number thirteen fifty five thirty nine liberty corporate capital limited first security safe outlet at all or argument i took the fifteen minutes per side mr bradford for the topic of insurance consumer commercial general liability coverage historically i've not considered it that exciting usually we don't even talk about our insurance except the day when we don't have coverage so we don't have coverage apparently so we're here today  a couple of bigger points before i focus in tightly on the issues that i think are relevant for this court to review the bigger issues are as a as an attorney when you receive a complaint that's twenty eight pages long  hundred forty six paragraphs with eleven camps the the last thing on your mind is that there's not something in there or the there's the absence of allegations that would trigger coverage in other words you think well gosh there's got to be something in here some words in here that are going to trigger coverage that's where you start with this particular case you also start with this particular case with the concept that yes we're now in two thousand and fourteen and businesses these days do a significant amount of business online and in fact the my client and the entity that was involved in this underlying dispute are both online businesses they do have a a presence in brick and mortar but the bulk of the business is all online so knowing those two kind of basic concepts of what's going on with this particular case the we have focused on counts one two in three of the complaint and not the other eight that are left we think count one is our strongest case and in fact the district court did hold that with count one it's the misappropriation of tech trade secrets and also cites the kentucky statute on the same  that's count one the essence of that case was an argument that s s improperly obtained a database of customer names and addresses in twenty fourteen it makes sense that it's a data file electronic file if we were here fifteen or eighteen years ago we probably would have had a stack of papers about eight inches thick that would have been the customer list we think it's important to understand where we are today with respect to the electronics think protections  into some or the hyper technical issues but fundamentally what you had here was that particular data it was alleged was then used to send out mass e mail blast which i'm sure i'm not the only fellow in town who received the lands in e mail blast every morning which is effectively what this is all about it's an email blast going to targeted customers to the extent that they are on that list it seems to us that this is your classic advertising injury and should fall under that  provision because the opposition was arguing you harmed us by not necessarily so much the misappropriation as much as the actual advertising blast that went out it went to our our customers we have been harmed you have devalued our name you are taking our customers you diminish the value of our products that seems to be your classic advertising injury claims fundamentally the trial court found that the misappropriation claim did fall under that advertising injury but then and as we narrow the focus here where the court decided we did not have coverage was under the exclusion the contract exclusion is what i generally refer to it as i think the important point about the contract exclusion is the facts in this particular case which i think just august to where you were talking about the employee what the trial court rule out upon was the notion that this exclusion that the advertising injury arises out of the bridge contract breach of contract in this context being the allegation that mr denning hoff was purportedly under a non compete such that when he was employed by the g s that he signed an agreement and therefore he violated that agreement by the misappropriation  our point is a couple of points on this the first one is there are allegations in this hundred forty six paragraphs that say we wrongfully acted and wrongfully obtain this information even separate and apart from mr denny the allegations in the complaint are that but your b g has admitted that they had allowed us access to that data that we had a joint feed that we shared the data that that allegation is in there so separate and apart from anything that mr denning hoff did or had access to as is so potentially was subject to exposure in liability based on those other allegations that you had access to a very restricted and limited basis for example you cou review maybe only a couple of the the item discreetly at one time i mean well that was the allegation but that seems to me that by opening that door that's separate and apart from the notion of a you know a total taking or a total download made separately if in fact that were the case once the door is open to access to that information on this pathway it seems to me the notion that the exclusion of arising out of  contract fails then second my second point on this contract provision that the court relied upon is this notion of the arising out of as we look at it that's quite problematic very vague ambiguous it doesn't limit who the parties to the contract have to be for it to be applicable to that exclusion and it's undisputed that that s s o was not a party to the contract that the trial court relied upon to say that the exclusion applies so interesting lee to think that out and through to the next logical step it doesn't limit who the parties to the contract could be it doesn't limit the type of contract narrowly supposed to be interpreted our position is under the kentucky supreme court case of which interestingly enough the district court cited in its opinion for a speed to kill or standard that's the one we think is more applicable to this situation about the arising out of a contract because it requires that there be some type of causal connection or some some hook between the contract and what's going on in this particular scenario the other point that needs to be made is that in this kind of jumps to the end of our argument which is mr denning hoff isn't insured that's an argument the trial court chose not to address but i think it's important to mention because the allegations in the complaint are not that mr denning hoff's actions were wrong full in the storing or the making of the backups of this information his actions for wrongful in the providing or the sharing of it after the fact and at the point of insured as you progress through the count one's misappropriation counts two and three deal with the fundamentally it's their trade name issue in the counts two and three it  seems to us that it is not is complicated as everyone wants to make out it's simply unauthorized use of a trade name counsel to three no matter how it's worded that's what's going on as they didn't like the fact that  continued to use the bugs name when it didn't have authorization to do it and in general it seems to us that that is also falling on to the end with an injury classic coverage claim last point that i would like to make on the overall scheme of the case is the arguments we made that we should have coverage under the property damage provision you probably read with some interest the district court i'll use the term court's characterization of our characterization but i'll leave that to you to review but fundamentally we think the rationale in that letter case is is good and on point with the notion of loss of use with the property damage falls under loss of use because the allegations in the complaint by b d s are that are on authorize use of the trade name diminish the value of their name and effectively took business from them and as a result they didn't have sales they lost sales they didn't have sales for certain inventory and that falls under that lucker analysis of what loss of use can be which is you lost the business supply and demand changes so we think overall that there should be coverage and the truck which should be reverse thank you good morning runners greg mass for liberty corporate capital i would respectfully ask this court to affirm the district court's decision for two primary reasons first s s o failed to contest the role of exclusions the district court level specifically contest the application of breach of contract exclusion so what's been presented here today largely is an argument that's frankly new second as the remaining substantive issues the claims are neither covered under cover j nor coverage b and even if they were addressing all these various provisions but that opposition brief fail to ever address the breach of contract exclusion in coverage be cited by liberty which was the primary oral argument the court just heard there for judge no does not respond to liberties argument that the exclusion for personal advertising injury arising from breach of contract bars coverage for count to use trademark infringement claim or for count three is breach of contract claim  waiving the opportunity and quote now this court has previously held in the case of michigan bell telephone company versus strand a two thousand and two case quote this court does not ordinarily address new arguments for the first time on appeal and explaining why we have written propounding new arguments on appeal and attempting to prompt us to reverse the trial court arguments never considered by the trial court is not only somewhat devious it undermines important judicial values in order to preserve the integrity of the appellate structure we should not be considered a second shot form a form where secondary backup theories may be minted for the first time and quit given the failure to address the of contract exclusion at the trial court level the entire analysis about capital specialty and whether iler applies simply goes out the window this is all new arguments being presented here for the first time i think maybe it makes sense to address the the actual substantive issues in order that is to start with coverage and which is our property damage coverage now that is the somewhat colorful analysis by judge forster of the gross misrepresentation of laugher decision but i don't think we can we need to get into the niceties of how that decision works or applies or what's fundamentally wrong with the decision because there simply is no allegation the underlying complaint of loss of use  physical or tangible property which is what's required by the policy what's alleged in the complaint is that security safe outlet at prepared paragraph of five false or represent the quality of its own goods and that  damage reputation in paragraph eighty eight to the goodwill and reputation of bugs gunshop respectfully that's not tangible property the goodwill and reputation of a company is not something that can be physically touched which is also a personal advertising injury decision makes it very clear that we shouldn't assume facts they're not mentioned in the complaint we shouldn't assume the cause and effect that case involved tortious interference climb and the subsequent allegation was well that there must have been disparagement because you were reaching out to my customers this court said well no just because you've torturously interfered with a business relationship doesn't mean that you've disparaged or that you qualify as a personal advertising injury for the same reason this court should not consider the lack of evidence in what is a lengthy complaint to be a basis upon which to reverse the trial court's decision referred to paragraph eighty eight that's part of count t under coverage b as to counts two and three but they also failed as to count one you know it's one that forms part of his decision he doesn't i guess for lack of a better word to fault them for that issue but he does address that specific solution now  some confusion if you if you don't study insurance policies on a regular basis you may miss that there is a contractual limitation exclusion which applies to coverage a and in fairness to security safe out what they did address that particular issue the trial court that is didn't address the very different breach of contract exclusion contractual i build exclusion limitation applies in the context of where you assume the liability of a third party whereas the breach of contract exclusion just simply yet is the intellectual property exclusion now the policy also in coverage b bars coverage for any claims of quote other intellectual property and the sole argument not position to the application of that or to count three the so argument is that it's invidious but the reason why it's argued in the papers to be in big us is because the policy in providing a grant of coverage says we do provide coverage for copyright trade dress and slogan so therefore the security safe argues that it must be ambiguous when applied to when we talk about what is other intellectual property respectfully that exclusion doesn't apply to the facts is being applied in this case because we don't deal with a copyright we don't deal with the trade dress or slogan issue so to the extent that there is a confusion in those very limited circumstances it doesn't apply to these facts reasonable  that this is where we're fortunate this court has been so detailed in addressing personal advertising injuries not refer the court to show a large case so decided by this court in which the court specifically said there is no it's not close enough that there is a difference between trademark trade dress those are distinct legal concepts but even if they were close enough it still appropriate for a policy to provide some limitation of coverage that is everything within the grant of coverage isn't guaranteed to be covered that is you can have subsequent exclusions that's the purpose of limitations of coverage in a policy and probably the more difficult detail question is whether the claims come within coverage at all under coverage b and i'm asked for the reason i suggest i don't think we have to get to that analysis but i don't think and i don't see here where we have an advertising injury advertising injury has a specific definition of policy now judge forster did find that it was probable that there was an advertising injury i think given the difficulties  this question and we have to kind of dig a little bit deeper there's two ways that the that s s argues that they have an advertising injury the first is to say that there was disparagement that is the you exists but as to the question of advertising idea i think this is one of the more complex questions because we deal with a case that's been highly criticized for other reasons across the country and that's the advanced watch case decided by th advance watch this court said that advertising idea is it was more than just the notice provided that is that's more than just the advertisement itself it has to have idea has to have some meaning which in that context is the is not sufficient to require the court to construe it against liberty in fact i would refer the court to judge moore's written decision in the case of cincinnati insurance versus zend where she dealt with the question of what constitutes a slogan and slogans defined in the policy either but yet based on the advance watch case the same one we were a lie on here judge moore was able to give the common understanding common definition of what constitutes a slogan so in that context i respect that disagree on  with regard to advance watch that much is made of the use of that court's decision or the way that court's decision has been construed by other jurisdictions visa v its trademark analysis respect before the court and so what we're really just looking at is that straight definition of what constitutes an idea because the policy itself defines advertisement advertisement being a notice so we know that an advertising idea has to mean more than just the plain simple notice to customers the e mail itself cannot be an advertising idea so what security safe then argues is well the ad the ad for ty's ing idea is the database well respectfully the database itself is not provided to customers it's not the idea the idea in the context of an advertising injury or advertising idea case is something about the products that is to say in going back to the  that matter they the question was the reference to the wearable light which was an case and judged more correctly noted that that's a slogan that's a phrase that some that the company uses to promote its ideas that would be an advertising idea what we have here though there's nothing unique about the e mails and there's no description of the e mails whatsoever so for that reason respectfully there is no unique advertising idea finally as to dennis hof i'll simply say that this is the one close call if we have if we actually get there because he took the database and the allegations in the complaint are that he knew that he was going to security safe sister was the vice president of security safe outlet that he did it in concert you took the database with the key in the conspiracy to provide this information on two hundred four thousand customers so security safe would have a competitive advantage in competing think the question then becomes is did he can commit those acts as well as an employee of security safe as opposed to bugs gunshop and did he do that within his duties as an employee of security safe a question whether industrial espionage could ever be considered within one's duties of employment but preventing that argument it's clear that the database was taken or at least kept when he returned everything else or deleted everything else he kept the kept the database while he was still an employee of securities or a gun shop and so for that reason your honour's there are no more questions that we just simply respectfully ask the court to affirm thank you very much please your honor we've been criticized for the issue about the exclusion and our argument at the trial court was and remains the same today that based upon the hundred forty six paragraphs there's coverage by other means the getting to that breach of contract issue was a non issue for us as you mentioned the broad standard in kentucky to provide coverage it's whether possibly or might some allegation might fall within the coverage so w broad standard our argument was presented to the trial court secondly as to the advertising idea segment that was just discussed i would point out that that term is not defined in the policy i agree it should be construed against the drafter we also cited trail of cases for example hyman versus nationwide that deal with the advertising idea terminology and we think it supports our position that the customer list is an advertising idea in with respect to advance watch our perspective on that case is and i think that's exactly what judge moore may have seen in the cincinnati versus in cases it seems to be somewhat of an outlier these days it's not necessarily that you have to run head first head first into it but it seems that it has been overread endorsed stretched to the extremes of its four corners as to what that case really stands for and finally a point on this the issue about mr denning hoff and the timing and those type things again the complaint itself acknowledges that d g s did not even legally exist at the time mr denning hoff left that employment whatever that employment was so the timing does mean a lot for all these allegations and again for the expectation that is this i would have coverage under its general liability policy