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Great Lakes Reinsurance UK PLC v. In & Out Fashion Inc.

United States District Court, C.D. California

June 21, 2016

GREAT LAKES REINSURANCE UK PLC
v.
IN AND OUT FASHION, INC.

          Present: The Honorable CHRISTINA A. SNYDERD Judge.

         EFENDANT-INSURED’S MOTION FOR PARTIAL SUMMARY JUDGMENT REGARDING PLAINTIFF-INSURER’S DUTY TO DEFEND (DKT. 29, FILED APRIL 29, 2016) PLAINTIFF-INSURER’S MOTION FOR PARTIAL SUMMARY JUDGMENT REGARDING DEFENDANT-INSURED’S DUTY TO DEFEND (DKT. 27, FILED APRIL 29, 2016)

          CHRISTINA A. SNYDERD Judge.

         I. INTRODUCTION

         On August 4, 2015, plaintiff-insurer Great Lakes Reinsurance (UK) PLC (“Great Lakes” or “insurer”) filed the instant action against defendant-insured In and Out Fashion, Inc. (“IOF” or “insured”). In the operative complaint, Great Lakes asserts declaratory relief claims regarding (1) its duty to defend and (2) its duty to indemnify defendant-insured IOF in relation to IOF’s defense of a 2014 lawsuit (the “underlying action”) filed by garment retailer Forever 21, Inc. (“Forever 21”).

         On April 29, 2016, defendant-insured IOF filed a motion for partial summary judgment as to Great Lakes’ first claim for declaratory relief regarding the duty to defend IOF in the underlying action. See Dkt. 29 (“IOF MSJ”). On May 5, 2016, the parties filed a Joint Statement of Undisputed Facts. Dkt. 31 (“JSUF”). On May 27, 2016, plaintiff-insurer Great Lakes filed an opposition to IOF’s motion for partial summary judgment, dkt. 35 (“GL Opp’n”), and on June 3, 2016, IOF filed a reply, dkt. 37 (“IOF Reply”).

         On April 29, 2016, plaintiff-insurer Great Lakes filed its own motion for partial summary judgment as to its first claim for declaratory relief regarding its duty to defend IOF in the underlying action. See Dkt. 27 (“GL MSJ”).[1] On May 20, 2016, defendant-insured IOF filed an opposition to Great Lakes’ motion for partial summary judgment, dkt. 32 (“IOF Opp’n”), and on June 3, 2016, Great Lakes filed a reply, dkt. 37 (“GL Reply”).

         On June 20, 2016, the Court provided the parties with a tentative order and held oral argument. Having carefully considered the parties’ arguments, the Court finds and concludes as follows.

         II. BACKGROUND

         A. The Great Lakes Insurance Policies

         Defendant-insured IOF is the named insured in two commercial general liability insurance policies (“the policies” or “the Great Lakes policies”) issued by plaintiff-insurer Great Lakes. JSUF Nos. 1-2. The policies collectively cover conduct that occurred between February 15, 2013, and February 15, 2015. Id.

         The “Personal and Advertising Liability” portions of the Great Lakes policies provide, in pertinent part, that Great Lakes “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, ” and that Great Lakes “will have the right and duty to defend the insured against any ‘suit’ seeking those damages.” JSUF No. 3.

         The policies define “personal and advertising injury, ” in relevant part, to include injury “arising out of one or more of the following offenses:”

d. Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s organizations goods, products or services;
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”.

Id. (emphasis added).

         An “advertisement, ” in turn, “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.”[2]

         As is relevant here, the policies also contain an exclusion for “Infringement Of Copyright, Patent, Trademark Or Trade Secret, ” which provides that the insurance does not apply to

“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.

Id. (emphasis added).

         B. The Underlying Action and the Insured’s Tender of a Defense

         On September 9, 2014, Forever 21 initiated the underlying action against IOF by filing a complaint (the “underlying complaint”) in the United District Court for the Central District of California. JSUF No. 4; see Case No. 2:14-cv-07014-CAS-MRW. The underlying complaint sought the recovery of damages and injunctive relief arising out of IOF’s alleged advertising, offering to sell, sale, and distribution of products that infringed various intellectual property rights of Forever 21. See generally Dkt. 28, Ex. C (underlying complaint). Specifically, Forever 21 asserted six claims against IOF in the underlying action, including (1) a claim for trademark infringement, pursuant to 15 U.S.C. § 1114 (Lanham Act § 32(a)); (2) a claim for false designation of origin, false advertising, and unfair competition, pursuant to 15 U.S.C. §1125(a) (Lanham Act § 43(a)); (3) a claim for trademark dilution, pursuant to 15 U.S.C. §1125(c); (4) a claim for unfair competition, pursuant to California Business and Professions Code § 17200, et seq.; (5) a California common law claim for unfair competition; and (6) a claim for inducement of breach of contract. See id.

         On September 26, 2014, counsel for defendant-insured IOF sent a letter to Great Lakes enclosing a copy of the complaint in the underlying action and requesting that a defense be provided to IOF. JSUF No. 5. In a letter dated October 31, 2014, counsel for plaintiff-insurer Great Lakes’ asserted that it had concluded that there is no coverage under its policies for any of the allegations contained in the underlying action, which Great Lakes considered to be a suit primarily seeking damages for non-covered trademark infringement. JSUF No. 6. The following month, in a letter dated November 20, 2014, counsel for IOF requested reconsideration of Great Lakes’ decision, and roughly two weeks later, counsel for Great Lakes denied IOF’s request for reconsideration. JSUF Nos. 7-8.

         In a letter dated February 26, 2015, counsel for IOF again requested reconsideration of Great Lakes’ decision not to provide a defense, this time enclosing a copy of Forever 21’s’s responses to IOF’s first set of interrogatories. JSUF No. 9. Just over a week later, in a letter dated March 4, 2015, counsel for Great Lakes again expressed its view that it was not obligated to defend or indemnify IOF in the underlying action. JSUF No. 10. In a letter dated May 19, 2015, counsel for IOF sent a final request for reconsideration of the denial of a duty to defend IOF ...


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