The Pittsburgh Steelers take their uniforms seriously. Two years ago, they reportedly became the first team in the NFL team to defeat an opponent three times in a single season using three different uniforms, having defeated the Baltimore Ravens once in their home black jerseys, once in their road whites, and another time in their alternate "third jerseys". So it is no wonder that, when All Authentic Corp. began marketing allegedly counterfeit Steelers jerseys, All Authentic found itself playing defense in a slogan infringement lawsuit.
But All Authentic had an effective playbook, and multiple insurance policies, so it passed its risk to its two insurers. When one agreed to defend and the other did not, the resulting insurance coverage case made its way to the U.S. Court of Appeals for the Ninth Circuit.
Last week, the Ninth Circuit ruled that the carrier that refused to defend was liable for equitable contribution for its share of the defense costs incurred by the other insurer in defending the slogan infringement claim.
The underlying case was brought by NFL Properties LLC against All Authentic. The complaint alleged that the Steelers have strong common law rights in the mark “Steel Curtain” and own a state registration for the mark “Steel Curtain... Pittsburgh Steelers.” On the other hand, it alleged, All Authentic was offering counterfeit jerseys that featured the same black and gold color combination and striping as official Steelers’ jerseys; including jerseys that read “Steel Curtain” across the back, bear the numbers of four Steelers players, and using the same style of numbering and lettering as appears on the authentic Steelers jerseys.
The two insurers to which All Authentic tendered the case both had issued policies covering "advertising injury," including "[i]nfringement of copyright, title or slogan." (A slogan is defined as a brief attention-getting phrase used in advertising or promotion.) There was no dispute that the subject policy covered slogan infringement. Before the case settled, the defending insurer incurred more than $900,000 in defense costs. Thus, after the case settled, it sued the company that had refused to cover the defense for reimbursement of its pro rata share of those fees and costs.
In the Trial Court, U.S. District Court Judge Stephen Larson granted summary judgment and held that the insurer's duty to defend extended to this case. The Ninth Circuit affirmed.
The Court dismissed the counterarguments that were offered, including that the NFL complaint had not specifically alleged slogan infringement as a cause of action or refer to "Steel Curtain" as a slogan and that California law precludes speculating about unpled claims in determining the insurer's duty to defend. The Court explained that an action for equitable contribution – which allows an insurer to sue for pro rata reimbursement from another insurance company when it has defended a mutually insured party without participation by the other insurance company – if a potential cause of action is shown for one covered claim, the duty arose to defend All Authentic as to all claims in the NFL Action, regardless of whether the other claims were covered under the policy.
In California, a liability insurer owes a broad duty to defend its insured against claims that create a potential for indemnity and the carrier must defend a suit that potentially seeks damages within the coverage of the policy. Any ambiguity in the policy, including the exclusions, must be resolved in favor of a finding of coverage. Because the duty to defend is so broad, the Court found, the NFL complaint sufficiently alleged a potential cause of action slogan infringement, therefore triggering the duty to defend. (Because the Court found that NFL complaint potentially supported a claim for slogan infringement, it was unnecessary to address the alternative argument that had been raised concerning whether the NFL complaint also potentially supported a claim for trade dress infringement.)
Thus, in light of the allegations in the complaint in the NFL's underlying action, the Court found that a potential for coverage existed, because the allegations supported a claim for slogan infringement, even if it was not specifically pled. Because both insurers had a duty to defend All Authentic, the one that refused to do so was liable for equitable contribution to the other.
Although the Steelers have faced some offensive challenges this year, it is still the team that has won more Super Bowls than any other team in NFL history and, at times, its defense has been described as legendary. So it seems only fair that, sitting a mile-and-a-half up the road from the Rose Bowl in Pasadena, three federal appellate judges have now ruled that the team's opponent was also owed a defense, as a matter of law.
But All Authentic had an effective playbook, and multiple insurance policies, so it passed its risk to its two insurers. When one agreed to defend and the other did not, the resulting insurance coverage case made its way to the U.S. Court of Appeals for the Ninth Circuit.
Last week, the Ninth Circuit ruled that the carrier that refused to defend was liable for equitable contribution for its share of the defense costs incurred by the other insurer in defending the slogan infringement claim.
The underlying case was brought by NFL Properties LLC against All Authentic. The complaint alleged that the Steelers have strong common law rights in the mark “Steel Curtain” and own a state registration for the mark “Steel Curtain... Pittsburgh Steelers.” On the other hand, it alleged, All Authentic was offering counterfeit jerseys that featured the same black and gold color combination and striping as official Steelers’ jerseys; including jerseys that read “Steel Curtain” across the back, bear the numbers of four Steelers players, and using the same style of numbering and lettering as appears on the authentic Steelers jerseys.
The two insurers to which All Authentic tendered the case both had issued policies covering "advertising injury," including "[i]nfringement of copyright, title or slogan." (A slogan is defined as a brief attention-getting phrase used in advertising or promotion.) There was no dispute that the subject policy covered slogan infringement. Before the case settled, the defending insurer incurred more than $900,000 in defense costs. Thus, after the case settled, it sued the company that had refused to cover the defense for reimbursement of its pro rata share of those fees and costs.
In the Trial Court, U.S. District Court Judge Stephen Larson granted summary judgment and held that the insurer's duty to defend extended to this case. The Ninth Circuit affirmed.
The Court dismissed the counterarguments that were offered, including that the NFL complaint had not specifically alleged slogan infringement as a cause of action or refer to "Steel Curtain" as a slogan and that California law precludes speculating about unpled claims in determining the insurer's duty to defend. The Court explained that an action for equitable contribution – which allows an insurer to sue for pro rata reimbursement from another insurance company when it has defended a mutually insured party without participation by the other insurance company – if a potential cause of action is shown for one covered claim, the duty arose to defend All Authentic as to all claims in the NFL Action, regardless of whether the other claims were covered under the policy.
In California, a liability insurer owes a broad duty to defend its insured against claims that create a potential for indemnity and the carrier must defend a suit that potentially seeks damages within the coverage of the policy. Any ambiguity in the policy, including the exclusions, must be resolved in favor of a finding of coverage. Because the duty to defend is so broad, the Court found, the NFL complaint sufficiently alleged a potential cause of action slogan infringement, therefore triggering the duty to defend. (Because the Court found that NFL complaint potentially supported a claim for slogan infringement, it was unnecessary to address the alternative argument that had been raised concerning whether the NFL complaint also potentially supported a claim for trade dress infringement.)
Thus, in light of the allegations in the complaint in the NFL's underlying action, the Court found that a potential for coverage existed, because the allegations supported a claim for slogan infringement, even if it was not specifically pled. Because both insurers had a duty to defend All Authentic, the one that refused to do so was liable for equitable contribution to the other.
Although the Steelers have faced some offensive challenges this year, it is still the team that has won more Super Bowls than any other team in NFL history and, at times, its defense has been described as legendary. So it seems only fair that, sitting a mile-and-a-half up the road from the Rose Bowl in Pasadena, three federal appellate judges have now ruled that the team's opponent was also owed a defense, as a matter of law.
The opinion in Hudson Ins. Co. v. Colony Ins. Co. (9th Cir., 2010) is available here.
Posts
