Westport Reinsurance Management, LLC v. St. Paul Fire & Marine Insurance

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
11-10-2003
Westport Reinsurance v. St Paul Fire
Precedential or Non-Precedential: Non-Precedential
Docket No. 02-3858
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NOT PRECEDENTIAL
IN THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 02-3858
________________
WESTPORT REINSURANCE MANAGEMENT, LLC,
Appellant
v.
ST. PAUL FIRE & MARINE INSURANCE COMPANY
____________________________________
On Appeal From the United States District Court
For the District of New Jersey
(D.C. No. 01-cv-00926)
District Judge: Honorable Garrett E. Brown, Jr.
_______________________________________
Argued September 9, 2003
Before: BARRY, BECKER and GREENBERG, Circuit Judges.
(Filed: November 10, 2003)
JEFFREY A. COOPER, ESQUIRE
ROBERT P. DONOVAN, ESQUIRE (ARGUED)
Carella, Byrne, Bain, Gilfillan, Cecchi,
Stewart & Olstein
5 Becker Farm Road
Roseland, New Jersey 07068
Attorneys for Appellant
GEORGE R. HARDIN, ESQUIRE (ARGUED)
JOHN R. SCOTT, ESQUIRE
Hardin, Kundla, McKeon, Poletto & Polifroni
673 Morris Avenue
P.O. Box 730
Springfield, New Jersey 07081
Attorneys for Appellee
_______________________
OPINION
_______________________
BECKER, Circuit Judge.
This in an insurance coverage case turning on the existence vel non of an
advertising injury. The ultimate issue is whether defendant St. Paul Fire Insurance
Company (“St. Paul”) had a duty to defend plaintiff Westport, a reinsurance company, in a
suit filed against Westport in Georgia state court. That suit, brought by Integrated Benefits
and Compensation (“IBC”), alleged that Westport was involved in a “scheme to steal
IBC’s 24 Hour product, its copyrights, confidential information, trade secrets and
intellectual property related to the design and development of the 24 Hour product.” The
IBC litigation was settled and under the terms of settlement, Westport paid $200,000 to
IBC. Westport then filed a complaint in New Jersey Superior Court against St. Paul for
coverage against the IBC litigation and for bad faith. The case was removed to Federal
District Court pursuant to diversity jurisdiction and both parties filed motions for summary
judgment. The District Court entered an order granting St. Paul’s motion for summary
judgment and denying Westport’s cross motion. This appeal followed. W e will affirm.
I.
The controlling cases are Tradesoft Technologies, Inc. v. Franklin Mutual
Insurance Co., 746 A.2d 1078 (N.J. Super. App. Div. 2000) and Frog Switch &
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Manufacturing Co. v. Travelers Ins. Co., 193 F.3d 742 (3 d Cir. 1999), which is followed in
Tradesoft. In Tradesoft, the Court held that “the determination of whether a liability
policy entitles the insured to a defense of an action brought against it requires first that the
allegations of the complaint be compared with the policy language. ‘When the two
correspond, the duty to defend arises, irrespective of the claim’s actual merit.’” Tradesoft,
746 A.2d at 1081 (quoting Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165, 173 (1992)).
Westport claims that the District Court erred when it bypassed this step and proceeded
directly to determine whether the allegations in the complaint asserted a causal connection
between the advertising and the injury. The District Court’s reasoning for doing so was
the following:
The court [in Tradesoft] noted, “[t]he injury must result from an offense committed
in the course of advertising.” Once the causal connection is established, the next
step is to identify whether the advertising injury was caused by one of the
delineated categories under the insurance policy. The court stated: “[w]e think it
plain that the import of the advertising injury coverage was to afford protection to
the insured for offenses committed while undertaking advertising activities that
caused specifically defined injuries.”
(Mem. Op. 8) (citations omitted) (second and third alterations in original) (emphasis
supplied by the District Court). We agree.
In its complaint, IBC describes its 24 Hour Insurance as follows:
The IBC 24 Hour Product is an insurance policy designed and developed by IBC to
be marketed and sold to employers in Georgia and throughout the United States.
The 24 Hour Product is designed to combine into a single integrated policy of
insurance an employee’s general health insurance and workers’ compensation
benefits to be sold to both self insured and fully insured employers. It is referred to
as the 24 Hour Product because it provides continuous insurance coverage to the
employee, both while engaged in his or her employment, the occupational coverage,
and while away from his or her employment, the non-occupational coverage. To
IBC’s knowledge, there is no other single integrated policy of insurance available
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on the market that is competitive with or comparable to its 24 Hour Product.
II.
IBC proceeds to describe at length the ways in which Westport schemed to steal
this idea from it in order to market it to competitors. Given IBC’s own definition of the 24
Hour Insurance Product, it seems very clear that we are, in fact, dealing with a product,
and not with an “advertising idea or concept.” As we stated in Green Machine Corp. v.
Zurich-American Insurance Group, 313 F.3d 837, 840 (3d Cir. 2002), which followed
Frog Switch, “[a]dvertising injury is the misappropriation of another’s advertising idea or
concept.” Like in Frog Switch, it seems that Westport stole an idea (here the integrated
insurance policy, there the dipper bucket design) and then set about to advertise and solicit
customers based on that idea. In Frog Switch, the Court held that advertising a stolen idea
does not convert the theft into an “advertising injury” and that the insurer therefore has no
duty to defend against such claims. See Frog Switch, 193 F.3d at 744.
Westport contends that IBC’s claims for misappropriation of the 24 Hour Insurance
Product triggered coverage because the insurance product itself, as alleged, constituted an
advertising idea or style of doing business. The District Court refused to accept
Westport’s characterization of the 24 Hour Insurance Product as an “advertising
gimmick/strategy” because it supposedly brought together two established insurance
policies into one. We agree with the District Court’s assessment: the 24 Hour Insurance
Product is a way of bundling two types of insurance together that may be novel in the
field, but it is not an “advertising idea, material, slogan, style, or title of others” as defined
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in the St. Paul Policy.
In Green Machine, we explicitly described the misappropriation of an advertising
idea as “the wrongful taking of an idea concerning the solicitation of business and
customers.” Green Machine, 313 F.3d at 841. This definition clearly does not apply to the
24 Hour Insurance Product because the product was a type of insurance, not an advertising
idea. “[T]o be covered by the policy, allegations of . . . misappropriation have to involve
an advertising idea, not just a nonadvertising idea that is made the subject of advertising.”
Green Machine, 313 F.3d at 839.
In sum, the integration of two types of insurance creates a product, not an
advertising idea or concept. We have carefully examined the provisions of the St. Paul
policy but find nothing in their definitions of advertising, advertising injury, or advertising
injury offense that undermines this analysis. We will therefore affirm the District Court’s
grant of summary judgment to St. Paul as it had no duty to defend Westport against the
IBC litigation.
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TO THE CLERK:
Kindly file the foregoing opinion.
/s/ Edward R. Becker
Circuit Judge
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