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Liberty Mutual obligated to defend company over contested slippers

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Liberty Mutual obligated to defend company over contested slippers

Liberty Mutual Holding Co. units are obligated to provide defense costs in litigation over slipper socks between two footwear companies, but at a later point in the litigation than called for by a lower court ruling, says a federal appeals court.

New York-based High Point Design LLC, which sells and distributes footwear on a wholesale basis, was the named insured on commercial general liability insurance and umbrella policies issued by Liberty Mutual units, according to Wednesday’s ruling by the 2nd U.S. Circuit Court of Appeals in New York in High Point Design LLC v. LM Insurance Corp. Liberty Mutual Fire Insurance Co., Liberty Insurance Corp.

Coverage included damages from “personal and advertising injury,” according to the decision.

High Points items include its “Fuzzy Babba” slipper, which it sold through various retailers. Elm City, North Carolina-based Buyer’s Direct Inc. manufactures slippers including the “Snoozie,” for which it holds a patent, said the ruling.

Buyer’s Direct sent High Point a cease-and-desist letter, alleging its Fuzzy Babba slipper infringed on its design patent, and High Point responded by seeking a declaratory judgment that its slipper did not do so. Buyer’s Direct then filed a counterclaim for patent and trade dress infringement, according to the ruling.

The counterclaim alleged High Point had infringed on its patent by “offering for sale” its slippers, said the ruling.  Buyer’s Direct made discovery demands seeking advertising and marketing materials.

Liberty Mutual denied coverage on the basis the underlying litigation alleged only injury for trade dress infringement, not advertising injury.

High Point filed suit in U.S. District Court in New York, which ruled Liberty Mutual owed High Point a duty to defend the company, and entered a final judgment awarding it $1.7 million.

On appeal, a three-judge appeals court panel agreed with the lower court that based on policy language, there was coverage based on the policies’ advertising injury provision.

“Viewed broadly as required under New York law, an ‘offer for sale’ extends to advertising,” said the ruling. Buyers Direct’s “claim that it was injured by High Point’s ‘offering for sale’ the infringing slippers suffices to demonstrate that an advertising injury may have resulted for the use of the infringing trade dress in advertisements,” it said.

The ruling held, however, that it agrees with Liberty Mutual “that its liability is limited to High Point’s defense costs incurred after the Liberty was made aware of the discovery demands.”

The panel vacated the lower court’s judgment and remanded the case to determine the amount of legal fees it incurred from that point.

In April, a federal appeals court upheld dismissal of litigation filed by a frozen fish company against its insurer for its refusal to defend or indemnify it in an advertising injury case.

 

 

 

 

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