Court Opinion

ID: 6114133
Source: CourtListenerOpinion
Date Created: 2022-01-31 22:00:42.579571+00
Date Added: 2024-06-11T09:18:43.796673
License: Public Domain

In the

    United States Court of Appeals
                 For the Seventh Circuit
                     ____________________
No. 21-1538
THE ALUMINUM TRAILER COMPANY
d/b/a ATC TRAILERS,
                                                  Plaintiff-Appellant,

                                 v.

WESTCHESTER FIRE INSURANCE
COMPANY,
                                                 Defendant-Appellee.
                     ____________________

         Appeal from the United States District Court for the
         Northern District of Indiana, South Bend Division.
            No. 20-cv-721 — Damon R. Leichty, Judge.
                     ____________________

   ARGUED OCTOBER 29, 2021 — DECIDED JANUARY 31, 2022
                ____________________

   Before SYKES, Chief Judge, and KANNE and HAMILTON,
Circuit Judges.
   KANNE, Circuit Judge. In 2016, Aluminum Trailer Com-
pany d/b/a ATC Trailers (“ATC”) purchased a commercial
general liability insurance policy from Westchester Fire Insur-
ance Company (“Westchester”). The policy provided cover-
age against liability incurred because of an “advertising
2                                                   No. 21-1538

injury,” a deﬁned term that included, as relevant here, trade
dress infringement.
    ATC ﬁled the suit after a company by the name of Sidi
Spaces, LLC d/b/a BizBox (“BizBox”) sued ATC in a separate
action for breach of contract and interference with its business
expectancies. BizBox alleged in that suit that ATC manufac-
tured and sold a knock-oﬀ trailer using BizBox’s design.
    ATC sued its insurer, Westchester, seeking a declaratory
judgment that Westchester owes it a duty to defend and a
duty to indemnify. Westchester moved to dismiss ATC’s com-
plaint for failure to state a claim, arguing that BizBox’s under-
lying suit was not covered under the insurance policy because
BizBox did not allege, in that litigation, an infringement of its
trade dress in ATC’s advertising. Even though BizBox’s com-
plaint indeed never alleged a trade dress infringement claim
against ATC nor an advertising injury, ATC argued that Biz-
Box’s complaint could be construed to plausibly allege a trade
dress infringement claim against ATC.
   The district court did not buy that argument, and it dis-
missed ATC’s complaint under Federal Rule of Civil Proce-
dure 12(b)(6). We agree with the district court and therefore
aﬃrm.
                       I. BACKGROUND
    On October 2, 2014, ATC contracted with BizBox to manu-
facture trailers using BizBox’s design. ATC promised not to
use BizBox’s design for any other purpose. ATC manufac-
tured approximately sixty-ﬁve to seventy trailers for BizBox
customers over the next three years.
   ATC purchased a Commercial General Liability Insurance
Policy (“the Policy”) from Westchester for the period from
No. 21-1538                                                    3

September 3, 2016, to September 3, 2017. The Policy contained
a $1 million personal and advertising injury limit. The Policy
also set forth a duty to defend.
    The Policy’s basic grant of coverage states that Westches-
ter promises to pay “sums that the insured becomes legally
obligated to pay as damages because of ‘personal and adver-
tising injury’ to which this insurance applies.” The Policy de-
ﬁnes “personal and advertising injury,” in relevant part, as in-
jury arising out of “[i]nfringing upon another’s … trade dress
… in your ‘advertisement.’” “Advertisement” is deﬁned un-
der the Policy 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 cus-
tomers or supporters.” “Your” refers to ATC.
    In January 2019, BizBox discovered that ATC had manu-
factured a knock-oﬀ trailer using BizBox’s design and sold the
trailer directly to a BizBox customer for a lower price. The
knock-oﬀ trailer was virtually identical to a BizBox trailer, ex-
cept that ATC had replaced BizBox’s name and logo with its
own name and logo. BizBox ﬁled suit in Arizona state court
against ATC after learning about the sale, asserting claims for
breach of contract and tortious interference with existing and
prospective contract relations. Notably, the term “trade
dress” never appears in BizBox’s complaint.
    ATC notiﬁed Westchester of the suit and sought coverage
under the Policy. Westchester denied coverage. ATC then
ﬁled the instant suit against Westchester in Indiana state court
seeking coverage relating to BizBox’s complaint, including a
defense and indemnity for any liability ATC might incur.
Westchester removed the suit to federal court based on diver-
sity jurisdiction and then moved to dismiss ATC’s complaint
4                                                     No. 21-1538

under Federal Rule of Civil Procedure 12(b)(6) for failure to
state a claim upon which relief could be granted, arguing that
BizBox’s underlying suit was not covered under the Policy be-
cause BizBox never alleged an infringement of its trade dress
in an “advertisement.”
    The district court granted Westchester’s motion and dis-
missed ATC’s complaint. The district court found that Biz-
Box’s complaint did not trigger Westchester’s duty to defend
or indemnify ATC under the “personal and advertising” pro-
vision of the Policy. ATC now appeals.
                          II. ANALYSIS
    We review the district court’s dismissal for failure to state
a claim de novo, accepting all well-pleaded factual allegations
as true and drawing permissible inferences in the plaintiﬀ’s
favor. Kubiak v. City of Chicago, 810 F.3d 476, 480–81 (7th Cir.
2016).
    It is undisputed that Indiana law applies here. In Indiana,
an insurer’s “duty to defend is broader than an insurance
company's coverage liability or its duty to indemnify … .”
Seymour Mfg. Co. v. Com. Union Ins. Co., 665 N.E.2d 891, 892
(Ind. 1996) (citing Trisler v. Ind. Ins. Co., 575 N.E.2d 1021, 1023
(Ind. Ct. App. 1991)). “[A]n insurer has a duty to defend its
insured against suits alleging facts that might fall within the
coverage.” Fed. Ins. Co. v. Stroh Brewing Co., 127 F.3d 563, 566
(7th Cir. 1997). “Only if there is no possible factual or legal
basis on which the insurer might be obligated to indemnify
will the insurer be excused from defending its insured.” City
of Gary v. Auto-Owners Ins. Co., 116 N.E.3d 1116, 1121 (Ind. Ct.
App. 2018) (citing Prop.-Owners Ins. Co. v. Virk Boyz Liquor
Stores, LLC, 219 F. Supp. 3d 868, 873 (N.D. Ind. 2016)).
No. 21-1538                                                    5

    Pointing to BizBox’s complaint in the underlying litiga-
tion, ATC argues that one could plausibly conclude that Biz-
Box alleges a trade dress infringement claim, and, moreover,
that its logo, aﬃxed to the knock-oﬀ trailer, was an “adver-
tisement” as deﬁned under the Policy. The district court con-
ducted a very thorough analysis of those arguments and ulti-
mately found them to be unavailing.
    We need not revisit the district court’s detailed trade dress
analysis nor entertain ATC’s trade dress arguments here,
however, because BizBox never alleged an advertising injury
in its suit against ATC. Remember, BizBox sued ATC for
breach of contract and tortious interference with contract. The
Policy’s coverage extends to ATC only if BizBox claimed that
ATC infringed on its trade dress in ATC’s “advertisement.”
BizBox therefore must have alleged an advertising injury or,
at the very least, alleged facts that plausibly show one oc-
curred. BizBox did not. Simply, the Policy does not cover any
of the claims BizBox raised.
    ATC attempts to read such a claim where none plausibly
exists. The district court found ATC’s argument—that its logo
aﬃxed to the knock-oﬀ trailer is an advertisement as deﬁned
under the Policy—unpersuasive because no facts from the
BizBox complaint could be construed to support the assertion
that the injury stemmed from the alleged advertisement. We
agree with the district court. Therefore, Westchester’s duty to
defend under the “personal and advertising injury” provision
of the Policy was never triggered. See Newnam Mfg., Inc. v.
Transcon. Ins. Co., 871 N.E.2d 396, 401 (Ind. 2007) (“If the
pleadings reveal that a claim is clearly excluded under the
policy, then no defense is required.” (citing Liberty Mut. Ins.
6                                                   No. 21-1538

Co. v. OSI Indus., Inc., 831 N.E.2d 192, 198 (Ind. Ct. App.
2005))).
    National Union Fire Insurance Co. of Pittsburgh, Pennsylvania
v. Mead Johnson & Co. LLC, 735 F.3d 539 (7th Cir. 2013), drives
the point home. Like this case, National Union involved the
application of Indiana law to the “advertising injury” cover-
age in a commercial general liability insurance policy. The
basic coverage language of the insuring agreement was simi-
lar to this case: the insurer promised to pay “sums that the
insured becomes legally obligated to pay as damages because
of … advertising injury.” Id. at 546–47 (alteration in original).
Like here, the term “advertising injury” was deﬁned in the
policy, but there the relevant part of the deﬁnition was prod-
uct disparagement, not trade dress infringement. The insured
was sued for consumer fraud and sought a defense and in-
demnity, arguing that the policy covered any injury that
could be “traced to product disparagement, rather than cover-
ing just claims of product disparagement.” Id. at 547. We re-
jected this argument, explaining that “[t]he policy says that
the damages must arise out of the ’oﬀense,’ in this case the
oﬀense of product disparagement,” and “[t]he oﬀense in this
case is not product disparagement but consumer fraud, which
the policy does not cover.” Id. The damages must, we clari-
ﬁed, “in other words arise from a ‘claim for’ product dispar-
agement, rather than just ‘having its origin in’ product dispar-
agement.” Id. The same sort of reasoning applies here, with
the same result.
   We also expressed concerns at oral argument about
whether the alleged conduct even occurred during the period
covered under the Policy. However, we need not further ad-
dress those concerns today.
No. 21-1538                                                 7

    In sum, BizBox did not bring a claim for infringement of
trade dress and did not allege an advertising injury against
ATC in the Arizona litigation. Importantly, BizBox alleged no
facts that can plausibly be construed to show that it asserted
that an advertising injury occurred in that suit. Westchester
therefore has no duty to defend or indemnify ATC under the
“personal and advertising injury” provision of the Policy.
ATC thus fails to state a claim upon which relief can be
granted, so its suit was properly dismissed under Rule
12(b)(6).
                      III. CONCLUSION
   For the reasons above, the district court did not err in
granting Westchester’s motion to dismiss. We AFFIRM.