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A Markel Corp. unit must defend a company that produces liquid energy shots in a trademark infringement lawsuit, a federal appeals court said Wednesday, in overturning a lower court ruling.
Glen Mills, Pennsylvania-based Vitamin Energy LLC was sued by a competitor, the owners of the 5-hour Energy brand, for claims under the Lanham Act for trademark infringement, false designation of origin, false advertising and trademark dilution, and under Michigan law, in connection with its marketing, according to Wednesday’s ruling by the 3rd U.S. Circuit Court of Appeals in Philadelphia in Vitamin Energy, LLC v. Evanston Insurance Co.
Vitamin Energy’s insurer, Markel unit Evanston Insurance Co., refused to defend the company on the basis the complaint did not allege an advertising injury, or other injury covered by the policy, and that if it did, coverage exclusions applied.
The U.S. District Court in Philadelphia granted Evanston’s motion to dismiss the case, but was overturned by a unanimous three-judge appeals court panel.
Under Pennsylvania law, an insurer’s duty to defend is broader than its duty to indemnify, said the appeal court panel’s ruling.
The disagreement in the case “lies in whether 5-hour Energy’s complaint alleges that Vitamin Energy’s comparative advertising contains a false or misleading statement about 5-hour Energy products or only a falsehood about Vitamin Energy’s own products,” with Vitamin Energy arguing the former, the ruling said.
Vitamin Energy “has the better of this dispute,” the ruling said.
“When construed liberally in favor of coverage,” allegations in the 5-hour Energy complaint “are best read as saying not only that Vitamin Energy’s own products contain 100% of the daily recommended value of Vitamin B, but also that 5-hour Energy’s products do not,” it said, in holding Evanston is obligated to defend Vitamin Energy and remanding the case for further proceedings.
Attorneys in the case could not be reached or did not respond to a request for comment.
A Markel Corp. unit is entitled to recover the $260,000 settlement it paid on behalf of a Colorado addiction treatment center and other expenses because of the center’s fraud, said a federal appeals court Wednesday, in affirming a lower court ruling.