April 28, 2014

This matter came before the court upon the motion by Selective Insurance Company for summary judgment. The case is Selective Insurance Company of America v. Smart Candle, LLC, 2014 WL 127094. 

 This insurance coverage dispute arises out of a lawsuit between Excell Consumer Products and Smart Candle. Excell alleged that Smart Candle sold products bearing the trademark, corporate name and trade name “Smart Candle”, and used the domain name of smartcandle.com. 

 Selective insured Smart Candle under a liability policy that provided coverage for damages because of personal and advertising injury. The policy expressly excluded coverage for personal and advertising injury that arises out of the infringement of trademark or other intellectual property rights, but clarifies that coverage remains for the infringement in the named insured's advertisement of copyright, trade dress, or slogan. The policy also excluded coverage for personal and advertising injury that arises out of the unauthorized use of another's name or product, domain name, or any other similar tactics to mislead another's potential customers. 

 The insurer notified Smart Candle that the claims were not covered and the filed this declaratory judgment action seeking a declaration that it had no duty to defend or indemnify Smart Candle. 

Selective argued that Smart Candle cannot establish a prima facie case of coverage. Smart Candle responded that the allegations against it arguably assert claims of slogan infringement which is covered by the personal and advertising injury section of the insurance policy. In order to determine whether “Smart Candle” qualifies as a slogan, the court examined the allegations in the underlying lawsuit and facts in the record regarding what Selective knew or could have reasonably ascertained about Smart Candle's use of the words “Smart Candle”.

 The court found that the Excell complaint was based on the improper use of “Smart Candle” as a mark, trademark, trade name, and the improper use of “smartcandle.com” as a domain name. The court said that no reasonable jury could find that such oblique references to promotion and marketing are sufficient to arguably state a claim for slogan infringement. The court further noted that renaming the trademark infringement and unfair competition claims against Smart Candle as slogan infringement in an effort to afford policy coverage would render the policy exclusion for claims of trademark infringement meaningless.

 Smart Candle also argued that Selective should have examined uses of the term “smart” as a slogan on its website. The court said that the insurer had no obligation to have investigated beyond the four corners of the complaint.

 The U.S. District Court ruled that a declaratory judgment in favor of Selective is warranted.

 Editor's Note: The U.S. District Court for the District of Minnesota said that, according to the insured's theory, any claim involving the alleged misuse of a trademarked name would be covered by the policy as a potential cause of action for slogan infringement. The court found such an interpretation is contrary to the plain language of the policy and standard rules of contract interpretation.

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