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

• Decision Date: 23 November 1999
• Docket Number: No. 4:98CV3327.,4:98CV3327.
• Citation: 75 F.Supp.2d 1023
• Court: U.S. District Court — District of Nebraska
• Parties: AMERICAN SIMMENTAL ASSOCIATION, a Montana Non-Profit Association, Plaintiff, v. COREGIS INSURANCE COMPANY, an Indiana Corporation, Defendant/Third Party Plaintiff, v. St. Paul Fire & Marine Insurance Company, a Minnesota Corporation, Defendant/Third Party Defendant.

75 F.Supp.2d 1023

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

No. 4:98CV3327.

United States District Court, D. Nebraska.

November 23, 1999.

R. Murray Ogborn, Vollis E. Summerlin, Jr., Krista L. Kester, Ogborn, Summerlin Law Firm, Lincoln, NE, for Plaintiff's Counsel.

William R. Johnson, Lamson, Dugan Law Firm, Omaha, NE, Jeffrey A. Goldwater, Robert S. Marshall, Bollinger, Ruberry Law Firm, Chicago, IL, for Defendant/Third Party Plaintiff's Counsel.

P. Shawn McCann, Sodoro, Daly Law Firm, Omaha, NE, Rebecca R. Haller, Vineet Gosain, Oppenheimer, Wolff Law Firm, Chicago, IL, for Defendant/Third Party Defendant's Counsel.

MEMORANDUM AND ORDER

KOPF, Chief Judge.

This diversity case is before the court on cross motions for summary judgment. It presents an insurance coverage issue. The American Simmental Association (ASA) was sued by third parties in what became known as the "Blue Dane Litigation." ASA tendered the defense of that litigation to, and requested indemnity from, Coregis Insurance Company (Coregis) and St. Paul Fire & Marine Insurance Company (St. Paul). Although it had no duty to provide a defense because of the terms of its policy, Coregis admitted that it was responsible for some or all of the defense costs incurred by ASA. In contrast, St. Paul asserted that it had no responsibility to provide a defense or to pay ASA's defense costs.

Both ASA and Coregis have filed motions for summary judgment against St. Paul arguing that St. Paul had a duty to defend and a responsibility to pay some or all ASA's defense costs. St. Paul has filed a summary judgment motion arguing that it has no such responsibility. (ASA also filed a motion for summary judgment against Coregis (filing 48) but did not brief it. That unbriefed motion is deemed abandoned under NELR 7.1(a)(1).)

In general, I will grant the motions for summary judgment submitted by ASA and Coregis. I deny St. Paul's motion.

I. UNDISPUTED FACTS

St. Paul issued a comprehensive general liability policy to the ASA, which provides coverage for "advertising injury" caused by the advertising offenses of "unauthorized taking of advertising ideas or style of doing business" and "infringement of copyright, title or slogan." The plaintiffs in the Blue Dane Litigation, owners of "fullblood" Simmental cattle, filed suit against the ASA alleging that the ASA falsely advertised the status of "Risinger cattle" as "fullblooded" Simmental cattle, causing plaintiffs to lose customers and sales and damaging their reputations as Simmental breeders. In disposing of this case by summary judgment, this court must address the following issue:

Did St. Paul breach its duty to defend the ASA by its refusal to defend the ASA under its advertising injury coverage against claims brought against the ASA for false advertising covering the "fullblood" designation applied to the "Risinger cattle?"

A. The St. Paul Policies

St. Paul issued three General Commercial Property and Liability Policies to the ASA.¹ The first policy was issued for the policy period October 1, 1991, to October 1, 1992. St. Paul then issued two renewal policies for the policy period October 1, 1992, to October 1, 1993, and October 1, 1993, to October 1, 1994. (Ex. E.²) The St. Paul policies provide liability insurance to the ASA and its officers, directors and employees for covered acts or omissions done within the course and scope of the ASA's activities.

The Insuring Agreement for the October 1, 1991, to October 1, 1992, St. Paul Policy provides the following coverage for advertising injury liability:

Personal injury and advertising injury liability. We'll pay amounts any protected person is legally required to pay as damages for covered personal injury or advertising injury that's caused by an offense committed while this agreement is in effect.

The St. Paul Policy specifically defines the term "Advertising injury" as follows:

Advertising injury means injury caused by any of the following offenses that result from the advertising of your products or work:

• Libel or slander;

• written or spoken material made public which belittles the products or work of others;

• written or spoken material made public which violates an individual's right of privacy;

• unauthorized taking of advertising ideas or style of doing business;

• infringement of copyright, title or slogan.³

The St. Paul policy contains a duty to defend clause, which reads in pertinent part, as follows:

Right and duty to defend: We'll have the right and duty to defend any claim or suit for covered injury or damage made or brought against any protected person.

(Ex. E.)

B. The Coregis Policy

Coregis issued a claims-made and reported Non-Profit Organization Liability Insurance Policy to the ASA, with effective dates of January 16, 1994, to January 16, 1995. (Ex. L.) The Coregis policy is an indemnity policy, which does not contain a duty to defend the ASA. The Coregis policy contains an "Other Insurance" provision, which states that the Coregis policy applies in excess of other insurance.

C. The ASA and Simmental Cattle

The ASA is a not-for-profit association that registers and promotes the designation of the Simmental breed of cattle. (Ex. A ¶¶ 10, 18.) Originally, the ASA designated Simmental cattle in one of four categories: (1) "purebred;" (2) seven eighths; (3) three quarters; or (4) half breeds. (Id. ¶ 18.) Through common usage, the "purebred" designation was equated with "fullblooded." The "purebred" designation required a high percentage of Simmental breed in the cattle's genetics.

In 1988, the ASA members passed a rule to include a classification for cattle with "foreign ancestry." (Id. ¶ 16.) Under the 1988 rule, the "foreign ancestry" designation applied to Simmental animals that originated from one of four European countries: Germany, Switzerland, France or Austria. (Id. ¶ 16.) The 1988 rule did not consider the genetic purity of the "foreign ancestry" cattle. (Id.)

In 1991, Tom Risinger ("Risinger"), a board member of the ASA, allegedly began efforts to import European bulls to the United States. (Id. ¶¶¶ 7, 21, 22.) In late 1991, Risinger attempted to register the German bulls, "Westoner" and "Washington" ("Risinger cattle") as "fullblood" Simmentals with the Canadian Simmental Association (the "CSA"). (Id. ¶ 24.) The CSA allegedly informed Risinger that neither of the Risinger cattle were eligible for "fullblood" designation because the cattle had Angus genetics in their background. (Id. ¶ 24.)

Thereafter, Risinger submitted registration applications to the ASA for the Risinger cattle. The ASA registered the Risinger cattle as "fullblood." (Id. ¶ 30.)

In 1991, the ASA amended its by-laws to replace the title "foreign ancestry" with "fullblood." (Id. ¶ 17.) Under the amendment, the "foreign ancestry" Simmental cattle were given the designation of "fullblood," based solely on whether the animals originated from any one of the four qualifying European countries. (Id.)

In February, 1994, the ASA membership, through a series of rule changes, formally adopted the revised "fullblood" designation for cattle with the requisite proven foreign ancestry. (Id. ¶ 29.) By virtue of the adoption, there was no longer an exclusive requirement that the "fullblood" cattle contain a certain percentage of Simmental genetics. (Id. ¶ 18.) In short, the designation "fullblood" was a unique term of art.

D. The Underlying Action

On April 14, 1994, Blue Dane Simmental Corporation, Roland Nuss, Ronald Vlasin, and Dennis Behrhorst (the "underlying plaintiffs") filed a two-count complaint against the ASA, Tom Risinger and John Doe in the United States District Court for the District of Nebraska, styled Blue Dane Simmental Corporation et al. v. American Simmental Association et al., Case No. CV 94-3116 (U.S.D.C.Neb.) (the "Blue Dane Litigation"). (Ex. A.) The complaint in the Blue Dane Litigation alleged that the ASA improperly designated the Risinger cattle as "fullblood" Simmentals in violation of RICO and the antitrust laws. (Id.)

Specifically, the complaint in the Blue Dane Litigation alleged that the underlying plaintiffs were members of the ASA and Simmental breeders. (Id. ¶¶¶ 2, 3, 4.) They claimed that the ASA was the only entity of its kind in the United States. (Id. ¶ 10.) Under the ASA by-laws, the underlying plaintiffs allegedly had rights and interests with respect to the ASA and its property. (Id. ¶ 15.) In 1991, the ASA allegedly amended its bylaws to provide the designation of "fullblood" to Simmentals. (Id. ¶ 17.) On April 15, 1992, the ASA registered the Risinger cattle as "fullbloods." (Id. ¶ 30.) The defendants allegedly designated the Risinger cattle as "fullbloods," despite the defendants' alleged knowledge that the animals were not "fullbloods." (Id. ¶ 37.) The ASA allegedly began "marketing" the cattle as "fullbloods." (Id. ¶ 39.)

In August, 1992, Risinger and the ASA allegedly published advertisements in the Register (the official publication of the ASA), indicating that the Risinger cattle were 100 percent Fleckvieh Simmental genetics. (Id. ¶ 41.) The underlying plaintiffs alleged that the representations made by defendants in that advertisement were false. (Id. ¶ 41.) The underlying plaintiffs alleged that defendants' representation of the Risinger cattle as "fullbloods" caused the value of their animals to diminish by at least 50 percent. (Id. ¶ 51.)

On or about April 18, 1994, the ASA tendered its defense in the Blue Dane Litigation to St. Paul, including a copy of the Blue Dane Litigation Complaint. (Ex. F.) By letter dated May 5, 1994, St. Paul informed the ASA that it refused to defend the ASA for the Blue Dane Litigation. (Ex. G.)

Subsequently, the underlying plaintiffs filed an...