Court Opinion

ID: 5927
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:11:12+00
Date Added: 2024-06-11T14:55:56.004403
License: Public Domain

IN THE UNITED STATES OF APPEALS

                          FOR THE FIFTH CIRCUIT

                          _____________________

                                No. 93-1222
                             Summary Calendar
                          _____________________

SENTRY INSURANCE, a Mutual Company,

                                                                  Appellee,

                              versus
R.J. WEBER COMPANY, INC., ETAL.,
                                                              Defendants,
R.J. WEBER COMPANY, INC., and
R.J. WEBER, Individually,

                                                             Appellants.

_________________________________________________________________

      Appeal from the United States District Court for the
                   Northern District of Texas

_________________________________________________________________
                        (August 20, 1993)

Before JOLLY, SMITH, and WIENER, Circuit Judges.

PER CURIAM:

     Sentry   Insurance    ("Sentry")   insured   R.J.    Weber    and   his

corporation, R.J. Weber Co., Inc., (collectively "Weber") against

claims based on personal and advertising injuries.        Sentry brought

the declaratory judgment action before us seeking a declaratory

judgment that it had no duty to defend Weber against a claim of

copyright   infringement.      The   district   court    granted   summary

judgment in favor of Sentry because it found that the copyright

infringement suit was not related to Weber's advertising activity.

Finding no error, we affirm.
                                     I

     In January of 1992, Caterpillar, Inc. ("Caterpillar") brought

suit against Weber alleging copyright infringement.          Caterpillar

has copyrighted two original works titled "Numerical Parts Record"

and "Parts Book Library."         It claimed that Weber infringed its

copyrights by copying, publishing, distributing, and selling copies

of these works without first obtaining permission from Caterpillar.

     Sentry     insured   Weber   against   personal   and   advertising

injuries. The policy provides Sentry "will pay those sums that the

insured becomes legally obligated to pay as damages because of

`personal injury' or `advertising injury' to which this insurance

applies."     In clause IV.B.1.c., the policy further provides that:

     This insurance applies to "advertising injury" only if
     caused by an offense committed:
          (1) In the "coverage territory" during the policy
     period; and
          (2)    In the course of advertising your goods,
     products or services. [Emphasis supplied.]

Later on in section V, the policy defines an advertising injury as

follows:

     "Advertising injury" means injury arising out of one or
     more of the following offenses:
          (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 privacy;
          (3) Misappropriation of advertising ideas or style
     of doing business; or
          (4)   Infringement of copyright, title or slogan.
     [Emphasis supplied.]

                                    -2-
Weber believed that the policy covered Caterpillar's suit and asked

Sentry to defend it against Caterpillar's claims. Sentry agreed to

defend Weber, but it reserved the right to bring suit to determine

whether the policy applied.

                                  II

     In June of 1992, Sentry filed this declaratory judgment action

seeking a declaration that it had no duty to defend or indemnify

Weber against Caterpillar's claims in the underlying lawsuit.

Weber counterclaimed that Sentry did have a duty to defend.      Sentry

moved for summary judgment in October of 1992.              After Weber

responded,   the   district   court   granted   Sentry's   motion.   On

January 5, 1993, the district court entered judgment in favor of

Sentry.   Weber moved the district court to reconsider, and Sentry

asked for reimbursement of the attorney's fees it incurred while

defending Weber.   The district court denied Weber's motion, but it

granted Sentry its attorney's fees. Weber filed a timely notice of

appeal and brought this appeal.

                                  III

     Weber contends that the district court erred when it granted

Sentry summary judgment because there is a potentiality that,

liberally construed, Caterpillar's complaint states a claim that

was caused by or related to Weber's advertising.       Because this is

a diversity case, we apply the substantive law of Texas.       Stine v.

Marathon Oil Co., 976 F.2d 254, 259 (5th Cir. 1992) (citing Erie

Railroad Co. v. Tompkins, 304 U.S. 78, 58 S. Ct. 817, 822 (1938)).

                                  -3-
On appeal from the district court's grant of summary judgment, we

review the record de novo to ascertain whether any genuine issue

exists as to any material fact.        Pullman-Standard v. Swint, 456
U.S. 273, 287, 102 S. Ct. 1781 (1982).       The reach of an insurance

contract, moreover, is a matter of law that we review de novo.

Matter of World Hospitality Ltd., 983 F.2d 650 (5th Cir. 1993);

Stine, 976 F.2d at 260.

     In Texas, if the allegations in the complaint will allow the

plaintiff to recover on a theory within the scope of the insurance

policy, there is potential liability against which the insurer is

obligated to defend.    Terra Intern. v. Commonwealth Lloyd's, 829
S.W.2d 270, 271 (Tex.App. - Dallas 1992, writ denied).     The burden

is generally on the insured to show that the claim against him is

potentially within his policy's coverage.       See, e.g., Employers

Cas. Co. v. Block, 744 S.W.2d 940, 944 (Tex. 1988).      The insurer,

however, bears the burden of establishing that one of the policy's

limitations or exclusions constitutes an avoidance or affirmative

defense to coverage.    Tex. Ins. Code Art. 21.58(b).

     Weber contends that the district court erred because it placed

the burden on Weber to prove the existence of an advertising

injury.   According to Weber, clause IV.B.1.c. of the insurance

contract is a policy limitation.    Weber, thus, concludes that the

Texas insurance code required Sentry to prove that the limitation

does not apply.   Weber is incorrect.      Clause IV.B.1.c. is not a

policy limitation.     On the contrary, it defines policy coverage

                                 -4-
with respect to "advertising injuries."          Specifically, the policy

covers advertising injuries that are caused in "the course of

advertising your goods, products or services."            In sum, the clear

language provides that the policy covers a copyright infringement

suit only if Weber infringes someone's copyright in the course of

its advertising.      If   Weber     infringes   a   copyright   in   another

context, there is no coverage under the terms of the policy.

      A review of the insurance policy's other provisions makes

unmistakable our conclusion that clause IV.B.1.c is not a policy

limitation or exclusion.     The policy contains explicit exclusions

and limitations in section IV.B.2.            This section excludes, for

instance, advertising injuries that arise out of a "failure of the

goods, products or services to conform with the advertised quality

or   performance."    Similarly,      the   policy   excludes    advertising

injuries that arise out of the "wrong description of the price of

goods, products or services."        In the light of section IV.B.2., we

think any argument that clause IV.B.1.c. is a policy exclusion or

limitation is precluded.

      Thus, the question before us is whether Weber can sustain its

burden of establishing that Caterpillar's complaint potentially

states a claim that the policy covers. As noted above, Caterpillar

claimed that Weber infringed its copyrights by copying, publishing,

distributing and selling copies of its "Numerical Parts Record" and

"Parts   Book   Library"   without    first   obtaining    permission   from

Caterpillar.     Weber admits the complaint states nothing about

                                     -5-
advertising.     Weber, however, resorts to arguing that the federal

system   of    notice    pleading       requires       only   a   "short   and    plain

statement of the claims."           Fed.R.Civ.P. 8.               Weber argues that,

under the federal system, Caterpillar does not have to state every

instance Weber infringed its copyright.                       Weber contends that

Caterpillar's complaint would allow it to show in a federal trial

that Weber     infringed    its     copyright      in     the     course   of   Weber's

advertising.

     Weber's argument does not bear scrutiny.                     Under such general

reasoning, the complaint would not serve as an indication of

whether there was coverage.             Other courts that have examined this

issue have required the insured to demonstrate that there is some

connection between its advertising activity and the plaintiff's

claim. See, e.g., Nat. Union Fire Ins. Co. v. Siliconix, Inc., 729
F. Supp. 77 (N.D. Cal. 1989); Lazzara Oil Co. Columbia Cas. Co., 683
F. Supp. 777, 780 (M.D. Fla. 1988), aff'd mem., 868 F.2d 1274 (11th

Cir. 1989; Bank of the West v. Superior Court of Contra Costa

County, 833 P.2d 545, 10 Cal. Rptr. 2d 538, 553 (Cal. 1992).                       In the

case before us, Weber does not identify any connection between

Caterpillar's     claims    and     Weber's       advertising       activity.         We,

therefore, conclude that the policy does not cover Caterpillar's

claims   and   that     Sentry    has    no     duty    to    defend    Weber    in   the

underlying suit.

                                          IV

                                          -6-
    For all the foregoing reasons, the decision of the district

court is

                                               A F F I R M E D.

                             -7-