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Selective Insurance Co. of America v. Smart Candle, LLC

United States Court of Appeals, Eighth Circuit

March 26, 2015

Selective Insurance Company of America, a New Jersey corporation, Plaintiff - Appellee
v.
Smart Candle, LLC, a Minnesota limited liability company, Defendant - Appellant

February 12, 2015

Appeal from United States District Court for the District of Minnesota - Minneapolis.

For Selective Insurance Company of America, a New Jersey corporation, Plaintiff - Appellee: William Auvergne LeMire, Colby B. Lund, Christina E. VonderHaar, Arthur & Chapman, Minneapolis, MN.

For Smart Candle, LLC, a Minnesota limited liability company, Defendant - Appellant: Thomas Henry Boyd, Bradley J. Walz, Winthrop & Weinstine, Minneapolis, MN; Peter Jester Gleekel I, Larson & King, Saint Paul, MN.

Before GRUENDER, SHEPHERD, and KELLY, Circuit Judges.

OPINION

Page 984

KELLY, Circuit Judge.

Smart Candle, LLC, sells light-emitting diode (LED) flameless candles and commercial lighting systems internationally. On October 31, 2011, Excell Consumer Products sued Smart Candle under the Lanham Act alleging that, among other things, Smart Candle's use of the trade name and trademark " Smart Candle" infringed rights that Excell had over use of that name and trademark. Excell sought a permanent injunction against Smart Candle's use of the name, trademark, and domain name " smartcandle.com."

Selective Insurance Company insured Smart Candle between October 18, 2010, and October 18, 2012, and during that period the Excell suit had commenced. Smart Candle requested that Selective defend Smart Candle in that suit, but Selective disclaimed coverage under the policy. Selective pointed to relevant portions of the policy that cover " personal and advertising injury," which the policy defines as injury resulting from, among other things, " Infringing upon another's copyright, trade dress or slogan in your 'advertisement.'" Excluded from that coverage of " personal and advertising injury," however, is any injury " arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights." The exclusion clarifies that it " does not apply to infringement in your 'advertisement' of copyright, trade dress or slogan." Because the policy required Selective to defend only suits claiming infringement of " copyright, trade dress[,] or slogan," Selective insisted, Selective had no duty to defend Smart Candle against Excell's suit for infringement of the " Smart Candle" trademark.

Smart Candle wrote Selective ten months later requesting reconsideration. Selective again disclaimed coverage, noting Excell's claims for infringement of its " mark" or " trademark." Because Excell did not claim infringement of a " slogan" or " copyright," Selective explained, it had no duty to defend or indemnify Smart Candle. Excell won its suit after a bench trial. See Excell Consumer Prods. Ltd. v. Smart Candle LLC, No. 11 C 7220, 2013 WL 4828581 (S.D.N.Y. Sept. 10, 2013).

In April 2013, Selective filed an action in federal court in Minnesota for a declaration that Selective owed no duty to defend or indemnify Smart Candle in the Excell lawsuit. Smart Candle counterclaimed for breach of contract. As part of those counterclaims, Smart Candle asserted that Selective had not conducted " any reasonable investigation of Excell's Claims" in that lawsuit, including " a review of Smart Candle's website . . . or any of Smart Candle's advertising before denying coverage." Selective denied that allegation and moved

Page 985

for summary judgment. Smart Candle in turn moved for partial summary judgment.

The district court[1] granted summary judgment in favor of Selective. The court noted that the insurance policy did not define " slogan," so the " popular and ordinary meaning" applied. To determine whether " Smart Candle" qualified as a slogan and thus, as Smart Candle argued, whether Excell's suit could qualify as one for infringement of that slogan, the court reviewed the allegations in Excell's suit. Excell, the court pointed out, " explicitly based its complaint on the improper use of 'Smart Candle' as a mark, trademark, trade name, and name," and therefore no reasonable jury would conclude that Excell was suing for slogan infringement. The court also concluded that Selective had no duty to investigate " beyond the four corners of the complaint" to determine whether other facts could be interpreted to trigger Selective's duty to defend or indemnify. Last, the court explained that interpreting " trademark" also to mean " slogan" would render meaningless the policy's differentiation of the two terms, contrary to the rules of contract ...


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