Opinions of the United
2003 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


11-10-2003

Westport Reinsurance v. St Paul Fire
Precedential or Non-Precedential: Non-Precedential

Docket No. 02-3858




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"Westport Reinsurance v. St Paul Fire" (2003). 2003 Decisions. Paper 123.
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                                                              NOT PRECEDENTIAL

                  IN THE UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT

                                    No. 02-3858
                                 ________________

                    WESTPORT REINSURANCE MANAGEMENT, LLC,

                                                     Appellant
                                           v.

                    ST. PAUL FIRE & MARINE INSURANCE COMPANY

                      ____________________________________
                    On Appeal From the United States District Court
                              For the District of New Jersey
                                 (D.C. No. 01-cv-00926)
                    District Judge: Honorable Garrett E. Brown, Jr.
                    _______________________________________

                           Argued September 9, 2003
            Before: BARRY, BECKER and GREENBERG, Circuit Judges.

                              (Filed: November 10, 2003)

JEFFREY A. COOPER, ESQUIRE
ROBERT P. DONOVAN, ESQUIRE (ARGUED)
Carella, Byrne, Bain, Gilfillan, Cecchi,
Stewart & Olstein
5 Becker Farm Road
Roseland, New Jersey 07068

Attorneys for Appellant

GEORGE R. HARDIN, ESQUIRE (ARGUED)
JOHN R. SCOTT, ESQUIRE
Hardin, Kundla, McKeon, Poletto & Polifroni
673 Morris Avenue
P.O. Box 730
Springfield, New Jersey 07081

             Attorneys for Appellee
                                _______________________

                                       OPINION
                                _______________________

BECKER, Circuit Judge.

       This in an insurance coverage case turning on the existence vel non of an

advertising injury. The ultimate issue is whether defendant St. Paul Fire Insurance

Company (“St. Paul”) had a duty to defend plaintiff Westport, a reinsurance company, in a

suit filed against Westport in Georgia state court. That suit, brought by Integrated Benefits

and Compensation (“IBC”), alleged that Westport was involved in a “scheme to steal

IBC’s 24 Hour product, its copyrights, confidential information, trade secrets and

intellectual property related to the design and development of the 24 Hour product.” The

IBC litigation was settled and under the terms of settlement, Westport paid $200,000 to

IBC. Westport then filed a complaint in New Jersey Superior Court against St. Paul for

coverage against the IBC litigation and for bad faith. The case was removed to Federal

District Court pursuant to diversity jurisdiction and both parties filed motions for summary

judgment. The District Court entered an order granting St. Paul’s motion for summary

judgment and denying Westport’s cross motion. This appeal followed. W e will affirm.




                                          I.

       The controlling cases are Tradesoft Technologies, Inc. v. Franklin Mutual

Insurance Co., 

(N.J. Super. App. Div. 2000) and Frog Switch &



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Manufacturing Co. v. Travelers Ins. Co., 

(3 d Cir. 1999), which is followed in

Tradesoft. In Tradesoft, the Court held that “the determination of whether a liability

policy entitles the insured to a defense of an action brought against it requires first that the

allegations of the complaint be compared with the policy language. ‘When the two

correspond, the duty to defend arises, irrespective of the claim’s actual merit.’” 

(quoting Voorhees v. Preferred Mut. Ins. Co., 

, 173 (1992)).

Westport claims that the District Court erred when it bypassed this step and proceeded

directly to determine whether the allegations in the complaint asserted a causal connection

between the advertising and the injury. The District Court’s reasoning for doing so was

the following:

      The court [in Tradesoft] noted, “[t]he injury must result from an offense committed
      in the course of advertising.” Once the causal connection is established, the next
      step is to identify whether the advertising injury was caused by one of the
      delineated categories under the insurance policy. The court stated: “[w]e think it
      plain that the import of the advertising injury coverage was to afford protection to
      the insured for offenses committed while undertaking advertising activities that
      caused specifically defined injuries.”
(Mem. Op. 8) (citations omitted) (second and third alterations in original) (emphasis

supplied by the District Court). We agree.

       In its complaint, IBC describes its 24 Hour Insurance as follows:

       The IBC 24 Hour Product is an insurance policy designed and developed by IBC to
       be marketed and sold to employers in Georgia and throughout the United States.
       The 24 Hour Product is designed to combine into a single integrated policy of
       insurance an employee’s general health insurance and workers’ compensation
       benefits to be sold to both self insured and fully insured employers. It is referred to
       as the 24 Hour Product because it provides continuous insurance coverage to the
       employee, both while engaged in his or her employment, the occupational coverage,
       and while away from his or her employment, the non-occupational coverage. To
       IBC’s knowledge, there is no other single integrated policy of insurance available

                                               3
       on the market that is competitive with or comparable to its 24 Hour Product.


                                             II.

       IBC proceeds to describe at length the ways in which Westport schemed to steal

this idea from it in order to market it to competitors. Given IBC’s own definition of the 24

Hour Insurance Product, it seems very clear that we are, in fact, dealing with a product,

and not with an “advertising idea or concept.” As we stated in Green Machine Corp. v.

Zurich-American Insurance Group, 

, 840 (3d Cir. 2002), which followed

Frog Switch, “[a]dvertising injury is the misappropriation of another’s advertising idea or

concept.” Like in Frog Switch, it seems that Westport stole an idea (here the integrated

insurance policy, there the dipper bucket design) and then set about to advertise and solicit

customers based on that idea. In Frog Switch, the Court held that advertising a stolen idea

does not convert the theft into an “advertising injury” and that the insurer therefore has no

duty to defend against such claims. See Frog 

.

       Westport contends that IBC’s claims for misappropriation of the 24 Hour Insurance

Product triggered coverage because the insurance product itself, as alleged, constituted an

advertising idea or style of doing business. The District Court refused to accept

Westport’s characterization of the 24 Hour Insurance Product as an “advertising

gimmick/strategy” because it supposedly brought together two established insurance

policies into one. We agree with the District Court’s assessment: the 24 Hour Insurance

Product is a way of bundling two types of insurance together that may be novel in the

field, but it is not an “advertising idea, material, slogan, style, or title of others” as defined

                                                   4
in the St. Paul Policy.

       In Green Machine, we explicitly described the misappropriation of an advertising

idea as “the wrongful taking of an idea concerning the solicitation of business and

customers.” Green 

. This definition clearly does not apply to the

24 Hour Insurance Product because the product was a type of insurance, not an advertising

idea. “[T]o be covered by the policy, allegations of . . . misappropriation have to involve

an advertising idea, not just a nonadvertising idea that is made the subject of advertising.”

Green 

.

       In sum, the integration of two types of insurance creates a product, not an

advertising idea or concept. We have carefully examined the provisions of the St. Paul

policy but find nothing in their definitions of advertising, advertising injury, or advertising

injury offense that undermines this analysis. We will therefore affirm the District Court’s

grant of summary judgment to St. Paul as it had no duty to defend Westport against the

IBC litigation.




                                               5
TO THE CLERK:

    Kindly file the foregoing opinion.




                                          /s/ Edward R. Becker
                                         Circuit Judge




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