Michigan Supreme Court 

Lansing, Michigan 

Chief Justice: Justices: 

Clifford W. Taylor Michael F. Cavanagh 

Elizabeth A. Weaver Opinion Marilyn Kelly 

Maura D. Corrigan 

Robert P. Young, Jr. 

Stephen J. Markman 

FILED APRIL 25, 2007 

CITIZENS INSURANCE COMPANY, 

 Plaintiff/Counter-Defendant-Appellant, 

v No. 130099 

PRO-SEAL SERVICE GROUP, INC, d/b/a 

PRO-SEAL, INC, 

Defendant/Counter-Plaintiff-Appellee, 

and 

SETH SHORT, RANDY QUINCY, 

FLOWSERVE CORPORATION, and 

FLOWSERVE MANAGEMENT COMPANY, 

 Defendants. 

_______________________________ 

BEFORE THE ENTIRE BENCH 

PER CURIAM. 

At issue in this insurance coverage dispute is whether defendant Pro-Seal 

Service Group, Inc.’s, act of shipping a product in a competitor’s packaging with 

Pro-Seal’s labeling affixed to it constitutes an “advertisement” for purposes of an 

insurance policy. The Court of Appeals determined that plaintiff (Citizens 

Insurance Company) was required to defend defendant under the terms of a 
 

commercial general liability policy (CGL policy) because the underlying 

complaint alleged a violation of trade dress1

 and such a violation inherently 

involves advertising activity. Because we conclude that the act of shipping a 

product in a competitor’s packaging with one's own name affixed to it is 

insufficient to satisfy the CGL policy’s definition of an “advertisement,” we 

reverse the judgment of the Court of Appeals that held to the contrary and remand 

this case to the trial court for further proceedings not inconsistent with this 

opinion. 

I. FACTS AND PROCEDURAL HISTORY 

Defendant Pro-Seal Service Group, Inc., is a Michigan corporation that 

sells and repairs mechanical seals used in oil production facilities in Alaska. ProSeal has a CGL policy and an umbrella insurance policy with plaintiff Citizens 

Insurance. Pro-Seal’s major competitor for mechanical seal sales in the Alaskan 

market is defendant Flowserve Corporation, a New York corporation that 

manufactures, sells, and refurbishes mechanical seals. The dispute between 

Flowserve and Pro-Seal began in June 2003, when a Flowserve employee 

discovered that two Flowserve mechanical seals that had been repaired by Pro1

 “The trade dress of a product is essentially its total image and overall 

appearance. It involves the total image of a product and may include features such 

as size, shape, color or color combinations, texture, graphics, or even particular 

sales techniques.” Two Pesos, Inc v Taco Cabana, Inc, 505 US 763, 764 n1; 112 

S Ct 2753; 120 L Ed 2d 615 (1992) (internal quotation marks and citations 

omitted). 

2
 
 

Seal were being shipped to a customer in the original Flowserve container, with 

the name “Pro-Seal” affixed to the outside of the container. Flowserve brought a 

suit against Pro-Seal in the United States District Court for the District of Alaska, 

claiming that Pro-Seal created confusion in the marketplace by imitating or 

infringing trademarks or product marks, and by using trade secrets, blueprints, 

engineering drawings, packaging materials, and sales practices that misrepresented 

Pro-Seal seals as being Flowserve seals.2 Pro-Seal requested that plaintiff defend 

it in the Flowserve action pursuant to both insurance policies. Plaintiff concluded 

that the nature of the allegations in the Flowserve complaint were beyond the 

scope of either policy and, therefore, refused to defend Pro-Seal. Plaintiff filed the 

instant action seeking a declaration that plaintiff was not required to defend ProSeal under either policy. 

The trial court granted plaintiff’s motion for summary disposition, 

introducing its analysis by noting that if a contract is plain and unambiguous, it 

must be enforced according to its terms. Burkhardt v Bailey, 260 Mich App 636, 

656; 680 NW2d 453 (2004). According to the terms of the instant insurance 

contract, coverage is excluded for advertising injuries that are “knowingly made.” 

The trial court concluded that coverage did not exist for the conduct asserted in the 

2

 After a facilitation session, the Flowserve complaint was dismissed by 

stipulation. Defendant admitted two inadvertent trademark infringements and 

settled the case for $1,800. 

3
 
Flowserve lawsuit because it “alleges an intentional course of conduct involving 

fraud, deceit, and counterfeit parts being sold as genuine.” 

On appeal, the Court of Appeals vacated the judgment of the trial court in a 

published opinion, holding that plaintiff was required to represent defendant ProSeal because Flowserve’s allegations fell within the definition of an “advertising 

injury” under the CGL policy. 268 Mich App 542; 710 NW2d 547 (2005). The 

Court of Appeals undertook its analysis by noting that the protection of trade dress 

is intended to “‘“secure to the owner of the mark the goodwill of his business and 

to protect the ability of consumers to distinguish among competing producers.”’” 

Id. at 550-551, quoting Two Pesos, supra at 774, quoting Park 'N Fly, Inc v Dollar 

Park & Fly, Inc, 469 US 189, 198; 105 S Ct 658; 83 L Ed 2d 582 (1985). Because 

the underlying complaint alleged that Pro-Seal’s conduct confused and misled 

customers into believing that Pro-Seal seals were Flowserve seals, the ability of 

customers to “distinguish between competing producers” was implicated. On that 

basis, the Court of Appeals held that Flowserve’s complaint alleged a trade dress 

infringement. The Court of Appeals also held that the alleged trade dress 

infringement occurred in an “advertisement” because “‘allegations of trademark 

and trade dress infringement inherently involve advertising activity. In other 

words, there can be no trademark/trade dress infringement without advertising 

having occurred.’” Id. at 551-552, quoting Poof Toy Products, Inc v United States 

Fidelity & Guaranty Co, 891 F Supp 1228, 1235-1236 (ED Mich, 1995). 

4
 
 

 

Leave to appeal was sought in this Court and, after directing the parties to 

address certain issues,3

 we heard oral argument on whether to grant the plaintiff’s 

application for leave to appeal or take other peremptory action permitted by MCR 

7.302(G)(1). 474 Mich 1112 (2006). 

II. STANDARD OF REVIEW 

We review de novo the grant or denial of a motion for summary 

disposition. Kreiner v Fischer, 471 Mich 109, 129; 683 NW2d 611 (2004). This 

case requires that we consider whether defendant’s alleged conduct took place in 

an “advertisement” as that term in defined in the insurance policy. The 

construction and interpretation of the language in an insurance contract is a 

question of law that this Court reviews de novo. Klapp v United Ins Group 

Agency, Inc, 468 Mich 459, 463; 663 NW2d 447 (2003). 

III. ANALYSIS 

The terms of the CGL policy provide that plaintiff “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.” The CGL policy defines 

a “personal and advertising injury” as follows: 

3

 These issues were as follows: “(1) whether Flowserve's complaint alleged 

an advertising injury within the meaning of the commercial general liability policy 

that Citizens Insurance Company issued to Pro-Seal, Inc., and (2) if so, whether 

Citizens was relieved of its duty to defend Pro-Seal by operation of the policy 

exclusion for actions taken with knowledge that an advertising injury would 

result.” 

5
 
 

14. “Personal and advertising injury” means injury, including 

consequential “bodily injury”, arising out of one or more of the 

following offenses: 

* * * 

(f) The use of another’s advertising idea in your 

“advertisement”; or 

(g) Infringing upon another’s copyright, trade dress or slogan 

in your “advertisement.” 

The umbrella policy defines an “advertising injury” as follows: 

A. Advertising Injury means injury caused by one or more of 

the following offenses committed during the policy period in the 

course of advertising your goods, products or services: 

1. 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. 

2. Oral or written publication of material that violates a 

person’s right or [sic] privacy. 

3. Misappropriation of advertising ideas or style of doing 

business; or 

4. Infringement of copyright, title or slogan. 

The term “advertisement” is defined in the CGL policy as4 

4

 The umbrella policy does not define the word “advertising.” However, 

the umbrella insurance policy does state: 

The definitions, terms, conditions and exclusions of 

underlying insurance in effect at the inception of this policy apply to 

[the umbrella] coverage unless: 

A. They conflict with any of the provisions of this policy; or 

(continued...) 

6
 
 

a notice that is broadcast or published to the general public or 

specific market segments about your goods, products or services for 

the purpose of attracting customers or supporters. 

“[I]n reviewing an insurance policy dispute we must look to the language of 

the insurance policy and interpret the terms therein in accordance with Michigan’s 

well-established principles of contract construction.” Henderson v State Farm 

Fire & Cas Co, 460 Mich 348, 353-354; 596 NW2d 190 (1999). In Henderson, 

this Court described those principles as follows: 

First, an insurance contract must be enforced in accordance 

with its terms. A court must not hold an insurance company liable 

for a risk that it did not assume. Second, a court should not create 

ambiguity in an insurance policy where the terms of the contract are 

clear and precise. Thus, the terms of a contract must be enforced as 

written where there is no ambiguity. 

While we construe the contract in favor of the insured if an 

ambiguity is found, this does not mean that the plain meaning of a 

word or phrase should be perverted, or that a word or phrase, the 

meaning of which is specific and well recognized, should be given 

some alien construction merely for the purpose of benefiting an 

insured. The fact that a policy does not define a relevant term does 

not render the policy ambiguous. Rather, reviewing courts must 

interpret the terms of the contract in accordance with their 

(...continued) 

B. There is a provision in this policy for which a similar 

provision is not contained in underlying insurance. 

As it relates to an “advertising injury,” there is no conflict between the terms of 

the CGL policy and the umbrella policy. Furthermore, the “advertising injury” 

section of the umbrella policy is substantially similar to the “advertising injury” 

provisions in the CGL policy. The dictionary defines the term “advertising” as 

“paid announcements; advertisements.” Random House Webster’s College 

Dictionary (1997) at 20. Therefore, pursuant to the terms of the umbrella policy, 

the definition of the term “advertisement” in the CGL policy applies to the 

umbrella policy as well. 

7
 
 

 

commonly used meanings. Indeed, we do not ascribe ambiguity to 

words simply because dictionary publishers are obliged to define 

words differently to avoid possible plagiarism. [Id. at 354 (citations 

omitted).] 

The Court of Appeals erred in this case by failing to enforce the terms of 

the CGL policy as written.5

 While the Court of Appeals noted that the CGL policy 

defined the term “advertisement,” it ultimately rejected that definition in favor of a 

different definition articulated by the United States District Court in Poof Toy, 

supra at 1235-1236. In Poof Toy, the United States District Court held that 

allegations of trademark and trade dress infringement inherently 

involve advertising activity. In other words, there can be no 

trademark/trade dress infringement without advertising having 

occurred. This conclusion results from a required element in every 

trademark/trade dress case, that the mark or dress is likely to cause 

confusion to the consumer or deceive the consumer as to the origin 

or manufacturer of the goods. See 15 U.S.C. § 1125(a). To have (or 

potentially cause) this effect, one must clearly advertise (announce 

to the intended customers) the mark or dress. 

However, the Court of Appeals failed to recognize that Poof Toys is readily 

distinguishable because the insurance contract at issue in that case did not define 

the term “advertisement.” Because the term was left undefined, the United States 

5

 Justice Cavanagh argues that Flowserve alleged in its complaint that ProSeal used the Flowserve trademark to identify its products as Flowserve products 

and, on that basis, “it can be deduced that Pro-Seal was accused of taking actions 

that inherently involved notice broadcast or published to the general public or 

specific market segments about its goods, products, or services for the purpose of 

attracting customers or supporters.” Post at 4. However, the only portion of the 

Flowserve complaint relied upon by the Court of Appeals in this case is the 

allegation that Pro-Seal “shipped the counterfeit [seals] to the customer in a 

shipping crate prominently labeled with the Flowserve label.” Flowserve 

complaint at paragraph 22. We should not resolve this case on the basis of 

allegations that were not addressed by the Court of Appeals. 

8
 
District Court consulted a dictionary to define the term and concluded on the basis 

of that definition that there was coverage under that policy. Because the term 

“advertisement” is defined in the instant CGL policy, and that definition is 

incorporated into the umbrella policy as well, the Court of Appeals’ reliance on 

Poof Toy was inappropriate inasmuch as it potentially subjects plaintiff to a risk 

that it did not assume. See, e.g., Westfield Companies v OKL CAN Line, 155 Ohio 

App 3d 747, 755; 804 NE2d 45 (2003) (holding that Poof Toy did not apply to an 

insurance policy that specifically defined the term “advertisement”). 

Thus, in order to determine whether plaintiff had a duty to defend in this 

case, we must ascertain whether defendant’s conduct falls within the scope of the 

term “advertisement” as written in the CGL policy. This Court interprets the 

words used in a contract “in accordance with their commonly used meanings.” 

Henderson, supra at 354. Further, when defining a phrase used in a contract, this 

Court “read[s] the phrase as a whole, giving the phrase its commonly used 

meaning.” Id. at 356. Under the instant policy, an “advertisement” takes place 

when there is: (1) a notice; (2) that is broadcast or published; (3) to the general 

public or specific market segments; (4) about [the company’s] goods, products, or 

services; and (5) for the purpose of attracting customers. “When considering a 

word or phrase that has not been given prior legal meaning, resort to a lay 

dictionary such as Webster’s is appropriate.” Greene v A P Products, Ltd, 475 

Mich 502, 510; 717 NW2d 855 (2006). The dictionary defines “notice,” in 

relevant part, as “a written or printed statement conveying . . . information . . . .” 

9
 
Random House Webster’s College Dictionary (1997) at 895. The dictionary 

defines “broadcast,” in relevant part, as “to speak, perform, or present on a radio 

or television program” or “to spread widely; disseminate.” Id. at 166. “Publish” 

is defined, in relevant part, as “to announce formally or officially; proclaim; 

promulgate” or “to make publicly or generally known.” Id. at 1054. These 

definitions are consistent with the common understanding of the term “broadcast 

or publish” in the advertising realm as the public dissemination of information 

intended to inform potential customers of a company’s availability to do business. 

Thus, for example, a business such as Pro-Seal may utilize television, radio, 

newspapers, or billboards in order to inform potential customers about the goods 

and services they provide and to attract the patronage of such customers. 

The Court of Appeals concluded that when defendant shipped one of its 

seals to a customer in a Flowserve container, that was an act that “constitute[ed] 

notice that is published to the specific market segment in which Pro-Seal and 

Flowserve compete about the seals for the purpose of attracting customers or 

supporters.” 268 Mich App at 552. Pro-Seal seizes on this argument, claiming 

that when it shipped the seal at issue to a distribution center to be forwarded to its 

customer, it could be observed by members of the general public visiting that 

distribution center. Therefore, according to defendant, the use of the Flowserve 

packaging constituted an “advertisement.” 

However, both the Court of Appeals and defendant overlook that, under the 

terms of the CGL policy, defendant must publicly disseminate information about 

10
 
 

its goods and services for the purpose of attracting the patronage of potential 

customers. Here, defendant sent a seal to a specific customer in a Flowserve 

container for the purpose of completing a single transaction. At best, Pro-Seal’s 

argument that it expected that other customers might view the package at the 

distribution center and, as a result, would be encouraged in doing business with 

defendant was an incidental and remote benefit that does not fundamentally alter 

the fact that this was a single transaction with a specific customer. We conclude 

that the purpose for placing a Pro-Seal label on the Flowserve container in this 

instance was to identify for that specific customer the source of the seal to allow 

that specific customer to contact defendant with any questions or complaints about 

that product.6

 Accordingly, we conclude that the harm alleged to have been 

6

 We do not, as Justice Kelly asserts, hold that a company must engage in 

“wide-scale dissemination of information, such as by television or radio, for there 

to be an advertisement.” Post at 10. In fact, we agree with Justice Kelly that, in a 

limited market such as the Alaskan oil market, a notice broadcast to even a single 

customer might constitute “advertising,” as long as that notice was designed to 

“attract[] customers or supporters.” However, Justice Kelly overlooks the fact that 

the conduct complained of in this case, namely Pro-Seal’s act of shipping the seal 

in question to its customer in the original Flowserve container affixed with a ProSeal label, was not undertaken to “attract[] customers or supporters.” Rather, ProSeal shipped the seal in question in order to complete an already agreed-upon 

transaction. In other words, Pro-Seal had already “attracted” its customer by the 

time the seal in question was shipped in the container provided to Pro-Seal by that 

customer. While the complaint alleges that customer was confused about the 

origin of the seal at issue in this appeal, there is nothing in the complaint that 

could reasonably be construed as an allegation that the Pro-Seal labeling was 

designed to “attract” that customer to purchase another seal from Pro-Seal. 

Rather, looking at the context of the transaction, the Pro-Seal labeling simply 

served to identify the source of the repaired seal and to provide contact 

information if the customer had any questions or concerns. Likewise, contrary to 

(continued...) 

11
 
 

 

caused by Pro-Seal’s act of shipping a seal in a Flowserve container did not “arise 

out of an advertisement” and, therefore, plaintiff was not obligated to tender a 

defense based on this allegation under the terms of the CGL policy.7 

IV. CONCLUSION 

In order to constitute an advertisement under the CGL policy, defendant 

must publicly disseminate information about its goods and services for the purpose 

of attracting the patronage of potential customers. We conclude that when 

defendant shipped the seal in question to its customer in a Flowserve container 

affixed with a Pro-Seal label, there was no "advertising injury" under the CGL 

policy. Accordingly, we reverse the judgment of the Court of Appeals and remand 

this case to the trial court for further proceedings not inconsistent with this 

opinion.8 

(...continued) 

Justice Kelly’s contention, nothing in the Flowserve complaint alleged that ProSeal utilized the container in question in order to “attract[] customers or 

supporters.” Rather, Flowserve alleged that the shipping container was used as 

part of an attempt by Pro-Seal to lead customers to believe that its seals were 

actually Flowserve seals. Accordingly, Pro-Seal’s act of shipping a seal to its 

customer in the original Flowserve container is simply not an “advertisement” as 

the term is defined by the policy. 

7

 Because we conclude that no advertising occurred, we find it unnecessary 

to decide whether the underlying complaint alleged a “trade dress” or “trademark” 

violation, or whether Citizens Insurance was relieved of its duty to defend ProSeal by operation of the policy exclusion for actions taken with knowledge that an 

advertising injury would result. 

8

 Justice Cavanagh argues that a remand to the trial court is inappropriate 

because when the trial court held that the policy did not apply to advertising 

(continued...) 

12
 
 

Clifford W. Taylor 

 Maura D. Corrigan 

Robert P. Young, Jr. 

Stephen J. Markman 

(...continued) 

injuries that are knowingly made, “it is clear that it found [an advertising injury] 

because it determined that the advertising injury was made knowingly.” Post at 4. 

We disagree. In granting summary disposition to plaintiff, the trial court 

concluded that the Flowserve complaint “alleges an intentional course of conduct 

involving fraud, deceit, and counterfeit parts being sold as genuine. Clearly, this 

conduct does not fall within the scope of the limited coverage for advertising 

injury provided by the policy.” Because the trial court relied wholly on the 

intentional nature of Pro-Seal’s conduct, it did not address whether the Flowserve 

complaint actually set forth an “advertising injury” as defined by the policy. 

Because the trial court never addressed the issue left unresolved in this opinion, it 

should do so on remand. 

13
 
 

v 

S T A T E O F M I C H I G A N 

SUPREME COURT 

CITIZENS INSURANCE COMPANY, 

Plaintiff/Counter-DefendantAppellant, 

No. 130099 

PRO-SEAL SERVICE GROUP INC., doing 

business as PRO-SEAL INC., 

Defendant/CounterPlaintiff-Appellee, 

and 

SETH SHORT, RANDY QUINCY, 

FLOWSERVE CORPORATION, and 

FLOWSERVE MANAGEMENT 

COMPANY, 

Defendants. 

CAVANAGH, J. (dissenting). 

I agree with dissenting Justice Kelly that in the underlying complaint in 

this action, Flowserve’s allegations amounted to allegations of a violation of its 

trade dress. I also agree with her analysis of the terms “advertisement” and 

“notice.” However, I would resolve this case simply by reviewing the specific 

allegations Flowserve made in its complaint against Pro-Seal Service Group, Inc., 

because as Justice Kelly notes, and as the majority ignores, the question whether 
an insurer has the duty to defend must be answered by examining the allegations 

in the underlying complaint, rather than by looking at the insured’s specific 

actions. In fact, “[i]f the allegations of a third party against the policyholder even 

arguably come within the policy coverage, the insurer must provide a defense.” 

American Bumper & Mfg Co v Hartford Fire Ins Co, 452 Mich 440, 450-451; 

550 NW2d 475 (1996), citing Polkow v Citizens Ins Co, 438 Mich 174, 178, 180; 

476 NW2d 382 (1991); Allstate Ins Co v Freeman, 432 Mich 656, 662; 443 

NW2d 734 (1989). “This is true even where the claim may be groundless or 

frivolous.” Id. 

Here, Flowserve accused Pro-Seal’s individual employees of 

misrepresenting to the public that they were associated with Flowserve, that they 

were capable of performing certified repairs on Flowserve products, and that ProSeal seals were Flowserve seals. Flowserve further alleged that defendant 

“improperly appropriated and used Flowserve’s “P-50” trademark to identify 

their inferior seal” to “capitalize on Flowserve’s goodwill and to further confuse 

the process industry into believing that [Pro-Seal’s] competitive seals are 

Flowserve seals.” Further, Flowserve accused Pro-Seal of using three of 

Flowserve’s trademarks and attached several purchase orders allegedly showing 

that customers were ordering Flowserve seals from Pro-Seal and were being sent 

Pro-Seal seals. Flowserve attached a photograph of a Flowserve product bearing 

Flowserve trademarks and alleged that Pro-Seal had replaced internal parts with 

Pro-Seal parts. Flowserve explained that it discovered these internal parts while 

2
 
fixing a pump in which the seal had been installed and that it also discovered 

another seal it accused Pro-Seal of altering before it was installed. Another 

allegation involved an allegedly improperly labeled crate, which contained 

another allegedly altered Flowserve product, and an assembly drawing bearing 

the Flowserve name and trademark in the box in which the seal was shipped. 

Specific guiding principles governing the determination of an insurer’s 

duty to defend were aptly set forth in American Bumper, supra, and bear 

repeating here: 

“‘An insurer has a duty to defend, despite theories of liability 

asserted against any insured which are not covered under the policy, 

if there are any theories of recovery that fall within the policy. 

Dochod v Central Mutual Ins Co, 81 Mich App 63; 264 NW2d 122 

(1978). The duty to defend cannot be limited by the precise 

language of the pleadings. The insurer has the duty to look behind 

the third party’s allegations to analyze whether coverage is possible. 

Shepard Marine Construction Co v Maryland Casualty Co, 73 Mich 

App 62; 250 NW2d 541 (1976). In a case of doubt as to whether or 

not the complaint against the insured alleges a liability of the insurer 

under the policy, the doubt must be resolved in the insured’s favor 

14 Couch, Insurance, 2d (rev ed), § 51:45, p 538 (now § 51:49, p 

489).’” [American Bumper, supra at 451-452, quoting Protective 

Nat’l Ins Co v City of Woodhaven, 438 Mich 154, 159; 476 NW2d 

374 (1991), quoting Detroit Edison Co v Michigan Mut Ins Co, 102 

Mich App 136, 142; 301 NW2d 832 (1980).] 

While the complaint in the present case certainly could have been crafted 

more specifically with respect to describing precisely how defendant 

accomplished these violations, i.e., how it “advertised,” Flowserve’s allegations 

were sufficient to trigger a duty to defend. Flowserve alleged that Pro-Seal used 

Flowserve’s trademarks to identify Pro-Seal products and through its actions 

3
 
caused customer confusion regarding the origin or manufacturer of the goods. 

From these allegations alone, it can be deduced that Pro-Seal was accused of 

taking actions that inherently involved notice broadcast or published to the 

general public or specific market segments about its goods, products, or services 

for the purpose of attracting customers or supporters. Thus, the Court of Appeals 

correctly determined that plaintiff had a duty to defend Pro-Seal. 

On that basis, I would affirm the Court of Appeals. But even if I agreed 

with the majority’s substantive analysis, I would not remand this case to the trial 

court to allow it to determine anew whether plaintiff was required to defend ProSeal. The trial court was presented with this and other issues in the proceedings 

on this declaratory judgment action, and it made its ruling accordingly. In its 

written opinion and order granting summary disposition for plaintiff, the trial 

court described the nature of the claims being made, summarized the various 

complaint allegations, and ruled that plaintiff had no duty to defend. In fact, it 

ruled that “coverage is excluded for advertising injuries that are ‘knowingly 

made.’” See ante at 3. While the trial court did not provide a detailed analysis 

with regard to the alleged “advertising injury,” it is clear that it found one 

because it determined that the advertising injury was made knowingly. And it 

did not use conditional language, such as stating that if there were an advertising 

injury, it was knowingly made. Presumably, the trial court is unlikely to change 

its mind on remand, making the preliminary “victory” in this case hollow for 

4
 
defendant. Quite simply, the majority’s remand unfairly gives plaintiff a second 

opportunity to convince the trial court to again rule in its favor. 

Michael F. Cavanagh 

 Elizabeth A. Weaver 

5
 
v 

S T A T E O F M I C H I G A N 

SUPREME COURT 

CITIZENS INSURANCE COMPANY, 

Plaintiff/Counter-DefendantAppellant, 

No. 130099 

PRO-SEAL SERVICE GROUP, INC., doing 

business as PRO-SEAL, INC., 

Defendant/CounterPlaintiff-Appellee. 

and 

SETH SHORT, RANDY QUINCY, 

FLOWSERVE CORPORATION, and 

FLOWSERVE MANAGEMENT 

COMPANY, 

 Defendants. 

KELLY, J. (dissenting). 

The majority has decided that plaintiff Citizens Insurance Company had no 

duty to defend defendant Pro-Seal Service Group, Inc., in the underlying 

trademark infringement action. It asserts that the complaint did not allege an 

advertising injury as that term is defined by the parties’ commercial general 

liability policy (CGL policy). I believe that the complaint alleges one of the 

advertising injury offenses covered by the policy and the injury complained of 
does not fall within an enumerated exception to coverage. As a consequence, I 

respectfully dissent. I would affirm the judgment of the Court of Appeals. 

THE UNDERLYING FACTS 

Defendant Pro-Seal is in the business of selling and repairing mechanical 

seals used in high-temperature and extreme-pressure environments. It is not a 

manufacturer of these seals but a distributor that sells mechanical seal products 

manufactured by others and performs repairs on seals, using its own employees. 

In the underlying action, a customer of Pro-Seal requested that Pro-Seal 

make repairs and modifications to mechanical seals that the customer had 

purchased from defendants Flowserve Corporation and Flowserve Management 

Company (Flowserve). Flowserve is a large manufacturer of mechanical seals that 

also operates a repair business for its seals. Flowserve and Pro-Seal are 

competitors in the Alaskan market in both the sale of new seals and in the repair of 

worn seals. 

Pro-Seal repaired two Flowserve mechanical seals and shipped them to 

Alaska Roteq Corporation, an Alaskan distribution center engaged in the 

distribution and sale of mechanical seals, for delivery to Pro-Seal’s client. The 

seals were shipped in a distinctive Flowserve reusable container. Pro-Seal’s name 

appeared on the outside with a prominent red label that displayed the location of 

and contact information for Pro-Seal, a product description, and testing 

information. The exterior packaging also displayed the Flowserve trademark. 

2
 
An employee of Flowserve observed the packaging while it sat in the open 

on the premises of Roteq. The Flowserve employee knew that the product inside 

had been repaired by Pro-Seal because the affixed label displayed Pro-Seal’s 

name. Flowserve intercepted the repaired seal and the box in which it was 

contained. 

Four months after the incident, Flowserve filed a complaint against ProSeal in the United States District Court in Alaska. It alleged, among other things, 

that Pro-Seal created confusion in the marketplace by (1) imitating or infringing 

trademarks and product marks, (2) by using trade secrets, blueprints, engineering 

drawings, and packaging materials, and (3) by engaging in sales-related conduct, 

all of which misrepresented Pro-Seal’s products as being Flowserve products in 

violation of Flowserve product trademarks, trade names, and the Lanham Act. 15 

USC 1125(a). The complaint asserted that Pro-Seal unfairly competed with 

Flowserve through these devices and misrepresented to particular customers and 

the public that Pro-Seal’s products and services were Flowserve products and 

services. 

Pro-Seal notified its insurer, Citizens Insurance Company, of the lawsuit 

and requested that it provide a defense. Citizens Insurance declined and filed this 

lawsuit seeking a declaration that it had neither a duty to defend nor an obligation 

to indemnify. Both parties moved for summary disposition. The trial court went 

directly to an exclusion in the CGL policy. It pertains to injuries caused by acts of 

the insured done with knowledge that an injury to another will occur. It decided 

3
 
that the exclusion applied and, as a result, that Citizens Insurance had no duty to 

defend. 

Pro-Seal appealed to the Court of Appeals, which, in a published opinion, 

vacated the trial court’s order. The appellate court determined that the advertising 

injury coverage under the CGL policy required Citizens Insurance to defend the 

underlying action. It reasoned that the substance of the complaint relied on the 

doctrine of “trade dress,” a theory on which recovery could be based. The claimed 

injury, the appeals court held, arguably fell within the definition of an advertising 

injury. It ruled that the CGL policy exclusion did not apply because the complaint 

alleged both intentional and nonintentional acts. Flowserve, it held, could have 

recovered without proving that any relevant act was committed intentionally. 

STANDARD OF REVIEW 

This Court reviews de novo the interpretation given to language in an 

insurance contract. Klapp v United Ins Group Agency, Inc, 468 Mich 459, 463; 

663 NW2d 447 (2003). An insurance company’s duty to defend its insured 

depends on the allegations the third party makes in the underlying complaint 

against the insured. Illinois Employers Ins of Wausau v Dragovich, 139 Mich App 

502, 506; 362 NW2d 767 (1984). If the allegations fall even arguably within the 

coverage of the policy, the insurer has a duty to defend. American Bumper & Mfg 

Co v Hartford Fire Ins Co, 452 Mich 440, 450-451; 550 NW2d 475 (1996). 

Where there is doubt about whether the complaint alleges a liability of the insurer 

4
 
under the policy, the doubt must be resolved in favor of the insured. Polkow v 

Citizens Ins Co, 438 Mich 174, 180; 476 NW2d 382 (1991). 

ADVERTISING INJURY 

The issue in this case is whether Citizens Insurance had a duty to defend 

under the CGL policy. In resolving this issue, the Court must construe the terms 

of the policy. A court will not hold an insurance company liable for a risk that it 

did not assume. Henderson v State Farm Fire & Cas Co, 460 Mich 348, 354; 596 

NW2d 190 (1999). 

The policy provides in section 1(a) that Citizens Insurance “will pay those 

sums that the insured becomes legally obligated to pay as damages because of 

personal and advertising injury.” In relevant part, “advertising injury” is defined 

in Section V, paragraph 14: 

“Personal and advertising injury” means injury, . . . arising 

out of one or more of the following offenses: 

* * * 

(g) Infringing upon another’s copyright, trade dress, or slogan 

in your “advertisement.” 

In order to qualify as an advertising injury under this subsection, two 

requirements must be satisfied: Pro-Seal must have infringed Flowserve’s 

copyright, trade dress, or slogan, and the infringement must have occurred in ProSeal’s “advertisement.” 

Flowserve alleged that Pro-Seal used Flowserve’s trademark and 

represented Flowserve products to be its own, and sent a seal that it had repaired to 

5
 
 

 

a customer in distinctive Flowserve packaging. The “trade dress” of a product 

refers to the product’s overall image and may include features such as a particular 

sales technique. Two Pesos, Inc v Taco Cabana, Inc, 505 US 763, 764; 112 S Ct 

2753; 120 L Ed 2d 615 (1992). It is a broad term that is expansive enough to 

include Flowserve’s allegations, even though Flowserve never used the term 

“trade dress.” Thus, considering the substance of the claim, contrasted with the 

language of the complaint, as this Court must do, the complaint alleged that ProSeal infringed Flowserve’s trade dress. See American Bumper, 452 Mich 451-

452. 

The injury must also arise out of an “advertisement” in order to qualify as 

an advertising injury. As defined by the CGL policy, an “advertisement” takes 

place when the following four elements are satisfied: (1) a notice about the 

company’s goods, products, or services, (2) is broadcast or published, (3) to the 

general public or specific market segments, (4) for the purpose of attracting 

customers.1 

The first requirement is that there be notice about the company’s goods, 

products or services. The majority opinion defines “notice” as including “‘a 

written or printed statement conveying . . . information.’” Ante at 9 (citation 

omitted.) In this case, Pro-Seal shipped a package containing a label displaying its 

1

 “Advertisement” is defined in the CGL policy as “[n]otice that is 

broadcast or published to the general public or specific market segments about 

your goods, products or services for the purpose of attracting customers or 

supporters.” 

6
 
name as well as product information. This satisfied the notice requirement under 

the majority’s definition. 

The next inquiry concerns whether the notice was broadcast or published. 

As defined by the majority, “publish” is “‘to make publicly . . . known.’” Ante at 

10 (citation omitted). The act of providing a member of the public with 

information, without more, makes the information public. Since Pro-Seal placed 

the label on a package, then sent that package to a customer, there was publication. 

The next requirement is that the notice be conveyed to the general public or 

to specific market segments. There is no definition in the CGL policy of “specific 

market segments.” However, given that “segment” is a synonym for “piece” or 

“section,” it can be presumed that “market segments” refers to particular 

customers or vendors in the marketplace. Rogets II: The New Thesaurus (3d ed). 

Here, as the parties agree, the geographic area where Pro-Seal and 

Flowserve competed, the North Slope of Alaska, contains few customers. Because 

the market is so restricted, communication with one customer or vendor would be 

communication with a market segment. Accordingly, I conclude that, the sending 

of the package to Roteq for delivery to a specific customer constituted giving 

notice to a specific market segment. 

The final requirement is that the notice be for the purpose of attracting 

customers. Flowserve’s complaint alleges that Pro-Seal unfairly competed because 

its communications in the marketplace about its products and services caused ProSeal products and services to be confused with those of Flowserve. The essence 

7
 
 

 

of Flowserve’s claim is that, by shipping a seal in a Flowserve package with a 

label containing Pro-Seal’s contact information, Pro-Seal unfairly sought to attract 

customers. This allegation satisfies the final requirement. 

Since the allegation is that Pro-Seal infringed Flowserve’s trade dress in 

Pro-Seal’s “advertisement,” I believe that the complaint asserted an advertising 

injury, as the policy defines that term.2

 Accordingly, Citizens Insurance had a 

duty to defend unless a specific policy exclusion excused it. 

The majority disagrees and holds that Citizens Insurance had no duty to 

defend. It claims that the purpose of the notice must be to attract “potential” 

customers. Ante at 10. According to the majority, since the package was sent to a 

specific customer, the purpose of its label was to “allow that specific customer to 

contact defendant with any questions or complaints about the product,” not to 

attract potential customers. Ante at 11. 

The majority claims that I disregard the fact that the conduct complained of 

“was not undertaken to ‘attract[] customers or supporters.’” Ante at 11 n 6. 

disagree. Actually, it is the majority that errs by improperly ignoring the 

complaint in deciding that there is no duty to defend. See Protective Nat'l Ins Co 

of Omaha v Woodhaven, 438 Mich 154, 159; 476 NW2d 374 (1991). 

2

 Subsection f provides another means by which there could be an 

advertising injury. That subsection indicates that there is an advertising injury 

when the injury arises out of “[t]he use of another’s advertising idea in your 

‘advertisement.’” However, because coverage is available for an advertising 

injury as defined in subsection g, it is unnecessary to determine if an advertising 

injury was alleged as defined by subsection f. 

8
 

I 
A closer look illustrates that the majority’s decision is contrary to crucial 

allegations in the complaint. Paragraph 22 of the complaint alleges that Pro-Seal’s 

actions have led to customer confusion and lists specific examples of such acts. 

Subpart e of that paragraph discusses the particular act at issue in this case. 

Paragraphs 34 through 37 assert the unfair competition claim. Paragraph 34 

repeats and realleges the allegations of the prior 33 paragraphs. Paragraphs 35 

through 37 contain the substance of the unfair competition claim, which is that 

Pro-Seal created confusion in the marketplace and this confusion caused 

Flowserve to lose business. 

Though the complaint never explicitly states that the particular act at issue 

was done to “attract[] customers or supporters,” the duty to defend cannot be 

limited by the precise language in the pleadings. American Bumper, 452 Mich 

450-451. Rather, the insurer has a duty to look beyond the allegations to analyze 

whether coverage is required. Id. at 452 By asserting that the particular act at 

issue was done to cause confusion in the marketplace at Flowserve’s expense, 

Flowserve alleged that the particular act was done to attract customers. 

The majority appears to agree that the act at issue was done to cause 

confusion in the marketplace but still concludes that it was not performed to attract 

customers. This conclusion ignores reality. The only reason for Pro-Seal to cause 

confusion in the marketplace would be to draw customers to itself and away from 

Flowserve. Flowserve’s complaint alleges as much by asserting that Flowserve 

has lost business as a result of this confusion. The majority errs by failing to look 

9
 
 

beyond the precise language used in the pleading to determine whether there is a 

duty to defend 

The majority also errs by relying on the fact that the container was sent to 

an existing customer in order to conclude that the notice was not sent to attract 

customers. This fact is irrelevant. The policy says nothing about “potential” 

customers. As long as the complaint alleges that the notice was meant to attract 

customers, be they existing or potential, the requirement is satisfied. Here, the 

complaint alleges that the container was sent to an existing customer. It further 

alleges that this act was done to cause confusion. Flowserve claims that this 

marketplace confusion made it lose business. We should consider the substance of 

this claim: Flowserve accused Pro-Seal of confusing this customer so that in the 

future the customer would conduct business with Pro-Seal under the mistaken 

belief that he was conducting business with Flowserve. By making this allegation, 

Flowserve clearly accused Pro-Seal of acting with the intent to attract future 

business from this particular customer. 

By deciding as it does, the majority would seem to require wide-scale 

dissemination of information, such as by television or radio, for there to be an 

advertisement. I believe that it is error to impose such a requirement. There is 

nothing in the policy that precludes a finding that giving notice to a specific 

customer can qualify as an advertisement.3 If the notice is published to the general 

3

 The policy does require that the notice be sent to the general public or 

specific market segments. However, this language does not preclude situations, 

(continued...) 

10
 
 

public or to a specific market segment for the purpose of attracting customers, 

there is no requirement that it be widely disseminated. Rather, any such 

requirement is one of this Court’s own making. 

It is improper to read a nonexistent limitation on coverage into an insurance 

policy. This is especially true where, as here, the party benefiting from the 

limitation drafted the policy. If Citizens Insurance had intended to require 

dissemination through the public airwaves or communication with a large number 

of people, it easily could have imposed such a requirement. It did not do so. It is 

the insurance company’s obligation to define the coverage to be provided. The 

courts should not save an insurance company from the plain meaning of terms that 

it used in its policy or artificially limit the scope of coverage, as the majority does 

here. 

EXCLUSIONS 

As discussed above, I believe that the complaint alleged an advertising 

injury as that term is defined by the policy. Accordingly, Citizens Insurance has a 

duty to defend Pro-Seal unless a specific exclusion excuses it from this duty. See 

Protective Nat’l Ins Co, 438 Mich at 159. 

The CGL policy’s “personal and advertising injury” coverage is subject to 

the following exclusion: 

(...continued) 

like this one, where the market is so restricted that one customer would constitute 

a specific market segment. 

11
 
2. Exclusions 

This insurance does not apply to: 

(a) “Personal and advertising injury”: 

(1) Caused by or at the direction of the insured with the 

knowledge that the act would violate the rights of another and would 

inflict “personal and advertising injury[.]” 

By requiring knowledge that the acts would violate the rights of another, 

this exclusion applies only to claims of intentional wrongdoing. Here, several of 

the allegations in Flowserve’s complaint contain no reference to intent and seek 

recovery for conduct that was innocent, inadvertent, negligent, or reckless. As a 

result, even though Citizens Insurance correctly points out that the complaint also 

alleged intentional wrongdoing, the exclusion does not excuse it from its duty to 

defend Pro-Seal. An insurer must defend its insured even if theories of liability 

asserted are not covered under the policy, if any asserted theories of recovery fall 

within the policy coverage. American Bumper & Mfg Co, 452 Mich at 451. 

CONCLUSION 

Since the complaint alleged that Pro-Seal infringed Flowserve’s trade dress 

in its “advertisement,” and no specific policy exclusion excused Citizens 

Insurance from its duty to defend, I must dissent. I would affirm the judgment of 

the Court of Appeals. 

 Marilyn Kelly 

 Elizabeth A. Weaver 

12