Value Wholesale, Inc. v. KB Ins. Co.
| Decision Date | 02 November 2020 |
| Docket Number | 18-cv-5887(KAM)(SMG) |
| Parties | VALUE WHOLESALE, INC., Plaintiff, v. KB INSURANCE CO. LTD., Defendant. |
| Court | U.S. District Court — Eastern District of New York |
This action concerned the duty of defendant KB Insurance Co., Ltd. ("KBIC") to defend its insured, Value Wholesale, Inc. ("Value"), in a trademark lawsuit before Judge Carol Bagley Amon: Abbott Laboratories v. Adelphia Supply USA, No. 15-cv-5826 (E.D.N.Y.) (the "Abbott Litigation"). This court previously found, on summary judgment, that KBIC breached its duty to defend Value in the Abbott Litigation. Now pending before the court are the parties' submissions regarding the proper amount of damages to be awarded to Value.
For the reasons set forth below, the court finds that KBIC owes Value $347,800.89 in damages, plus prejudgment interest at a rate of nine percent per annum since April 4, 2018, and postjudgment interest as prescribed by 28 U.S.C. § 1961.
The relevant factual background giving rise to this action was set forth in the court's March 31, 2020 Memorandum and Order granting Value's motion for partial summary judgment with respect to KBIC's liability for its breach of its duty to defend. (See generally ECF No. 57, Memorandum and Order, published as Value Wholesale, Inc. v. KB Ins. Co., 450 F. Supp. 3d 292 (E.D.N.Y. 2020).) The court summarizes that background only briefly here.
Value is a pharmaceutical wholesaler. .) KBIC is a foreign insurance company that operates in the United States through its manager, Leading Insurance Services, Inc., a New Jersey corporation with its headquarters in Ridgefield Park, New Jersey. (ECF No. 32, KBIC Objections to Rule 56.1 Statement, ¶¶ 1-2.) KBIC is licensed to issue insurance policies in the State of New York. (Id.; see also Compl. ¶ 16; Ans. ¶ 16.)
Value purchased a commercial insurance package from KBIC covering the period from February 4, 2014 through February 4, 2015, and renewed the package for the period from February 4, 2015 through February 4, 2016 (the "Policy"). (Compl. ¶¶ 17-19; Ans. ¶¶ 17-19; see ECF No. 33, Declaration of Matthew Kraus ("Kraus Decl."), Ex. D, Commercial General Liability CoverageForm, Coverage B, Personal and Advertising Injury ("Pol.")1.) The package included a "Commercial General Liability Coverage Part," under which KBIC agreed to defend Value against any lawsuits seeking damages resulting from covered "Personal and Advertising Injuries." (Pol. at 116.)
To trigger coverage and, consequently, KBIC's duty to defend, a complaint naming Value as a defendant had to allege an injury arising out of one of a number of "qualifying offenses." (Id.) Value would be covered it if were sued for an injury allegedly resulting from: (1) "[Value's] use of another's advertising idea in [its] 'advertisement'"; or (2) Value "[i]nfringing upon another's copyright, trade dress or slogan in [its] 'advertisement.'" (Id.) Advertisement, as used in these provisions, was broadly defined as "a notice that is broadcast or published to the general public or specific market segments about [Value's] goods, products or services for the purpose of attracting customers or supporters." (Id. at 105.) Even if a claim would otherwise be covered, however, KBIC may not have needed to provide coverage if one or more policy exclusions applied. (See id. at 99.) There was, for example, an "intentional acts exclusions," which precluded coverage againstclaims arising from Value's intentional conduct. (Id.) Furthermore, the "intellectual property exclusion" precluded coverage against claims arising from alleged intellectual property infringement. (Id.)
In November 2015, Abbott Laboratories and related companies (collectively, "Abbott") filed a lawsuit in the Eastern District of New York against Value and over one-hundred other pharmaceutical distributers and pharmacies. Abbott v. Adelphia Supply USA, No. 15-cv-5826 (E.D.N.Y.). Value retained the law firm Stern & Schurin LLP ("Stern & Schurin") to defend it in the Abbott Litigation. One of Value's co-defendants in the Abbott Litigation, MedPlus, Inc. ("MedPlus") retained the same law firm for its defense.
Abbott alleged that the defendants engaged in a wrongful scheme to "import[], advertise[] and . . . distribut[e]" boxes of international blood glucose test strips produced by Abbott, which were not approved for domestic sale in the United States. Abbott's complaint alleged that Abbott's harm resulted, at least in part, from the defendants' advertising activities:
Defendants' unauthorized importation, advertisement, and subsequent distribution causes, or is likely to cause, consumer confusion, mistake, and deception to thedetriment of Abbott. . . . As a result of Abbott's extensive branding, marketing, sales, and quality control efforts . . . patients in the United States expect a certain quality, packaging, and overall image from Abbott for FreeStyle test strips. When such patients encounter the diverted international FreeStyle test strips, which bear certain of Abbott's trademarks but which are materially different from what U.S. patients expect [as described above], they are likely to be confused and, indeed, disappointed. . . . And the advertisement and sales of diverted international FreeStyle test strips cause great damage to Abbott and the goodwill of Abbott's valuable trademarks.
(Id. ¶ 15 (emphasis added).) Abbott also explained in its initial discovery disclosures that its demand for monetary damages was based on "all ill-gotten profits from Defendants' importation, purchase, marketing, advertisement, distribution, sale, offer for sale, and/or use in commerce in the United States of diverted international FreeStyle test strips." (Compl., Ex. F, Initial Disclosures in Abbott Litigation, at 4 (emphasis added).) Based on the alleged conduct and resulting harm, Abbott asserted claims for, inter alia, trademark infringement under Section 32 of the Lanham Act, 15 U.S.C. § 1114(1); unfair competition under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(i)(A); and trademark dilution under Section 43(c) of the Lanham Act, 15 U.S.C. § 1125(c). (Abbott Compl. ¶¶ 563-71, 572-78, 582-86.)
On March 29, 2016, Value tendered Abbott's Second Amended Complaint to KBIC. (Kraus Decl., Ex. E, Tender.) Value asserted that the complaint alleged a qualifying advertisinginjury, triggering KBIC's duty to defend. (Id.) KBIC declined coverage, arguing that Abbott's complaint did not allege a causal nexus between its injuries and Value's advertising activities and that, even if it had, exclusions in the policy applied. (Kraus Decl., Ex. F, Disclaimer). Value asked KBIC to reconsider, to no avail. (Kraus Decl. Ex. G, Request for Reconsideration, and Ex. H, Supplemental Disclaimer.)
KBIC's disclaimer of its duty to defend Value spawned two lawsuits: (1) a state court action between Continental Casualty Company ("Continental") (Value's other insurer) and KBIC, in which Continental sought a declaration that KBIC owed Value a duty to defend under the terms of the Policy and, accordingly, had to reimburse Continental for the money Continental had spent providing Value with a defense, see Continental Casualty Company v. KB Insurance Co., Ltd., Index No. 652103/2018, slip op. , appeal filed, Index No. 2019-4978 (N.Y. App. Div. 2019); and (2) the instant federal action initiated by Value against KBIC, which sought identical declaratory relief and, accordingly, compensation for the unpaid defense costs Value incurred in the Abbott Litigation, and a declaration that KBIC must defend Value going forward in the Abbott Litigation.
In the instant case, following the state court's decision in the Continental action that KBIC had a duty to defend Value, the parties moved for summary judgment in this action. (See ECF Nos. 24-27, 31-39.) On March 31, 2020, this court granted Value's motion for partial summary judgment as to liability on KBIC's duty to defend, and denied KBIC's motion for summary judgment. The court ruled that (1) the state court decision in Continental did not prevent this court from determining whether KBIC owed damages to Value, 450 F. Supp. 3d at 302-03; and (2) KBIC breached its duty to defend Value, id. at 303-07. The court therefore granted Value's motion, and directed the parties to appear for an inquest on damages. Id. at 308. In a letter to the court dated April 14, 2020, KBIC represented "that it will defend Value on a going forward basis." (ECF No. 58, KBIC Letter, at 1.)
After further litigation over the expert discovery relevant to the inquest on damages, the result of which allowed the parties to submit the numerous filings, replies, and expert declarations that are now before the court, the parties submitted their papers setting forth their respective positions on damages. The parties have agreed to rely solely on their numerous submissions, and have stipulated to the admissibility of the declarations and exhibits filed in support. (See ECF No. 88, Stipulation.)
"Where an insurer breaches the duty to defend,...
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