Complaint For Declaration Of Insurance Coverage Scope

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MISSOURI AT ST. LOUIS HARTFORD CASUALTY INSURANCE COMPANY Plaintiff, v. U.S. FIDELIS, INC., BMW OF NORTH AMERICA, LLC and BAYERISCHE MOTOREN WERKE AG, Defendants.

) ) ) ) Case No. 09-1860 ) ) ) ) ) ) ) )

COMPLAINT FOR DECLARATORY JUDGMENT Plaintiff Hartford Casualty Insurance Company, under 28 U.S.C. § 2201 et seq. and Fed. R. Civ. P. 57, and for its Complaint for Declaratory Judgment, states as follows: 1.

Hartford Casualty Insurance Company (“Hartford”) was at all times relevant is a

corporation organized and existing under the laws of the State of Indiana with its principal place of business in Hartford, Connecticut. Hartford is authorized and licensed to sell insurance in Missouri. 2.

Defendant U.S. Fidelis, Inc. (“US Fidelis”) was at all times relevant a corporation

organized and existing under the laws of the State of Missouri with its principal place of business located at 100 Mall Parkway, Wentzville, Missouri 63385. 3.

Defendant BMW of North America, LLC (“BMW NA”) was at all times relevant

a limited liability company organized and existing under the laws of the State of Delaware with its principal place of business located at 300 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677.

BMW NA is a wholly owned subsidiary of BMW (US) Holding Corporation, a

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Delaware corporation, which is a wholly owned subsidiary of Bayerische Motoren Werke AG (“BMW AG”). 4.

Defendant BMW AG was at all times relevant a corporation organized and

existing under the laws of the Federal Republic of Germany, with its principal place of business at Petuelring 130, 80809 Munich, Germany.

BMW AG designs and manufactures motor

vehicles, parts, and other products for sale in Europe and for export and sale throughout the world. 5.

This Court has jurisdiction of this action by virtue of 28 U.S.C. §§ 2201 et seq.

under the federal declaratory judgment act and 28 U.S.C. § 1332 because the amount in controversy exceeds $75,000 and there is diversity of citizenship. 6.

This Court has personal jurisdiction over the defendant as it is a resident of

Missouri. 7.

Venue is proper pursuant to 28 U.S.C. § 1391 in that the defendant resides within

this judicial district, and upon information and belief, the insurance contracts sought to be interpreted were delivered within this judicial district. General Allegations 8.

Hartford brings this action seeking an interpretation of contracts of insurance and

a declaration of the parties’ respective rights and obligations under those policies. 9.

An actual, justiciable controversy exists between the parties herein. Litigation

with respect to such controversy is imminent and inevitable, as set forth below. 10.

All necessary and proper parties are before this Court for the matters in

controversy. All parties who have or claim any interest in this matter and would be affected by any declaration of this Court have been made parties to this action.

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Policies of Insurance 11.

Hartford issued to US Fidelis a Hartford Spectrum Business Insurance policy of

insurance. The policy is identified as Policy Number 84 SBQ BX1103 SA. The policy was effective from July 1, 2005 until July 1, 2006. 12.

The Policy provides commercial general liability coverage subject to a $1,000,000

personal and advertising injury limit, and $2,000,000 general aggregate limit with an effective date of July 1, 2005. 13.

The Policy was renewed by separate policies, each bearing the same policy

numbers for the policy periods: July 1, 2006 until July 1, 2007; July 1, 2007 until July 1, 2008; July 1, 2008 until July 1, 2009; and July 1, 2009 until July 1, 2010 (the “Renewal Policies”). 14.

Each of the Renewal Policies also provides commercial general liability coverage

subject to a $1,000,000 personal and advertising injury limit, and $2,000,000 general aggregate limit with an effective date of July 1, 2005. 15.

Hartford also issued an umbrella policy for the initial Policy period with a

$1,000,000 each occurrence limit, a $1,000,000 general aggregate limit and a $10,000 selfinsured retention, and issued umbrella policies with each Renewal Policy period with a $10,000,000 each occurrence limit, a $10,000,000 general aggregate limit and a $10,000 self-insured retention. 16.

The following insuring clause is contained in the liability coverage section of The

Policy1:

1 The Policy is quoted in relevant part. A copy of the 2009-2010 Renewal Policy is attached as Exhibit A. Hartford will provide certified copies of the Policy and Renewal Policies during discovery but will not expand this filing by attaching copies of each policy to this complaint. 4847-1056-8709.2

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BUSINESS LIABILITY COVERAGE FORM A.

COVERAGES 1.

BUSINESS LIABILITY COVERGE (BODILY INJURY, PROPERTY DAMAGE, PERSONAL AND ADVERTISING INJURY) Insuring Agreement: a. We will pay those sums that the insured becomes legally obligated to pay as damages because of . . . “personal and advertising injury” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for . . . “personal and advertising injury” to which this insurance does not apply. We may at our discretion investigate any offense and settle any claim or “suit” that may result. But: (1) The amount we will pay for damages is limited as described in Section D.–Liability and Medical Expenses Limits; and (2) Our right and duty to defend ends when we have used up the applicable limit of insurance in the payment of judgments, settlements or medical expenses to which this insurance applies. No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Coverage Extension – Supplementary Payments. b. This insurance applies: ... 2.

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To “personal and advertising injury” caused by an offense arising out of your business, but only if the offense was committed in the “coverage territory” during the policy period.

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17.

The following definitions are contained in The Policy: “personal and advertising injury” means injury, including consequential “bodily injury” arising out of one or more of the following offenses: ... d. Oral, written or electronic publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services; ... f. Copying, in your “advertisement”, a person’s or organization’s “advertising idea” or style of “advertisement”;

18.

The following exclusions are contained The Policy:

B.

Exclusions 1. Applicable to Business liability Coverage This insurance does not apply to: a. Expected or Intended Injury ... “Personal and advertising injury” arising out of an offense committed by, at the direction of, or with the consent or acquiescence of the Insured with the expectation of inflicting “personal and advertising injury”. ... p. Personal and Advertising Injury: “Personal and Advertising Injury”: (2) Arising out of oral, written or electronic publication of material whose first publication took place before the beginning of the policy period; ... (7) Arising out of any violation of any intellectual property rights such as copyright, patent, trademark,

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trade name, service mark or other designation of origin or authenticity. However, this exclusion does not infringement, in your “advertisement”, of

apply

to

(a) Copyright; (b) Slogan, unless the slogan is also a trade name, service mark or other designation of origin or authenticity; or (c) Title of any literary or artistic work; ... Underlying Claim 19.

On July 22, 2009, BMW of North America, LLC and Bayerische Motoren Werke

AG (hereafter “BMW”) filed a Complaint and Demand for Trial by Jury against US Fidelis in the United States District Court for the District of New Jersey, Case Number 2:09-cv-03607KSH-PS (the “BMW Complaint”). A copy of the BMW Complaint is attached as Exhibit B. Claim for Coverage 20.

US Fidelis has sought coverage and a defense from Hartford pursuant to the

Policy and/or the Renewal Policies arising out of the allegations against it in the BMW Complaint. 21.

The damages alleged in the BMW Complaint are alleged to relate to 2006 model-

year BMW automobiles. See BMW Complaint, Ex. B. and Exhibits A and B therein. 22.

BMW filed the BMW Complaint on July 22, 2009.

23.

BMW seeks injunctive and monetary relief from US Fidelis for its claims of

trademark infringement, unfair competition, false advertising and also seeks declaratory judgment with regard to their “BMW” mark and their “3 SERIES,” “5 SERIES,” “6 SERIES,” and “7 SERIES” marks. See BMW Complaint, Ex. B.

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24.

BMW claims that US Fidelis has made and is making false, misleading and

confusing commercial use of its marks. See BMW Complaint, Ex. B., ¶ 23. 25.

BMW claims that with the use of protected marks, the potential exists to deceive

the reader that US Fidelis is affiliated with, or received permission from BMW, to make such solicitations. See BMW Complaint, Ex. B., ¶ 41. 26.

Specifically, BMW alleges that US Fidelis has solicited its customers in New

Jersey using its protected marks seeking sales of US Fidelis’ extended warranty products. See BMW Complaint, Ex. B., ¶¶ 23–24. 27.

BMW claims that US Fidelis has solicited groups of BMW 3-Series, 5-Series and

7 Series owners similarly stating that their warranties are about to expire. See BMW Complaint, Ex. B., ¶¶ 25–26 and Exhibit A and B therein. 28.

The allegations include solicitations both by direct mail and by telephone. See

BMW Complaint, Ex. B., ¶¶ 24–27. 29.

In every claim or count, BMW’s allegations are that US Fidelis’ alleged acts were

“deliberate, willful, and intentional, with full knowledge and in conscious disregard of BMW’s rights in its marks.” See BMW Complaint, Ex. B., ¶¶ 47, 53, 59, 65, 69, and 73. 30.

BMW claims that certain aspects of US Fidelis’ alleged solicitations are false

and/or misleading in that it warrants every new vehicle for four years or fifty thousand miles and as such the claim that some customers’ warranties may be expiring soon is untrue. See BMW Complaint, Ex. F\B., ¶ 29. 31.

BMW alleges that it has received customer complaints arising from US Fidelis’

solicitations including confusion as to whether the contact was affiliated with, or connected to, BMW. See BMW Complaint, Ex. B., ¶ 30.

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32.

BMW claims to have received customer complaints that BMW improperly

disclosed sensitive customer information to US Fidelis, which BMW denies.

See BMW

Complaint, Ex. B., ¶ 31. 33.

BMW claims damage under the Lanham Act, § 32, 15 U.S.C. § 1114(1) for

federal trademark infringement; § 42(a), 15 U.S.C. § 1125 for federal unfair competition and false designation of origin; § 43(a), 15 U.S.C. § 1125 for false advertising; trademark infringement and unfair competition under the common law of New Jersey; unfair competition under the New Jersey unfair competition act, N.J.S.A. § 56:4-1 et seq.; and declaratory judgment, 28 U.S.C. §§ 2201-2202. See BMW Complaint, Ex. B., ¶¶ 46, 52, 58, 64, 68, and 72. 34.

A jury trial on the claims against US Fidelis has been demanded, but not yet

scheduled; a settlement conference is presently set for January 19, 2010. See BMW Complaint, Ex. B., Jury Demand. COUNT I–No Coverage for Violation of Intellectual Property Rights 35.

Plaintiff incorporates the allegations of paragraphs 1 through 34 above.

36.

The Policies set forth in the insuring grant the coverage agreement for which

coverage for “personal and advertising injury” applies. See Ex. A, § A (1) (a) and (b) (2). 37.

Coverage is only available for “personal and advertising injury” caused by an

offense arising out of US Fidelis’ business if such offense was committed in the “coverage territory” during the policy period. 38.

Following the Policies’ grant of coverage, exclusions narrow the scope of

coverage, including the exclusion for “personal and advertising injury.” See Ex. A, § B (1) (p) (7).

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39.

This exclusion’s bar for coverage for violation of intellectual property rights,

specifically including trademark, applies to each and every Count in the BMW Complaint and precludes coverage for BMW’s alleged claims. WHEREFORE, Plaintiff Hartford Casualty Insurance Company respectfully requests that the Court enter a Judgment that Policy Number 84 SBQ BX1103 SA, beginning on its Effective Date and including all Renewal Policies, provides no coverage for defendant US Fidelis, Inc. for claims made against it in the BMW Complaint. COUNT II–No Coverage for Knowing Violations 40.

Plaintiff incorporates the allegations of paragraphs 1 through 39 above.

41.

The allegations in every Count of the BMW Complaint allege that US Fidelis’

acts “have been and are deliberate, willful, and intentional with full knowledge and in conscious disregard of BMW’s rights.” See BMW Complaint, Ex. B., ¶¶ 47, 53, 59, 65, 69, and 73. 42.

The Policy and the Renewal Policies exclude coverage for “Expected or Intended

Injury.” See Ex. A., § B (1) (a) (2). 43.

Each claim for US Fidelis’ “deliberate, willful and intentional” use of BMW’s

trademarks in its letters and phone calls falls within this exclusion, which precludes coverage for each and every Count in the BMW Complaint. WHEREFORE, Plaintiff Hartford Casualty Insurance Company respectfully requests that the Court enter a Judgment that Policy Number 84 SBQ BX1103 SA, beginning on its Effective Date and including all Renewal Policies, provides no coverage for defendant US Fidelis, Inc. for claims made against it in the BMW Complaint.

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COUNT III–No Coverage for Prior Publications 44.

Plaintiff incorporates the allegations of paragraphs 1 through 43 above.

45.

The Policy and the Renewal Policies exclude coverage “for material whose first

publication took place before the beginning of the policy period.” See Ex. A, § B (1) (p) (2). 46.

To the extent that any of US Fidelis’ publications occurred prior to the effective

date listed in the 2005–2006 Policy, July 1, 2005, this exclusion would apply. 47.

To the extent any of US Fidelis’ publications occurred prior to the effective date

of each Renewal Policy, this exclusion would apply to each such policy. WHEREFORE, Plaintiff Hartford Casualty Insurance Company respectfully requests that the Court enter a Judgment that Policy Number 84 SBQ BX1103 SA provides no coverage for defendant US Fidelis, Inc. for claims made against it in the BMW Complaint arising out of publications that first occurred prior to July 1, 2005, and for Judgment that each Renew Policy provides no coverage for defendant US Fidelis, Inc. for claims made against it in the BMW Complaint arising out of publications that first occurred prior to each such policies’ effective date. COUNT IV–No Coverage for Punitive Damages 48.

Plaintiff incorporates the allegations of paragraphs 1 through 47 above.

49.

The Policy and the Renewal Policies only extend coverage for “damages because

of ‘bodily injury’, ‘property damage’ or ‘personal and advertising injury’ to which this insurance applies.” See Ex. A, § A (1) (a). 50.

To the extent that BMW seeks an award of punitive or exemplary damages for US

Fidelis’ willful acts, such damages are not damages for “bodily injury”, “property damage” or “personal and advertising injury” and are uninsurable as a matter of Missouri public policy.

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WHEREFORE, Plaintiff Hartford Casualty Insurance Company respectfully requests that the Court enter a Judgment that Policy Number 84 SBQ BX1103 SA provides no coverage for defendant US Fidelis, Inc. for claims for punitive or exemplary damages made against it in the BMW Complaint. COUNT V–No Coverage for Injunctive Relief 51.

Plaintiff incorporates the allegations of paragraphs 1 through 50 above.

52.

The Policy and the Renewal Policies only extend coverage for “damages because

of ‘bodily injury’, ‘property damage’ or ‘personal and advertising injury’ to which this insurance applies.” See Ex. A, § A (1) (a). 53.

BMW’s claims for injunctive relief are not claims for damages; therefore,

coverage is not afforded by the insuring grant of the Policy or the Renewal Policies. WHEREFORE, Plaintiff Hartford Casualty Insurance Company respectfully requests that the Court enter a Judgment that Policy Number 84 SBQ BX1103 SA provides no coverage for defendant US Fidelis, Inc. for claims for injunctive relief made against it in the BMW Complaint. COUNT VI–No Coverage under Insuring Grant 54.

Plaintiff incorporates the allegations of paragraphs 1 through 53 above.

55.

Policy 84 SBQ BX1103 SA sets forth in the insuring grant the coverage

agreement for which coverage for “personal and advertising injury” applies. See Ex. A, § A (1) (a) and (b) (2). 56.

Coverage is only available for “personal and advertising injury” caused by an

offense arising out of US Fidelis’ business if such offense was committed in the “coverage territory” during the policy period.

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57.

The definition of “personal and advertising injury” includes claims of copyright

infringement, but does not include trademark violations or infringement. 58.

BMW alleges that it suffered injury or damages as a result of US Fidelis’ use of

its trademarks. WHEREFORE, Plaintiff Hartford Casualty Insurance Company respectfully requests that the Court enter a Judgment that Policy Number 84 SBQ BX1103 SA provides no coverage for defendant US Fidelis, Inc. for claims for trademark infringement made against it in the BMW Complaint. COUNT VII–Single Occurrence 59.

Plaintiff incorporates the allegations of paragraphs 1 through 58 above.

60.

BMW’s allegations consist of offenses arising out of the continuing use of its

trademarks. 61.

If the Court determines that coverage applies, which plaintiff specifically denies,

US Fidelis’ infringing acts constitute a single occurrence as of the date it first used BMW’s trademarks in its advertising. 62.

The date of first publication will either fall within or prior to one of Hartford’s

policy periods and shall determine whether coverage is available or not. WHEREFORE, Plaintiff Hartford Casualty Insurance Company respectfully requests that the Court enter a Judgment that the claims made against US Fidelis in the BMW Complaint constitute allegations of a single, continuous act of infringement as of the date of first publication. COUNT VIII–No Coverage Under Umbrella Policy 63.

Plaintiff incorporates the allegations of paragraphs 1 through 62 above.

64.

Hartford issued Umbrella Policies for each policy period. See Ex. A.

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65.

Coverage for personal and advertising injury is only available under the umbrella

policies to the extent it is available under each respective underlying policy.. 66.

For all of the reasons stated above, there is no coverage under the Umbrella

Policies. WHEREFORE, Plaintiff Hartford Casualty Insurance Company respectfully requests that the Court enter a Judgment that Umbrella Policy Number 84 SBQ BX1103 SA, beginning on its Effective Date and including all Renewal Policies, provides no coverage for defendant US Fidelis, Inc. for claims made against it in the BMW Complaint. REQUEST FOR TRIAL BY JURY 67.

Plaintiff Hartford Casualty Insurance Company hereby requests a trial by jury. CONCLUSION

Plaintiff Hartford Casualty Insurance Company prays the Court enter a declaratory judgment finding that Hartford owes neither a duty to defend nor a duty to indemnify defendant US Fidelis under the Policy or the Renewal Policies for the following reasons: A)

All of the policies at issue exclude coverage for claims for violation of

intellectual property rights, including specifically trademark claims, so that defendant BMW’s claims for trademark infringement are excluded from coverage; B)

All of the policies at issue exclude coverage for knowing violations, or

expected or intended injuries, and all of the allegations against US Fidelis allege only “deliberate, willful and intentional” conduct that is excluded from coverage; C)

All of the policies at issue exclude coverage for material published prior to

each policy’s effective date, and the materials allegedly published by US Fidelis predate the effective dates of some or all of the policies at issue and are thus excluded from coverage; 4847-1056-8709.2

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D)

None of the policies at issue include coverage for punitive or exemplary

damages, which are not claims for damages for “personal and advertising injury,” so the claims for such damages are not covered; E)

None of the policies at issue include coverage for claims for injunctive

relief, which are not claims for damages for “personal and advertising injury,” so the claims for injunctive relief are not covered; F)

BMW’s claims against US Fidelis are for trademark infringement, which

is not “personal or advertising injury” as defined in the policies, so such claims are not covered; G)

Since none of the claims trigger any duty to defend or to indemnify under

the Policy or Renewal Policies, none of the claims are covered under the umbrella policy for each such policy’s period. WHEREFORE, the Court should enter judgment in favor of plaintiff Hartford on all counts and award Hartford its costs incurred herein, plus any other relief that the Court deems just and appropriate. Dated this 13th day of November, 2009.

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Respectfully submitted,

s/ Michael E. Brown Michael E. Brown MO #49979 M. Courtney Koger MO #42343 KUTAK ROCK LLP Suite 500 1010 Grand Boulevard Kansas City, MO 64106 Telephone No. (816) 960-0090 Facsimile No. (816) 960-0041 [email protected] [email protected] ATTORNEYS FOR PLAINTIFF

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