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Hartford Casualty Insurance Co. v. Dental Usa, Inc.

United States District Court, N.D. Illinois, Eastern Division

June 24, 2014

HARTFORD CASUALTY INSURANCE COMPANY, Plaintiff,
v.
DENTAL USA, INC. et al., Defendants.

MEMORANDUM OPINION

SAMUEL DER-YEGHIAYAN, District Judge.

This matter is before the court on Plaintiff Hartford Casualty Insurance Company's (Hartford) partial motion for summary judgment, and on Defendant Dental USA, Inc.'s (Dental) partial motion for summary judgment. For the reasons stated below, Hartford's motion is granted in part and denied in part without prejudice, and Dental's motion is granted in part and denied in part without prejudice.

BACKGROUND

Hartford is an insurance company that since 2008 has issued separate liability insurance policies (Policies) to Dental, effective annually and subject to ongoing reviews. Dental is a supplier of dental instruments allegedly owning several U.S. Trademark Registrations and Patents. Dental commenced two lawsuits asserting alleged patent, trademark, and copyright infringement of such intellectual property. In one action, Dental sued Jayson McClellan (McClellan) and other defendants (McClellan Action), and in the other action Dental sued Carl E. Misch (Misch) and other defendants (Misch Action). In both the McClellan Action and Misch Action (collectively referred to as "Underlying Actions"), counterclaims (Counterclaims) were brought against Dental, which allegedly asserted infringement by Dental of intellectual property rights. Dental requested that Hartford defend and indemnify Dental in the Underlying Actions pursuant to the coverage in the Policies. Hartford brought the instant action and includes in the amended complaint claims seeking a declaration that Hartford owes no duty to defend or indemnify Dental under the "bodily injury" or "property damage" coverage (Count I), claims seeking a declaration that Hartford owes no duty to defend or indemnify Dental under the "personal and advertising injury" coverage (Count II), claims seeking a declaration that Hartford owes no duty to defend or indemnify Dental under the "damages" coverage (Count III), claims seeking a declaration that Hartford owes no duty to defend or indemnify Dental based on the intellectual property exclusion (Count IV), claims seeking a declaration that Hartford owes no duty to defend or indemnify Dental based on the expected or intended injury exclusion (Count V), claims seeking a declaration that Hartford owes no duty to defend or indemnify Dental based on the knowledge of falsity exclusion (Count VI), claims seeking a declaration that Hartford owes no duty to defend or indemnify Dental based on the periods of coverage (Count VII), claims seeking a declaration that Hartford owes no duty to defend or indemnify Dental based on the quality or performance of goods/failure to conform to statements exclusion (Count VIII), claims seeking a declaration that Hartford owes no duty to defend or indemnify Dental in the Misch Action based on the breach of contract exclusion (Count IX).

On January 15, 2014, Hartford voluntarily dismissed all claims brought against Jayson McClellan, Shabbir A. Gul, Randall Pardy, and Marketing Logistics, LLC. On February 11, 2014, Hartford dismissed all claims brought against Misch Instruments, LLC and Carl E. Misch. Dental is the sole remaining defendant in this action. Hartford now moves for summary judgment on the claims brought against Dental in Counts I, IV, VII, and IX. Dental moves for summary judgment on the claims brought against Dental in Counts II-IX.

LEGAL STANDARD

Summary judgment is appropriate when the record, viewed in the light most favorable to the non-moving party, reveals that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Smith v. Hope School, 560 F.3d 694, 699 (7th Cir. 2009). A "genuine issue" in the context of a motion for summary judgment is not simply a "metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, a genuine issue of material fact exists when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Insolia v. Phillip Morris, Inc., 216 F.3d 596, 599 (7th Cir. 2000). In ruling on a motion for summary judgment, the court must consider the record as a whole, in a light most favorable to the non-moving party, and draw all reasonable inferences in favor of the non-moving party. Anderson, 477 U.S. at 255; Bay v. Cassens Transport Co., 212 F.3d 969, 972 (7th Cir. 2000). When there are cross motions for summary judgment, the court should "construe the evidence and all reasonable inferences in favor of the party against whom the motion under consideration is made." Premcor USA, Inc. v. American Home Assurance Co., 400 F.3d 523, 526-27 (7th Cir. 2005).

DISCUSSION

The parties agree that Illinois law governs the coverage dispute in this case. (PSJ 3 n.3); (D SJ 1-2). In an insurance coverage declaratory judgment action brought in federal court in Illinois based on diversity, Illinois contract law applies. Clarendon Nat. Ins. Co. v. Medina, 645 F.3d 928, 933 (7th Cir. 2011)(stating that "[i]n Illinois, insurance policies are contracts; the general rules governing the interpretation and construction of contracts govern the interpretation and construction of insurance policies")(citing Hobbs v. Hartford Ins. Co. of the Midwest, 823 N.E.2d 561, 564 (Ill. 2005)). In interpreting an insurance policy under Illinois law the court should "aim to ascertain and give effect to the intention of the parties, as expressed in the policy language, so long as doing so does not contravene public policy." Id. (stating that "[i]n doing so, they read the policy as a whole and consider the type of insurance purchased, the risks involved, and the overall purpose of the contract"). If the pertinent language in the insurance policy is "unambiguous, courts apply it as written." Id. Terms in an insurance policy that limit coverage "are liberally construed in favor of coverage, but only when they are ambiguous, or susceptible to more than one reasonable interpretation." Id.

An insurer has a duty to defend the insured under Illinois law "if the underlying complaint alleges facts that fall within, or potentially within, the policy's coverage." Menard, Inc. v. Country Preferred Ins. Co., 992 N.E.2d 643, 648-49 (Ill.App.Ct. 2013)(explaining that "[t]he duty to defend is much broader than the duty to indemnify, because the duty to defend is triggered if the complaint potentially falls within the policy's coverage; the duty to indemnify, on the other hand, applies only when the resulting loss or damages actually come within the policy's coverage")(emphasis in original). In order to ascertain whether a "loss is potentially covered under an insurance policy, a court must compare the allegations in the underlying complaint to the policy language" and "[b]oth the underlying complaint and the insurance policy should be liberally construed in favor of the insured." Id.

It is undisputed that the Policies contained the following provision:

We will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury, ' property damage' or personal and advertising injury' to which this insurance applies. We will have the right and duty to defend the insured against any suit' seeking those damages. However, we will have no duty to defend the insured against any suit' seeking damages for bodily injury, ' property damage' or personal and advertising injury' to which this insurance does not apply.
(R PSF Par. 35).

I. Bodily Injury or Property ...


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