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General Liability Insurer Must Defend Trademark and Other IP Claims

On November 25, 2020, an Illinois federal judge ruled in Grinnell Mutual Reinsurance Co. v. S.B.C. Flood Waste Solutions, Inc., that an Iowa based insurance company must continue to defend a waste disposal company in an underlying trademark infringement and defamation lawsuit.

The decision stemmed from an Illinois state court action brought against S.B.C. Flood Waste Solutions, Inc. The plaintiff, Flood Bros. Disposal Co., alleged that Mr. Brian Flood and his sons, who had been terminated from prior employment at Flood Bros., started their own waste disposal company and disparaged their former employer. The complaint alleged that S.B.C. engaged in a coordinated effort to deprive Flood Bros. of customers by making various false statements. In addition, Flood Bros. alleged that S.B.C.’s logo and signage intentionally emphasized the term “Flood” in an effort to confuse existing customers and infringe on the Flood Bros. trademark.

S.B.C. notified Grinnell of the state court action and requested a defense and indemnification under its commercial general liability insurance policy. In response, Grinnell filed a coverage action in the Northern District of Illinois seeking a ruling it had no duty to defend or indemnify S.B.C. Grinnell moved for summary judgment contending that the underlying lawsuit by Flood Bros. did not qualify for coverage. The court disagreed and denied Grinnell’s motion. The court found that the allegations set forth in the underlying action constitute “personal and advertising injury” under the insurance policy. The court further held that Grinnell has a duty to defend the entire action since the underlying action contains allegations regarding defamatory conduct, which fall within the plain meaning of the policy.

As is typically the case, an insurer’s duty to defend is broader than its duty to indemnify. This broad duty is triggered when the underlying allegations raise a mere potential for coverage. As is also generally the case, so long as one claim in the underlying lawsuit is potentially covered, the insurer must defend against all claims alleged in that lawsuit.  As shown in Grinnell Mutual Reinsurance Co. v. S.B.C. Flood Waste Solutions, Inc., this broad and all-encompassing defense applies even to those claims that do not fall within the scope of coverage. For these reasons, among others, the defense coverage afforded under standard general liability policies is of significant value and should not be overlooked, particularly in disputes involving intellectual property issues, where coverage may be limited to only certain types of claims.

Experienced coverage counsel can help to determine whether a potential for coverage exists that might require a defense in your next intellectual property dispute.

Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.National Law Review, Volume X, Number 344
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About this Author

Michael S. Levine Insurance Lawyer Hunton Andrews Kurth
Partner

Mike has more than 20 years of experience litigating insurance disputes and advising clients on insurance coverage matters.

Mike Levine is a partner in the firm’s Washington, DC office and a member of the firm’s Insurance Recovery team. Mike’s policyholder representation focuses on:

  • Property damage and business interruption claims, including COVID-19 losses
  • Event cancellation insurance counseling
  • Representations and warranties coverage
  • ...
202 955 1857
Daniel Hentschel Complex Business Litigation Attorney Hunton Andrews Kurth Miami, FL
Associate

Daniel’s practice focuses on complex business litigation, with an emphasis on insurance coverage litigation and government investigations.

With experience in the areas of insurance litigation, bad faith and government investigations, Daniel represents corporate entities in complex litigation disputes in both federal and state court. Daniel’s practice focuses on counseling clients on insurance coverage disputes arising out of cyber policies, crime policies, commercial general liability (CGL) policies, professional liability/errors and omissions (E&O) policies, and directors and...

305-810-2469
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