Lexmark Intern., Inc. v. Transp. Ins. Co.

• Decision Date: 19 December 2001
• Docket Number: No. 1-01-0962., No. 1-01-0719
• Citation: 327 Ill. App.3d 128,260 Ill.Dec. 658,761 N.E.2d 1214
• Parties: LEXMARK INTERNATIONAL, INC., a Kentucky Corporation, Plaintiff-Appellee, v. TRANSPORTATION INSURANCE COMPANY, an Illinois Corporation, and American Motorists Insurance Company, an Illinois Corporation, Defendants-Appellants.
• Court: United States Appellate Court of Illinois

761 N.E.2d 1214

327 Ill. App.3d 128

260 Ill.Dec. 658

LEXMARK INTERNATIONAL, INC., a Kentucky Corporation, Plaintiff-Appellee, v. TRANSPORTATION INSURANCE COMPANY, an Illinois Corporation, and American Motorists Insurance Company, an Illinois Corporation, Defendants-Appellants.

Nos. 1-01-0719, 1-01-0962.

Appellate Court of Illinois, First District, Third Division.

December 19, 2001.

Patrick E. Maloney, Katherine E. Tammaro and Daneen D. Fitzpatrick, Tressler, Soderstrom, Maloney & Priess, Chicago, for American Motorists Insurance Company.

Michael Resis, Ellen L. Green and Victor J. Piekarski, O'Hagan, Smith & Amundsen, L.L.C., Chicago, for Transportation Insurance Company.

John S. Vishneski, III and Angela Elbert Dietz, Neal, Gerber & Eisenberg, Chicago (David A. Gauntlett and Eric R. Little, Gauntlett & Associates, Irvine, CA, of counsel), for Appellee.

Justice WOLFSON delivered the opinion of the court:

The question before us is whether two insurance companies had a contractual duty to defend their insured in underlying causes of action. To answer that question we have to test the tensile strength of factual allegations of the complaints filed against the insured in California and Kentucky courts.

INTRODUCTION

In December 1999, plaintiff Lexmark International, Inc. (Lexmark), filed a second amended complaint for declaratory judgment against defendants Transportation Insurance Company (Transportation) and American Motorists Insurance Company (AMICO) (collectively the "Insurers") seeking a declaration the Insurers owed a duty to defend Lexmark in lawsuits brought against it by BDT Products, Inc. and Buro Datentechnik GMBH & Co., KG (collectively "BDT"). The Insurers had issued general liability insurance policies to Lexmark.

In response to Lexmark's complaint, the Insurers filed, among other things, counterclaims seeking declarations they owed no duty to defend Lexmark because BDT's complaints against Lexmark did not contain allegations that created a potential for coverage under the Insurers' policies. That is, BDT's complaints did not contain allegations of "personal injury" or "advertising injury," as those terms are defined in the Insurers' policies.

Lexmark and the Insurers moved for summary judgment on the insurance coverage issue. In January 2001, the trial court granted summary judgment in Lexmark's favor, finding "there is a potential for coverage based upon the language contained in this [BDT's] Complaint." The trial court held the Insurers had a duty to defend Lexmark against BDT's lawsuits.

Both insurance companies contend the trial court erred in entering summary judgment in Lexmark's favor and erred in denying summary judgment in their favor. We agree.

We reverse the trial court's decision and remand this cause with directions to enter summary judgment for the insurance companies.

FACTS

THE INSURANCE COMPANIES' POLICIES

AMICO, an Illinois corporation with its principal place of business in Long Grove, Illinois, issued two comprehensive general liability policies to Lexmark, a Kentucky corporation with its principal place of business in Lexington, Kentucky. They were effective from April 3, 1997, to April 3, 1999.

Transportation, an Illinois corporation with its principal place of business in Chicago, Illinois, issued three commercial general liability policies to Lexmark. They were effective from March 27, 1994, to March 27, 1997.

The issues in this case arise out of AMICO and Transportation policy coverage for personal injury and advertising injury claims brought against Lexmark. The pertinent provisions in the policies are almost identical:

"COVERAGE B—PERSONAL AND ADVERTISING INJURY COVERAGE

1. 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 the duty to defend any `suit' seeking those damages * * *.

* * *

b. This insurance applies to:

1) `Personal injury' caused by an offense arising out of your business, excluding advertising, publishing, broadcasting or telecasting done by or for you 2) `Advertising injury' caused by an offense committed in the course of advertising your goods, products or services;

but only if the offense was committed in the `coverage territory' during the policy period."

The policies defined the term "personal injury:"

"`Personal injury' means 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. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person or organization occupies, if committed by or on behalf of its owner, landlord or lessor;

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 policies defined the term "advertising injury:"

"`Advertising injury' means 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; or

d. Infringement of copyright, title or slogan."

HISTORY OF BDT v. LEXMARK

On August 13, 1998, BDT filed a lawsuit against Lexmark in the Superior Court of the State of California, San Diego County (the "California State Lawsuit"). In BDT's California State Lawsuit complaint, it alleged Lexmark improperly acquired BDT's printer paper feed and handling technology and incorporated BDT technology into Lexmark's line of printers. BDT sought damages and other relief for (1) breach of contract (implied-in-fact), (2) breach of contract (implied-in-law), (3) misappropriation of trade secrets, (4) fraud and deceit, (5) unfair business practices, (6) tortious interference with business relationships, (7) breach of fiduciary duty, and (8) breach of confidence.

On September 9, 1998, Lexmark removed the California State Lawsuit to the United States District Court for the Southern District of California (the "California Southern District Lawsuit"). On September 11, 1998, BDT filed a first amended complaint. The allegations and prayer for relief of the first amended complaint were virtually the same as the California State Lawsuit complaint.

On or about September 28, 1998, BDT filed a separate complaint against Lexmark in the United States District Court for the Central District of California (the "California Central District Lawsuit"). The California Central District Lawsuit complaint was almost identical to the first amended complaint of BDT's California Southern District Lawsuit. Consequently, BDT dismissed the California Southern District Lawsuit on October 22, 1998.

On October 8, 1998, Lexmark filed a lawsuit against BDT seeking a declaratory judgment that, among other things, "Lexmark did not misappropriate any trade secrets belonging to the defendants[, BDT,] or engage in any wrongdoing with regard to defendants (or either of them) whatsoever." Lexmark filed the suit in the United States District Court for the Eastern District of Kentucky, Lexington Division.

On February 10, 1999, the California Central District Lawsuit was transferred to the United States District Court for the Eastern District of Kentucky. On August 3, 1999, BDT filed its first amended complaint in the Kentucky District Court ("BDT's Kentucky Complaint").

BDT's Kentucky Complaint contained counts for (1) breach of contract (implied-in-fact), (2) breach of contract (implied-in-law), (3) misappropriation of trade secrets, (4) unfair competition, and (5) breach of confidence.

The General Allegations of the Kentucky Complaint tell the story of BDT's claims against Lexmark:

BDT alleged it was a design, development, and manufacturing corporation, organized under the laws of the state of California, with its principal place of business in Irvine, California. For over thirty years, BDT has been one of the world leaders in paper singulation and feeding technology. Sometime in 1991, BDT and Lexmark began a joint development program on various projects. BDT worked closely with Lexmark's design engineers on advanced solutions in printer paper handling technology, that is, "sheet feed paper handling" for printers.

In 1992, BDT began production of a laser printer with multiple paper input trays and a variety of paper output options. BDT provided its production information and prototype printers to Lexmark for general evaluation and for Lexmark to consider possible custom applications of BDT's technology into Lexmark products.

BDT alleged that, for the next few years, it kept Lexmark apprised of its progress in paper singulation and feeding technology. BDT continued to disclose to Lexmark's engineers its confidential technology, trade secrets, and "general paper handling know-how." More specifically, BDT disclosed to Lexmark details concerning BDT's "critical trade secrets and paper singulation and feeding systems." BDT alleged it also continued to provide Lexmark with samples of its re-designed laser printer prototypes for in-house evaluation and testing by Lexmark's engineering staff.

After some time, BDT alleged Lexmark began developing its own new laser printer that would print 16 pages per minute. Lexmark allegedly asked BDT to develop and manufacture an output device and auxiliary trays for its new laser printer, which would later be named the "Optra S." In February 1995, BDT allegedly agreed to leave prototype products with Lexmark while the parties negotiated a formal development...