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Boehm v. Scheels All Sports, Inc.

United States District Court, W.D. Wisconsin

August 17, 2016


          OPINION & ORDER

          JAMES D. PETERSON District Judge

         Plaintiffs are sports photographers who accuse defendants, mostly sports memorabilia dealers, of making and selling unauthorized reproductions of their work. Some defendants have business insurance policies that may cover “advertising injury, ” so those defendants tendered this case to their insurers, who intervened to contest coverage. Three of those insurers now move for summary judgment that their policies do not afford coverage for plaintiffs’ claims.

         A basic business insurance policy will often include coverage for what is called “advertising injury.” In general terms, advertising injury covers claims that the insured has violated another’s intellectual property rights in the insured’s advertising. It does not, however, provide coverage for claims of intellectual property infringement generally. Publishers and others in the media industries who want broader protection against claims of copyright infringement can get a policy with “media perils” coverage, but none of the defendants here had that type of insurance. So the primary questions here are first, whether each insured actually had advertising injury coverage, and if so, whether the complaint alleges that copyright infringement occurred in the insured’s advertisement.

         The court will grant the motion by State Farm Fire and Casualty Company, Dkt. 280, [1] because the State Farm policy issued to Event USA Corp. includes an endorsement that expressly excludes advertising injury coverage. The court will grant the motion by Grinnell Mutual Reinsurance Company, Dkt. 285, because plaintiffs not allege any infringement in an advertisement by Grinnell’s insureds, AW Artworks and Andrew Wredberg. The court will grant the motion by Society Insurance, A Mutual Company, Dkt. 305, because the alleged infringement that its insured, Nicholas Martin, d/b/a Sports-4-Less, committed in his listings on Amazon were published before the Society policy took effect.


         A. Summary judgment standard

         Summary judgment is appropriate if the intervenors show “that there is no genuine dispute as to any material fact and [each] is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). To avoid summary judgment, defendants “must set forth specific facts showing that there is a genuine issue for trial.” Id.

         The determination of insurance coverage questions is commonly amenable to resolution on summary judgment, because it depends on comparison of the allegations in the complaint to the terms of the policy.

         B. Basic legal principles concerning insurance coverage

         Insurance coverage disputes are governed by well-known principles of state law. If even one claim in the complaint falls within the coverage afforded by the policy, the insurers must defend the policy holders against the entire suit. Wilson Mut. Ins. Co. v. Falk, 2014 WI 136, ¶ 69, 360 Wis.2d 67, 857 N.W.2d 156. To determine whether the intervenors have a duty to defend, the court compares the allegations of the complaint to the terms of the policy. Estate of Sustache v. Am. Family Mut. Ins. Co., 2008 WI 87, ¶ 20, 311 Wis.2d 548, 751 N.W.2d 845. Under Wisconsin law, [2] the process has three steps. Am. Family Mut. Ins. Co. v. Am. Girl, Inc., 2004 WI 2, ¶ 24, 268 Wis.2d 16, 673 N.W.2d 65. First, the court determines whether the policy makes an initial grant of coverage. Second, the court considers whether there are exclusions that would preclude coverage of the particular claim at issue. And third, the court considers whether the applicable exclusions are subject to exceptions that would afford coverage after all.

         If there is even arguable-as opposed to actual-coverage, then the intervenors must defend defendants. Gen. Cas. Co. of Wis. v. Hills, 209 Wis.2d 167, 561 N.W.2d 718, 722 n.11 (1997). “Generally, the duty to defend is broader than the duty to indemnify, ” which means that the insurer will have a duty to defend a case, even if the allegations may be “groundless, false, or fraudulent.” Johnson Controls, 2010 WI 52, ¶¶ 29, 83 (quotation marks and citations omitted).

         The interpretation of the insurance contract is a question of law. Phillips v. Parmelee, 2013 WI 105, ¶ 11, 351 Wis.2d 758, 840 N.W.2d 713.[3] The purpose of policy interpretation is “to give effect to the intent of the parties, ” using the policy language’s “plain and ordinary meaning, as understood by a reasonable person in the position of the insured.” Id. ¶ 12. When the policy language is unambiguous, the policy is enforced as written, “without resorting to the rules of construction or principles from case law.” Johnson Controls, Inc. v. London Mkt., 2010 WI 52, ¶ 26, 325 Wis.2d 176, 784 N.W.2d 579. “[I]f the language of a policy is ambiguous, susceptible of more than one reasonable interpretation, [the Wisconsin courts] will construe it narrowly, against the insurer, and in favor of coverage.” Liebovich v. Minn. Ins. Co., 2008 WI 75, ¶ 18, 310 Wis.2d 751, 751 N.W.2d 764.

         With these principles in mind, the court turns to each motion for summary judgment. The court starts with Grinnell’s motion, because it presents typical advertising injury provisions.

         C. Grinnell Mutual (insureds: AW Artworks and Andrew Wredberg)

         The Grinnell policy confers coverage for “personal and advertising injury, ” and the scope of that coverage is circumscribed by definitions in the policy. The initial grant of coverage provides:

b. This insurance applies:
. . .
(2) To “personal and advertising injury” caused by an offense arising out of your business, but only if the offense was committed in the “coverage territory.” Dkt. 287-1. The policy provides a definition of “personal and advertising injury.” That definition provides, in pertinent part:
14. “Personal and advertising injury” means injury, including consequential "bodily injury", arising out of one or more of the following offenses:
. . .
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. The policy also defines “advertisement”:

1. “Advertisement” 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. For the purposes of this definition:
a. Notices that are published include material placed on the Internet or on similar electronic means of communication; and
b. Regarding web-sites, only that part of a web-site that is about your goods, products or services for the purposes of attracting customers or supporters ...

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