Basic Research, LLC v. Admiral Ins. Co.

• Decision Date: 08 February 2013
• Docket Number: No. 20110556.,20110556.
• Citation: 297 P.3d 578,727 Utah Adv. Rep. 5
• Parties: BASIC RESEARCH, LLC, Dynakor Pharmacal, LLC, The Carter–Reed Company, LLC, Zoller Laboratories, LLC, Dennis Gay, Daniel B. Mowrey, and Mitchell K. Friedlander, Plaintiffs and Appellants, v. ADMIRAL INSURANCE COMPANY, a Delaware Corporation, Defendant and Appellee.
• Court: Utah Supreme Court

297 P.3d 578

727 Utah Adv. Rep. 5

BASIC RESEARCH, LLC, Dynakor Pharmacal, LLC, The Carter–Reed Company, LLC, Zoller Laboratories, LLC, Dennis Gay, Daniel B. Mowrey, and Mitchell K. Friedlander, Plaintiffs and Appellants,

v.ADMIRAL INSURANCE COMPANY, a Delaware Corporation, Defendant and Appellee.

No. 20110556.

Supreme Court of Utah.

Feb. 8, 2013.

Alan C. Bradshaw, Aaron C. Garret, David A. Gauntlett, Andrew M. Sussman, Salt Lake City, for appellants.

Phillip S. Ferguson, Rebecca L. Hill, David J. Garthe, Salt Lake City, for appellee.

Justice DURHAM, opinion of the Court:

INTRODUCTION

¶ 1 Basic Research, LLC, along with related corporations and officers thereof (Basic Research), appeals the district court's grant of summary judgment in favor of Admiral Insurance (Admiral). Basic Research argues that in finding that Admiral had no duty to defend it against the underlying claims, the district court interpreted provisions of Basic Research's insurance policy too narrowly. We affirm.

BACKGROUND

¶ 2 Basic Research is a limited liability company organized and existing under the laws of Utah. Its principal place of business is located in Salt Lake City, Utah. Basic Research markets the weight-loss product Akävar, using the slogans “Eat All You Want And Still Lose Weight” and “And we couldn't say it in print if it wasn't true!” (the slogans).¹ Customers who purchased Akävar filed lawsuits in multiple federal and state jurisdictions, all claiming false advertising, defective product, and/or failure to perform as promised (the underlying claims).

¶ 3 Basic Research was insured by Admiral under two consecutive Commercial General Liability insurance policies (the Policy). A portion of the Policy provided coverage for “Personal and Advertising Injury,” defined relevant terms, and contained a list of types of claims specifically excluded from coverage. After the underlying claims were filed, Basic Research invoked its coverage and asked Admiral to defend it. Admiral refused to defend on the premise that the underlying claims were not covered by the terms of the Policy.

¶ 4 Basic Research sued Admiral for declaratory relief. Both parties filed motions for summary judgment. The district court denied Basic Research's motion for summary judgment and granted Admiral's, finding that the underlying claims were not covered by the terms of the Policy and were in fact specifically excluded. Basic Research timely appealed. We have jurisdiction under Utah Code section 78A–3–102(3)(j).

STANDARD OF REVIEW

¶ 5 Summary judgment is appropriate only where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Utah R. Civ. P. 56(c). “We review a district court's grant of summary judgment for correctness and afford no deference to the court's legal conclusions.” Salt Lake City Corp. v. Big Ditch Irrigation Co., 2011 UT 33, ¶ 18, 258 P.3d 539. “When the existence of a contract and the identity of the parties are not in issue and when the contract provisions are clear and complete, the meaning of the contract can appropriately be resolved by the court on summary judgment.” Morris v. Mountain States Tel. & Tel. Co., 658 P.2d 1199, 1201 (Utah 1983). Furthermore, the interpretation of a contract is a question of law that is reviewed for correctness, giving no deference to the district court. Saleh v. Farmers Ins. Exch., 2006 UT 20, ¶ 14, 133 P.3d 428.

ANALYSIS

¶ 6 Basic Research argues that the district court interpreted the Policy terms too narrowly in concluding that the underlying offenses were not indemnified. For the following reasons, we agree with the district court that the underlying claims are not covered by the Policy. In fact, claims of this type are specifically excluded. Therefore, Admiral did not have a duty to defend Basic Research.

¶ 7 In Utah, an insurer has a duty to defend “when the insurer ascertains facts giving rise to potential liability under the insurance policy.” Sharon Steel Corp. v. Aetna Cas. & Sur. Co., 931 P.2d 127, 133 (Utah 1997). Where the allegations, if proved, show “there is no potential liability [under the policy], there is no duty to defend.” Deseret Fed. Sav. & Loan Ass'n v. U.S. Fid. & Guar. Co., 714 P.2d 1143, 1147 (Utah 1986). The question of whether there is potential liability under the policy “is determined by comparing the language of the insurance policy with the allegations of the complaint.” Benjamin v. Amica Mut. Ins. Co., 2006 UT 37, ¶ 16, 140 P.3d 1210 (internal quotation marks omitted). “The question is whether the allegations, if proved, could result in liability under the policy.” Deseret, 714 P.2d at 1147. “If the language found within the collective ‘eight corners' of these documents clearly and unambiguously indicates that a duty to defend does or does not exist, the analysis is complete.” Equine Assisted Growth & Learning Ass'n v. Carolina Cas. Ins. Co., 2011 UT 49, ¶ 18, 266 P.3d 733. When interpreting a contract, a court looks “within the four corners of the contract to determine the parties' intentions, which are controlling.” Innerlight, Inc. v. Matrix Group, LLC, 2009 UT 31, ¶ 14, 214 P.3d 854 (internal quotation marks omitted).

¶ 8 The relevant portions of the Policy provide:

Coverage B—Personal and Advertising Injury Liability Insuring Agreement

We will pay those sums that the insured becomes legally obligated to pay as damages because of “personal and advertising injury” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for personal and advertising injury to which this insurance does not apply. We may, at our discretion, investigate any offense and settle any claim or “suit” that may result....

Section VI—definitions: “Personal and advertising injury” means injury, including consequential “bodily injury,” arising out of one or more of the following offenses: ...

f. The use of another's advertising idea in your “advertisement.”

(Emphasis added.)

¶ 9 Admiral argues that the phrase “those sums that the insured becomes legally obligated to pay as damages because of ‘personal and advertising injury’ ” must be understood to limit its duty to defend to liability incurred as a result of “personal and advertising injury.” We agree.

¶ 10 Basic Research argues that the causes of action pled in the underlying claims fall within the Policy's definition of “personal and advertising injury,” and specifically that the claims stem from “the use of another's advertising idea.” Accordingly, Basic Research asks the court to require indemnification against claims of “personal and advertising injury” where the claim has some factual connection with Basic Research's “use of another's advertising idea” in its advertisement. In so doing, Basic Research ignores the definition of “personal and advertising injury” within the context of the coverage provision, creating ambiguity where there is none. “[A] contract term is not ambiguous simply because one party ascribes a different meaning to it to suit his or her own interests.” Equitable Life & Cas. Ins. Co. v. Ross, 849 P.2d 1187, 1192 (Utah Ct.App.1993).

¶ 11 It is true that “personal and advertising injury” may factually arise out of the “use of another's advertising idea.” But in order to trigger Admiral's duty to defend, the underlying claims must allege “personal and advertising injury” that occurred as a result of the “use of another's advertising idea.” That connection is lacking in the present case. Although the underlying claims asserted that Basic Research used the slogans “Eat All You Want And Still Lose Weight” and “And we couldn't say it in print if it wasn't true!,” the underlying causes of actions were in no way dependent on the source or ownership of those slogans. In fact, if the underlying claims were to go to trial, the plaintiffs would never be required to prove the original source of the slogans. They would need to prove only that Basic Research used the slogans to market a defective product.

¶ 12 None of the plaintiffs allege injury “as a result of” Basic Research's having misappropriated or otherwise wrongfully used the advertising slogan of “another[ ].” Indeed, allowing Basic Research to invoke the Policy based on underlying claims of this sort would require indemnification where there is any but-for causal link between the “use of another's advertising idea” and an underlying plaintiff's damages, no matter how legally irrelevant the link. “In interpreting a contract, the intentions of the parties are controlling.” Cent. Fla. Invs., Inc. v. Parkwest Assocs., 2002 UT 3, ¶ 12, 40 P.3d 599. To so interpret the Policy would expand the scope of the contractual terms beyond their plain meaning and the parties' original intentions. Where the alleged damages do not legally “aris[e] out of” the...