courts reviewing cases which involve the construction of an insurance contract must apply the law of the state where the insurance policy was issued. See Rubin v. Gallagher, 294 Mich. 124, 128, 292 N.W. 584 (1940) ("validity and construction of a contract are controlled and to be determined by the laws of the situs, or the place where the contract was entered into"); Insurance Co. of North America v. Forty-Eight Insulations, Inc., 451 F.Supp. 1230, 1237 (E.D.Mich.1978), aff'd, 633 F.2d 1212 (6th Cir.1980). Here, all of the parties agree that the insurance policies are governed by Michigan law.

B. Insurance Claims

An insurance policy is a contract. Consequently, when a dispute arises between the parties, a court may evaluate the terms and conditions of the agreement in order to discern their intent. Eghotz v. Creech, 365 Mich. 527, 530, 113 N.W.2d 815 (1962). In interpreting the terms of the policy, a court must look to the agreement as a whole in a manner that will give meaning to all of its terms. Fresard v. Michigan Millers Mut. Ins. Co., 414 Mich. 686, 694, 327 N.W.2d 286 (1982). Clear, unambiguous language is given its commonly understood meaning. Upjohn Co. v. New Hampshire Ins. Co., 438 Mich. 197, 206-07, 476 N.W.2d 392 (1991) (clear, unambiguous language must be considered "in its plain and easily understood sense") (citation omitted); see also Group Insurance Co. v. Czopek, 440 Mich. 590, 597, 489 N.W.2d 444 (1992) (language not clearly defined is given commonly used meaning).

Where the language is unclear or its terms are ambiguous, the agreement is construed in favor of coverage for the insured. Fresard v. Michigan Millers Mut. Ins. Co., 97 Mich.App. 584, 590, 296 N.W.2d 112 (1980), aff'd, 414 Mich. 686, 327 N.W.2d 286 (1982). In general, an insurer may limit its duties to the insured by (1) drafting its coverage to only include certain activities, or (2) explicitly eliminating specific events through an exclusionary clause. Czopek, 440 Mich. at 604, 489 N.W.2d 444.

In liability policies, the obligation of the insurer depends upon the allegations of the underlying complaint. Detroit Edison Company v. Michigan Mutual Ins. Co., 102 Mich.App. 136, 141, 301 N.W.2d 832 (1980). The insurer only has a duty to defend the insured if the charges against the insured in the underlying action arguably fall within the language of the policy. Allstate Ins. Co. v. Freeman, 432 Mich. 656, 662, 443 N.W.2d 734 (1989). However, the terminology that was used by the underlying plaintiff in the complaint is not dispositive. Instead, the analysis of the issue must include the actual cause of the injury. Id. at 662-63, 443 N.W.2d 734. Any doubt as to the insurer's liability must be resolved in favor of the insured. Detroit Edison, 102 Mich.App. at 142, 301 N.W.2d 832. Moreover, where only some of the claims against the insured party are covered, the insurer must defend the whole claim until it becomes apparent that no recovery is possible under the covered theory. Titan Holdings Syndicate v. Keene, 898 F.2d 265, 269 (1st Cir.1990) (applying New Hampshire law and citing the majority rule).

The insurance policy at issue in this case provides for coverage of an advertising injury which is "caused by an offense committed in the course of advertising the insured's goods, products or services...." Policy at § I, coverage B(1)(b)(2). Because of this provision, a causal connection between the alleged injury and the advertising is clearly required for coverage. See Iolab Corp. v. Seaboard...