The opinion of the court was delivered by: GERARD E. LYNCH, District Judge
Century 21, Inc. ("Century") moves for partial summary judgment
against Diamond State Insurance Company ("Diamond") seeking a judgment
declaring that Diamond must defend it in a trademark infringement action
and awarding it the fees thus far incurred in defending that action.
Diamond cross-moves, disavowing any duty to defend or indemnify Century.
Because Century's claim does not, as a matter of New York law, fall
within the terms of its policy with Diamond, Century's motion will be
denied, Diamond's motion granted, and this action dismissed.
Century, a retail store in Manhattan that sells goods including
"personal apparel such as wallets, handbags, suitcases and briefcases"
(Sultan Aff. ¶ 2), entered into an insurance contract with Diamond.
(P. Rule 56.1 Stmt. ¶ 2.) The contract covered the term April 1,
1999, to April 1, 2002 (id.; D. Rule 56.1 Stmt. ¶ 5), and
insured Century for, among other things, "[a]dvertising injury' caused by
an offense committed in the course of advertising [Century's] goods."
(Sultan Aff., Ex. C, Form CG 00 01 01 96 at 4.) The insurance policy
defined "advertising injury," in turn, as
injury arising out of one or more of the following
a. 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;
b. Oral or written publication of material that
violates a person's right of privacy;
c. Misappropriation of advertising ideas or style
of doing business; or
d. Infringement of copyright, title or slogan.
(Id. at 10.)
In June 2002, Gucci America, Inc. ("Gucci") filed a complaint against
Century and others for trademark infringement and unfair competition.
(Sultan Aff. ¶ 4; Ex. D.) Gucci Am., Inc. v. Big M Corp.,
No. 02 Civ. 3191 (S.D.N.Y. June 19, 2002.) The complaint alleges that
defendants distributed and sold "handbag and wallet items . . . bearing
copies of one or more of the various Gucci Trademarks." (Sultan Aff., Ex.
D ¶ 17.) While it does not allege specifically that Century
wrongfully advertised goods bearing Gucci's trademarks (D.
Rule 56.1 Stmt. ¶ 4), it does allege that defendants, presumably including
Century, "affixed, applied, or used in connection with the sale of
[their] goods, false descriptions and representations," and "marketed,
distributed and sold goods in connection with a colorable imitation and
simulation of Gucci Trademarks." (P. Resp. to D. Rule 56.1 Stmt. ¶ 2
Sultan Aff., Ex. D. ¶¶ 26, 28.)
By letter dated May 3, 2002, within ten days of receiving Gucci's
complaint, Century notified Diamond of the Gucci action, provided it
copies of the summons and complaint, and requested confirmation that
Diamond would defend Century. (Sultan Aff. ¶ 8; Ex. E.) By letter
dated May 17, 2002, Diamond disavowed coverage on several grounds,
including that Century's claim did not qualify as "advertising injury." (Sultan Aff. ¶
9; Ex. F at 3.) Century then retained counsel to represent it in the
Gucci action. (P. Rule 56.1 Stmt. ¶ 8.) In July 2003, Century filed
this action against Diamond, seeking contractual damages and a judgment
declaring that Diamond must defend and indemnify Century in connection
with the Gucci action.
I. Standard for Summary Judgment
Summary judgment must be granted where "there is no genuine issue as to
any material fact and . . . the moving party is entitled to a judgment as
a matter of law." Fed.R.Civ.P. 56(c); see Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). The parties do not dispute
any genuine issues of material fact, and the interpretation of
unambiguous provisions in an insurance contract is a pure question of
law. Mazzuoccolo v. Cinelli, 666 N.Y.S.2d 621, 622-23 (1st
New York law imposes on insurers an "exceedingly broad" duty to defend.
Cont'l Gas. Co. v. Rapid-Am. Corp., 80 N.Y.2d 640, 648 (1993);
see also Hugo Boss Fashions. Inc. v. Fed. Ins. Co.,
252 F.3d 608, 620 (2d Cir. 2001); First Investors Corp. v. Liberty Mut. Ins.
Co., 152 F.3d 162, 165 (2d Cir. 1998). That duty "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): see
also., 41 N.Y.2d 947, 949 (1977) ("So long as the claims
[against the insured], even though predicated on debatable or even
untenable theory, may rationally be said to fall within policy coverage,
whatever may later prove to be the limits of the insurer's responsibility to pay, there is no doubt that it is
obligated to defend.").
But the duty to defend has its limits. First Investors, 152
F.3d at 165. 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, 252 F.3d at 620, and
courts "should not attempt to impose the duty to defend on an insurer
through a strained, implausible reading of the complaint that is
linguistically conceivable but tortured and unreasonable."
Northville Indus. Corp. v. Nat'l Union Fire Ins. Co., 89 N.Y.2d 621,
634-35 (1997) (internal quotation marks omitted). Rather, the Court
must examine the policy language and 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, 152 F.3d 165-66 (internal quotation marks omitted);
A. Meyers & Sons Corp. v. Zurich Am. Ins. Group, 74 N.Y.2d 298,
302-03 (1989) (court must "compare the allegations of the complaint
to the terms of the policy to determine whether a duty to defend
exists"), always mindful that ambiguities must be resolved in favor of
the insured. Handelsman v. Sea Ins. Co., 85 N.Y.2d 96, 101
Diamond's policy insured Century for "advertising injury," as defined
above, "caused by an offense committed in the course of advertising
[Century's] goods." (Sultan Aff., Ex. C, Form CG 00 01 01 96 at 4.)
Century cites four allegations in Gucci's complaint that, in its view,
claim "advertising injury": that it (1) "affixed, applied or used [Gucci
trademarks] in connection with the sale of [its] goods (Gucci Compl.,
¶ 26); (2) "marketed, distributed and sold goods in connection with a
colorable imitation and simulation of the Gucci trademarks"
(id. ¶ 28); (3) "engaged in deceptive acts in the ...