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A Hartford Financial Services Group Inc. unit was not obligated to defend or indemnify a fabric retailer in copyright infringement litigation, a federal appeals court ruled Wednesday in affirming a lower court ruling.
New York-based Spandex House Inc. was sued by Los Angeles-based Rex Fabrics for copyright infringement in connection with Spandex’s creation, sale and distribution of fabric bearing designs Rex Fabrics had allegedly copyrighted, according to Wednesday’s ruling by the 2nd U.S. Circuit Court of Appeals in New York in Spandex House Inc. v. Hartford Fire Insurance Co. et al.
The U.S. District Court in New York ruled in favor of Hartford unit Hartford Fire Co. and was unanimously affirmed by a three-judge appeals court panel.
Pointing to the coverage’s intellectual property and advertising exception, the appeals court ruling said the district court “correctly determined that the Rex Fabrics Action complaint in its current form, which was replete with infringement allegations unrelated to advertising, definitively precluded the possibility of coverage, such that Hartford was not subject to a duty to defend.” The ruling also held the policy language unambiguously excluded coverage.
Spandex attorney Richard S. Schurin, a partner with Stern & Schurin LLP in Garden City, New York, said in a statement, “We are disappointed that the Justices did not seriously consider our argument that so long as the complaint alleged a possible basis for coverage the duty to defend must attach.
“Our concern is that the Court's ruling opens the door for plaintiffs to freely alter their pleadings to create or eliminate insurance coverage, regardless of the true facts, which is something that the New York Court of Appeals has repeatedly warned against.”
Hartford’s attorneys did not respond to a request for comment.
A Hartford Financial Insurance Group unit is not obligated to pay claims submitted by a financially troubled Detroit meat retailer that suffered robbery, vandalism then a fire that destroyed its remaining property because it misrepresented its losses, says a federal district court.