Jovani Fashion, Ltd. v. Fed. Ins. Co.

416 F.Supp.3d 334

JOVANI FASHION, LTD., Plaintiff,

v.FEDERAL INSURANCE COMPANY and Great Northern Insurance Company, Defendants.

No. 17-CV-4518 (RA)

United States District Court, S.D. New York.

Signed September 26, 2019

A. Loewy, Joseph Sofer, Sofer & Haroun, LLP, New York, NY, for Plaintiff.

Katherine E. Tammaro, Tressler LLP, Newark, NJ, for Defendants.

OPINION & ORDER

RONNIE ABRAMS, United States District Judge:

Plaintiff Jovani Fashion, Ltd. brings this action against Defendants Federal Insurance Company and Great Northern Insurance Company for their alleged failure to defend and indemnify Plaintiff in an underlying lawsuit for copyright infringement.¹ On September 6, 2018, the Court granted Defendants' motion to dismiss Plaintiff's claims for failure to indemnify and breach of the implied covenant of good faith, but denied their motion with respect to Plaintiff's claim for failure to defend. Now before the Court are (1) Plaintiff's motion for reconsideration as to the duty to indemnify claim and for summary judgment as to the duty to defend claim, and (2) Defendants' motion for reconsideration, or in the alternative for summary judgment, as to the duty to defend claim. For the reasons provided below, Plaintiff's motion for reconsideration is denied, and Defendants' motion for reconsideration is granted. The parties' motions for summary judgment are denied as moot.

BACKGROUND

In October 2016, Malibu Textiles, Inc. ("Malibu") sued Plaintiff for copyright infringement in the United States District Court for the Southern District of New York. See Case No. 16-CV-8409 ("Underlying Complaint" or "Underlying Action"). Malibu alleged that Plaintiff infringed on its copyrighted lace textile design ("Subject Design") by producing and selling garments with a substantially similar design. Compl. Ex. 1.² Two months later, Plaintiff gave Defendants, its insurers, notice of the Underlying Action, and requested that Defendants defend and indemnify it. Compl. ¶ 28. Pursuant to general and excess liability policies issued to Plaintiff, Defendants were obligated to defend and indemnify Plaintiff in any suit where a third party sought damages against Plaintiff for a personal or advertising injury, subject to exceptions listed in the policy's exclusion terms. Compl. Ex. 3, 4.

In January 2017, Defendants denied coverage to Plaintiff in the Underlying Action, explaining that the Underlying Complaint did not allege an infringement of any "copyrighted advertisement," as is required under the policy's definition of an "advertising injury." Compl. ¶ 29. Between January and April 2017, Plaintiff sent three letters contesting Defendants' coverage denial. In response, Defendants reiterated their view that Malibu had not alleged an injury within the policy's scope. Compl. Ex. 1, 2. During this time, Plaintiff and Malibu reached a settlement in the Underlying Action. Compl. ¶ 23.

In June 2017, Plaintiff filed this action, seeking damages and declaratory relief that Defendants had a duty to indemnify and defend it. Defendants filed a motion to dismiss. Dkt. 14. Plaintiff did not cross-move in any way. In its September 6, 2018 bench ruling, the Court granted Defendants' motion in part and denied it in part. While it granted Defendants' motion to dismiss the duty to indemnify and the breach-of-covenant claims, it denied the motion as to the duty to defend claim.

Both Plaintiff and Defendants filed motions for reconsideration, to be construed in the alternative as motions for summary judgment.

STANDARD OF REVIEW

Motions for reconsideration are governed by Local Civil Rule 6.3 and Federal Rule of Civil Procedure 60(b). To prevail, the movant must identify "an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice." Virgin Atl. Airways, Ltd. v. Nat'l Mediation Bd. , 956 F.2d 1245, 1255 (2d Cir. 1992). The standard "is strict, and reconsideration will generally be denied unless the moving party can point to controlling decisions or data that the court overlooked – matters, in other words, that might reasonably be expected to alter the conclusion reached by the court." Shrader v. CSX Transp., Inc. , 70 F.3d 255, 257 (2d Cir. 1995). Ultimately, however, whether to grant or deny a motion for reconsideration is "committed to the sound discretion of the district court." Abu Dhabi Commercial Bank v. Morgan Stanley & Co. , 888 F. Supp. 2d 478, 483 (S.D.N.Y. 2012).

I. Plaintiff's Motion for Reconsideration

Plaintiff moves the Court to reconsider its prior ruling that Defendants had no duty to indemnify. In so doing, it only restates its previous arguments before the Court. See Davidson v. Scully , 172 F. Supp. 2d 458, 462 (S.D.N.Y. 2001) (explaining that a motion for reconsideration is not to be used as "a substitute for appeal"). For the reasons explained in the bench ruling, Plaintiff has not plausibly alleged an "advertising injury" as required by the policy's terms for coverage, and the Court denies Plaintiff's motion for reconsideration. Because this ruling underlies the subsequent analysis regarding the duty to defend claim, the Court briefly elaborates on this holding.

An insurer's duty to indemnify "does not turn on the pleadings" but on "the actual basis for the insured's liability to a third person." U.S. Fid. & Guar. Co. v. Fendi Adele S.R.L. , 823 F.3d 146, 150 (2d Cir. 2016) (quoting Atl. Mut. Ins. Co. v. Terk Techs. Corp , 309 A.D.2d 22, 763 N.Y.S.2d 56, 60 (2003) ). Under New York law, which the parties agree applies, the insured bears the burden of establishing that a claim falls within the policy's scope. See Con. Ed. Co. of N.Y. v. Allstate Ins. Co. , 98 N.Y.2d 208, 218, 746 N.Y.S.2d 622, 774 N.E.2d 687 (2002).

The duty to indemnify, therefore, turns on a particular policy's terms. See Fieldston Prop. Owners Ass'n v. Hermitage Ins. Co. , 16 N.Y.3d 257, 264, 920 N.Y.S.2d 763, 945 N.E.2d 1013 (2011) ("In resolving insurance disputes, we first look to the language of the applicable policies."). "Insurance policies are contracts to which the ordinary rules of contractual interpretation apply." Accessories Biz, Inc. v. Linda & Jay Keane, Inc. , 533 F. Supp. 2d 381, 386 (S.D.N.Y. 2008). Its terms are to be construed "in light of ‘common speech’ and the reasonable expectations of a businessperson." Fendi Adele , 823 F.3d at 150 (quoting Belt Painting Corp. v. TIG Ins. Co. , 100 N.Y.2d 377, 383, 763 N.Y.S.2d 790, 795 N.E.2d 15 (2003) ). "[T]he initial interpretation of a contract is a matter of law for the courts to decide." Int'l Multifoods Corp. v. Commercial Union Ins. Co. , 309 F.3d 76, 83 (2d Cir. 2002) (internal quotation marks omitted).

The policy provision relevant to this dispute is as follows below:

Coverages

Advertising Injury and Person Liability Coverage

Subject to all of the terms and conditions of this insurance, we will pay damages that the insured becomes legally obligated to pay by reason of liability:

• imposed by law; or

• assumed in an insured contract ;

for advertising injury or personal injury to which this coverage applies.

This coverage applies only to such advertising injury or personal injury caused by an offense that is first committed during the policy period.

Compl. Ex. 4. The policy defines an "advertising injury" and "advertisement" as follows:

Advertising Injury

Advertising Injury means injury, other than bodily injury, property damage or personal injury, sustained by a person or organization and caused by an offense of infringing, in that particular part of your advertisement about your goods, products or services, upon their:

• copyrighted advertisement; or

• registered collective mark, registered service mark or other registered trademarked name, slogan, symbol or title.

Advertisement

Advertisement means an electronic, oral, written or other notice, about goods, products or services, designed for the specific purpose of attracting the general public or a specific market segment to use such goods, products or services.

Advertisement does not include any e-mail address, Internet domain name or other electronic address or metalanguage.

Compl. Ex. 4. The policy also includes the following "intellectual property laws or rights" ("IPLR") exclusion, which applies broadly with one exception:

Intellectual Property Laws or Rights

This insurance does not apply to any actual or alleged bodily injury, property damage, advertising injury or personal injury arising out of, giving rise to or in any way related to any actual or alleged:

• assertion; or

• infringement or violation;

by any person or organization (including any insured ) of any intellectual property law or right , regardless of whether this insurance would otherwise apply to all or part of any such actual or alleged injury or damage in the absence of any such actual or alleged assertion, infringement or violation.

This exclusion applies, unless such injury:

• is caused by an offense described in the definition of advertising injury; and

• does not arise out of, give rise to or in any way relate to any actual or alleged assertion, infringement or violation of any intellectual property law or right , other than one described in the definition of advertising injury .

Compl. Ex. 4.

For the policy to cover the Underlying Action, Plaintiff was thus required to establish there was an alleged "advertising injury," specifically an alleged infringement of a "copyrighted advertisement." As the Court held in its oral ruling, however, Plaintiff cannot, as a matter of law, establish that the Subject Design was an "advertisement," let alone a "copyrighted advertisement," as the policy requires.

A. The Subject Design Was Not an "Advertisement."

As alleged in the Underlying Complaint, Malibu "use[s] [the Subject Design] for purposes of textile printing." Compl. Ex. 1. Plaintiff argues that the Subject Design also constitutes an "advertisement" because of "Malibu's acts in disseminating the Subject Design to the public,"...