JA Brundage Plumbing v. Massachusetts Bay Ins.

• Decision Date: 10 March 1993
• Docket Number: No. 92-CV-531A.,92-CV-531A.
• Citation: 818 F. Supp. 553
• Parties: J.A. BRUNDAGE PLUMBING & ROTO-ROOTER, INC., the Drain Doctor, Inc., and John A. Brundage, Plaintiffs, v. The MASSACHUSETTS BAY INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Western District of New York

818 F. Supp. 553

J.A. BRUNDAGE PLUMBING & ROTO-ROOTER, INC., the Drain Doctor, Inc., and John A. Brundage, Plaintiffs, v. The MASSACHUSETTS BAY INSURANCE COMPANY, Defendant.

No. 92-CV-531A.

United States District Court, W.D. New York.

March 10, 1993.

Peter K. Sommer, Sommer, Oliverio & Sommer, Buffalo, NY, for plaintiffs.

Russell N. Brown, Sherry Robinson, Lustig & Brown, Buffalo, NY, for defendant.

DECISION AND ORDER

HECKMAN, United States Magistrate Judge.

The parties have consented to final disposition of this case before the Magistrate Judge, pursuant to 28 U.S.C. § 636(c). Pending for decision are Defendant's motion and Plaintiffs' cross-motion for summary judgment.

For the following reasons, Defendant's motion is denied, and Plaintiffs' cross-motion is granted.

FACTS

The relevant facts are not in dispute. On July 23, 1990, John A. Brundage and his companies J.A. Brundage Plumbing & Roto-Rooter, Inc. and the Drain Doctor, Inc., were sued in this Court in an action entitled Roto-Rooter Corp. v. J.A. Brundage Plumbing & Roto-Rooter, Inc., John A. Brundage, the Drain Doctor, Inc., and John A. Brundage, Jr., 92-CV-402A. This lawsuit asserted six causes of action based on the following facts.

Roto-Rooter owns both New York State servicemarks and United States trademarks for its name and services. It permits others to use these marks by granting licenses and franchises. On April 1, 1990, Roto-Rooter granted Brundage a written license and franchise to perform and sell sewer, drain and pipe cleaning services.

In ¶ 16 of the franchise agreement, Brundage promised not to compete with the Roto-Rooter trademarks or servicemarks by entering into any other sewer, drain or pipe cleaning business in the geographic territory in which the franchise agreement operated. Brundage also agreed to use the trademarks and servicemarks only as authorized in ¶ 8.

Roto-Rooter alleges that Brundage violated this franchise agreement by:

1. Failing to maintain service personnel in Roto-Rooter uniforms.

2. Inappropriately and improperly using the Roto-Rooter trademarks in connection with sales and service performed by unauthorized entities.

3. Failing to maintain separate telephone lines, equipment, vehicles, employees and facilities in rendering Roto-Rooter business.

4. Entering into a competing business called "The Drain Doctor."

When Brundage failed to cure these alleged violations, Roto-Rooter terminated Brundage's franchise agreement. Roto-Rooter then instituted the underlying lawsuit alleging that Brundage's acts constituted:

1. Federal trademark and servicemark infringement.

2. False designation of origin.

3. State servicemark infringement.

4. Dilution and injury to business reputation.

5. Unfair competition.

6. Breach of contract.

Roto-Rooter demanded that the Court declare that Brundage breached the franchise agreement, infringed Roto-Rooter's registered marks, falsely designated the source of the services in violation of federal law, diluted the quality of Roto-Rooter's marks and unfairly competed with Roto-Rooter. Roto-Rooter also demanded that Brundage be preliminary and permanently enjoined from using the designation "ROTO-ROOTER" or any like mark, together with damages in excess of $50,000.

Brundage notified its primary insurance carrier, Massachusetts Bay Insurance Company, of the underlying suit and requested defense of the action. Massachusetts Bay denied coverage, asserting that the complaint did not fall within either the personal injury coverage or the advertising injury coverage in the policy.

On August 10, 1992, Brundage instituted the instant action seeking a declaration that coverage was provided under the policy.

In September of 1992, the underlying action was settled at no cost to the parties. At issue are Plaintiff's attorneys fees in the underlying action.

Defendant Massachusetts Bay now moves for summary judgment. Plaintiffs have cross-moved for summary judgment.

DISCUSSION

The relevant portions of the insurance policy provide as follows:

I. Insuring Agreement.

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "personal injury" or "advertising injury" to which this insurance applies.... We will have the right and duty to defend any "suit" seeking those damages.

* * * * * *

b. This insurance applies to "personal injury" only if caused by an offense:

(1) committed in the "coverage territory" during the policy period; and

(2) arising out of the conduct of your business excluding advertising, publishing, broadcasting or telecasting done by you or for you.

c. This insurance applies to "advertising injury" only if caused by an offense committed:

(1) In the "coverage territory" during the policy period; and

(2) In the course of advertising your goods, products or services.

The policy defines "personal injury" as:

Injury, other than "bodily injury," arising out of one or more of the following offenses:

a. False arrest, detention or imprisonment,

b. Malicious prosecution;

c. Wrongful entry into, or eviction of a person from, a room, dwelling or premises that the person occupies;

d. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services; or

e. Oral or written publication of material that violates a person's right of privacy.

The policy defines "advertising injury" as:

Injury arising out of one or more of the following offenses:

a. Oral or written 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 or written publication of material that violates a person's right of privacy.

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

d. Infringement of copyright, title or slogan.

The policy excludes coverage for "advertising injury" arising out of:

Breach of contract, other than misappropriation of advertising ideas under an implied contract.

Since the underlying suit has been settled at no cost, indemnification under the policy is not an issue. The question here is whether the Defendant had a duty to defend the underlying action and is therefore obligated to pay the costs of defense.

The parties agree that New York law governs this dispute. Under New York law, an insurer's duty to defend its insured is determined by comparing the allegations of the complaint to the policy language. Servidone Construction Company v. Security Insurance Company, 64 N.Y.2d 419, 423-24, 488 N.Y.S.2d 139, 477 N.E.2d 441 (1985). The insurer is required to provide a defense to any action within the policy coverage, even if that action is groundless. Avondale Industries, Inc. v. Travelers Indemnity Company, 123 F.R.D. 80, 82 (S.D.N.Y.1988), aff'd, 887 F.2d 1200 (2d Cir.1989), cert. denied, 496 U.S. 906, 110 S.Ct. 2588, 110 L.Ed.2d 269 (1990). As stated by the New York Court of Appeals:

The duty to defend is not contingent upon the insurer's ultimate duty to indemnify should the insurer be found liable, nor is it material that the complaint against the insured asserts additional claims which fall outside the policy's general coverage or within the exclusionary provisions. Rather, the duty of the insurer to defend the insured rests solely on whether the complaint alleges any facts or grounds which bring the action within the protection purchased.

Seaboard Surety Company v. Gilette Company, 64 N.Y.2d 304, 310, 486 N.Y.S.2d 873, 476 N.E.2d 272 (1984). An insurer's obligation to defend is determined by examining the entire insurance contract to determine its purpose and intent. Murray Oil Products v. Royal Exchange Assurance Company, 21 N.Y.2d 440, 445, 288 N.Y.S.2d 618, 235 N.E.2d 762 (1968).

Insurance policies are contracts to which the ordinary rules of contractual interpretation apply. The goal of contract interpretation is to give effect to the intention of the parties. If the contract language is clear and explicit, it governs. If it is ambiguous, the court must interpret the language in context with regard to its intended function in the policy to give effect to the reasonable expectation of the insured. Murray Oil Products v. Royal Exchange Assurance Co., supra, 21 N.Y.2d at 445, 288 N.Y.S.2d 618, 235 N.E.2d 762; A. Meyers & Sons Corp. v. Zurich American Insurance Group, 74 N.Y.2d 298, 302-03 (1989).

Furthermore, terms which are not defined in the policy are to be given the meaning ascribed to those terms in the common law or as they ordinarily would be understood by laypersons. Ruder & Finn, Inc. v. Seaboard Surety Co., 52 N.Y.2d 663, 671, 439 N.Y.S.2d 858, 422 N.E.2d 518 (1981). If this rule does not resolve the ambiguity, the Court must then resolve it against the insurer. See, e.g., Id. at 671, 439 N.Y.S.2d 858, 422 N.E.2d 518. The complaint must be liberally construed to "protect against poorly or incompletely pleaded cases as well as those artfully drafted." Id. at 669, 439 N.Y.S.2d 858, 422 N.E.2d 518.

Plaintiff contends that each of Roto-Rooter's first five causes of action allege "advertising injury" within the policy definition, any one of which is sufficient to trigger the insurer's duty to defend. Plaintiff concedes that subsections (a) and (b) of the definition of advertising injury do not apply. Rather, Plaintiff seeks coverage under subsection (c) or (d) — i.e., advertising injury arising out of "misappropriation of advertising ideas or style of doing business" (subsection (c)) or "infringement of ... title or slogan" (subsection (d)). Both of these subsections will be addressed in turn.

A. Misappropriation of Advertising Ideas or Style of Doing Business

Addressing subsection (c) first, the policy does not define "advertising ideas" or "style of doing business." Nor do these terms have clear definitions in the common law. However, in the ordinary sense of these terms, misappropriation of an "advertising idea" would mean the...