Opinion
04 CV 6733 (TPG).
May 22, 2006
OPINION
Plaintiffs Michael Marvisi and 365 Canal Corp. commenced this action seeking a declaratory judgment as to their rights under a commercial general liability insurance policy issued by defendant Greenwich Insurance Company. Plaintiffs seek a declaration that Greenwich is obligated to provide a defense and to indemnify plaintiffs in connection with ten lawsuits, two of which are pending in this court and eight of which are pending in New York State Supreme Court. Plaintiffs also seek damages for breach of contract. Greenwich has disclaimed coverage as to each of the ten lawsuits.
Greenwich has moved for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c). The motion is granted.
THE COMPLAINT
The following allegations are drawn from the complaint, and other court filings and documents referenced therein. The Insurance Policy
Marvisi owns a building located at 365-367 Canal Street in New York (the "Subject Premises"). Between April 18, 2002 and April 18, 2004, Marvisi was insured for the Subject Premises under a commercial general liability insurance policy issued by Greenwich.
The policy provides two main forms of coverage:
The first coverage, entitled "COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY," provides coverage for certain bodily injury and property damage occurring at the Subject Premises.
The issues in the present action relate mainly to the second form of coverage, listed in the policy under the heading "COVERAGE B PERSONAL AND ADVERTISING INJURY LIABILITY." This portion of the policy provides, in pertinent part:
We 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. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "personal and advertising injury" to which this insurance does not apply.
The policy defines "Personal and advertising injury" as follows:
"Personal and advertising injury" means injury, including consequential "bodily injury," arising out of one or more of the following offenses:
a. False arrest, detention or imprisonment;
b. Malicious Prosecution;
c. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor;
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;
e. Oral or written publication of material that violates a person's right of privacy;
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 policy defines "Advertisement" as follows:
"Advertisement" means 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.
The policy also contains certain exclusions from Coverage B. The policy specifically excludes the following from such coverage:
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";
. . .
(4) Arising out of a criminal act committed by or at the direction of any insured;
The policy also contains the standard notice provisions, requiring Marvisi to notify Greenwich "as soon as practicable of an `occurrence' or an offense which may result in a claim."
The Federal Actions
On March 2, 2004, Louis Vuitton and Fendi filed an action in this court, Louis Vuitton Malletier v. Marvisi, 04-CV-1700 (TPG), against Marvisi and certain unnamed defendants, John Does I-XXIX.
The complaint alleges that certain unnamed defendants are commercial tenants of Marvisi at the Subject Premises, and that they have used that location to engage in the sale of counterfeit products that infringe trademarks belonging to the plaintiffs.
The complaint alleges that Marvisi, referred to in that complaint as the "Landlord Defendant," knew or had reason to know of his tenants' infringing activities, and should therefore be held liable for their actions. Two theories are asserted against Marvisi. The first is for contributory trademark counterfeiting and infringement, and alleges that Marvisi "induced and aided" the infringement of the plaintiffs' registered trademarks by providing his tenants with a "safe haven and marketplace" in which counterfeit goods could be sold. The second theory claims vicarious liability on the part of Marvisi for the tenants' sale of counterfeit goods. This claim is based upon Marvisi's control of the property and derivation of financial benefit from the tenants' infringing activities.
The complaint contains no allegation that Marvisi did any advertising, although the complaint does allege that the tenant defendants were guilty of "the advertising and sale of counterfeit goods."
An action almost identical to the Louis Vuitton and Fendi action was filed in this court the same day by Rolex Watch U.S.A., Inc. Rolex Watch U.S.A., Inc. v. Marvisi et al., 04-CV-1701 (TPG). Like the Louis Vuitton and Fendi complaint, the complaint in the Rolex action alleges that Marvisi's ownership and control of the Subject Premises, coupled with his knowledge that his tenants were selling counterfeit items there, makes him liable for the acts of his tenants. The Rolex action contains no allegation that Marvisi himself sold or advertised counterfeit goods.
On March 16, 2004, Marvisi notified Greenwich of the two federal actions, and demanded coverage under the policy. In a letter dated April 19, 2004, Greenwich denied coverage for those claims, stating (1) that the claims made in the federal actions were not covered under Coverage A of the policy because there was no "bodily injury," "property damage" or "occurrence" within the meaning of the policy, and (2) that Marvisi failed to notify Greenwich within a reasonable time after receiving the April 10, 2003 letter from the plaintiffs in the federal actions advising him of their potential claims. Greenwich further stated:
Inasmuch as it is unclear, at this time, whether you conducted any advertisement with respect to the illegal products at issue herein, Greenwich reserves its rights to further deny coverage herein based upon Exclusions a(1) and a(4) under Coverage B of the subject policy.The State Actions
On May 3 and 4, 2004, the City of New York filed eight separate lawsuits against 365 Canal Corp. and Marvisi in New York State Supreme Court. See, e.g., The City of New York v. 365 Canal Corp. et al., No. 401360-04 (N.Y.Sup.Ct. filed May 3, 2004). The causes of action contained in these complaints are identical, but the separate complaints refer to, and name as additional defendants, proprietors of different sales booths within the Subject Premises.
Each of the complaints alleges that Marvisi, as owner of the Subject Premises, was responsible for the creation of a public nuisance by "knowingly conducting and/or maintaining the subject premises as an illegal establishment where persons gather for purposes of purchasing, selling, and/or possessing merchandise bearing counterfeit trademarks, in violation of Article 165 of the Penal Law."
On May 20, 2004, Marvisi informed Greenwich of the state actions and demanded coverage. In a letter dated June 24, 2004, Greenwich denied coverage for the claims in the state actions for essentially the same reasons it denied coverage for the claims in the federal actions. With regard to notice, the letter stated that Marvisi had become aware of the "distinct possibility of a potential claim on October 8, 2003 when the police first arrested an unnamed tenant of yours for selling a counterfeit CD . . .," and that the notice Marvisi provided on May 20, 2004, was therefore not timely. As in its letter denying coverage with respect to the federal actions, Greenwich also reserved its right to further deny coverage based upon Exclusions a(1) and a(4) under Coverage B of the policy.
Marvisi thereafter filed this action seeking a declaration that Greenwich is obligated to provide a defense and indemnify Marvisi for the claims asserted in the federal and state actions.
DISCUSSION
Upon a motion for judgment on the pleadings under Rule 12(c), the court follows the same standards applicable to a motion to dismiss for failure to state a claim upon which relief may be granted under Rule 12(b)(6). Irish Lesbian and Gay Organization v. Giuliani, 143 F.3d 638, 644 (2d Cir. 1999). Thus, in determining whether dismissal is proper under Rule 12(c), the court must accept all allegations contained in the complaint as true, and draw all reasonable inferences in favor of the nonmovant. Shechter v. Comptroller of the City of New York, 79 F.3d 265, 270 (2d Cir. 1996).
Furthermore, when deciding a Rule 12(c) motion, the court shall consider "the pleadings and exhibits attached thereto, statements or documents incorporated by reference in the pleadings, matters subject to judicial notice, and documents submitted by the moving party, so long such documents either are in the possession of the party opposing the motion or were relied upon by that party in its pleadings."Brass v. Am. Film Techs., Inc., 987 F.2d 142, 150 (2d Cir. 1993).
Marvisi acknowledges that Coverage A, the bodily injury and property damage liability portion of the policy, is inapplicable to the present case. Rather, Marvisi asserts that the claims asserted in the underlying federal and state action should be covered as advertising injuries, within the scope of Coverage B, "Personal and Advertising Injury."
Advertising Injury
New York law imposes on insurers an "exceedingly broad" duty to defend, Cont'l Cas. Co. v. Rapid-Am. Corp., 80 N.Y.2d 640, 648 (1993), which arises whenever the allegations in a complaint against the insured fall within the scope of the risks undertaken by the insurer, regardless of how false or groundless those allegations might be. Seaboard Sur. Co. v. The Gillette Co., 64 N.Y.2d 304, 310 (1984).
However, where, as a matter of fact or law, the allegations do not assert a claim that conceivably falls within the terms of the policy, no duty to defend arises. Hugo Boss Fashions, Inc. v. Fed. Ins. Co., 252 F.3d 608, 620 (2d Cir. 2001). In determining whether the claim falls within the policy coverage, the court must examine and compare the policy language with the allegations in the complaint to determine whether "the underlying complaint alleges any facts or grounds which bring the action within the protection purchased." First Investors Corp. v. Liberty Mut. Ins. Co., 152 F.3d 162, 165 (2d Cir. 1998); A. Meyers Sons Corp. v. Zurich Am. Ins. Group, 74 N.Y.2d 298, 302-03 (1989).
Marvisi's main argument is that the claims in the underlying federal and state actions are within Section "g" of the definition of "personal and advertising injury," which covers claims for "infringing upon another's copyright, trade dress or slogan in your `advertisement.'" Marvisi asserts that the complaints in the underlying actions allege that he advertised counterfeit goods. Marvisi also argues that the policy provides coverage to the extent the plaintiffs' seek to hold him vicariously liable for his tenants' advertising of counterfeit goods.
Greenwich asserts that it properly denied coverage on three independent grounds: (1) the allegations in the underlying federal and state actions do not fall within the policy coverage for "advertising injury"; (2) the allegations in the underlying federal and state actions fall within the exclusions to "advertising injury" coverage; and (3) Marvisi failed to timely notify Greenwich of the potential claims as required under the policy.
The court finds that the underlying actions do not contain any allegations of advertising injury that would trigger coverage to Marvisi under the policy, and, in any event, the claims in the underlying actions are explicitly excluded from coverage under the policy. It is therefore not necessary to reach the notice issue.
None of the allegations in the federal or state actions fall within the scope of advertising injury as that term is defined in the policy. Coverage B, "Personal and Advertising Injury," provides coverage for "the use of another's advertising idea in your `advertisement'" or "infringing upon another's copyright, trade dress or slogan in your `advertisement.'" "Advertisement" is defined in the policy as "a notice that is broadcast to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters." Thus, coverage would exist only for injuries caused by the advertising of Marvisi's goods, products or services. However, the federal and state actions contain no allegations of such "advertisements."
The federal actions allege that Marvisi, as owner and landlord of the Subject Premises, provided his tenants with a safe haven from which to sell counterfeit goods, and seek recovery based upon Marvisi's right to control the Subject Premises and derivation of financial benefit from his tenants' infringing activities. The federal actions do not contain any allegation that Marvisi sold or advertised any "goods, products or services," or that he otherwise had any personal involvement in the business that was being conducted at the Subject Premises.
The state actions do not contain any allegations of advertising by Marvisi, and are predicated solely upon Marvisi's creation of a "criminal nuisance . . . by knowingly conducting and/or maintaining the subject premises as an illegal establishment where persons gather for purposes of purchasing, selling, and/or possessing merchandise bearing counterfeit trademarks." Thus, the allegations in the state actions also cannot be read to fall within the scope of the policy's coverage for advertising injury.
Although the complaints in the federal actions do contain some oblique references to the advertising of counterfeit goods, these are contained entirely within the counts directed toward the Tenant Defendants, and are not asserted against Marvisi.
Moreover, under the express terms of the policy, allegations of vicarious liability are patently insufficient to require coverage. The policy states: "throughout this policy the words `you' and `yours' refer to the Named Insured shown in the Declarations, and any other person or organization qualifying as a Named Insured under this policy." It is undisputed that Marvisi is the only Named Insured on the policy and that the Tenant Defendants do not qualify as Named Insureds under the policy. However, coverage under the policy extends only to claims for "infringing upon another's copyright, trade dress or slogan in your `advertisement.'"
Furthermore, advertisement is defined in 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 customers or supporters." Since Marvisi is not alleged to have personally advertised at all, let alone advertised his own goods, the claims asserted against him in the federal actions are outside the scope of coverage.
Marvisi also asserts that the claims in the underlying actions are within the scope of the policy based upon Section "d" of the definition of "personal and advertising injury," which defines that term to include:
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
Marvisi suggests that this section, under which advertising is not a prerequisite to coverage "provides coverage for breach of a trademark which disparages an organization's goods, products or services." This argument fails on its face, however, because there are no allegations of "oral or written publication of material" disparaging to the plaintiffs goods.
Marvisi's reliance upon PCB Piezotronics, Inc. v. Kistler Instrument Corp., 1997 U.S. Dist. LEXIS 20783 (W.D.N.Y. December 31, 1997) is misplaced. In PCB Piezotronics, the plaintiff sought coverage from its insurer to defend and indemnify it on the defendant's counterclaim that plaintiff had "misrepresented the nature, characteristics and qualities of [defendant's] goods" in a magazine advertisement. The plaintiff asserted that coverage for this claim existed under a provision identical to the present policy, covering claims arising from the "oral or written publication of material that . . . disparages a person's or organization's good, products or services." The court rejected the insurer's argument that the word "disparage" in the policy refers exclusively to the common law tort of product disparagement, and held that the term "disparage" should be given its "ordinary meaning, which is `to speak of as unimportant or small,' to `belittle,' `to reduce in esteem or rank.'" Unlike the present case, however, the complaint in PCB Piezotronics specifically alleged the written publication of disparaging material. As no such allegation is present here, Marvisi is not entitled to coverage under Section "d."
The Policy Exclusions
Even if the claims asserted against Marvisi could somehow be construed as "personal and advertising injury," they would still be excluded from coverage under Exclusions a(1) and a(4) thereunder. As to the federal actions, the allegations contained in the federal complaints fall within Exclusion a(1), which excludes from coverage any "advertising injury"
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."
The federal Complaints assert that Marvisi knowingly permitted the Subject Premises to be used for the sale of counterfeit goods that infringed the plaintiffs' trademarks. Such alleged conduct-i.e., knowingly permitting his property to be used for illegal purposes, is certainly "caused by or at the direction of the insured." The claims in the federal actions are therefore excluded from coverage.
In addition, the state actions fall within Exclusion a(4), which excludes from coverage any "action arising out of a criminal act committed by or at the direction of any insured." As the state actions allege that Marvisi created a criminal nuisance pursuant to N.Y. Penal Law § 240.45, Greenwich properly denied coverage under Exclusion a(4).
Marvisi's final contention is that Greenwich's denial of coverage was untimely. Marvisi points to State of New York v. AMRO Realty Corp., 936 F.2d 1420, 1431 (2d Cir. 1991) and Luria Bros. Co. v. Alliance Assurance Co., 780 F.2d 1082, 1090-91 (2d Cir. 1986), which hold that an insurer is deemed, as a matter of law, to have intended to waive a defense to coverage where other defenses are asserted, and where the insurer possesses sufficient knowledge (actual or constructive) of the circumstance regarding the unasserted defense." AMRO Realty, 936 F.2d at 1431. Marvisi argues that by failing to deny coverage under Coverage B of the policy for "personal and advertising injury" in its April 19 and June 24 denial letters, Greenwich waived any argument with respect to such coverage.
The waiver doctrine articulated in AMRO Realty is inapplicable in the present case, because unlike AMRO Realty, where the insurer's belated defense was untimely notice, Greenwich contests coverage altogether. The New York courts have repeatedly stated that the doctrine of waiver does not apply where coverage itself is at issue:
Waiver evolved because of courts' disfavor of forfeitures of the insured's coverage which would otherwise result where an insured breached a policy condition, as, for instance, failure to give timely notice of a loss or failure to co-operate with the insured. To defeat the forfeiture, courts find waiver where there is direct or circumstantial proof that the insurer intended to abandon the defense. . . . This, however, does not create coverage, for the underlying coverage must be subsisting if the forfeiture is to serve any purpose. So, where the issue is the existence or nonexistence of coverage (e.g., the insuring clause and exclusions), the doctrine of waiver is simply inapplicable.Albert J. Schiff Associates, Inc. v. Flack, 51 N.Y.2d 692, 698 (1980). See also Cent. Gen. Hosp. v. Chubb Group of Ins. Cos., 90 N.Y.2d 195, 200 (1997).
Therefore, Greenwich's failure, in its initial denial letters, to deny coverage for "personal and advertising injury" under Coverage B is not deemed a waiver of their defense that the claims asserted against Marvisi do not fall within the scope of the policy's coverage.
CONCLUSION
Greenwich's motion to dismiss the complaint pursuant to Rule 12(c) is granted.
SO ORDERED