CGL NOT OBLIGATED TO COVER OR DEFEND INFRINGEMENT

Pro’s Choice Beauty Care, Inc. (Choice), was insured under a commercial general liability policy from Great Northern Insurance Company (Northern) when it was sued by Bumble and Bumble (Bumble). The latter sought damages and an injunction based on trademark infringement. Choice sent a claim to Northern. The company settled the trademark suit on its own and then sued its insurer for denying coverage.

Choice’s lawsuit alleged breach of contract and also sought declaratory relief. In response, Northern requested summary judgment that it had no obligation to cover or defend the Choice’s loss. Both parties appealed when the lower court denied their respective motions.

On appeal, the appellate division of the supreme court of New York noted that the policy provided coverage for advertising injury. There was no dispute between the parties that the trademark infringement action contained allegations of an advertising injury as defined in the policy.

The court noted that the policy, while covering trademark infringement (as part of advertising injury), excluded coverage for any instance or element of infringement or violation of intellectual property. The court also noted that the CGL policy defined intellectual property as including trademarks.

Bumble’s complaint alleged, among other things, that Choice counterfeited and infringed on another's trademark and engaged in the sale and distribution of offending goods. Under these circumstances, the high court determined that Northern satisfied its burden of demonstrating that the exclusion applied. Further, the court also ruled that Choice could not support its argument that a policy exception to the advertising injury exclusion applied to Choice’s actions.

Because there was no legal basis on which Northern could be held liable for coverage, it had no legal obligation to defend or indemnify Choice. Accordingly, the lower court should have granted Northern’s motion for summary judgment. The matter was remanded to the lower court for entry of such judgment.

Pro’s Choice Beauty Care, Inc., v. Great Northern Insurance Company—New York Supreme Court, Appellate Division, Second Department—January 20, 2021—No. 2018-10274.