American Simmental Ass'n v. Coregis Ins. Co.

• Citation: 282 F.3d 582
• Decision Date: 08 March 2002
• Docket Number: No. 00-3218.,No. 00-3312.,No. 00-3217.,00-3217.,00-3218.,00-3312.
• Parties: AMERICAN SIMMENTAL ASSOCIATION, a Montana Non-Profit Association, Plaintiff-Appellee, v. COREGIS INSURANCE COMPANY, an Indiana Corporation, Defendant Third Party Plaintiff-Appellee, St. Paul Fire and Marine Insurance Company, a Minnesota Corporation, Defendant Third Party Defendant-Appellant. American Simmental Association, a Montana Non-Profit Association, Plaintiff-Appellant, v. Coregis Insurance Company, an Indiana Corporation, Defendant Third Party Plaintiff, St. Paul Fire and Marine Insurance Company, a Minnesota Corporation, Defendant Third Party Defendant-Appellee. American Simmental Association, a Montana Non-Profit Association, Plaintiff, v. Coregis Insurance Company, an Indiana Corporation, Defendant Third Party Plaintiff-Appellant, St. Paul Fire and Marine Insurance Company, a Minnesota Corporation, Defendant Third Party Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

282 F.3d 582

AMERICAN SIMMENTAL ASSOCIATION, a Montana Non-Profit Association, Plaintiff-Appellee, v. COREGIS INSURANCE COMPANY, an Indiana Corporation, Defendant Third Party Plaintiff-Appellee, St. Paul Fire and Marine Insurance Company, a Minnesota Corporation, Defendant Third Party Defendant-Appellant.

American Simmental Association, a Montana Non-Profit Association, Plaintiff-Appellant, v. Coregis Insurance Company, an Indiana Corporation, Defendant Third Party Plaintiff, St. Paul Fire and Marine Insurance Company, a Minnesota Corporation, Defendant Third Party Defendant-Appellee.

American Simmental Association, a Montana Non-Profit Association, Plaintiff, v. Coregis Insurance Company, an Indiana Corporation, Defendant Third Party Plaintiff-Appellant, St. Paul Fire and Marine Insurance Company, a Minnesota Corporation, Defendant Third Party Defendant-Appellee.

No. 00-3217.

No. 00-3218.

No. 00-3312.

United States Court of Appeals, Eighth Circuit.

Submitted: October 15, 2001.

Filed: March 8, 2002.

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Bethany K. Culp, argued, Minneapolis, MN (P. Shawn McCann, Omaha, NE, on the brief), for St. Paul Fire and Marine Ins. Co.

Carol L. Johnson, argued, Chicago, IL (Jeffrey A. Goldwater, Chicago, IL, Williams Johnson, Omaha, NE, on the brief), for Coregis Ins. Co.

Darin L. Mackender, argued, Lincoln, NE (Murray Ogborn, Lincoln, NE, on the brief), for Simmental.

Before MURPHY, BEAM and BYE, Circuit Judges.

BYE, Circuit Judge.

This is an insurance coverage dispute. St. Paul Fire and Marine Insurance Company (St.Paul) appeals the district court's determination that St. Paul had a duty to defend its insured, American Simmental Association (ASA), in a suit brought against ASA by the Blue Dane Simmental Corporation (Blue Dane). St. Paul also appeals the district court's determination that it must reimburse Coregis Insurance Company (Coregis), ASA's errors and omissions (E & O) carrier, for 60% of the reasonable defense costs incurred by ASA but paid by Coregis in the Blue Dane litigation.

In its cross-appeal, Coregis argues St. Paul should pay all of ASA's defense costs. Coregis also argues the district court unreasonably reduced ASA's recoverable defense costs, and erred in denying Coregis's request for attorneys' fees against St. Paul. ASA joins Coregis in arguing the district court should have awarded prejudgment interest. We reverse the district court's order denying prejudgment interest, and affirm in all other respects.

I

We briefly summarize the background of this insurance coverage dispute here, and refer the reader to the first of three published district court decisions for a more detailed account of this extended litigation. See Am. Simmental Ass'n v. Coregis Ins. Co., 75 F.Supp.2d 1023, 1024-28 (D.Neb. 1999) (ASA I).

Simmental is a breed of cattle. ASA is a not-for-profit association that registers and promotes Simmental cattle. In April 1994, a group of Simmental breeders (Blue Dane) sued ASA alleging it improperly designated certain bulls as "fullblood" Simmentals, improperly marketed the bulls, and falsely advertised the bulls in the Register, ASA's official publication. Blue Dane alleged ASA's activities decreased the value of their true "fullblood" Simmentals. ASA tendered defense of the Blue Dane suit to St. Paul, its commercial general liability (CGL) carrier. In May 1994, St. Paul refused to defend.

Blue Dane's original complaint stated violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962, and the Sherman Act, 15 U.S.C. §§ 1 & 4(a). As the suit progressed, amended complaints added a claim under the Lanham Act, 15 U.S.C. § 1125, and state law negligence claims. The second amended complaint alleged several claims pertinent to the insurance coverage dispute: ASA engaged in advertisement, promotion, and representation of the disputed bulls as "fullbloods"; ASA's statements were false because the bulls had Angus blood; ASA falsely advertised to Simmental breeders who were or could be deceived; and ASA's misrepresentations were likely to affect the purchasing decisions of those Simmental breeders and impaired Blue Dane's ability to compete, causing lost customers and sales.

ASA tendered the second amended complaint to St. Paul in April 1996. St. Paul again refused to defend in August 1996. In June 1997, ASA tendered a third amended complaint containing the same causes of action as the second amended complaint. After St. Paul's third refusal in October 1997, ASA turned to Coregis, its E & O carrier. Pursuant to its policy, Coregis agreed to indemnify ASA for defense costs arising from the Blue Dane suit, but indicated Coregis had no obligation to actually defend ASA in the suit.

In January 1998, the Blue Dane litigation was tried. ASA successfully defended itself, obtaining judgment as a matter of law. Blue Dane appealed and we affirmed. Blue Dane Simmental Corp. v. Am. Simmental Ass'n, 178 F.3d 1035 (8th Cir.1999). ASA incurred roughly $1.2 million in fees and costs defending itself.

In October 1998, ASA commenced the present suit against Coregis to recover the fees and costs which Coregis had not yet paid. Coregis third-partied St. Paul, seeking a declaration that St. Paul had the duty to defend ASA in the Blue Dane litigation. Coregis sought contribution, indemnity, or equitable subrogation from St. Paul for the full amount Coregis had paid ASA. ASA also amended its complaint to add a direct claim against St. Paul.

The parties brought cross-motions for summary judgment on the duty to defend issue. Applying Montana law,¹ the district court granted the motions of Coregis and ASA, concluding St. Paul had a duty to defend because the Blue Dane allegations fell within St. Paul's coverage for "advertising injury" under the "unauthorized taking" and "infringement" clauses of the policy. See ASA I, 75 F.Supp.2d at 1031.

Two months later, St. Paul renewed its motion for summary judgment. The motion raised, for the first time, a defense based on the policy's "false material" exclusion and cited our decision in Callas Enter., Inc. v. Travelers Indem. Co., 193 F.3d 952 (8th Cir.1999). The district court denied the motion as untimely, and also noted the Callas opinion was "not substantively persuasive." Am. Simmental Ass'n v. Coregis Ins. Co., 190 F.R.D. 640, 641 (D.Neb.2000) (ASA II).

Next, the district court addressed Coregis's claims against St. Paul for contribution, indemnity, and equitable subrogation. The district court ultimately determined both Coregis and St. Paul were obligated to pay a share of ASA's defense costs. The court ordered St. Paul to reimburse Coregis for 60% of the reasonable costs incurred by ASA. Am. Simmental Ass'n v. Coregis Ins. Co., 107 F.Supp.2d 1064, 1079 (D.Neb.2000) (ASA III). The district court determined the amount of defense costs incurred by ASA in the Blue Dane litigation was unreasonable and reduced the amount by 25% (from $1,199,178 to $809,830). In addition, the district court denied both ASA and Coregis prejudgment interest on their respective awards against St. Paul. Finally, the district court granted ASA's request for attorneys' fees incurred in the coverage suit against St. Paul, but denied Coregis's similar request for fees. Id. at 1085-87.

II

We review all issues related to the district court's interpretation of insurance policies de novo. United Fire & Cas. Co. v. Fidelity Title Ins. Co., 258 F.3d 714, 718 (8th Cir.2001).

A. St. Paul's Duty to Defend

The CGL policy issued by St. Paul provided coverage for "advertising injury." Advertising injury was defined in relevant part as "injury caused by any of the following offenses that result from the advertising of your products or work ... unauthorized taking of advertising ideas or style of doing business [or] infringement of copyright, title or slogan." The policy did not further define "unauthorized taking of advertising ideas," "infringement," or "title," the terms principally at issue in this appeal. Therefore, those terms must be understood in their plain and ordinary meaning under Montana law, and cannot be given a technical meaning. Wendell v. State Farm Mut. Auto. Ins. Co., 293 Mont. 140, 974 P.2d 623, 628 (1999).

St. Paul argues the "unauthorized taking of advertising ideas" and "infringement" clauses do not apply to the allegations contained in the Blue Dane complaints. We disagree. The plain and ordinary meaning of "advertising idea" generally encompasses "an idea for calling public attention to a product or business, especially by proclaiming desirable qualities so as to increase sales or patronage." Advance Watch Co., Ltd. v. Kemper Nat. Ins. Co., 99 F.3d 795, 801 (6th Cir.1996). Blue Dane used the word "fullblood" in a manner that falls within the ordinary meaning of an "advertising idea." Blue Dane used the term "fullblood" to call attention to its Simmental cattle, and all parties agree that "fullblood" was a desirable quality in Simmental cattle.

In addition, the word "fullblood" would be commonly understood to be a "title." Blue Dane accused ASA of wrongfully using the "fullblood" title to advertise bulls, thereby causing Blue Dane injury. Thus, under a plain and ordinary meaning analysis, Blue Dane alleged an "unauthorized taking" of Blue Dane's "advertising idea," which "infringed" upon Blue Dane's use of the term "fullblood" and caused injury.

St. Paul further contends Blue Dane's complaints against ASA did not trigger a duty to defend because the advertising offenses did not "result from the advertising of [ASA's] products or work." St. Paul argues the advertised bulls were not ASA's products or work, but the products or work of Tom Risinger, the bulls' owner. We disagree. The Blue Dane complaints alleged Tom Risinger was "at all relevant times" an officer and director of ASA. Blue Dane did not distinguish between actions taken by Risinger in his official capacity, and those taken...