On November 25, 2020, a federal judge in Illinois Grinnell Mutual Reinsurance Co. v. S.B.C. Flood Waste Solutions, Inc. that an Iowa-based insurance company must continue to defend a waste management company in an underlying trademark infringement and defamation.
The decision stemmed from a state lawsuit in Illinois against S.B.C. Flood Waste Solutions, Inc. Complainants, Flood Bros. Disposal Co., claimed that Brian Flood and his sons, who had resigned from their previous employment with Flood Bros., started their own waste management company and despised their previous employer. The complaint alleged that S.B.C. engaged in a concerted effort to deprive Flood Bros. customers by making various false statements. In addition, Flood Bros. claimed. that S.B.C.'s logo and signage intentionally emphasized the term "Flood" in an attempt to confuse existing customers and infringe the Flood Bros. trademark.
S.B.C. informed Grinnell of the State's court proceedings and requested a defense and damages in accordance with its commercial insurance policy. In response, Grinnell filed a coverage action in the Northern District of Illinois requesting a decision that it had no obligation to defend or harm S.B.C. Grinnell moved to a summary judgment, arguing that the underlying lawsuit from Flood Bros. not eligible for coverage. The court disagreed and denied Grinnell's proposal. The court found that the accusations in the underlying measure constitute "personal and advertising damage" according to the insurance policy. The court further held that Grinnell has an obligation to defend the entire measure, since the underlying measure contains allegations of defamatory conduct, which fall within the clear meaning of the policy.
As usual, the insurer's obligation to defend is broader. than its obligation to make amends. This broad duty is triggered when the underlying accusations give rise to only potential for coverage. As is generally the case, the insurer must defend itself against all claims alleged in that lawsuit as long as a claim in the underlying lawsuit is potentially covered. As shown in Grinnell Mutual Reinsurance Co. v. S.B.C. Flood Waste Solutions, Inc. This broad and comprehensive defense also applies to those claims that do not fall within the scope. For these reasons, among other things, the defense coverage according to the standard general liability policy is of significant value and should not be overlooked, especially in intellectual property disputes, where the coverage can only be limited to certain types of claims.
Experienced coverage advice can help determine if there is potential for coverage that may require a defense in your next intellectual property dispute.