Tuesday, December 20, 2011

The claim is dismissed but the insurance lingers

Southern Snow Manufacturing Co. v. Sno Wizard Holdings, Inc., 2011 WL 6296735 (E.D. La.)
This part of the dispute is SnoWizard’s fight with its insurer.  (I let a couple other rulings go by, though the court also excluded the testimony of plaintiffs’ damages expert for being unable to show a connection between the allegedly misleading use of “TM” by SnoWizard and harm suffered by SnoWizard’s competitors.)
Hanover’s policy covers “personal and [] advertising injury,” including “[o]ral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products, or services.”  SnoWizard tendered defense of plaintiffs’ claims and Hanover denied any duty to defend or indemnify. The court initially ruled against Hanover, reasoning that “disparages” was broad enough to potentially cover a C&D containing an allegedly false accusation of trademark infringement.
Given subsequent procedural developments, the questions before the court were whether coverage existed under the policy, and whether Hanover's duty to defend terminated as a matter of law once it became clear that coverage was not a possibility. 
The policy covered slander, libel, and disparagement, but didn’t define them.  The court noted that general meaning of those terms is broader than that constituting a cause of action in tort, particularly with respect to “disparagement,” which isn’t an independent tort in Louisiana. 
However, it was now undisputed that Southern Snow couldn’t sustain any defamation tort claim.  Thus, the court agreed with Hanover that the policy didn’t cover Southern Snow’s claims.
Still, the court denied Hanover’s attempt to terminate its defense obligations.  The policy expressly stated the circumstances allowing termination, and none were applicable.  The duty to defend is broader than the duty to indemnify.  The court pointed out that “we will have no duty to defend the insured against any ‘suit’ seeking damages for ‘personal and advertising injury’ to which this insurance does not apply,” appears in non-Louisiana policies. “But the specific Louisiana insuring agreement endorsement included with this policy glaringly omits this phrase, likely in recognition of the broad and continuing duty to defend that is implicit in Louisiana law.”

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