FIREMAN'S FUND INS. CO v. Bradley Corp.
| Decision Date | 06 May 2003 |
| Docket Number | No. 01-2432.,01-2432. |
| Citation | 2003 WI 33,261 Wis.2d 4,660 N.W.2d 666 |
| Parties | FIREMAN'S FUND INSURANCE COMPANY OF WISCONSIN, Plaintiff-Appellant, v. BRADLEY CORPORATION and Kevin B. Kline, Defendants-Respondents-Petitioners, LAWLER MANUFACTURING CORPORATION, INC., Defendant. |
| Court | Wisconsin Supreme Court |
For the defendants-respondents-petitioners there were briefs by Thomas L. Shriner, Jr., Lisa S. Neubauer, G. Michael Halfenger, and Foley & Lardner, Milwaukee, and oral argument by Thomas L. Shriner, Jr.
For the plaintiff-appellant there was a brief by William P. Croke, Todd M. Rowe, and Quale, Feldbruegge, Calvelli, Thom & Croke, S.C. Milwaukee, and oral argument by William P. Croke.
An amicus curiae brief was filed by Heidi L. Vogt and Cooke & Franke S.C., Milwaukee, on behalf of the Wisconsin Insurance Alliance.
¶ 1.
This is a review of a published opinion of the court of appeals, Fireman's Fund Insurance Co. v. Bradley Corp., 2002 WI App 179, 256 Wis. 2d 643, 649 N.W.2d 685. The circuit court for Milwaukee County, Thomas R. Cooper, Judge, granted summary judgment in favor of the defendants, Bradley Corporation (Bradley), and its employee, Kevin B. Kline, against Fireman's Fund Insurance Co. (Insurance Company). The court of appeals reversed the judgment of the circuit court.
¶ 2. The Insurance Company initiated a declaratory judgment action against the defendants seeking a determination of whether the Insurance Company had a duty under its Comprehensive General Liability (CGL) insurance policies to defend Bradley in a lawsuit brought by Lawler Manufacturing Corporation (Lawler).1
¶ 3. The circuit court denied the Insurance Company's motion for summary judgment and granted summary judgment to the defendants instead. The circuit court held that the Insurance Company had a duty to defend Bradley in the underlying Lawler lawsuit because count II of the Lawler complaint, alleging "trade secret misappropriation," constituted an "advertising injury" covered by the CGL insurance policies. In addition, the circuit court held that although the notice provided by Bradley was untimely, the Insurance Company was not prejudiced by the delay and therefore the lack of timely notice did not result in the loss of coverage.2
¶ 4. The court of appeals reversed the judgment of the circuit court. The court of appeals held that neither count II (alleging "trade secret misappropriation") nor count VII (alleging "federal unfair competition") of Lawler's complaint triggered the Insurance Company's duty to defend.
¶ 5. The issue presented is whether the Insurance Company had a duty to defend Bradley under the advertising injury provisions of its CGL insurance policies. We conclude that it had such a duty and therefore reverse the decision of the court of appeals.
¶ 6. We hold that the allegations in count VII of the Lawler complaint, alleging unfair competition in violation of the federal Lanham Act, give rise to the possibility of coverage. Count VII of the Lawler complaint arguably makes a claim for trade dress infringement that falls within the advertising injury's "infringement of trademark" provision.3 The complaint also alleges an injury—consumer confusion—that is arguably caused by Bradley's advertising of products that include Lawler's misappropriated designs.4
¶ 7. Furthermore, we hold that although Bradley did not provide timely notice to the Insurance Company of the Lawler lawsuit, Bradley carried the burden of persuasion that the late notice did not prejudice the Insurance Company.
¶ 8. Accordingly, we hold, as a matter of law, that the Insurance Company had a duty to defend Bradley in the Lawler lawsuit and therefore reverse the decision of the court of appeals. We remand the award of attorney fees to the circuit court for additional evidence and the determination of reasonable attorney fees.
¶ 9. The court of appeals cogently summarized the facts of this case, and we substantially adopt its statement of the facts here.
¶ 10. The Insurance Company issued four Comprehensive General Liability (CGL) insurance policies to Bradley effective from February 1, 1996 to February 1, 2000. The insurance policies provided that the Insurance Company would pay those sums that Bradley became obligated to pay as damages because of bodily injury, property damage, personal injury, or advertising injury. The insurance policies define each of these terms.
¶ 11. On December 3, 1998, Lawler filed a lawsuit against the defendants in the United States District Court for the Southern District of Indiana. The original complaint set forth eight counts, including breach of fiduciary duty, trade secret misappropriation, unjust enrichment, diversion of corporate opportunities, conversion, negligence, federal unfair competition, and common law unfair competition. Lawler's supplemental complaint further asserted a claim for patent infringement.
¶ 12. Bradley and Lawler are competitors in the development and sale of thermostatic mixing systems intended for emergency applications. The lawsuit resulted from alleged corporate/industrial espionage by a former Lawler employee, Kevin Kline.5 Lawler designed and patented thermostatic mixing valves capable of regulating the inflow of hot and cold water into emergency showers and eyewash systems so as to consistently and immediately produce tempered water.6 The complaint alleges that Kline stole Lawler's "ideas, concepts, and designs" for its thermostatic mixing valves, and that Bradley then hired Kline and used the stolen information to create its own thermostatic mixing valves for emergency showers and eyewash systems.
¶ 13. Bradley did not notify the Insurance Company of the Lawler lawsuit until March 2, 2000, nearly 15 months after the initial complaint and just two weeks before a hearing on a preliminary injunction had been scheduled. At that time, the Insurance Company denied coverage for the lawsuit.
¶ 14. On August 18, 2000, the Insurance Company sought a declaratory judgment in Milwaukee County circuit court that it had no obligation under its insurance policies to defend or indemnify Bradley in the Lawler lawsuit. On July 25, 2001, the circuit court denied the Insurance Company's motion for summary judgment and granted summary judgment to the defendants. The circuit court ordered the Insurance Company to pay Bradley $2,887,594.24 for defense and indemnification costs.
[1]
¶ 15. We review a circuit court order granting summary judgment applying the same methodology as that used by the circuit court.7 Summary judgment will be entered when a court is satisfied that the pleadings, depositions, answers to interrogatories, admissions, and affidavits show that no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law.8
[2, 3]
¶ 16. This declaratory judgment action also involves the interpretation of insurance policies. The court has set forth, in numerous cases, overlapping rules for interpreting an insurance policy. The rules of interpretation applicable in the present case are as follows: Words and phrases in insurance contracts are subject to the same rules of construction that apply to contracts generally;9 the primary objective in interpreting and construing a contract is to ascertain and carry out the true intent of the parties.10 [4]
¶ 17. When no extrinsic evidence is introduced, the interpretation of an insurance policy is a question of law that we determine independently of the circuit court or court of appeals but benefiting from their analyses.11 No extrinsic evidence was introduced in the present case.
¶ 18. The relevant legal analysis for determining when an insurer has a duty to defend an insured is well established in Wisconsin.
[5-7]
¶ 19. An insurer's duty to defend an insured is determined by comparing the allegations of the complaint to the terms of the insurance policy.12 "An insurer's duty to defend the insured in a third-party suit is predicated on allegations in a complaint which, if proven, would give rise to the possibility of recovery that falls under the terms and conditions of the insurance policy."13 The duty to defend is based solely on the allegations "contained within the four corners of the complaint," without resort to extrinsic facts or evidence.14 [8-10]
¶ 20. When comparing the allegations of a complaint to the terms of an insurance policy, the allegations in the complaint are construed liberally.15 The duty to defend is necessarily broader than the duty to indemnify because the duty to defend is triggered by arguable, as opposed to actual, coverage.16 We therefore "assume all reasonable inferences"17 in the allegations of a complaint and resolve any doubt regarding the duty to defend in favor of the insured.18
[11-14]
¶ 21. In addition, a duty to defend is based upon the nature of the claim and not on the merits of the claim. "It is the nature of the claim alleged against the insured which is controlling even though the suit may be groundless, false or fraudulent."19 Consequently, "an insurer may have a clear duty to defend a claim that is utterly specious because, if it were meritorious, it would be covered."20 Finally, when an insurance policy provides coverage for even one claim made in a lawsuit, the insurer is obligated to defend the entire suit.21
¶ 22. To determine the Insurance Company's duty to defend we first examine the advertising injury provision of the CGL insurance policies and then turn to the allegations in the Lawler complaint, focusing especially on count VII.
¶ 23. The CGL insurance policies in the present case provide that the Insurance Company will have the right and duty to defend Bradley against any suit alleging advertising injury. Advertising injury provisions have been part of the standard form CGL insurance policy for many years, and a growing body of case law has developed...
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