No Coverage — No Duty to Defend: Personal Injury Offenses Must Be Alleged

No Coverage — No Duty to Defend: Personal Injury Offenses Must Be Alleged

Business relationships are often contentious. When a contract to sell a product devolves into a dispute by selling the product under a slightly different name, suits are filed. Insurance is designed to protect the party insured against certain enumerated causes or risks of loss. However, no policy provides coverage for EVERY potential risk of loss.

In Crum & Forster Specialty Ins. Co. v. Willowood USA, LLC, Slip Copy, 2014 U.S. Dist. LEXIS 105389 (D.Or., Aug. 1, 2014), [enhanced version available to subscribers], the U.S. District Court for the District of Oregon was faced with a dispute by plaintiff, Crum & Forster Specialty Insurance Company (Crum), along with defendant insurance providers Allied World Assurance Company (Allied) and Colony Insurance Company (Colony), that sought a legal declaration against defendant Willowood USA, LLC (Willowood) that they had no duty to defend Willowood in a companion case before the same Court, Repar Corporation v. Willowood USA, LLC et al., Civ. No. 6:13–cv–01043–MC (underlying action).


This action aroseout of an insurance coverage dispute. Because the action relied on the factual allegations in the underlying action, the District Court first looked to the First Amended Complaint (FAC).

Repar, a corporation in the business of distributing agricultural pesticides, began distributing an agricultural pesticide containing tebuconazole under the trade names TEBUCON 45 DF and TEBUCON 3.6F in 2008.

Willowood, also a corporation in the business of distributing agricultural pesticides, was formed in December 2009. Willowood agreed to “maintain the confidentiality of any confidential or proprietary information,” to not use “the name TEBUCON except for sales authorized under the EPA Form 8570–5 agreement,” and to allow Repar to “be the exclusive supplier of technical grade tebuconazole for both products.” As a result, Repar granted Willowood a “license to distribute and sell products in connection with the TEBUCON mark as an EPA subregistrant of Repar for the TEBUCON 45 DF and 3.6F products and subject to Repar’s quality control.”

After gaining chemistry information Willowood successfully refiled its EPA registration applications using product chemistry data from another supplier. In its refiled EPA registration applications, Willowood identified its products as WILLOWOOD TEBUCON 45DF and WILLOWOOD TEBUCON 3.6 SC. Id. “Willowood subsequently began using Repar’s TEBUCON mark in connection with the sale and distribution of its own tebuconazole products.”

Repar sought damages and injunctive relief under theories of implied-in-fact contract, quasi-contract/unjust enrichment, Federal Trademark Infringement (15 U.S.C. § 1114), [enhanced version available to subscribers], and Federal Unfair Competition (15 U.S.C. § 1125(a)), [enhanced version available to subscribers].

The insurance providers contended that the claims and allegations in the underlying action were not covered under the respective policies and, to the extent that the claims and allegations were covered, the claims and allegations were excluded.


Policy Coverage

Willowood contended that all three insurance providers had to defend because the allegations in the underlying action “fall squarely within the coverage for ‘personal and advertising injury’ provided by each of the policies.”

Oregon determines the intent of the parties to an insurance contract by looking first to the plain meaning of any disputed terms and then to the structure and context of the policy as a whole. If the parties’ intent cannot be determined by doing so, the policy is construed against the insurer, because any reasonable doubt as to the intended meaning of an ambiguous term will be resolved against the insurance company and in favor of extending coverage to the insured.

The Policies

Colony’s policy extended the “duty to defend the insured against any ‘suit’ seeking ‘damages’” for covered “personal and advertising injur [ies].” “[I]njury, including consequential ‘bodily injury’, arising out of one or more of the following offenses: ¶ … d. Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services; ¶ … 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’.”

Willowood argued, in reliance upon the definition of “personal and advertising injury” that Repar, in the underlying action, alleges “disparagement” under subsection “d” and “use of another’s advertising idea in your ‘advertisement’ “ under subsection “f.” Because the policies do not define either “disparagement” or “use of another’s advertising idea in your ‘advertisement,’ “ the Court first considered whether the phrases in question have a plain meaning, ie., whether they are susceptible to only one plausible interpretation.


As long as the complaint contains allegations that, without amendment, state a basis for a claim covered by the policy, the duty to defend arises. That question can be answered only by examining Repar’s complaint.

In assessing Repar’s allegations, the court should not be concerned with potential factual determinations. Rather, the court looks to those torts identified by the parties, including: (1) trade libel, (2) defamation, and (3) quasi-contract/unjust enrichment.

To prevail on a state law trade libel claim, it must be established that the defendant published false allegations about the plaintiff with malice, and that the plaintiff suffered special damages or pecuniary harm as a result of the publication.

The elements of a claim for defamation are: (1) the making of a defamatory statement; (2) publication of the defamatory material; and (3) a resulting special harm, unless the statement is defamatory per se and therefore gives rise to presumptive special harm.

The factual allegations of Repar’s FAC do not state a claim for defamation or trade libel.

The term implied contract has also been used to refer to contracts that are implied-in-law or quasi-contracts.Unlike true contracts, quasi-contracts are not based on the apparent intention of the parties to undertake the performances in question, nor are they promises. They are obligations created by law for reason of justice. To establish a quasi-contract, a plaintiff must prove all three of the following: (1) a benefit was conferred; (2) the recipient was aware that a benefit was received and; (3) under the circumstances, it would be unjust to allow retention of the benefit without requiring the recipient to pay for it.

Repar does not allege that Willowood belittled or discredited Repar’s goods or products. Rather, Repar merely seeks to utilize a remedial device to prevent unjust enrichment. Accordingly, Repar’s claim for breach of a quasi-contract/unjust enrichment is not covered as “disparagement” under the policies.

The policies also define “personal and advertising injury” as “[t]he use of another’s advertising idea in your ‘advertisement.’ Repar’s use of the TEBUCON mark in lieu of the chemical name, tebuconazole, represents a thought or conception (“idea”). This “idea” also represents an “advertising idea” under the broad definition identified above, ie., a conception intended to attract public attention to a product. For example, Repar alleges that the TEBUCON mark immediately and inherently signified the quality, reputation, and source of these products. This allegation, in tandem with the paragraphs identified by Willowood, plausibly indicate that Repar used the TEBUCON mark to distinguish its product from the competition, ie., to attract public attention to the advantages of its own product vis-à-vis its competition. However, to extend coverage to the insured, this “advertising idea” must also be used in an “advertisement.”

To the extent that Willowood’s interpretation is plausible, ie., the TEBUCON mark communicates information about goods or products to the general public, the District Court declined to find it reasonable. The mere sale of a product bearing another’s mark does not constitute an advertisement.


The insurer has the burden of proof that a claim or action is excluded. Also, any ambiguity in an exclusionary clause is strictly construed against the insurer. Repar, in the underlying action, seeks “damages” under claims asserting: breach of implied-in-fact contract; quasi-contract/unjust enrichment; Federal Trademark Infringement (15 U.S.C. § 1114); and Federal Unfair Competition (15 U.S.C. § 1125(a)).

Breach of Contract Exclusion

The exception precludes exclusion if “personal and advertising injury” arises out of “an implied contract to use another’s advertising idea in your ‘advertisement.’ The District Court was unable to reasonably interpret the allegations to meet the definition of “advertisement.” Accordingly, the breach of contract exclusion applies to Repar’s claim for breach of implied-in-fact contract.

Trademark Exclusion

To prevail on a claim of trademark infringement under 15 U.S.C. § 1114, a party must prove that it has a protectable ownership interest in the mark; and that the defendant’s use of the mark is likely to cause consumer confusion.

Federal Unfair Competition

Repar also alleges a claim for Federal Unfair Competition under 15 U.S.C. § 1125(a). The elements of infringement and unfair competition claims are essentially the same; the rulings stand or fall together. As in Repar’s trademark infringement claim, the gravamen of Repar’s unfair competition claim is that Willowood used a “confusingly similar imitation” of Repar’s mark. Accordingly, this claim arises out of “trademark” and is excluded.


Litigants in Oregon who want the defendant’s insurance to protect them against the allegations of a claim for trade libel, defamation, or other personal injury coverages must draft their complaints to allege facts that bring the case within coverage. In this case they either failed to properly allege the causes of action or decided to punish the defendant by seeking liability for torts not covered by insurance. The failed in the former and succeeded in the latter.

    By Barry Zalma, Attorney and Consultant

Reprinted with Permission from Zalma on Insurance, (c) 2014, Barry Zalma.

Barry Zalma, Esq., CFE, is a California attorney who limits his practice to consultation regarding insurance coverage, insurance claims handling, insurance bad faith and fraud and acting as a mediator or arbitrator on insurance disputes. Mr. Zalma serves as a consultant and expert almost equally for insurers and policyholders. He founded Zalma Insurance Consultants in 2001 and serves as its only consultant. He recently published the e-books, "Zalma on Rescission in California - 2013"; "Random Thoughts on Insurance" containing posts from this blog; "Zalma on Insurance;" "Murder and Insurance Don't Mix;" “Heads I Win, Tails You Lose — 2011,” “Zalma on Diminution in Value Damages,” “Arson for Profit” and “Zalma on California Claims Regulations,” and others that are available at Zalma Books.

Mr. Zalma can be contacted at Barry Zalma or, and you can access his free "Zalma on Insurance Fraud" newsletter at Zalma’s Insurance Fraud Letter.

For more information about LexisNexis products and solutions connect with us through our corporate site