Cat Internet Ser v. Providence ( 2002 )

Opinions of the United
2002 Decisions States Court of Appeals
for the Third Circuit
11-18-2002
Cat Internet Ser v. Providence
Precedential or Non-Precedential: Non-Precedential
Docket No. 01-4166
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Recommended Citation
"Cat Internet Ser v. Providence" (2002). 2002 Decisions. Paper 744.
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
NO. 01-4166
CAT INTERNET SERVICES, INC.;
INTERNET SUPPLY, INC.
Appellees
v.
PROVIDENCE WASHINGTON INSURANCE CO.;
YORK INSURANCE COMPANY,
Appellants
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
District Court Judge: Honorable Anita B. Brody
(D.C. Civil No. 00-CV-3238)
Argued October 29, 2002
Before: SLOVITER, FUENTES, Circuit Judges, and DEBEVOISE,
Senior District Judge
(Opinion filed: November 18, 2002)
Appearances:
Michael F. Aylward, Esq. (Argued)
Morrison, Mahoney and Miller
250 Summer Street
Boston, MA 02210-1181
Eugene J. Maginnis, Jr., Esq.
Dugan, Brinkmann, Maginnis and Pace
Suite 1400
1880 John F. Kennedy Boulevard
Philadelphia, PA 19103
Attorneys for Appellants
Stephen Levin, Esq. (Argued)
81 Big Oak Road, Suite 100
Morrisville, PA 19607
Attorney for Appellees
Laura A. Foggan, Esq.
John C. Yang, Esq.
Seth J. Blonder, Esq.
Wiley Rein & Fielding LLP
1776 K Street, N.W.
Washington, D.C. 20006
Attorney for Amicus Curiae
Complex Insurance Claims Litigation Association
OPINION
DEBEVOISE, Senior District Judge
Appellants, Providence Washington Insurance Company ("Providence
Washington") and York Insurance Company ("York") (collectively "Providence") appeal
from the District Court’s order granting summary judgment in favor of appellees on their
claim that the advertising injury provisions of Providence’s standard commercial liability
policy entitled them to coverage in a Tennessee lawsuit in which appellees were named as
defendants. We agree with the District Court and will affirm.
I. Facts and Procedural History
In February 2000 Magazines.com Inc. (the "Tennessee Plaintiff"), sued appellees,
CAT Internet Services, Inc. ("CAT") and Internet Supply, Inc. ("INS"), charging that
through the use of CAT’s and INS’s Internet domain name, Magazine.com, CAT and INS
infringed the Tennessee Plaintiff’s name and trademark Magazines.com for the purpose
and with the effect of diverting sales of magazines and other products to their own
affiliates, some of which were competitors of the Tennessee Plaintiff. The complaint in
the Tennessee action charged statutory and common law trademark and trade name
infringement as well as injury to business reputation and common law unfair competition.
After notice of the Tennessee Plaintiff’s suit, CAT’s and INS’s insurers, Providence
Washington and York, declined to undertake their defense under the advertising injury
provisions of their standard commercial liability policy. The pertinent provisions of the
policy provided:
1. Business Liability
a. We will pay those sums that the insured becomes legally obligated to
pay as damages because of "bodily injury", "property damage",
"personal injury" or "advertising injury" to which this insurance
applies . . .
b. This insurance applies to:
(2) "advertising injury" caused by an offense committed in the course
of advertising your goods, products or services . . .
"Advertising injury" was defined in the policy as:
"Advertising injury" means injury arising out of one or more of the
following offenses:
a. Oral or written publication of material that slanders or libels a person or
organization or disparages a person’s or organization’s goods, products or
services;
b. Oral or written publication of material that violates a person’s right of
privacy;
c. Misappropriation of advertising ideas or style of doing business; or
d. Infringement of copyright title or slogan.
Following Providence’s refusal to accept coverage for the Tennessee Plaintiff’s
claims, CAT and INS commenced an action for declaratory relief and damages in the
District Court. The parties filed cross-motions for summary judgment. The District
Court granted CAT’s and INS’s motion, ruling that Providence Washington and York had
a duty to defend the Tennessee litigation. This appeal followed.
II. The District Court Opinion
Applying Pennsylvania law to the coverage issue, the District Court noted that the
insurer’s "duty to defend is broader than the duty to indemnify, because a duty to defend
arises ’whenever an underlying complaint may "potentially" come within the insurance
coverage.’ Frog, Switch [& Manufacturing Co., Inc. v. Travelers Insurance Company,
193 F.3d 742, 746 (3d Cir. 1999)]. . . If a single allegation of a complaint is potentially
covered by a policy, an insurer has an obligation to defend its insured against all claims
until there is no possibility of recovery for a covered claim." (Slip. Op. at 7).
Addressing the question whether the complaint in the Tennessee litigation alleged
an "advertising injury" within the meaning of the policy, the District Court held that it
did. It concluded that under Pennsylvania law the advertising injury provisions cover
trademark infringement as a "misappropriation of an advertising idea or style of doing
business," a view with which our court has in dicta suggested agreement. Frog, Switch,
(Slip. Op. at 8,9).
Distinguishing Sorbee International Ltd. v. Chubb Custom Insurance Co., 735 A.
2d 712 (Pa. Super. 1999), the District Court found that "the allegations of the Tennessee
Complaint . . . do allege trademark infringement that is a ’misappropriation of an
advertising idea or style of doing business’" (Slip. Op. at 10), thus asserting an
"advertising injury" that triggered Providence’s obligation to defend under the policy.
III. Jurisdiction and Standard of Review
The District Court had diversity jurisdiction pursuant to 28 U.S.C. 1332(a)(1).
We have jurisdiction under 28 U.S.C. 1291, as this is an appeal from a final judgment of
the District Court. We review the District Court’s grant of summary judgment de novo.
Fogleman v. Mercy Hosp., Inc., 283 F.3d 561, 566 n.3 (3d Cir. 2002). Summary
judgment was proper if, viewing the record in the light most favorable to Providence,
there is no genuine issue of material fact and CAT and INS are entitled to judgment as a
matter of law. The parties agree that there is no genuine issue of fact on the policy
coverage issue.
IV. Discussion
Providence urges that the District Court misinterpreted dicta in this court’s holding
in Frog, Switch and ignored the Pennsylvania Superior Court’s holding in Sorbee
International and thus erred in holding that a trademark infringement dispute involving
competing Internet domain sites sought recovery for "misappropriation of an advertising
idea or style of doing business." At oral argument Providence’s counsel advanced the
position that listing a domain site name such as "magazine" is not "advertising" within
the meaning of the policy as it was not part of a marketing campaign to sell CAT’s or
INS’s products to the consuming public. It would follow, according to Providence, that
misuse of the domain name as charged in the Tennessee litigation did not cause an
"advertising injury."
In Frog, Switch insurance carriers that had issued policies covering "advertising
injury" were asked to defend a claim for theft of trade secrets, unfair competition and
reverse passing off. We held that "[t]he allegation that Frog engaged in unfair
competition by misappropriating trade secrets relating to the manufacture of a product
line does not allege misappropriation of advertising ideas or styles of doing business as
such." 193 F.3d at 748. However, in dicta we suggested disagreement with the Sixth
Circuit Court of Appeals which had held that trademark infringement was not covered by
the standard policy because there was no specific references to trademark infringement in
the policy (as distinguished from specific references to copyright infringement). Advance
Watch Co., Ltd. v. Kemper National Insurance Co., 99 F.3d 795 (6th Cir. 1996).
Sorbee International, dealing with the same policy language, did not address
appropriation of an advertising idea. Rather the claim for which the insured demanded a
defense was for misleading factual representations about the nature and characteristics of
the insured’s product and violation of FDA policies and regulations.
After reviewing the record, the briefs and applicable Pennsylvania law, we
conclude that Providence adopts an excessively narrow interpretation of the policy
language. For substantially the same reasons set forth in the District Court’s opinion we
conclude that CAT and INS established that at least one allegation in the Tennessee
complaint potentially fell within the policy’s advertising injury coverage, triggering
Providence’s duty to defend.
For the foregoing reasons, we will AFFIRM the judgment of the District Court.
/s/ Dickinson R. Debevoise
Senior District Judg