In Sentinel Ins. Co. v. Beach for Dogs Corp., No. 17 C 1501, 2017 WL 6570079 (N.D. Ill. Dec. 21, 2017), the court held that the insurer owed no coverage to its insured, finding that an Intellectual Property Exclusion (“the IP Exclusion”) barred coverage for an underlying lawsuit that alleged both trademark and copyright infringement claims against the insured.
In Sentinel, the insured was sued in an underlying lawsuit for trademark infringement, violation of the Illinois Uniform Deceptive Trade Practices Act, and violation of the Illinois Consumer Fraud and Deceptive Trade Practices Act. The plaintiff alleged that the insured used door hangers that purportedly contained confusingly similar name and design elements as the plaintiff’s door hanger advertisements. The insured tendered the underlying lawsuit its insurer. The insurer filed a declaratory judgment action and denied the insured’s request for defense based on the IP Exclusion.
The IP Exclusion applied to any damage arising out of any actual or alleged infringement of violation of any intellectual property right, including copyright and trademark, as well as “Any injury or damages alleged in any claim or ‘suit’ that also alleges an infringement or violation of any intellectual property right, whether such allegation of infringement or violation is made by you or any other party involved in the claim or “suit”, regardless of whether this insurance would otherwise apply.” However, the IP Exclusion provided an exception if the only allegation of the complaint was limited to infringement of copyright, slogan, or title of literary or artistic work in your advertisement.
The insured argued that while the plain language of the IP Exclusion precludes coverage for the trademark claims, the IP Exclusion would not extend to the additional allegations of copyright infringement, and thus, the insurer owes a duty to defend. However, the court found that the language of the IP Exclusion broadly provided that coverage was not only precluded for specific claim, but applied the plain language of the exclusion, which applied to any suit involving trademark infringement unless the only allegation in that lawsuit was copyright infringement in an advertisement. The court noted that its position is consistent with recent decisions within the same district that have interpreted similar IP Exclusions, including Sentinel Ins. Co., Ltd. v. Yorktown Industries, Inc., No. 14-cv-4212, 2017 WL 446044 (N.D. Ill. Feb. 2, 2017) and Hartford Casualty Ins. Co. v. Dental USA, Inc., No. 13-C-7637, 2014 WL 2863164 (N.D. Ill. June 24, 2014). Based on the foregoing, the court held that by the express language of the IP Exclusion, the existence of the trademark allegations precluded coverage for the entire underlying lawsuit, and thus, no duty to defend was owed.