Rosemoor Suites, LLC v. Harleysville Lake States Ins. Co., Case No. 18 CV 6890

• Decision Date: 16 March 2020
• Docket Number: Case No. 18 CV 6890
• Citation: 444 F.Supp.3d 902
• Parties: ROSEMOOR SUITES, LLC, Plaintiff, v. HARLEYSVILLE LAKE STATES INS. CO., Defendant.
• Court: U.S. District Court — Northern District of Illinois

444 F.Supp.3d 902

ROSEMOOR SUITES, LLC, Plaintiff,

v.HARLEYSVILLE LAKE STATES INS. CO., Defendant.

Case No. 18 CV 6890

United States District Court, N.D. Illinois, Eastern Division.

Signed March 16, 2020

Arnold H. Landis, Law Office of Arnold H. Landis, Chicago, IL, for Plaintiff.

Edric S. Bautista, John J. Piegore, Sanchez Daniels & Hoffman, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

Joan B. Gottschall, United States District Judge

Plaintiff Rosemoor Suites, LLC ("Rosemoor") brought this action against defendant Harleysville Lake States Insurance Company ("Harleysville") seeking a declaration that Harleysville owed it a duty to defend it in an underlying Lanham Act suit (state law claims were also raised) concerning the use of the name "Hotel Chicago." Harleysville moves for summary judgment that it owed Rosemoor no duty to defend. For the following reasons, the court grants the motion.

I. Background

The parties do not dispute the following facts at summary judgment.

A. The Policies

Harleysville issued two policies naming Rosemoor as the insured (collectively "the policies"), commercial general liability policy No. MPA 00000085976V ("CGL Policy") and commercial liability umbrella policy No. CMB 00000085974V ("Umbrella Policy"). Statement of Facts ("SOF") ¶¶ 32,¹ 33; ECF No. 27; see also id. ¶ 34 (the named insured on the policy was later amended in immaterial way).

The CGL policy provides:

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "personal and advertising injury" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "personal and advertising injury" to which this insurance does not apply.

...

2. Exclusions

This insurance does not apply to:

...

i. Infringement Of Copyright, Patent, Trademark Or Trade Secret

"Personal and advertising injury" arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. Under this exclusion, such other intellectual property rights do not include the use of another's advertising idea in your "advertisement".

However, this exclusion does not apply to infringement, in your "advertisement," of copyright, trade dress or slogan.

SOF ¶ 41, 43 (quoting Coverage Form 6, ECF No. 5-1).² (alterations in original).

The parties agree that the following definitions in the CGL policy are relevant:

1. "Advertisement" means a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters. For the purposes of this definition:

a. Notices that are published include material placed on the Internet or on similar electronic means of communication; and

b. Regarding web-sites, only that part of a web-site that is about your goods, products or services for the purpose of attracting customers or supporters is considered an advertisement

...

14. "Personal and advertising injury" means injury, including consequential "bodily injury", arising out of one or more of the following offenses:

...

f. The use of another's advertising idea in your "advertisement"; or

g. Infringing upon another's copyright, trade dress or slogan in your "advertisement".

SOF ¶ 42 (quoting Coverage Form 12, 14) (alterations in original). It is undisputed that the umbrella policy contains "substantially identical" insuring language, definitions, and exclusions. See SOF ¶¶ 44–47.

B. The Underlying Suit

In 2016, LHO Chicago River, LLC ("LHO") brought the underlying suit against Rosemoor and other defendants alleging trademark infringement and unfair competition claims under § 43 of the Lanham Act; an Illinois common law trademark infringement claim; and a claim under the Illinois Uniform Deceptive Trade Practices Act.³ Resp. to SOF ¶¶ 17–21; see also Am. Compl., No. 16-CV-6863, ECF No. 42 (N.D. Ill. Aug. 4, 2016). The dispute centered on the use of the name "Hotel Chicago." LHO alleged that it had been using the "Hotel Chicago" mark since at least February 2014, and these defendants opened a new "Hotel Chicago" in 2016 about three miles from the location of LHO's hotel. SOF ¶¶ 11, 13. LHO claimed that the defendants' use of the "Hotel Chicago" mark interfered with its trademark rights and caused confusion amongst consumers. Id. ¶¶ 17–21. LHO sought, among other things, a judgment declaring that the defendants had infringed, and were infringing, LHO's "Hotel Chicago" mark. Id. ¶ 21.

Rosemoor tendered the defense of the underlying suit to Harleysville. Harleysville denied coverage and did not defend. Id. ¶ 27. Nor did Harleysville file a declaratory judgment suit to obtain a coverage determination. See id. ¶¶ 28–29; Def.'s Resp. to Pl.'s Stmt. Add'l Facts ("Resp. to SAF") ¶¶ 5–6, ECF No. 39.

LHO voluntarily dismissed the underlying suit with prejudice in 2018. SOF. ¶ 22. The defendants subsequently moved under § 35 of the Lanham Act for more than $500,00 of attorneys' fees in the underlying suit, but the court denied their motion. Id. ¶¶ 23–24.

C. The Instant Coverage Suit

Rosemoor filed the instant coverage suit in Circuit Court of Cook County against Harleysville on September 26, 2018. Id. ¶ 25, 26. It initially named LHO as an additional defendant. In addition to seeking a coverage determination, Rosemoor asserted that Harleysville is estopped from denying coverage because it did not defend the underlying suit under a reservation of rights and did not file a declaratory judgment action seeking a coverage determination.

Harleysville removed the case to this court. Notice Removal, ECF No. 1. Rosemoor moved under Colorado River Water Conservation District v. United States , 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), for this court to abstain and remand the case to be heard with another coverage dispute in Cook County Circuit Court. This court denied the motion. Order, ECF No. 22 (N.D. Ill. Apr. 17, 2019).

Harleysville subsequently moved to dismiss LHO, contending that Rosemoor had fraudulently joined it as an in-state defendant to defeat this court's diversity jurisdiction. The motion was granted. Order, ECF No. 32 (N.D. Ill. July 2, 2019).

II. Analysis

The parties argue the motion for summary judgment under the substantive insurance law of Illinois. "Under Illinois law, the interpretation of an insurance policy is a question of law that is properly decided by way of summary judgment." BASF AG v. Great Am. Assur. Co. , 522 F.3d 813, 818–19 (7th Cir. 2008) (citing Crum & Forster Managers Corp. v. Resolution Trust Corp. , 156 156 Ill.2d 384, 189 Ill.Dec. 756, 620 N.E.2d 1073, 1077 (1993) ) (other citations omitted). Rosemoor recites the Illinois summary judgment standard in its memorandum in opposition to summary judgement. ECF No. 36 at 7–8. Rossmoor's reliance on state procedural law appears to be an oversight, however, for Rosemoor does not argue that any aspect of Illinois's summary judgment standard affects the outcome. See id.

This court's jurisdiction is based on the parties' diverse citizenship. 28 U.S.C. § 1332(a)(1). Under the Erie doctrine, Erie R. Co. v. Tompkins , 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), this court applies federal procedural rules, specifically Federal Rule of Civil Procedure 56, to the motion for summary judgment and the law of Illinois to resolve substantive questions. See Houben v. Telular Corp. , 309 F.3d 1028, 1033 (7th Cir. 2002) ; Mayer v. Gary Partners and Co., Ltd. , 29 F.3d 330, 334 (7th Cir. 1994).

Summary judgment is appropriate "where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law." Haley v. Kolbe & Kolbe Millwork Co. , 866 F.3d 824 (7th Cir. 2017) (citing Fed. R. Civ. P. 56(a) ) (resolving insurance coverage suit at summary judgment). The parties identify no material factual disputes. See Pl.'s Resp. to Stmt. Undisputed Facts ("Resp. to SOF") 1–2, ECF No. 37; Resp. to SAF ¶¶ 1–6, ECF No. 39. The court must therefore decide whether Harleysville is entitled to judgment as a matter of law.

Under Illinois law, an insurer owes a duty to defend "if the allegations in the underlying complaint fall within, or potentially within, the policy's coverage." Westfield Ins. Company v. Na'tl Decorating Serv., Inc. , 863 F.3d 690, 695 (7th Cir. 2017) (citing Gen. Agents Ins. Co. of Am., Inc. v. Midwest Sporting Goods Co. , 215 Ill.2d 146, 293 Ill.Dec. 594, 828 N.E.2d 1092, 1098 (2005) ). "This is true even if the allegations are groundless, false, or fraudulent, and even if only one of several theories of recovery alleged in the complaint falls within the potential coverage of the policy." Id. (quoting Valley Forge Ins. Co. v. Swiderski Elecs., Inc. , 223 Ill.2d 352, 307 Ill.Dec. 653, 860 N.E.2d 307, 315 (2006) ). The court "must liberally construe the underlying complaint and the insurance policies in favor of the insured." Westfield Ins. Co. , 863 F.3d at 695 (citations omitted).

The parties raise three related issues. All concern the policies' language and the scope of coverage. Harleysville contends that the underlying complaint did not trigger a duty to defend because it alleged no "personal and advertising injury" to which the policies applied. SOF ¶ 41 (scope of coverage). Even if the complaint falls within the scope of coverage, Harleysville says that the exclusion for "Infringement Of Copyright, Patent, Trademark Or Trade Secret" claims, SOF ¶ 43, precludes coverage.

Rosemoor responds to both arguments by citing paragraphs 33 and 39–43 of the complaint filed in the underlying suit. As Rosemoor reads them, the paragraphs trigger the exclusion by alleging an "advertising injury," as the phrase is used in the policies, because they plead infringement of trade dress. See SOF ¶ 43 ("this exclusion does not apply to infringement, in your ‘advertisemen...