An Iowa reinsurer must continue to represent a waste disposal company in a trademark infringement case where company officials who had been terminated from their previous employer are charged with starting a new firm, then falsely disparaging their former company, a federal district court has ruled.

Grinnell, Iowa-based Grinnell Mutual Reinsurance Co. had issued a commercial general liability insurance policy to Broadview, Illinois-based S.B.C. Floor Waste Solutions Inc., according to last week’s ruling by the U.S. District Court in Chicago in Grinnell Mutual Reinsurance Co. v. S.B.C. Flood Waste Solutions, Inc.

Litigation filed in Illinois state court by Oakbrook Terrace, Illinois-based Flood Bros. Disposal Co. charged that Brian Flood and his sons Shawn and Christopher, who had all been fired by the firm, started their own company, whose name became S.B.C. Flood.

The state lawsuit litigation charged that S.B.C. “engaged in efforts to pass SBC off as Flood Bros. in order to deceive, mislead and confuse the public,” according to the federal district court ruling.

Grinnell filed suit in federal court seeking a ruling it had no duty to defend or indemnify S.B.C. in the state action, stating that none of the 11 counts in the underlying action qualified for policy coverage, according to the ruling.

On the lawsuit’s defamation claim, the ruling states, “The state complaint alleges that Shawn Floyd anonymously called a third party and falsely stated that Flood Bros. had stolen a trash compactor….It additionally alleges that Shawn and Christopher Flood falsely stated that Flood Bros. was going to be sold to a large corporate waste company, customers’ rates would increase and that SBC was started because Shawn Flood, Brian Flood, and Christopher Flood wanted to remain a family-owned company,” the ruling said.

The state complaint generally “describes a coordinated effort” to deprive Flood Bros. of customers, the ruling says. “As pleaded, the allegations about Shawn Flood’s phone calls state a ‘personal and advertising injury,’” under the policy.

On the state lawsuit’s advertising idea or trade dress infringement claim, the ruling states the defendants “intentionally designed SBC Flood’s logo and signage displayed on its containers, trucks, letter head, business cards and promotional materials to emphasize Flood in order to trade upon the good name and reputation of Flood Bros. and confuse customers of waste and recycling services.

“SBC Flood’s name and trade dress in connection with the provision of waste and recycling services in the Chicagoland area creates confusion or misunderstanding as to the source and sponsorship of the provider of waste and recycling services,” the ruling said, in denying Grinnell’s motion for partial summary judgment.

Attorneys in the case did not respond to requests for comment.