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Liberty Mutual Insurance Group units are on the hook for the defense costs of an ice cream company in a patent dispute over milkshake machines, a federal district court ruled Monday.
Separately, the patent dispute in the underlying litigation led to a jury verdict of more than $3 million in a federal district court in Delaware last week.
Harrisburg, Pennsylvania-based Hershey Creamery Co., which manufactures and sells ice cream and other frozen dessert products throughout the eastern United States, was sued in 2014 by Orinda, California-based f’real Foods LLC, a unit of Rich Products Corp., for charges including patent infringement, according to the ruling by the U.S. District Court in Harrisburg in Hershey Creamery Co. v. Liberty Mutual Fire Insurance Co. and Liberty Insurance Corp.
The complaint charged that Hershey and other codefendants unlawfully copied f’real’s self-serve milkshake machine and related marketing designs, display and verbiage, according to the ruling.
Liberty Mutual initially defended Hershey subject to a reservation of rights but withdrew after dismissal of several counts in the litigation, stating the remaining claims did not implicate a duty to defend or indemnify under the pertinent insurance policies, according to the ruling.
The Pennsylvania court ruled in Hershey’s favor. “The complaint makes clear that f’real believes Hershey infringed on f’real’s advertising ideas and slogans, and specifically did so in the context of advertising for ‘competing blending machines and milkshakes,’” said the ruling.
“This is a sufficient nexus between advertising and injury to trigger a duty to defend – it is at least possible that a covered ‘advertising injury’ may be part of f’real’s recovery against Hershey.
“We conclude that, in light of the broad nature of the allegations, and when liberally construing the Complaint in Hershey’s favor, f’real’s claims ‘may potentially come within the coverage of the policy,’” said the ruling, in quoting an earlier ruling.
“Consequently, ‘until the claim(s are) confined to a recovery that the policy does not cover,’ Liberty Mutual has a duty to defend Hershey in the Delaware action,” said the ruling in quoting another case.
A footnote to the ruling states “Because there is a duty to defend in the Delaware Action, but liability is not yet determined, we need not (and indeed cannot) address the parties’ claims regarding indemnification.”
Referring to the judge in the case, Hershey attorney Thomas A. French, a partner with Barley Snyder LLP in Harrisburg, said, “I think he got it right. The opinion’s pretty self-explanatory as to what happened in the case.
“The court interpreted the complaint reasonably. In order to determine that the allegations of the complaint fell within the duty to defend, I can’t really add anything to that,” said Mr. French.
Liberty Mutual’s attorney had no comment.
Meanwhile, last week a jury in U.S. District Court in Wilmington, Delaware, held in f’real Products LLC and Rich Products Corp. v. Hamilton Beach Brands Inc., Hershey Creamery Co. and Paul Mills dba Mills Brothers Markets that defendants were liable for $3 million in lost profits caused by defendants’ infringement and $245,000 in royalties.
Attorneys in that case could not immediately be reached for comment.
Liberty Mutual Insurance Co. has agreed to pay the Diocese of Duluth, Minnesota, $6.5 million to settle litigation over insurance coverage for child sexual abuse claims.