Secard Pools Inc et al v. Kinsale Insurance Company et al

Filing 54

JUDGMENT by Judge John F. Walter. IT IS HEREBY ORDERED, ADJUDGED AND DECREED that Kinsale Insurance Company is entitled to Judgment in its favor on all Claims for Relief of the First Amended Complaint herein, that the plaintiffs Secard Pools, Inc., Joe Secard and Edmond Secard take nothing by said First Amended Complaint, that this action be dismissed on the merits and that defendant Kinsale Insurance Company shall recover its costs. (MD JS-6, Case Terminated). (jp)

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JS-6

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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SECARD POOLS, INC., a California
Corporation; JOE SECARD, an
individual; and EDMOND SECARD, an
individual,

Case No.: 5:16CV02404-JFW (SPx)
[Assigned for AllstPurposes to the Hon.
John F. Walter, 1 St. Ctrm 7A]
JUDGMENT

Plaintiffs,

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vs.

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KINSALE INSURANCE COMPANY,
an Arkansas Corporation; DOES 1
through 100, inclusive,

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Defendants.

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On February 21, 2017, defendant Kinsale Insurance Company (“KINSALE”)

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filed its Motion for Summary Judgment (Dkt. # 25). Plaintiffs Secard Pools, Inc.,

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Joe Secard, and Edmond Secard (the “SECARD PARTIES”) timely filed an

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Opposition on March 6, 2017 (Dkt. # 38). On March 13, 2017, KINSALE filed its

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Reply (Dkt. # 40). The SECARD PARTIES also filed a Cross-motion for Partial

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///
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Summary Judgment (Dkt. # 30), to which KINSALE filed Opposition (Dkt. # 32)

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and the SECARD PARTIES filed a Reply (Dkt. # 43).

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On March 23, 2017, pursuant to Fed.R.Civ.P. 78 and Local Rule 7-15, the

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Court determined that KINSALE’s Motion for Summary Judgment and the

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SECARD PARTIES’ Cross-motion for Partial Summary Judgment were appropriate

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for decision without oral argument and vacated the hearing set for March 27, 2017.

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(Dkt. # 48). On March 28, 2017, the Court issued an Order GRANTING

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KINSALE’s Motion and DENYING the SECARD PARTIES’ Motion as moot (Dkt.

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# 51) and issued its Statement of Decision specifying the reasons for said Order.

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(Dkt. # 52).

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NOW THEREFORE, having considered KINSALE’s moving papers, the

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Opposition filed by the SECARD PARTIES, the Reply filed by KINSALE, and the

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evidence presented having been fully considered, the issues having been duly heard

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and a decision having been duly rendered,

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IT IS ORDERED AND ADJUDGED as follows:
A.

The following material facts are established:

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1. On November 21, 2014, Solar Sun Rings (“SSR”), a competitor of Secard

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Pools, Inc. (“SECARD POOLS”), filed an action in the Central District of

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California entitled Solar Sun Rings, Inc. v. Secard Pools et al., USDC

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Central District of Cal. Case No. 5:14-cv-02417 (the “SSR Action”).

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2. In the SSR Action, SSR alleged that Secard Pools used the name “Solar

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Heat Squares” which allegedly was an imitation of SSR’s trademarks

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“Solar Sun Rings” and “Solar Sun Squares.”

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3. In the SSR Action, SSR alleged that the Secard Pool products included a

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sticker bearing the name “Solar Heat Squares.” Those stickers would

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dissolve if submerged into water, revealing the name “Solar Sun Squares”

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on the product.

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4. In the SSR Action, SSR alleged that the disclaimer on the Solar Heat
Squares product included a reference to the Solar Sun Squares trademark.
5. In the SSR Action, SSR alleged that Secard Pools used a color scheme
and style of printing like SSR’s.

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6. In the SSR Action, SSR alleged that Secard Pools actively and knowingly

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engaged in the manufacture, distribution, promotion, and sale of products

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that copied SSR’s products and “unscrupulously usurped SSR’s

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trademark and trade dress for their own benefit.”

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7. In the SSR Action, SSR alleged that Secard Pools “intentionally adopted

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the Solar Heat Squares infringing mark in order to trade on and infringe

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SSR’s Solar Sun Rings and Solar Sun Squares trademarks . . . .”

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8. In the SSR Action, SSR alleged that Secard Pools “intentionally adopted”

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an identical set and sequence of colors as SSR’s Color Scheme to trade on

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and infringe SSR’s trade dress.

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9. In the SSR Action, SSR alleged that Secard Pools ignored SSR’s cease

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and desist letters and continued to manufacture, distribute and offer for

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sale and sell infringing products.

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10. In the SSR Action, SSR alleged that use of the Solar Heat Squares mark

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and the color scheme was “in bad faith, and with the intent to cause

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confusion.”

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11. In the SSR Action, SSR alleged that adoption of the mark and color

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scheme was “not accidental or innocent,” but instead was done with a

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purpose to deceive the consuming public and others.

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12. In the SSR Action, SSR alleged that Secard Pools acted “wilfully and in
bad faith.”
13. The First Claim for Relief in the SSR Action was for Federal Trademark
Infringement [15 U.S.C. § 1114(1); Lanham Act § 32(a)].

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14. The Second Claim for Relief in the SSR Action was for Federal Trade

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Dress Infringement [15 U.S.C. § 1125(a); Lanham Act § 43(a)].

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15. The Third Claim for Relief in the SSR Action was for False Designation

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of Origin / False Advertising / Unfair Competition [15 U.S.C. §

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1125(1)(1)(A); Lanham Act § 43(c)].

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16. The Fourth Claim for Relief in the SSR Action was for Federal Trademark
Dilution [15 U.S.C. § 1125(c); Lanham Act § 43(a)].
17. The Fifth Claim for Relief in the SSR Action was for Trademark
Infringement and Unfair Competition (Common Law and California State
Law).
18. The Sixth Claim for Relief in the SSR Action was for Unfair Business
Practices (California Business & Professions Code § 17200).
19. Plaintiffs in the SSR Action alleged, among other things, “This action is

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brought to obtain equitable and legal relief for Defendants’ infringement

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of Plaintiff’s registered trademark, and Defendants’ infringement of

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Plaintiff’s common law trademark and trade dress.”

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20. KINSALE issued Commercial General Liability Insurance Policy No.

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0100022495-0 to Secard Pools, effective August 28, 2014 to August 28,

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2015 (the “KINSALE POLICY”).

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21. The SECARD PARTIES have not challenged KINSALE’s conclusion

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that coverage for the Claims in the SSR Action would have existed, if at

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all, only under Coverage B.

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22. Pursuant to the Insuring Agreement for Coverage B, KINSALE promised

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to “pay those sums that the insured is legally obligated to pay as damages

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because of ‘personal and advertising injury’ to which this insurance

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applies.”

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23. The KINSALE POLICY provides “we will have the right and duty to
defend the insured against any “suit” seeking [damages for “Personal and
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advertising injury”]. However, we will have no duty to defend the

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Insured against any “suit” seeking damages for “personal and advertising

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injury” to which this insurance does not apply.”

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24. The KINSALE POLICY partially defines “Personal and Advertising

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Injury” as follows:

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“14. ‘Personal and advertising injury’ means injury, including

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consequential ‘bodily injury’, arising out of one or more of the

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following offenses:

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f. the use of another’s advertising idea in your ‘advertisement’; or

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g. infringing upon another’s copyright, trade dress or slogan in your

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‘advertisement.’”
25. The KINSALE POLICY defines the term “Advertisement” as:

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“’Advertisement’ means a notice that is broadcast or published to the

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general public or specific market segments about your goods, products or

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services for the purpose of attracting customers or supporters. For the

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purposes of this definition:

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a.

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Notices that are published include material placed on the Internet or
on similar electronic means of communication; and

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Regarding web-sites, only that part of a web-site that is about your

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goods, products or services for the purposes of attracting customers

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or supporters is considered an advertisement.”

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26. Exclusion i in Form CG 002 1001 precludes coverage for ““‘Personal and

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advertising injury’ arising out of the infringement of copyright, patent,

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trademark, trade secret or other intellectual property rights. However, this

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exclusion does not apply to infringement, in your ‘advertisement,’ of

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copyright, trade dress or slogan.”

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27. The KINSALE POLICY contains an endorsed exclusion entitled
“EXCLUSION – INTELLECTUAL PROPERTY” (the “IP Exclusion”)
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which replaces Exclusion i found in the main Policy form of the

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KINSALE POLICY.

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28. The IP Exclusion provides:
“This insurance does not apply to any claim or ‘suit’ arising out of any:
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actual or alleged infringement of copyright, patent, trademark,

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service mark, right of publicity, slogan, trade dress, trade secret or

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other intellectual property rights;

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2.

actual or alleged false advertising, false designation of origin,

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product disparagement, trade libel, or other Claims for Relief

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arising out of unfair competition; or
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products or goods manufactured, sold, handled or distributed or

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work completed by the insured or others operating under the

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direction or control of the insured in violation of any law, statute

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or ordinance of any federal, state or municipal government, or any

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agencies thereof, including violations of the Lanham Act or other

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unfair competition statutes.”

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29. On December 1, 2014 the SECARD PARTIES tendered the defense of
the SSR Action to KINSALE in writing.
30. On December 4, 2014, KINSALE informed the SECARD PARTIES in
writing that it was disclaiming coverage for the SSR Action.
31. KINSALE’s disclaimer letter stated, among other things, that:
(a) The SSR Action did not allege claims for “Bodily injury or Property
damage” within Coverage A;
(b) Under Coverage B, Exclusions a. (Knowing Violation of Rights of

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Another), i. (Infringement of Copyright, Patent, Trademark or Trade

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Secret) and l. (Unauthorized Use of Another’s Name or Product)

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applied to limit or exclude coverage for the SSR Action; and

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(c) “All of the allegations in the Plaintiff’s complaint arise out of alleged

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trademark violations, false advertising, violation of the Lanham Act,

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and unfair business practices. Therefore, there would be no coverage

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under the Policy for this complaint based on [the endorsed Exclusion

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- Intellectual Property].”

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32. The SSR Action alleges that

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“157.

Defendants' unauthorized promotion and sale in interstate

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commerce of passive pool and spa heating products that are identified by

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the Color Scheme, in conjunction with confusingly similar trademarks

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(e.g., Defendants' SOLAR HEAT SQUARES versus SSR'S SOLAR SUN

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RINGS and SOLAR SUN SQUARES), trade dress, and/or trade name

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constitutes a false designation of origin and/or a false representation of

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fact, in that it is likely to cause confusion, or to cause mistake, or to

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deceive, mislead, betray, and defraud consumers and potential customers

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and the public as to the source and sponsorship of Defendants' goods.”

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B.

The Following Conclusions of Law are Applicable and Established:
33. All of the factual allegations and Claims for Relief alleged in the SSR
Action fall within the IP Exclusion contained in the KINSALE POLICY.

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34. The plain meaning of the IP Exclusion contained in the KINSALE

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POLICY precludes coverage for the SSR Action as a matter of law.

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35. Based on the information available to KINSALE at the time of tender of

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the SSR Action, including the allegations of the Complaint therein,

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KINSALE had no duty to defend the SECARD PARTIES against the SSR

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Action and has no obligation to pay the attorney’s fees and costs incurred

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by the SECARD PARTIES in defense of the SSR Action.

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36. Applying the IP Exclusion to the facts of the SSR Action, KINSALE has

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no duty to indemnify the SECARD PARTIES for any amounts they paid

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in settlement of the SSR Action.
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37. KINSALE did not breach the terms, conditions, exclusions and

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endorsements of the KINSALE POLICY when it declined to defend the

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SSR Action.

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38. The lack of KINSALE’s breach of the KINSALE POLICY precludes the

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SECARD PARTIES’ First Claim for Relief for Breach of the Implied

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Covenant of Good Faith and Fair Dealing as a matter of law.

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Accordingly, IT IS HEREBY ORDERED, ADJUDGED AND DECREED

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that Kinsale Insurance Company is entitled to Judgment in its favor on all Claims

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for Relief of the First Amended Complaint herein, that the plaintiffs Secard Pools,

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Inc., Joe Secard and Edmond Secard take nothing by said First Amended Complaint,

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that this action be dismissed on the merits and that defendant Kinsale Insurance

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Company shall recover its costs.

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DATED:

April 3, 2017

_______________________________
UNITED STATES DISTRICT JUDGE

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