Fireman's Fund Ins. Co. v. Bradley Corp.

• Decision Date: 11 June 2002
• Docket Number: No. 01-2432.,01-2432.
• Citation: 649 N.W.2d 685,256 Wis.2d 643,2002 WI App 179
• Parties: FIREMAN'S FUND INSURANCE COMPANY OF WISCONSIN, Plaintiff-Appellant, v. BRADLEY CORPORATION and Kevin B. Kline, Defendants-Respondents, LAWLER MANUFACTURING CORPORATION, INC., Defendant.
• Court: Wisconsin Court of Appeals

256 Wis.2d 643

2002 WI App 179

649 N.W.2d 685

FIREMAN'S FUND INSURANCE COMPANY OF WISCONSIN, Plaintiff-Appellant, v. BRADLEY CORPORATION and Kevin B. Kline, Defendants-Respondents,¹ LAWLER MANUFACTURING CORPORATION, INC., Defendant.

No. 01-2432.

Court of Appeals of Wisconsin.

Submitted on briefs March 28, 2002.

Decided June 11, 2002.

On behalf of the plaintiff-appellant, the cause was submitted on the briefs of William P. Croke of Quale, Feldbruegge, Calvelli, Thom & Croke, S.C., of Milwaukee.

On behalf of the defendants-respondents, the cause was submitted on the brief of Lisa S. Neubauer and Michael D. Rosenberg of Foley & Lardner, of Milwaukee.

Before Fine, Schudson and Curley, JJ.

¶ 1. CURLEY, J.

Fireman's Fund Insurance Company of Wisconsin (Fireman's) appeals from the trial court's denial of its motion for summary judgment in a declaratory judgment action. Fireman's also appeals from the trial court's grant of summary judgment to Bradley Corporation (Bradley). Fireman's raises three issues on appeal: (1) whether the insurance policies issued to Bradley by Fireman's provide coverage for any of the claims in the complaint filed in the underlying lawsuit by Lawler Manufacturing Corporation, Inc., (Lawler), against Bradley; (2) whether Bradley's delay of over one year in providing Fireman's with notice of the underlying lawsuit was prejudicial; and (3) whether the trial court's assessment of Bradley's legal expenses was proper.

¶ 2. We conclude that the insurance polices do not provide coverage for any of the allegations in Lawler's complaint raised by Bradley. Because this issue is dispositive, we need not address the remaining issues. See Gross v. Hoffman, 227 Wis. 296, 300, 277 N.W. 663 (1938) (stating that if a decision on one point disposes of the appeal, we need not address the other issues raised); see also State v. Blalock, 150 Wis. 2d 688, 703, 442 N.W.2d 514 (Ct. App. 1989) ("[C]ases should be decided on the narrowest possible ground."). Accordingly, the trial court is reversed and the cause remanded for the trial court to enter an order in conformity herewith.

I. BACKGROUND.

¶ 3. In February of 1996, Fireman's issued four liability insurance policies to Bradley. These policies were effective from February 1, 1996 to February 1, 2000. The policies provided that Fireman's would pay those sums that the insured, Bradley, became obligated to pay as damages because of bodily injury, property damage, personal injury, or advertising injury. The policies define each of these terms.

¶ 4. On December 3, 1998, Lawler filed a federal lawsuit in the southern district of Indiana against Bradley claiming breach of fiduciary duty, trade secret misappropriation, unjust enrichment, diversion of corporate opportunities, conversion, negligence and unfair competition. Approximately six months later, Lawler filed a supplemental complaint also asserting a claim for patent infringement.

¶ 5. Bradley and Lawler are competitors in the development and sale of thermostatic mixing systems intended for emergency applications.² The lawsuit resulted from alleged corporate/industrial espionage by a former Lawler employee, Kevin Kline. The complaint alleges that Kline stole Lawler's designs for its thermostatic mixing valve technology, and that Bradley then hired Kline and used the stolen technology to create its own emergency showers and eyewash systems.

¶ 6. On March 2, 2000, Bradley notified Fireman's of the lawsuit. Fireman's denied coverage for the lawsuit, claiming that Lawler's complaint did not contain allegations that were potentially covered under the policies. On August 18, 2000, Fireman's sought a declaratory judgment in Milwaukee County stating that it had no obligation to defend or indemnify Bradley in the Lawler lawsuit. Both parties filed motions for summary judgment, and on July 25, 2001, the trial court denied Fireman's motion and granted Bradley's. The trial court ordered Fireman's to pay Bradley $2,887,594.24 for defense and indemnification costs.

II. ANALYSIS.

A. Fireman's does not have a duty to indemnify Bradley based on Lawler's claim for trade secret misappropriation.

¶ 7. In its summary judgment analysis, the trial court determined that Fireman's was obligated to defend and indemnify Bradley based on Lawler's claim of trade secret misappropriation. Fireman's contends that there is no coverage under the advertising injury clause of the insurance policies because there is no causal connection between Lawler's alleged injuries and Bradley's advertising activities.

[1-3]

¶ 8. Our review of the circuit court's decision to grant summary judgment is de novo. See Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315-16, 401 N.W.2d 816 (1987). Summary judgment must be granted if the evidence demonstrates "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." WIS. STAT. § 802.08(2).³ Further, "the construction of the words and clauses in an insurance policy is a question of law for the court," Katze v. Randolph & Scott Mut. Fire Ins. Co., 116 Wis. 2d 206, 212, 341 N.W.2d 689 (1984), which we review de novo.

[4, 5]

¶ 9. "To determine whether a duty to defend exists, the complaint claiming damages must be compared to the insurance policy and a determination made as to whether, if the allegations are proved, the insurer would be required to pay the resulting judgment." School Dist. of Shorewood v. Wausau Ins. Cos., 170 Wis. 2d 347, 364-65, 488 N.W.2d 82 (1992). "We determine an insurer's duty to defend solely from the allegations contained in the complaint; extrinsic facts are not considered." Atlantic Mut. Ins. Co. v. Badger Med. Supply Co., 191 Wis. 2d 229, 236, 528 N.W.2d 486 (Ct. App. 1995). We review the complaint in the instant case with the following in mind:

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. The duty has nothing to do with the merits of the claim because the insurer agreed to defend even if the allegations in the suit are groundless, false or fraudulent. Rather, it is the nature of the claim alleged against the insured which is controlling. If there is any doubt about the duty to defend, it must be resolved in favor of the insured.

School Dist. of Shorewood, 170 Wis. 2d at 364 (citations omitted).

¶ 10. The insurance policies in question state, in relevant part:

We will pay those sums that the insured becomes legally obligated to pay as damages because of personal injury or advertising injury....

....

... This insurance applies to:

....

... Advertising injury caused by an offense committed in the course of advertising your goods, products or services.

An amendment to the original policies defines an "advertising injury" as the following:⁴

Advertising injury means injury arising out of one or more of the following offenses:

a. Oral, written, televised or videotaped publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services b. Oral, written, televised or videotaped publication of material that violates a person's right of privacy;

c. Misappropriation of advertising ideas or style of doing business; or

d. Infringement of trademark, copyright, title or slogan.

¶ 11. Bradley argues that paragraph 72 of Lawler's complaint falls within the coverage in Bradley's insurance policy for the "[m]isappropriation of advertising ideas or style of doing business." Paragraph 72 of the complaint states:

Count II

Trade Secret Misappropriation

....

72. During his employment with Lawler and as an officer, director and shareholder of Lawler, Kline had access to, learned and acquired Lawler's highly confidential and proprietary information including but not limited to Lawler's annual business and strategic plans, sales reports and strategies, pricing margin and profitability information, material pricing and distribution costs, new product development, technology, personnel information and production, planning and scheduling, all of which is hereinafter collectively referred to as the "Trade Secrets" of Lawler.

¶ 12. Bradley links these activities to those alleged in paragraph 63 of the complaint in support of its conclusion that the injury complained of was committed in the course of advertising. Paragraphs 63 states:

63. During the week of October 26, 1998, at a show of the American Society of Plumbing Engineers (ASPE) held in Indianapolis, Indiana, Bradley and its representatives displayed emergency shower systems incorporating the accused products to existing and potential customers.

[6-8]

¶ 13. The offense Bradley relies on — the misappropriation of advertising ideas or style of doing business — may be committed in one of two ways: by misappropriating advertising ideas or by misappropriating a style of doing business. See Atlantic Mut. Ins. Co., 191 Wis. 2d at 238. "[T]he essence of the cause of action in misappropriation is the defendant's use of the plaintiff's product, into which the plaintiff has put time, skill, and money; and the defendant's use of the plaintiff's product or a copy of it in competition with the plaintiff and gaining an advantage in that competition because the plaintiff, and not the defendant, has expended the energy to produce it." Id. An "advertising idea" is "an idea for calling public attention to a product or business, especially by proclaiming desirable qualities so as to increase sales or patronage." Id. at 239. "`Style of doing business' is a phrase used by the courts to refer to `a company's comprehensive manner of operating its business.'" Id.

[9, 10]

¶ 14. Two fundamental prongs must be satisfied before we may find coverage under an advertising injury clause: (1) the injury must fall within one of the...