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PERSPECTIVES: Dictionary definitions can be helpful in resolving claims disputes

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PERSPECTIVES: Dictionary definitions can be helpful in resolving claims disputes

INTRO: Sometimes in an insurance coverage dispute, a policyholder needs to rely on dictionary definitions for terms that are not defined in the policy. Dennis T. Smith, a member of the law firm Pashman Stein P.C., explains how this is done.

When courts are confronted with the question of whether a claim is covered under a particular provision of an insurance policy and the provision under which coverage is sought contains undefined words or terms, courts often will look to dictionary definitions to ascertain the meaning of the words.

This is exactly what happened in the case captioned Bridge Metal Industries L.L.C. v. Travelers Indemnity Cos., filed in the 2nd U.S. Circuit Court of Appeals in New York.

Bridge Metal sought a declaratory judgment that Travelers was required to reimburse it for costs and expenses of defending two lawsuits by National Lighting Co. alleging infringement of trade dress and other related claims. The central contention in the underlying lawsuits was that Bridge “cloned” the unique trade dress of National's lighting fixtures and advertised and sold the clones as its own, thereby creating customer confusion as to the product's origin and causing National damages.

Bridge sought coverage under the advertising injury liability section of Traveler's policy in which Traveler's promised to pay those sums that Bridge becomes legally obligated to pay as damages because of “advertising injury.” “Advertising injury” was defined in an endorsement to the policy to mean infringement of copyright, title or slogan. However, the words “copyright,” “title” and “slogan” were not defined in the policy.

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Notably, the original policy, which was superseded by the endorsement, defined “advertising injury” as “infringing upon another's copyright, trade dress or slogan in your advertisement.” Nowhere in the policy did Travelers explicitly state that trade dress infringement claims were excluded from advertising injury coverage by way of the endorsement; nor was there any indication that substituting the word “title” for “trade dress” was intended to limit rather than expand the scope of advertising injury coverage.

In determining whether trade dress infringement claims were covered under the policy, the court turned to the sixth edition of Black's Law Dictionary, observing that “title” is defined as a “mark, style or designation; a distinctive appellation; the name by which anything is known.” Employing this definition, the court found the allegations contained in National's complaints fit within the policy's definition of infringement of title holding that:

“It is this distinctive, overall image that Bridge Metal was alleged to have copied. The appearance of the light fixtures can be viewed as the style or designation by which National's product is known; indeed, that seems to be the very heart of National's case against Bridge Metal. Thus, by alleging that Bridge Metal copied this trade dress, National could be claiming that plaintiff's infringed National's title under the Black's sixth edition definition.”

This did not end the court's inquiry, because the definition of title in the sixth edition of Black's Law Dictionary was replaced with a new definition in the seventh and eighth editions (the editions in place at the time Travelers issued its policy); and if one were to employ the current definition of “title” it would not encompass the trade dress infringement allegations contained in National complaints. Against this unique back drop the court held:

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“Nevertheless, the removal of that particular definition of title does not relieve Defendant of its duty to defend. The Second Circuit has held that if there is legal uncertainty regarding whether cases governing an insurance policy will be read to impose coverage in a given situation, the insurer has a duty to defend … Here, there is … case law that raises the possibility that claims of trade dress infringement, such as those asserted by National, fall within 'infringement of title' … ”

The lesson learned from Bridge Metal is that when there is uncertainty as to whether a particular claim may be covered under the provisions of an insurance policy, the burden falls upon the insurer to file a declaratory judgment action to obtain a definitive ruling on the meaning of the contested provision. If the insurer elects to disclaim coverage and let the insured file a declaratory judgment action, it exposes the insurer to liability for defense costs up until the time the uncertainty as to the meaning of the disputed policy provision is definitively resolved — even if the court's ultimate resolution is favorable to the insurer. This logic previously had been applied by the 2nd Circuit in Hugo Boss Fashions Inc. v. Federal Insurance Co.

From the insured's perspective, if dictionary definitions support an interpretation of otherwise undefined terms that the claim against you is potentially covered and the insurer refuses to defend, one should consider filing a declaratory judgment action, especially if the insured is successful in its defense of the underlying action leaving reimbursement of defense costs as the only viable coverage issue.

Dennis T. Smith is a member of the law firm Pashman Stein P.C. in Hackensack, N.J., and chairs the firm's insurance coverage practice. He was the lead counsel for Bridge Metal Industries L.L.C. in its suit against Travelers. He can be reached at dsmith@pashmanstein.com.