General Cas. Co. v. Wozniak Travel

• Decision Date: 19 March 2009
• Docket Number: No. A08-321.,A08-321.
• Citation: 762 N.W.2d 572
• Parties: GENERAL CASUALTY COMPANY OF WISCONSIN, Plaintiff, v. WOZNIAK TRAVEL, INC. d/b/a Hobbit Travel, Defendant, The Saul Zaentz Company d/b/a Tolkien Enterprises, Defendant.
• Court: Minnesota Supreme Court

762 N.W.2d 572

GENERAL CASUALTY COMPANY OF WISCONSIN, Plaintiff, v. WOZNIAK TRAVEL, INC. d/b/a Hobbit Travel, Defendant The Saul Zaentz Company d/b/a Tolkien Enterprises, Defendant.

No. A08-321.

Supreme Court of Minnesota.

March 19, 2009.

Jeffrey A. Evans, Cook & Franke S.C., Milwaukee, WI; and James L. Haigh, Trina R. Alvero, Andrea E. Reisbord, Cousineau McGuire Chartered, Minneapolis, MN, for plaintiff.

Thomas C. Mielenhausen, Christopher L. Lynch, Jessica L. Meyer, Lindquist & Vennum P.L.L.P., Minneapolis, MN, for defendant Wozniak Travel, Inc. d/b/a Hobbit Travel.

Gary J. Haugen, Mary R. Vasaly, Margo S. Brownell, Maslon Edelman Borman & Brand, LLP, Minneapolis, MN, for amici curiae Land O'Lakes, Inc., 3M Company and Apogee Enterprises, Inc.

OPINION

MEYER, Justice.

The Saul Zaentz Company d/b/a Tolkien Enterprises (Tolkien) sued Wozniak Travel, Inc. d/b/a Hobbit Travel (Hobbit Travel) alleging trademark infringement for the wrongful use of the word "hobbit" in Hobbit Travel's business name. Hobbit Travel's insurer, General Casualty Company of Wisconsin (General Casualty), sought declaratory relief in the United States District Court for the District of Minnesota from its duty to defend and indemnify Hobbit Travel. The federal district court certified two questions to this court:

1) Does trademark infringement fall within the scope of "misappropriation of advertising ideas or style of doing business" or constitute "infringement of copyright, title or slogan" as set forth in the CGL [commercial general liability] policy?

2) Is a trademark an "advertising idea" or does trademark infringement constitute "infringing upon another's copyright, trade dress or slogan" as set forth in the CUL [commercial umbrella liability] policy?

We answer both questions in the affirmative.

Tolkien is a California corporation that owns the right to use and license trademarks related to the late Professor J.R.R. Tolkien's novels The Hobbit and The Lord of the Rings trilogy. Professor Tolkien created the term "hobbit" in the 1930s to describe the fictional, three-foot-tall characters featured in those novels. Since publication, the novels and their hobbit characters have enjoyed widespread popularity, which exponentially grew as the novels were developed into plays, movies, and merchandise. To promote and protect its increasingly valuable interests in the Tolkien works, Tolkien became the owner of numerous trademarks, including the term "hobbit," and established a worldwide licensing program to publicize these interests.

Hobbit Travel is a Minnesota-based travel agency that has been operating under that name since 1976. Hobbit Travel established a website directed at travel consumers all over the United States. This website incorporated the term "hobbit" in displaying Hobbit Travel's name, in titles of special offers, and in several connected domain names. Tolkien's discovery of this website prompted a 2006 lawsuit against Hobbit Travel in the United States District Court for the Northern District of California for trademark infringement, trademark dilution, and unfair competition.

Tolkien claimed Hobbit Travel was wrongfully appropriating Tolkien's "hobbit" trademark, confusing the public about Hobbit Travel's association with Tolkien, and capitalizing on Tolkien's goodwill. Tolkien, through its licensees, utilized the term "hobbit" and the corresponding characters for its own advertising and merchandising of the Tolkien works. Some marketing specifically combined the "hobbit" mark with the theme of travel, as the journeys of hobbits compose a significant thread in each novel's story. The term "hobbit" was licensed for travel products such as bags, souvenirs, board games, and computer games. One licensee made an agreement with Air New Zealand for the airline to market itself as "Airline to Middle-earth" and paint the hobbit characters on its jets. Another Tolkien licensee arranged for an online travel ticketing service to promote travelling to London and Canada for a stage musical adaption of The Lord of the Rings. Tolkien argued that its market for these and other services was "irreparably harmed" by Hobbit Travel's use of "hobbit," and asked for injunctive relief, monetary damages, and attorney fees.¹

At the time Tolkien filed suit against Hobbit Travel, General Casualty insured Hobbit Travel under a Commercial General Liability (CGL) policy and a Commercial Umbrella Liability (CUL) policy. General Casualty agreed to defend the Tolkien/Hobbit Travel litigation under a reservation of rights, and filed a complaint for declaratory relief in the United States District Court of Minnesota. In its complaint, General Casualty asserted that the allegations made by Tolkien in the underlying complaint failed to allege an enumerated "advertising injury" offense under General Casualty's insurance policies. Both General Casualty and Hobbit Travel moved for summary judgment on whether these "advertising injury" definitions extended coverage for Tolkien's allegations.

The federal district court determined there was no controlling decision on "this important question of Minnesota law." Accordingly, the district court certified to this court whether Tolkien's trademark infringement allegations fall within the scope of General Casualty's policies. We accepted the certified questions.

This court "may answer a question of law certified ... by a court of the United States ... if the answer may be determinative of an issue in pending litigation in the certifying court and there is no controlling appellate decision, constitutional provision, or statute of this state." Minn.Stat. § 480.065, subd. 3 (2008).² The certified questions presented are questions of law that we review de novo. Dohney v. Allstate Ins. Co., 632 N.W.2d 598, 600 (Minn.2001). The interpretation of an insurance policy, the underlying issue in this case, is also a legal issue subject to de novo review. Home Ins. Co. v. Nat'l Union Fire Ins., 658 N.W.2d 522, 527 (Minn. 2003).

Because most insurance policies are preprinted forms drafted solely by insurance companies—basically contracts of adhesion—policy words of inclusion will be broadly construed, and words of exclusion are narrowly considered. Nathe Bros., Inc. v. Am. Nat'l Fire Ins. Co., 615 N.W.2d 341, 344 (Minn.2000); 2 Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 22:31 (3d ed.2005). Unambiguous words will be given their "plain, ordinary, and popular meaning." Minn. Mining & Mfg. Co. v. Travelers Indem. Co., 457 N.W.2d 175, 179 (Minn.1990) (citing Smith v. St. Paul Fire & Marine Ins. Co., 353 N.W.2d 130, 132 (Minn. 1984)). Ambiguous words, however, will be construed against the insurer according to the "reasonable expectations" of the insured. Id. If undefined terms are reasonably susceptible to more than one interpretation, the terms must be interpreted liberally in favor of finding coverage. Wanzek Constr., Inc. v. Employers Ins. of Wausau, 679 N.W.2d 322, 329 (Minn.2004).

I.

The first certified question from the federal district court of Minnesota asks:

Does trademark infringement fall within the scope of "misappropriation of advertising ideas or style of doing business" or constitute "infringement of copyright, title or slogan" as set forth in the CGL policy?

This question stems from the advertising-injury definitions in General Casualty's CGL policy; General Casualty's duty to defend arises if Tolkien's alleged damages arose under one of these advertising-injury definitions. An insured's "duty to defend extends to every claim that `arguably' falls within the scope of coverage[, and] the duty to defend one claim creates a duty to defend all claims." Wooddale Builders, Inc. v. Md. Cas. Co., 722 N.W.2d 283, 302 (Minn.2006). An insurer trying to avoid a duty to defend "has the burden of establishing that all parts of the cause of action fall clearly outside the scope of coverage." Metro. Prop. & Cas. Ins. Co. v. Miller, 589 N.W.2d 297, 299 (Minn.1999). To determine whether a duty exists, the allegations in the underlying complaint and the surrounding facts will be compared with the relevant language in the insurance policy. Haarstad v. Graff, 517 N.W.2d 582, 584-85 (Minn. 1994).

Relevant provisions in the CGL policy state that General Casualty will defend any suit seeking damages because of "advertising injury" to which the insurance applies. The policy provides that

"[a]dvertising [i]njury" means injury arising out of one or more of the following offenses:

....

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

d. Infringement of copyright, title or slogan.

A threshold question is whether the absence of the word "trademark" in the advertising-injury definitions excludes Tolkien's claims. General Casualty argues that if its policies were intended to provide coverage for trademark infringement, they would have expressly referenced trademark infringement in them, citing to cases from the Sixth and Eighth Circuits that used this reasoning to support their holdings that trademark infringement claims do not constitute advertising injury. See Callas Enters., Inc. v. Travelers Indem. Co., 193 F.3d 952, 956-57 (8th Cir.1999); ShoLodge, Inc. v. Travelers Indem. Co., 168 F.3d 256, 260 (6th Cir.1999); Advance Watch Co. v. Kemper Nat'l Ins. Co., 99 F.3d 795, 803 (6th Cir.1996).

We conclude that the absence of the word "trademark" in the CGL policy does not foreclose the possibility that trademark infringement falls within the scope of the advertising-injury definitions in General Casualty's policy. First, the policy provides coverage for injuries "arising out of" the advertising-injury definitions, which expands the scope of the policy language since this court has defined "arising out of" broadly as "originating from," "growing out of," or "flowing from." Dougherty v. State Farm Mut. Ins. Co., 699 N.W.2d 741, 744 (Minn.2005). Second, the Minnesota rules of insurance policy...