Primed Pharmaceuticals LLC v. Starr Indemnity & Liability Company

Background

PriMed brought a breach-of-contract and declaratory-judgment action against Starr, seeking damages and a declaration that Starr had duties to defend and indemnify PriMed in pending litigation brought by Abbott Laboratories and related entities. PriMed moved under Rule 56 for partial summary judgment concerning Starr’s duty to defend. Starr opposed that motion and cross-moved for summary judgment seeking dismissal of the complaint and a declaration that it had no duty to defend or indemnify PriMed.

PriMed bought a commercial general liability policy from Starr covering November 15, 2014 through November 15, 2015. The policy covered certain “personal and advertising injury,” including infringement of another’s copyright, trade dress, or slogan in an advertisement. It also contained a prior-publication exclusion for advertising injury arising from material whose first publication occurred before the policy period.

Abbott’s operative complaint alleged that PriMed and others engaged in unauthorized importation, advertising, and distribution of diverted international FreeStyle test strips, using Abbott’s trademarks and trade dress in advertisements. Starr denied coverage, arguing in part that PriMed’s alleged advertising began before the policy period. The parties focused on emails PriMed sent to customers in July and August 2014 and on order forms that listed products and prices.

Choice of Law and Duty to Defend

The court applied New York law because Starr failed to show a substantive, material difference between New York and New Jersey law relevant to the motions, and New York law was among the possible choices. Under New York law, an insurer’s duty to defend is broader than its duty to indemnify. The duty generally exists when the underlying allegations potentially state a covered claim, unless the insurer establishes that the allegations fall entirely within a policy exclusion and leave no possible factual or legal basis for coverage.

The court held that Abbott’s allegations triggered Starr’s duty to defend against claims involving advertising injury. Starr conceded that the Abbott litigation included allegations of trade-dress infringement, and the court concluded that those allegations potentially fell within the policy’s coverage.

Prior-Publication Exclusion

The court held that Starr had not established that the prior-publication exclusion conclusively applied. First, the Abbott amended complaint alleged that PriMed had purchased and sold the test strips during the preceding 24 months, but that period included time both before and during the policy period. The complaint therefore did not establish that PriMed’s first advertisement occurred before November 15, 2014. The complaint also referred to PriMed’s purchases and sales without specifically describing PriMed’s advertising activity, leaving uncertainty about the required connection between the alleged injury and advertising.

Second, Starr had not established as a matter of law that the July and August 2014 emails or the order forms were “advertisements” under the policy. The policy required a notice to be broadcast or published to the general public or to specific market segments. The emails went to about a dozen customers, and Starr did not provide undisputed evidence showing that those recipients formed a specific market segment. The communications listed products and prices but did not describe desirable qualities of the products or otherwise conclusively meet the ordinary meaning of advertising.

Because Starr did not prove that the exclusion applied, the court held that Starr had a duty to defend PriMed in the Abbott litigation. The court did not need to decide PriMed’s separate argument that the emails did not infringe Abbott’s trade dress.

Disposition

The court granted PriMed’s motion for partial summary judgment and denied Starr’s motion for summary judgment. The parties were directed to confer about mediation or scheduling the remaining pretrial proceedings. The opinion states that the action still contained remaining disputes, including the issue of indemnification.