In Selective Ins. Co. of America v. Smart Candle, LLC, ___ F.3d ___, 2015 WL 1345231 (8th Cir. 2015), the United States Court of Appeals for the Eighth Circuit, applying Minnesota law, affirmed the district court’s grant of summary judgment to the insurer, holding (1) that the policyholder’s alleged trademark infringement was not covered by an insurance policy that provided coverage for Personal and Advertising Injury, and (2) that the insurer did not have any obligation to look beyond the four corners of the complaint to determine whether it had a duty to defend.
A third party, Excell Consumer Products (Excell), filed a lawsuit against the policyholder, Smart Candle, LLC (SC) under the Lanham Act, alleging that SC’s use of the trade name and trademark “Smart Candle” infringed Excell’s rights over use of that name and trademark. SC, in turn, tendered the lawsuit for coverage to its insurer, Selective Insurance Co. (Selective). Id. at *1. Selective disclaimed coverage, pointing to the “personal and advertising injury” section of its policy, which provided coverage for injury resulting from “[i]nfringing upon another’s copyright, trade dress, or slogan in your ‘advertisement,” but excluded coverage for any injury “arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights.” Id. The exclusion further clarified that the policy “does not apply to infringement in your ‘advertisement’ of copyright, trade dress or slogan.” Id. On the basis of these policy terms, Selective informed SC that it had no duty to defend Excell’s lawsuit. Id.
Selective subsequently filed a declaratory judgment suit against SC in the district of Minnesota. Id. SC counterclaimed for breach of contract, alleging, in part, that Selective had not conducted “any reasonable investigation of Excell’s Claims” before denying coverage. Id. The parties cross moved for summary judgment. Id. The district court granted summary judgment for Selective, and SC appealed. Id.
The Eighth Circuit explained the basic insurance law principles in Minnesota: insurance policies are interpreted in accordance with the parties’ intent and, while ambiguities are resolved in favor of the policyholder, unambiguous language is to be given its “plain and ordinary meaning.” Id. at *2. The court further explained that an insurer has a duty to defend where any part of a claim is arguably within the terms of the policy. Id.
The court then explained that SC’s policy excluded coverage for suits based on trademark infringement but granted coverage for suits based on infringement of a slogan. Id. Although the policy did not define the term “slogan,” the court deemed the term unambiguous and applied the “plain and ordinary meaning,” which it had applied in an earlier case: either “(1) a word or phrase used to express a characteristic position or stand or a goal to be achieved and (2) a brief attention-getting phrase used in advertising or promotion.” Id. (internal quotation marks and citations omitted).
Although SC argued that it was entitled to indemnification because the lawsuit was about its use of the phrase “Smart Candle” as either a slogan or as both a trademark and a slogan, the court rejected this argument. Id. Rather, the court found that the phrase “Smart Candle” did not meet either definition of the term slogan: the words do not express a position or goal nor are they, by themselves, “attention-getting.” Id. The court explained that “[t]he words simply are the trademarked name of the company, used for product recognition.” Id. The court further explained that the allegations in Excell’s complaint were limited to trademark and trade-name infringement and did not implicate any slogan infringement, either in substance or in form. Id. at *3.
The court also rejected SC’s argument that Selective should have looked beyond the four corners of the complaint to determine whether there was an arguable claim of slogan infringement. In this regard, the court noted: “Minnesota law requires an examination of the complaint only, unless the pleadings arguably raise a claim that is within the scope of coverage.” Id. The court explained that Selective’s investigation complied with Minnesota law when it reviewed the complaint and determined that the allegations were not covered by the policy. Id. The court, thus, affirmed the district court’s rulings in favor of Selective. Id. at *4.
This case is a good example of a court applying the plain and unambiguous language of an insurance policy to determine the parties’ rights and obligations under the policy.