2002 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

11-18-2002

Cat Internet Ser v. Providence

Precedential or Non-Precedential: Non-Precedential

Docket No. 01-4166

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Recommended Citation

"Cat Internet Ser v. Providence" (2002). 2002 Decisions. Paper 744.

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 NOT PRECEDENTIAL 

 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 

 

 NO. 01-4166 

 CAT INTERNET SERVICES, INC.; 

 INTERNET SUPPLY, INC. 

 Appellees 

 v. 

 PROVIDENCE WASHINGTON INSURANCE CO.; 

 YORK INSURANCE COMPANY, 

 Appellants 

 On Appeal from the United States District Court 

 for the Eastern District of Pennsylvania 

 District Court Judge: Honorable Anita B. Brody 

 (D.C. Civil No. 00-CV-3238) 

 Argued October 29, 2002 

 Before: SLOVITER, FUENTES, Circuit Judges, and DEBEVOISE, 

 Senior District Judge 

 (Opinion filed: November 18, 2002) 

Appearances: 

Michael F. Aylward, Esq. (Argued) 

Morrison, Mahoney and Miller 

250 Summer Street 

Boston, MA 02210-1181 

Eugene J. Maginnis, Jr., Esq. 

Dugan, Brinkmann, Maginnis and Pace 

Suite 1400 

1880 John F. Kennedy Boulevard 

Philadelphia, PA 19103 

 Attorneys for Appellants 

Stephen Levin, Esq. (Argued) 

81 Big Oak Road, Suite 100 
Morrisville, PA 19607 

 Attorney for Appellees 

Laura A. Foggan, Esq. 

John C. Yang, Esq. 

Seth J. Blonder, Esq. 

Wiley Rein & Fielding LLP 

1776 K Street, N.W. 

Washington, D.C. 20006 

 Attorney for Amicus Curiae 

 Complex Insurance Claims Litigation Association 

 OPINION 

DEBEVOISE, Senior District Judge 

 Appellants, Providence Washington Insurance Company ("Providence 

Washington") and York Insurance Company ("York") (collectively "Providence") appeal 

from the District Court’s order granting summary judgment in favor of appellees on their 

claim that the advertising injury provisions of Providence’s standard commercial liability 

policy entitled them to coverage in a Tennessee lawsuit in which appellees were named as 

defendants. We agree with the District Court and will affirm. 

 I. Facts and Procedural History 

 In February 2000 Magazines.com Inc. (the "Tennessee Plaintiff"), sued appellees, 

CAT Internet Services, Inc. ("CAT") and Internet Supply, Inc. ("INS"), charging that 

through the use of CAT’s and INS’s Internet domain name, Magazine.com, CAT and INS 

infringed the Tennessee Plaintiff’s name and trademark Magazines.com for the purpose 

and with the effect of diverting sales of magazines and other products to their own 

affiliates, some of which were competitors of the Tennessee Plaintiff. The complaint in 

the Tennessee action charged statutory and common law trademark and trade name 

infringement as well as injury to business reputation and common law unfair competition. 

 After notice of the Tennessee Plaintiff’s suit, CAT’s and INS’s insurers, Providence 

Washington and York, declined to undertake their defense under the advertising injury 

provisions of their standard commercial liability policy. The pertinent provisions of the 

policy provided: 

 1. Business Liability 

 a. We will pay those sums that the insured becomes legally obligated to 

 pay as damages because of "bodily injury", "property damage", 

 "personal injury" or "advertising injury" to which this insurance 

 applies . . . 

 b. This insurance applies to: 

 

 (2) "advertising injury" caused by an offense committed in the course 

 of advertising your goods, products or services . . . 

 "Advertising injury" was defined in the policy as: 

 "Advertising injury" means injury arising out of one or more of the 

 following offenses: 

 a. Oral or written publication of material that slanders or libels a person or 
 organization or disparages a person’s or organization’s goods, products or 

 services; 

 b. Oral or written publication of material that violates a person’s right of 

 privacy; 

 c. Misappropriation of advertising ideas or style of doing business; or 

 d. Infringement of copyright title or slogan. 

 Following Providence’s refusal to accept coverage for the Tennessee Plaintiff’s 

claims, CAT and INS commenced an action for declaratory relief and damages in the 

District Court. The parties filed cross-motions for summary judgment. The District 

Court granted CAT’s and INS’s motion, ruling that Providence Washington and York had 

a duty to defend the Tennessee litigation. This appeal followed. 

 II. The District Court Opinion 

 Applying Pennsylvania law to the coverage issue, the District Court noted that the 

insurer’s "duty to defend is broader than the duty to indemnify, because a duty to defend 

arises ’whenever an underlying complaint may "potentially" come within the insurance 

coverage.’ Frog, Switch [& Manufacturing Co., Inc. v. Travelers Insurance Company, 

193 F.3d 742, 746 (3d Cir. 1999)]. . . If a single allegation of a complaint is potentially 

covered by a policy, an insurer has an obligation to defend its insured against all claims 

until there is no possibility of recovery for a covered claim." (Slip. Op. at 7). 

 Addressing the question whether the complaint in the Tennessee litigation alleged 

an "advertising injury" within the meaning of the policy, the District Court held that it 

did. It concluded that under Pennsylvania law the advertising injury provisions cover 

trademark infringement as a "misappropriation of an advertising idea or style of doing 

business," a view with which our court has in dicta suggested agreement. Frog, Switch, 

(Slip. Op. at 8,9). 

 Distinguishing Sorbee International Ltd. v. Chubb Custom Insurance Co., 735 A. 

2d 712 (Pa. Super. 1999), the District Court found that "the allegations of the Tennessee 

Complaint . . . do allege trademark infringement that is a ’misappropriation of an 

advertising idea or style of doing business’" (Slip. Op. at 10), thus asserting an 

"advertising injury" that triggered Providence’s obligation to defend under the policy. 

 III. Jurisdiction and Standard of Review 

 The District Court had diversity jurisdiction pursuant to 28 U.S.C. 1332(a)(1). 

We have jurisdiction under 28 U.S.C. 1291, as this is an appeal from a final judgment of 

the District Court. We review the District Court’s grant of summary judgment de novo. 

Fogleman v. Mercy Hosp., Inc., 283 F.3d 561, 566 n.3 (3d Cir. 2002). Summary 

judgment was proper if, viewing the record in the light most favorable to Providence, 

there is no genuine issue of material fact and CAT and INS are entitled to judgment as a 

matter of law. The parties agree that there is no genuine issue of fact on the policy 

coverage issue. 

 IV. Discussion 

 Providence urges that the District Court misinterpreted dicta in this court’s holding 

in Frog, Switch and ignored the Pennsylvania Superior Court’s holding in Sorbee 

International and thus erred in holding that a trademark infringement dispute involving 

competing Internet domain sites sought recovery for "misappropriation of an advertising 

idea or style of doing business." At oral argument Providence’s counsel advanced the 

position that listing a domain site name such as "magazine" is not "advertising" within 

the meaning of the policy as it was not part of a marketing campaign to sell CAT’s or 

INS’s products to the consuming public. It would follow, according to Providence, that 

misuse of the domain name as charged in the Tennessee litigation did not cause an 

"advertising injury." 

 In Frog, Switch insurance carriers that had issued policies covering "advertising 

injury" were asked to defend a claim for theft of trade secrets, unfair competition and 

reverse passing off. We held that "[t]he allegation that Frog engaged in unfair 

competition by misappropriating trade secrets relating to the manufacture of a product 

line does not allege misappropriation of advertising ideas or styles of doing business as 
such." 193 F.3d at 748. However, in dicta we suggested disagreement with the Sixth 

Circuit Court of Appeals which had held that trademark infringement was not covered by 

the standard policy because there was no specific references to trademark infringement in 

the policy (as distinguished from specific references to copyright infringement). Advance 

Watch Co., Ltd. v. Kemper National Insurance Co., 99 F.3d 795 (6th Cir. 1996). 

 Sorbee International, dealing with the same policy language, did not address 

appropriation of an advertising idea. Rather the claim for which the insured demanded a 

defense was for misleading factual representations about the nature and characteristics of 

the insured’s product and violation of FDA policies and regulations. 

 After reviewing the record, the briefs and applicable Pennsylvania law, we 

conclude that Providence adopts an excessively narrow interpretation of the policy 

language. For substantially the same reasons set forth in the District Court’s opinion we 

conclude that CAT and INS established that at least one allegation in the Tennessee 

complaint potentially fell within the policy’s advertising injury coverage, triggering 

Providence’s duty to defend. 

 For the foregoing reasons, we will AFFIRM the judgment of the District Court. 

 

 /s/ Dickinson R. Debevoise 

 Senior District Judg