Policy. Central's duty to defend was triggered in any event.
bastly, Central argues that coverage is precluded by
Gallagher's allegations that StunFence acted intentionally and
with knowledge that it was violating Gallagher's rights. In that
respect it will be remembered that the Primary Policy did exclude
from coverage any injuries caused by the insured “with the
knowledge that the act would violate the rights of another and
would inflict ‘personal and advertising injury'” and any injuries
“[a] rising out of oral or written publication of material, if
done by or at the direction of the insured with knowledge of its
falsity.” But it must also be remembered that exclusions are
subject to the same interpretive rule that all ambiguities are

resolved in favor of the insured (Outboard Marine Corp. v.

Liberty Mut. Ims. Co., 154 T11.2d 90, 119, 607 N.E.2d 1204, 1217
(1992)). Thus the insurer may refuse to defend only if it is
clear from the face of the pleading that all of the allegations
in the Underlying Action fall outside of the policy's actual or
potential coverage (Wilkin Insulation, 144 J11.2d at 74, 578
N.E.2d at 930).

In this instance the quoted exclusions do not negate
Central's duty to defend. Contrary to Central's vigorous
assertion, 15 U.S.C. §1114 (“Section 1114”) does not uniformly

require that infringements be committed with knowledge. In that

regard it is troubling that Central quotes only Section

19



to squeeze into the “trade dress” language.

But with all that being said, one can only wonder why
StunFence has spent so much effort in trying to fit a square peg
in a round hole and so little in advancing the “use of another's
advertising idea” language of the Primary Policy. Despite that
seeming effort to snatch defeat from the jaws of victory, this
Court holds that Gallagher's allegations clearly triggered
Central's duty to defend under the latter provision. Two other
opinions by this Court's colleagues have held persuasively that
the term “misappropriation of advertising ideas or style of doing
business” (the language in the Excess Policy) encompasses claims
for trademark infringement so long as there is a sufficient nexus
between the injury and the injured party's advertising (Flodine

v. State Farm Ins. Co., No. 99 C 7466, 2001 WL 204786, at *8-*9

(N.D, Ill, Mar. 1), evaluating Illinois and Colorado law;

Winklevoss Consultants, 991 F. Supp. at 1038, applying Illinois

law). No reason appears, and Central makes no argument, as to
why the use of a trademark is to be included (as it is) within
the trademark owner's “advertising idea” for purposes of the
older IS0-drafted Primary Policy language but not for purposes of
the policy's revised language.

As against that, Central does observe that “misappropriation
of advertising ideas of style of doing business” can be

interpreted narrowly so as to take trademark infringement claims

13



rh

The use of another's advertising idea in your
“advertisement”; or

g- Infringing upon another's copyright, trade dress or
slogan in your “advertisement.”

In turn, Primary Policy §V {1 defined “advertisement” as “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.” inally,
Primary Policy §I Coverage B 42.a excluded from coverage
“personal and advertising injury” (again only the relevant
subparagraphs are listed):

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”;

2) Avising out of oral or written publication of material,

if done by or at the direction of the insured with
knowledge of its falsity;

* * *

6) Arising out of a breach of contract, except an implied
contract to use another's advertising idea in your
“advertisement” ;

7) Arising out of the failure of goods, products or
services to conform with any statement of quality of
performance made in your “advertisement”....

Excess Policy

In the Excess Policy Central assumed a duty to defend

against any suit seeking “personal injury” or “advertising

injury” damages that were not covered by any other insurance

policy. Excess Policy §VI 41 defined “advertising injury’



1114 (1) (b)--which addresses infringements “intended to be used in
commerce” and does require a showing of intent or knowledge to
recover damages--while it totally ignores Section 1114 (1) (a),
which addresses infringements on goods or services that were
actually used in commerce. To recover under either Section
1114(1) (a) or 15 U.S.C. §1125(a), a plaintiff need demonstrate
only that defendant's use of a registered mark caused actual
confusion, resulting in actual injury to plaintiff (Zelinski v.
Columbia 300, Inc., 335 F.3d 633, 639 (7th Cir. 2003)).

Because Gallagher alleged that the infringing conduct
actually took place in commerce, Gallagher's assertions of
intentional and willful conduct on the part of StunFence need not
have been proved for Gallagher to recover damages for trademark
infringement*--and that being so, the exclusions do not apply.
That same issue has arisen in other litigation, and the cases
have so held in nearly identical circumstances: Finger Furniture

Co. v. Travelers Indem, Co. of Conn., No. Civ.A. H-01-2797, 2002

WL 32113755, at *13 (S.D. Tex. Aug. 19); Adolfo House Distrib.

Corp. v. Travelers Prop. & Cas. Ins. Co., 165 F. Supp. 2d 1332,

1341 (S.D. Fla. 2001); Bay Elec, Supply, Inc. v. Travelers Lloyds

* As Cincinnati Ins. Co. v. FB. Atl. Ins. Co., 260 F.3d 742,
746 (7th Cir, 2001) observed in an analogous setting, “[p]roof of
deliberateness would merely be the icing on the cake.” Gallagher
seems likely to have made allegations of intentional and wilful
conduct to seek treble damages and attorneys' fees under 15
U.S.C. §1117, but if it failed to prove those charges, single
damages would still have been available to it.

20



not, as Central contends, simply trade secret and contract claims
masquerading under the Lanham Act. Rather Gallagher quite
plainly charged injuries that arose from StunFence's use of
Gallagher's trademark and StunFence's false or misleading
statements about the Power Fence product.

Even if Gallagher's alleged trademark infringement claims
played a minor role in its counterclaims in relation to what
Central characterizes as trade secret and breach of contract
claims (something that has not been, but need not be, established
here), Central could not run from its duty to defend StunFence.
While Illinois cases have said that the underlying complaint (or,
as in this case, the counterclaim) “must be read as a whole in

order to assess its true nature” (Twin City Pire Ins. Co. v.

Somer, 342 I1].App.3d 424, 431, 794 N.E.2d 958, 964 (1% Dist.
2003)), it would be entirely wrong to extend that general
statement to hold that any potential causes of action that are
minor in comparison to the overall complaint do not give rise to
the duty to defend. Any such result would be at war with the
well-settled principle that the duty to defend arises even if
only one of the theories of recovery is within the potential

coverage of the policy (HF®, L.L.C. v. Gen. Star Indem. Co., 338

t11.App.3d 912, 915, 788 N.E.2d 753, 756 (1"* Dist. 2003)).

Curtis-Universal, Inc. v. Sheboygan Emergency Med. Servs.

inc., 43 F.3d 1119 (7 Cir. 1994), though applying Wisconsin

17



“trademark” is sometimes employed “in a broad and generic sense
to denote the entire field of trademarks, service marks, trade
names, and trade dress” (Platinum Home Mortgage Corp. v. Platinun
Fin, Group, Inc., 149 F.3d 722, 726 n.1 (7th Cir. 1998)), the
term “trade dress” alone denotes only a subset of trademark law.
StunFence's premise amounts to urging instead that the lesser
(“trade dress”) includes the greater (trademark infringement
generally) --a neat trick, but at war with normal usage. Just
because courts apply essentially the same type of legal analysis
to the two concepts in no way implies that the parties to the
Primary Policy intended to treat the concepts as identical in
scope.

In fact, StunFence's argument runs exactly opposite to the

familiar canon expressio unius est exclusio alterius.*

Furthermore, it ignores the fact that in 1998 the Insurance

* As Lord Justice Lopez, quoted in Ford v. United States,
273 U.S, 593, 612 (1927), said of that maxim:

It is often a valuable servant, but a dangerous master
to follow in the construction of statutes or documents.

Others since have also criticized its use as opportunistic or
contextually limited (see, e.g., Black's Law Dictionary 602 (7th
ed. 1999), quoting Richard Posner, The Federal Courts: Crisis and
Reform 282 (1985) and his reference to a 1983 Supreme Court
opinion. All the same, no lesser authority than a unanimous
Supreme Court, speaking through Chief Justice Rehnquist, has
chosen more recently than the Posner article to use the maxim to
good advantage in Leatherman v. Tarrant Cty. Narcotics
Intelligence & Coordination Unit, 507 U.S. 163, 168 (1993). In
any event, StunFence misses the mark entirely by attempting to
stand the maxim on its head,



else--courts look to the allegations of a third party's
underlying pleading to determine whether an insurer has a duty to
defend its insured against that third party's action (United

States Fid, & Guar. Co. v. Wilkin Insulation Co., 144 I11.2d 64,

73-74, 578 N.E.2d 926, 930 (1991). Here Central had a duty to
defend StunFence if any of Gallagher's factual allegations even
potentially (emphasis in Wilkin, id.) stated a claim that fell
within policy coverage--“even if the allegations are groundless,
false, or fraudulent” (id.). Where a third party alleges several
theories of recovery, as Gallagher did, the insurer's duty is
triggered “even if only one such theory is within the potential
of the policy coverage” (id.). Lastly, the policy language “must
be liberally construed in favor of the insured’--in favor of
coverage--and “any doubts and ambiguities must be resolved in
favor of the insured” (id.).

Application of the Standards

To mesh those standards with the language of the two
policies at issue, Central had a duty to defend StunFence against
Gallagher's counterclaims:

1. if Gallagher's allegations potentially stated a
claim that fit one or more of the enumerated offenses listed
in either the Primary Policy or the Excess Policy;

2. aif Gallagher sought recovery for injuries arising

from that offense or those offenses; and



differently than the Primary Policy defined “personal and
advertising injury” (although subparagraph “a” below is identical
to subparagraph “d” in the Primary Policy):

‘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;

* * *

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

da. Infringement of copyright, title or slogan.

Excess Policy §I 42.p excluded from coverage “personal injury” or

“advertising injury” “[a]rising out of oral or written

publication of material, if done by or at the direction of the

insured with knowledge of its falsity,” while 92.q excluded:
Advertising injury” arising out of:

1) Breach of contract, other than misappropriation of
advertising ideas under an implied contract;

2) The failure of goods, products or services to conform
with advertised quality or performance;

3) The wrong description of the price of goods, products
or services....

Unlike the Primary Policy, the Excess Policy did not separately
define what constituted an “advertisement.”

Standards Defining the Duty To Defend

Both sides agree that Illinois law governs this contract

dispute. And under Iliinois law--as probably everywhere



law, states the same doctrine that is uniformly expressed and
applied by Illinois courts. It explains that the underlying
allegations do not need to recite the exact words of coverage or
allege predominantly covered claims to invoke an insurer's duty
to defend (id. at 1122, citations omitted):

What is important is not the legal label that the plaintiff
attaches to the defendant's (that is, the insured's)
conduct, but whether that conduct as alleged in the
complaint is at least arguably within one or more of the
categories of wrongdoing that the policy covers....Nor is
the insurer allowed to escape from his duties of defense and
indemnification by reference to the core or dominant
character of the plaintiff's allegations. That would
violate the principle that if any of the conduct alleged in
the complaint falls within the scope of the insurance
policy, the insurer must defend. If unfair competition
within the meaning of the insurance contract is alleged (not
necessarily by name), it is irrelevant that it is a
subordinate aspect of the plaintiff's case.

None cf the cases that Central cites in claimed support of
its “gist” approach to determining the duty to defend actually
favors or adopts that method--rather they all follow the doctrine

reiterated in such cases as HFP and Curtis-Universal. For

instance, Central again attempts to point to Frog, Switch, but
that case teaches instead that “if a single claim in a multiclaim
lawsuit is potentially covered, the insurer must defend all
claims until there is no possibility that the underlying
plaintiff can recover on a covered claim’ (193 F.2d at 746).
Because Gallagher more than sufficiently alleged a covered
offense, it does not matter whether Gallagher sought to advance

other causes of action that are not covered by the Primary

18



a reply memorandum if it felt sandbagged.

Moreover, if this Court were consequently to deny both
motions for summary judgment, where would that leave the matter?
After all, the only dispute in this case involves an issue of
contract interpretation--there are no disputed issues of fact.

In other words, the parties' cross-motions are correct: There is
nothing to submit to a jury. And it is this Court's obligation
to interpret the contracts--the two policies--in their entirety,
without turning a blind eye to any obviously relevant provision.

This opinion will therefore also evaluate the issue whether
Gallagher's allegations fit within the provision in question--and
if Central has anything truly meaningful to add by way of
argument or otherwise, it may file a timely motion for
reconsideration. Of course, StunFence could have made everything
a great deal easier if it had made the argument in a full-blown
manner in its opening memorandum.

But because StunFence occupies a considerable portion of its
memoranda in arguing that the “trade dress” coverage of the
Primary Policy gave rise to Central's duty to defend, that
provides as good a place as any to start. StunFence suggests
that the policy covers all trademark claims by its inclusion of
“trade dress” claims, because the same legal analysis is used to
resolve both types of claims.

Frankly, that contention makes no sense. While the term



Bhoute Order Ford (06/97)

United States District Court, Northern District of Illinois

Nume of Assigned Judge Milton L. Shadur Sitting Judge if Other
or Magistrate Judge than Assigned Judge
CASE NUMBER 03 C 429 DATE 11/18/2003
CASE Central Mutual Insurance Co. vs. Stunfence, Inc., et al
TITLE

MOTION:

[mn the following box (a) indicate the party filing the motion, ¢.¢., plaintiff, defendant, 3rd party plaintiff, und (b) state briefly the nature

of the motion being presented.]

DOCKET ENTRY;

q)
(2)

(9)

(10)

(11)

o Filed motion of [ use listing in “Motion” box above.]
Brief in support of motion due
Answer brief to motion duc. . Reply to answer brief duc.

Ruling/Hearing on set for at

Status hearing[held/continued to] [set for/re-set for]on.__ set for at

Pretrial conference[held/continued to] [set for/re-set for] on __ set for al

Trial[set for/re-set for] on at

[Bench/Jury trial] [Hearing] held/continued to at

ooagqcuauducmUmcmndcmcUunrUMmDD cD

This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OrRcP4(m) OLocal Rule 41.1 OFRCP41(ay1) ~OFRCP41(a)(2).

| [Other docket entry] Enter Memorandum Opinion and Order. For the reasons set forth in this
memorandum opinion and order, StunFence’s motion is granted(15-1) and Central’s is denied (13-1).
This case is set for a status hearing at 9 a.m. November 25, 2003 to discuss the still-open issue as to
Central’s duty to indemnify StunFence as to part of all of any liability incurred in the now-settled

Underlying Action.

a [For further detail see order attached to the original minute order, |

No notices required, advised in open court

No notices required number of notices

Document
Number

Notices mailed by judge’s staff,

NOV 18 9003

date docketed

sn

1is2003

Notified counsel by telephone,
Dockcting to mail notices

Mail AO 450 form. ot

Copy to judge/magistrate judge.

date mailed notice

courtroom
SN deputy's

op SN
initials

Datc/time received in
central Clerk’s Office naiting deputy initials

7-2



fully incorporate garden-variety trademark infringement,
Gallagher's allegations nevertheless potentially state a claim
for trade dress infringement as such, thus triggering Central's
duty to defend. That added argument must be evaluated in terms
of the scope of the concept as succinctly stated in AM Gen. Corp.
ve. DaimlerChrysler Corp., 311 F.3d 796, 814 (7th Cir. 2002)
(internal quotation marks omitted):

Trade dress is the total image or overall appearance of

a product, including size, shape, color, texture, and

graphics

On that score the closest that Gallagher came to alleging
that StunFence infringed upon the overall appearance of Gallacher
products was its assertion that StunFence put Power Fence signs
on StunFence products and tried to pass off its fences as though
they were Gallagher's.*® But StunFence makes no effort to explain
how those allegations have any connection with an “advertisement”
as that term is used in the Primary Policy. While some courts
have held that the ordinary meaning of “advertising” may indeed
be quite broad (see, e.g., Charter Oak Fire Ins. Co. v. Hedeen &
Cos,, 280 F.3d 730, 736-37 (7th Cir. 2002)), the Primary Policy
limited that term to notices that are “broadcast or published...

for the purpose of attracting customers or supporters.” Arguably

®§ Gallagher has not asserted that the overall appearance of
its fences was non-functional, which it would have had to
demonstrate to recover under trade dress infringement (15 U.S.C.
§1125(a) (3); Billy-Bob Teeth, Inc. v. Novelty, Inc., 329 F.3d
586, 593 (7th Cir. 2003)).

11


Services Office (“Iso”), the organization that accepta
responsibility for drafting the Primary Policy, changed the
definition of “advertising injury” from “[i]nfringement of
copyright, title or slogan’ to “[iJnfringing upon another's
copyright, trade dress or slogan in your ‘advertisement'” (5 J.

Thomas McCarthy, McCarthy on Trademarks & Unfair Competition

[*MeCarthy”] §33:5, at 33-10 to 33-11 (4 ed. 2003)). While the
historical evolution of the “advertising injury” section of the
Primary Policy is certainly not entitled to conclusive weight in

interpreting the policy provision (see Rhone-Pouleng Inc, v.

Int'l tns, Co., 71 F.3d 1299, 1304 (7th Cir, 1995)), it is
clearly significant that the ISO made the change from “title” to
“trade dress” and not “trademark” after there was a clear trend
in most courts to recognize that the term “title” included
trademark infringement claims (5 McCarthy §33:9) .3

That however does not dispatch the “trade dress” issue

entirely: StunFence also contends that even if the term does not

5 Because the Excess Policy kept the older definition of

“advertising injury” and provided coverage for “infringement of
title,” Gallagher's trademark infringement claims would be
covered under that provision in the Excess Policy if Illinois law
followed that majority trend. First State Ins. Co. v. Alpha
Delta Phi Fraternity, No. 1-94-1050, 1995 WL 901452, at *12 (111.
App. 18° Dist. Nov. 3) did arrive at that conclusion, but it is

an unpublished opinion. Hence Illinois Supreme Court Rule 23
states that it has no precedential value, and the issue therefore
remains open under Illinois law. That question need not be
decided here, however, because this opinion later finds that in
any case the “use of another's advertising idea” language in the
Primary Policy gives rise to Central's duty to defend.

10



3. if none of the specified exclusions applies.’
StunFence argues for coverage under two separate “offenses”
listed in the Primary Policy (or the corresponding provisions in
the Excess Policy) --"“Infringing upon another's copyright, trade
dress or slogan in your 'advertisement' and “The use of another's
advertising idea in your 'advertisement.'"

StunFence addressed the second of those two provisions only
in its responsive memorandum, aside from a one-line assertion in
its opening memorandum that was unaccompanied by any factual or
analytical support. Ordinarily such perfunctory treatment in ite
initial memorandum might bar StunFence from later raising the
“use of another's advertising idea” as an independent ground for
summary judgment (330 W. Hubbard Rest. Corp. v. United States,
203 F.3d 990, 997 (7th Cir. 2000)). But under the circumstances,
Central can hardly claim that it was taken by surprise or that it
did not have an adequate opportunity to argue or present evidence
on the issue. Central argued (unconvincingly) in its own opening
memorandum that the phrase “misappropriation of advertising ideas
or style of doing business” (the corresponding language in the
Excess Policy) did not give rise to a duty to defend trademark

infringement claims. And Central could have sought leave to file

7 Winklevoss Consultants, Inc. v. Fed. Ins. Co., 991 F.
Supp. 1024, 1030-31 (N.D. Ill. 1998) applied a somewhat similar
test, but it listed factors that were uniquely related to the
policy at issue in that case and that are not at all applicable
here.



Ins. Co., 61 F. Supp. 2d 611, 619 (S.D, Tex. 1999); Union Ins,
Co. v. Knife Co., 897 F. Supp. 1213, 1217 (W.D. Ark. 1995).
Conclusion

In the one area on which the litigants have agreed, it is
true that there is no genuine issue of material fact. But in
their area of total disagreement, it is StunFence and not Central
that is entitled to a judgment as a matter of law: Central had
the duty to defend StunFence in the Underlying Action. This case
is set for a status hearing at 9 a.m. November 25, 2003 to
discuss the still-open issue as to Central's duty to indemnify
StunFence as to part or all of any liability incurred in the now-

settled Underlying Action.’

Milton I. Shadur
Senior United States District Judge

Date: November 18, 2003

Nothing in the pleadings or in the Rule 56 cross-motions
has spoken to the issue of relief that may arise out of Central's
breach of the duty to defend, on which StunFence has now
prevailed.

21



perform its obligations under that contract. In addition
Gallagher charged that StunFence installed fence systems made
with non-Gallagher materials and sold them under Gallagher's
registered trademark “Power Fence,” while on other occasions
putting its own StunFence signs on Gallagher's products.
Moreover, StunFence had allegedly represented in industry
periodicals that it developed, introduced and owned the Power
Fence and its related technology. Relatedly, StunFence's website
assertedly touted among other things that its product was “the
world's only virtually false alarm free outdoor security
product”--the same marketing claims that Gallagher has made with
reference to its own product. Gallagher claimed that StunFence
thus “misappropriated [Gallagher's] advertising and promotion
claims,” causing harm to Gallagher's reputation and good will.
Primary Policy

Under the Primary Policy Central promised to defend
StunFence against any suit seeking “personal and advertising
injury,” defining that term in Primary Policy §V 414 to mean
(only the relevant subparagraphs are listed here):

injury, including consequential “bodily injury,” arising out
of one or more of the following offenses:

* * *

d. 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;

* * *



outside the scope of that coverage. Indeed, some courts have so
held by limiting that language to apply only to the state law
tort of misappropriation--or the “hot-news” claim, as it was
labeled in Nat'1] Basketball Ass'n v. Motorola, Inc., 105 F.3d
841, 845 (2d Cir. 1997) (see, e.g., Advance Watch Co. v. Kemper
Nat'l Ins. Co., 99 F.3d 795, 804 (6th Cir. 1996); Callas Enters.

Inc. v. Travelers Indem. Co. of Am., 193 F.3d 952, 956-57 (8th

Cir. 1999)). But for one thing, those decisions are wholly at
odds with the principle--firmly embedded in Illinois law--that
insurance contracts must be broadly and liberally construed to
favor the insured (Wilkin Insulation, 144 I1]1.2d at 74, 578
N.E.2d at 930). And more importantly in substantive terms, those
decisions are plainly inapplicable in evaluating the revised
Primary Policy, for that policy employs the word “use” and not
“misappropriation.” Under a straightforward reading of the
revised Primary Policy language, Central had a duty to defend
StunFence if Gallagher claimed (as it did) that it suffered an
injury that arose out of StunFence's use of its “advertising
idea.” In that regard a trademark (a designation affixed to
goods to identify their source) easily qualifies as an
‘advertising idea” under the line of analysis exemplified by
Flodine and Winklevoss.

In this instance Gallagher alleged that StunFence used

Gallagher's trademark “Power Fence” on its website and made

14



one or more of the following offenses committed in the course of
advertising your goods, products or services” (Winklevoss, 991 F,
Supp. at 1030). No such limiting language is to be found in the
Primary Policy or the Excess Policy at issue here. Instead
Gallagher's allegations that StunFence used the Power Fence
trademark and made false representations related to its own
product provide a sufficient link between Gallagher's advertising
and the injury--and the Primary Policy demands no more.

Each case on which Central attempts to rely to argue that
Gallagher's claims do not have a sufficient relationship with
advertising shares the characteristic that the complained-of
conduct had a tenuous connection at best to advertising, a
dramatic contrast with Gallagher's counterclaims in which the
connection between the use of Gallagher's advertising idea and

the injury is apparent. For example, Frog, Switch & Mfg. Co. v.

Travelers Ins. Co., 193 F.3d 742, 748 (7th Cir. 1999) found an
insufficient connection between the trade secret claims contained
in the underlying complaint and any advertising activity. But at
the same time Frog, Switch recognized (without deciding) that
trademarks are different in that they serve to communicate a
message about a marked good or service, “which is the essence of
advertising, and therefore allegations of trademark infringement
arguably allege misappropriation of an advertising idea” (id. at

749). In this instance Gallagher's counterclaim allegations are

16



“personal and advertising injury” and (2) a separate Commercial
Excess Policy (the “Excess Policy”) under which Central also
promised to defend StunFence against any suit for “advertising
injury” (those quoted terms are defined and discussed in detail
later in this opinion). On February 21, 2002--well within the
coverage period--Gallagher filed counterclaims against StunFence
in the Underlying Action, charging (among other things) breach of
contract, trademark infringement and violation of the Illinois
Consumer Fraud statute.

In late 2002? StunFence delivered a copy of Gallagher's
pleading to Central in the hope that Central would defend it
against the charges, but Central refused. Instead Central filed
this declaratory judgment action to obtain a determination
(1) that Gallagher's factual allegations do not constitute an
“advertising injury” as defined by either policy or (2) that one
of the exclusions frees Central from its duty to defend,
Although the Underlying Lawsuit has since settled, the question
whether Central had a duty to defend still remains ripe for
decision.

According to Gallagher, it had a contract with StunFence
that allowed the latter to sell Gallagher's electrical fence

systems to correctional facilities, but StunFence failed to

2 Neither party has raised any issue as to the timeliness

of StunFence's notice.



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

CENTRAL MUTUAL INSURANCE
COMPANY, Ww a
4%
Plaintiff, w
v. No, 03 C 429

)
}
)
)
)
)
)
STUNFENCE, INC., et al.,
}
Defendants. )
MEMORANDUM OPINION AND ORDER
Central Mutual Insurance Company (“Central”) filed this
diversity action against StunFence, Inc. (“StunFence”) and Robert
Gilmour (collectively ‘“StunFence”), seeking a declaration that it
had no duty to defend or indemnify them against counterclaims
brought against them by Gallagher Security USA, Inc. and some of
its affiliates (collectively “Gallagher”) in Case No. 01 C 9627
in this District Court (the “Underlying Action”). Each side has
sought summary judgment as to Central's duty to defend. For the
reasons set forth in this memorandum opinion and order,
StunFence's motion is granted and Central's is denied.
Background
Central issued two relevant policies to StunFence in 2001:
(1) as part of a Commercial Lines Policy, its Commercial General
Liability coverage (the “Primary Policy”) that obligated Central

to defend StunFence against any suit seeking damages for

+ These facts are culled from the parties' submissions and

are not in dispute.

ge



some signs (billboards, for example) would fit the policy's
definition of “advertising,” but it is not apparent from the
allegations itself that the signs were intended for purposes of
attracting customers or supporters (nor does StunFence make that
argument). In gum, no duty to defend arises from StunFence's
purported misuse of Power Fence signs on its own products because
there is no connection to “advertising” within the Primary
Policy's definition.

As for the statements that StunFence supposedly made in
industry pericdicals and on its website pertaining to the Power
Fence name and product, those allegations can properly be
characterized as stating only a garden-variety trademark
infringement claim, not by any stretch of the imagination a trade
dress claim. In essence that argument returns to StunFence's
earlier (and already rejected) position that “trade dress” and
“trademark infringement” are synonymous. Suffice it to say that
while this Court must read the Underlying Action's allegations as
broadly as possible, it should not bend those underlying
allegations or the Primary Policy's provisions entirely out of

shape just to find coverage (see Rohe ex rel. Rohe v. CNA Ings.

Co., 312 Ill.App.3d 123, 127, 726 N.E.2d 38, 41 (1% Dist.
2000)). Absent any Underlying Action allegations that allude to
the misuse of the overall impression, or of some distinct

feature, of StunFence's product, StunFence fails in its attempt


promotional claims identical to those used by Gallagher in
marketing its own product. Additionally, Gallagher claimed that
StunFence made statements in trade industry periodicals that
StunFence owned and developed the technology and maintained
proprietary rights over that technology--characteristics that
purportedly describe the Power Fence. And of course Gallagher
asserted that it suffered harm as a result of StunFence's
advertising, In combination those allegations are more than
sufficient to generate Central's duty to defend under the Primary
Policy's coverage of injuries arising from the “use of another's
advertising idea in your 'advertising,'”

Central attempts to escape its duties under the Primary
Policy by arguing that Winklevoss somehow established a more
rigorous requirement that “the injury to the underlying plaintiff
must have arisen solely out of the insured's offense committed in
the course of advertising.”" While Winklevoss did contain
language to that effect, the case makes clear that the
requirement was derived from the policy at issue in that case,

which defined advertising injury as “injury arising solely out of

’ It should of course be said, as our Court of Appeals

periodically reminds us (see, e.qg., Bank _of Am., N.A. v. Moglia,
330 F.3d 942, 949 (7° Cir. 2003)) that decisions by District
Judges (including this one) do not create precedent--they have
force (if at all) only to the extent that they are innately
persuasive, All the same, the text here demonstrates that
Central seeks to put considerably more weight on Winklevoss than
it can carry analytically.

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