Maids on Call, LLC et al v. Ohio Security Insurance Company

Filing 45

MEMORANDUM AND ORDER - Plaintiffs' Motion for Partial Summary Judgment, ECF No. 11 , is denied. The Motions for Summary Judgment, ECF Nos. 31 and 36 , filed by Defendant Ohio Security Insurance Company and Third Party Plaintiff Ohio Casualty Insurance Company, respectively, are granted. The Objection to Supplemental Authority, ECF No. 44 , is overruled as moot. This case is dismissed, with prejudice. A separate judgment will be entered. Ordered by Chief Judge Laurie Smith Camp. (KLF)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA

MAIDS ON CALL, LLC, a Connecticut
limited liability company; MAIDS ON
CALL II, LLC, a Massachusetts limited
liability company; TIMOTHY SCUSSEL,
an individual; MARYANN SCUSSEL, an
individual; SARA ROCK, an individual;
and STACEY GARON, an individual;

8:17CV252
MEMORANDUM AND ORDER

Plaintiffs,
vs.
OHIO SECURITY INSURANCE
COMPANY, a New Hampshire
corporation;
Defendant,
OHIO CASUALTY INSURANCE
COMPANY,
Intervenor.

This matter is before the Court on Plaintiffs’ Motion for Partial Summary
Judgment, ECF No. 11, and the Motions for Summary Judgment filed by Defendant
Ohio Security Insurance Company (Ohio Security) and Intervenor Ohio Casualty
Insurance Company (Ohio Casualty) (collectively “Ohio”), ECF Nos. 31 and 36,
respectively. Also before the Court is the Objection to Supplemental Authority, ECF No.
44, filed by Ohio Security. For the reasons stated, Ohio Security and Ohio Casualty’s
Motions for Summary Judgment will be granted, Plaintiffs’ Motion will be denied, and the
Objection will be denied as moot.

BACKGROUND
Unless otherwise indicated, the following facts are those stated in the Parties’
briefs, supported by pinpoint citations to admissible evidence in the record, in
compliance with NECivR 56.1 and Federal Rule of Civil Procedure 56.
The Parties
Maids on Call, LLC, is a Connecticut limited liability company that has its
principal place of business in Hartford, Connecticut. Maids on Call II, LLC, is a
Massachusetts limited liability company that has its principal place of business in West
Springfield, Massachusetts. Timothy and Maryann Scussel are residents of Connecticut
and the owners and only members of Maids on Call, LLC, and Maids on Call II, LLC (the
“former Maids franchises”). Stacey Garon and Sara Rock are also residents of
Connecticut. Rock and Garon were employees of the former Maids franchises.
Ohio Security is an insurance company organized and existing under the laws of
the state of New Hampshire and with its principal place of business in Boston,
Massachusetts. Ohio Security transacts business nationwide, including in the state of
Nebraska. Ohio Security is the named insurer on Policy No. BKS56009071 (the
“Policy”), issued to Maids on Call, LLC, and Maids on Call II, LLC, covering the policy
period of March 3, 2016, to March 3, 2017. The parties dispute whether the former
Maids franchises renewed the Policy for the period March 3, 2017, to March 3, 2018.
Each of the Plaintiffs was either a named insured or a defined insured under the Policy.
Ohio Casualty is an underwriting company that issued a commercial umbrella
insurance policy (the “Ohio Casualty Policy”) to Maids on Call with language similar to
the Policy at issue in this case. See Order at 2, ECF No. 34, Page ID 1985. The Court
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granted Ohio Casualty leave to intervene under Federal Rule of Civil Procedure
24(b)(1)(B) because the claims of Ohio Casualty and Ohio Security against the Plaintiffs
share common questions of law and fact, and the relief Ohio Casualty seeks is
premised on legal theories identical to those asserted by Ohio Security. See id. at 3,
Page ID 1986.
Policy Terms
The Policy’s Insuring Agreement under Coverage B – Personal and Advertising
Injury Liability provided as follows:
We will pay those sums that the insured becomes legally obligated to pay
as damages because of “personal and advertising injury” to which this
insurance applies. We will have that right and duty to defend the insured
against any “suit” seeking those damages.
Pls.’ Ex. 11 at 4-5; ECF No. 12-11, Page ID 484-85. The Policy also contained the
following exclusions:
This insurance does not apply to:
a. Knowing Violation of Rights of Another
“Personal and advertising injury” caused by or at the direction of the
insured with the knowledge that the act would violate the rights of another
and would inflict “personal and advertising injury.”
b. Material Published With Knowledge Of Falsity
“Personal and advertising injury” arising out of oral or written publication,
in any manner, of material, if done by or at the direction of the insured with
knowledge of its falsity.
…

f. Breach of Contract
“Personal and advertising injury” arising out of a breach of contract, except
an implied contract to use another’s advertising idea in your
“advertisement.”
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…
i. Infringement of Copyright, Patent, Trademark or Trade Secret
“Personal and advertising injury” arising out of the infringement of
copyright, patent, trademark, trade secret or other intellectual property
rights. Under this exclusion, such other intellectual property rights do not
include the use of another’s advertising idea in your “advertisement.”
However, this exclusion does not apply to infringement, in your
“advertisement”, of copyright, trade dress or slogan.
l. Unauthorized Use Of Another’s Name Or Product
“Personal and advertising injury” arising out of the unauthorized use of
another’s name or product in your e-mail address, domain name or
metatag, or any other similar tactic to mislead another’s potential
customers.
Id. at 5-6; ECF No. 12-11, Page ID 485-86.
The Policy provided the following regarding who was insured by the Policy:
1. If you are designated in the Declarations as [ . . . ]
d. An organization other than a partnership, joint venture or limited liability
company, you are an insured.
Your “executive officers” and directors are insureds, but only with respect
to their duties as your officers or directors. Your stockholders are also
insureds, but only with respect to their liability as stockholders.
2. Each of the following is also an insured:
a. Your “volunteer workers” only while performing duties related to the
conduct of your business, or your “employees”, other than either your
“executive officers” (if you are an organization other than a partnership,
joint venture or limited liability company) or your managers (if you are a
limited liability company), but only for acts within the scope of their
employment by you or while performing duties related to the conduct of
your business[.]
Id. at 7; ECF No. 12-11, Page ID 487.

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The TMI Lawsuit
On June 16, 2017, the Claimant, The Maids International, Inc. (TMI) filed its
Complaint against Maids on Call (the TMI Complaint) in this Court, in the action
captioned The Maids International, Inc. v. Maids on Call, LLC, et al., Case No. 8:17-cv00208 (the “TMI Lawsuit”). TMI filed the lawsuit in Nebraska based on the forumselection clauses in its franchise agreements with Maids on Call, LLC, Maids on Call II,
LLC, Timothy Scussel, and Maryann Scussel (the “Scussel Defendants”).
TMI alleged that the individual defendants, who were principals and employees
of a TMI franchise, abandoned their franchise operations and began operating a new
business in the same location as their old one, using the same customer list. TMI
further alleged that Maids on Call was using TMI’s trademarks and email address in the
operation of a competing business, in violation of the franchise agreements and federal
trademark law. The TMI Complaint alleged that the Scussel Defendants conspired to
operate Two Sisters Cleaning (“Two Sisters”) and harmed TMI by, among other things,
“diverting or attempting to divert customers to a competitor,” “using customer contact
information for the purpose soliciting [sic] customers,” and “soliciting TMI’s customers
and convincing them to cancel service with TMI and sign up for services by Two Sisters
Cleaning,” resulting in diversion of customers and damage to TMI’s reputation. Pls.’ Ex.
1 ¶¶ 52, 56, 106-09, 121; ECF No. 12-1, Page ID 173, 174, 183-84, 185.
On June 30, 2017, TMI filed a Motion for Preliminary Injunction in the TMI
Lawsuit, along with a two-volume Index of Evidence and a Brief in Support of the
Motion. TMI’s preliminary injunction motion sought an order “prohibiting Defendants
from operating their competing Two Sisters cleaning business,” and argued that the
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Scussel Defendants “have already poached TMI’s customers” and were “stealing the
goodwill and relationship The Maids customers have with the franchise system.” ECF
Nos. 12-2, 12-3, 12-4. Also on June 30, 2017, Plaintiffs’ counsel notified Ohio Security
of the TMI Lawsuit and requested an immediate defense of the lawsuit. On July 10,
2017, Plaintiffs’ counsel sent a letter to Ohio Security explaining why Plaintiffs
contended that Ohio Security owed Plaintiffs a defense in the TMI Lawsuit.
On July 24, 2017, Maids on Call filed its Brief in Opposition to TMI’s Motion for
Preliminary Injunction, accompanied by an Index of Evidence (the “Opposition Index”).
See ECF No. 12-5. On July 31, 2017, TMI filed its Reply Brief in support of its Motion for
Preliminary Injunction, accompanied by a Supplemental Index of Evidence. TMI’s Reply
Brief emphasized the importance of a “Retirement Letter,” and communications
between the Scussel Defendants and customers after the Retirement Letter was sent,
causing harm to TMI. TMI argued that “[c]learly, Two Sisters obtained these customers
because of Mr. Scussel’s solicitation letter.” and “[Two Sisters] have stolen customers
away from TMI and The Maids system, and are pirating TMI’s goodwill.” ECF No. 12-7.
On July 31, 2017, Ohio Security served a letter denying coverage for the TMI
Lawsuit.
STANDARD OF REVIEW
“Summary judgment is appropriate when the evidence, viewed in the light most
favorable to the nonmoving party, presents no genuine issue of material fact and the
moving party is entitled to judgment as a matter of law.” Garrison v. ConAgra Foods
Packaged Foods, LLC, 833 F.3d 881, 884 (8th Cir. 2016) (citing Fed. R. Civ. P. 56(c)).
“Summary judgment is not disfavored and is designed for every action.” Briscoe v. Cty.
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of St. Louis, 690 F.3d 1004, 1011 n.2 (8th Cir. 2012) (quoting Torgerson v. City of
Rochester, 643 F.3d 1031, 1043 (8th Cir. 2011) (en banc)). In reviewing a motion for
summary judgment, the Court will view “the record in the light most favorable to the
nonmoving party . . . drawing all reasonable inferences in that party’s favor.” Whitney v.
Guys, Inc., 826 F.3d 1074, 1076 (8th Cir. 2016) (citing Hitt v. Harsco Corp., 356 F.3d
920, 923–24 (8th Cir. 2004)). Where the nonmoving party will bear the burden of proof
at trial on a dispositive issue, “Rule 56(e) permits a proper summary judgment motion to
be opposed by any of the kinds of evidentiary materials listed in Rule 56(c), except the
mere pleadings themselves.” Se. Mo. Hosp. v. C.R. Bard, Inc., 642 F.3d 608, 618 (8th
Cir. 2011) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986)). The moving
party need not produce evidence showing “the absence of a genuine issue of material
fact.” Johnson v. Wheeling Mach. Prods., 779 F.3d 514, 517 (8th Cir. 2015) (quoting
Celotex, 477 U.S. at 325). Instead, “the burden on the moving party may be discharged
by ‘showing’ . . . that there is an absence of evidence to support the nonmoving party’s
case.” St. Jude Med., Inc. v. Lifecare Int’l, Inc., 250 F.3d 587, 596 (8th Cir. 2001)
(quoting Celotex, 477 U.S. at 325).
In response to the moving party’s showing, the nonmoving party’s burden is to
produce “specific facts sufficient to raise a genuine issue for trial.” Haggenmiller v. ABM
Parking Servs., Inc., 837 F.3d 879, 884 (8th Cir. 2016) (quoting Gibson v. Am.
Greetings Corp., 670 F.3d 844, 853 (8th Cir. 2012)). The nonmoving party “must do
more than simply show that there is some metaphysical doubt as to the material facts,
and must come forward with specific facts showing that there is a genuine issue for
trial.” Wagner v. Gallup, Inc., 788 F.3d 877, 882 (8th Cir. 2015) (quoting Torgerson, 643
7

F.3d at 1042). “[T]here must be more than the mere existence of some alleged factual
dispute” between the parties in order to overcome summary judgment.

Dick v.

Dickinson State Univ., 826 F.3d 1054, 1061 (8th Cir. 2016) (quoting Vacca v. Viacom
Broad. of Mo., Inc., 875 F.2d 1337, 1339 (8th Cir. 1989)).
In other words, in deciding “a motion for summary judgment, facts must be
viewed in the light most favorable to the nonmoving party only if there is a genuine
dispute as to those facts.” Wagner, 788 F.3d at 882 (quoting Torgerson, 643 F.3d at
1042). Otherwise, where the Court finds that “the record taken as a whole could not
lead a rational trier of fact to find for the non-moving party,” there is no “genuine issue of
material fact” for trial and summary judgment is appropriate. Whitney, 826 F.3d at 1076
(quoting Grage v. N. States Power Co.-Minn., 813 F.3d 1051, 1052 (8th Cir. 2015)).
DISCUSSION
Choice of Law
The parties disagree as to whether this action is governed by Nebraska or
Connecticut law. Because the Court’s subject matter jurisdiction is based on diversity,
and the Ohio Security Policy does not contain a choice-of-law provision, this Court
applies the choice-of-law rules of Nebraska to determine which law applies. See
Schwan’s Sales Enters., Inc. v. SIG Pack, Inc., 476 F.3d 594, 595 (8th Cir. 2007). “In
answering any choice-of-law question, the court first asks whether there is any real
conflict between the laws of the states.” Yoder v. Cotton, 758 N.W.2d 630, 635 (Neb.
2008). The parties agree that there is no conflict between Nebraska and Connecticut
law and Plaintiffs rely on cases from several jurisdictions outside Nebraska and
Connecticut to support their position.

The Court’s review of the law of both states
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demonstrates that there is no significant conflict between relevant Connecticut and
Nebraska law. Accordingly, the Court need not perform a choice-of-law analysis.
Coverage Under the Policy
A duty to defend arises “when the complaint states facts that bring the injury
within the policy coverage.” QSP, Inc. v. Aetna Cas. & Sur. Co., 773 A.2d 906, 915
(Conn. 2001); see also Peterson v. Ohio Cas. Group, 724 N.W.2d 765, 773 (Neb. 2006)
(stating that an insurer “bears a duty to defend its insured whenever it ascertains facts
which give rise to the potential of liability under the policy”). For the duty to arise, the
allegations in the underlying action must fall within the scope of coverage provided by
the policy at issue. Id. In addition to considering express allegations in the complaint,
an insurer must defend where “a reasonable investigation of the actual facts by the
insurer would or does disclose facts that would obligate the insurer to indemnify.”
Peterson, 724 N.W.2d at 773-74; Hartford Casualty Ins. Co. v. Litchfield Mut. Fire Ins.
Co., 876 A.2d 1139, 1146 (Conn. 2005) (holding that the insurer is required to “provide
a defense when it has actual knowledge of facts establishing a reasonable possibility of
coverage”). Maids on Call bears the burden of demonstrating that the TMI suit gave rise
to potential liability under the Policy. See QSP, 773 A.2d at 916; Williams Steel, Inc. v.
Continental Cas. Co., 883 N.W.2d 60, 65 (Neb. 2016).
In claiming Ohio Security had a duty to defend in the TMI lawsuit, Maids on Call
relies solely on the “personal and advertising injury” coverage in the Policy. The
personal and advertising injury coverage applies to seven offenses specifically defined
in the Policies. Plaintiffs seek coverage under one of those seven offenses: injury
arising out of “[o]ral or written publication, in any manner, of material that slanders or
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libels a person or organization or disparages a person’s or organization’s goods,
products or services.” Pls.’ Ex. 11 at 6; ECF No. 12-11, Page ID 486; ECF No. 13, Page
ID 527. Thus, to fall within the scope of the coverage, Plaintiffs must show that (1) the
fundamental elements of libel or slander were expressly alleged, or (2) that a
reasonable investigation of the facts would show that Ohio had a duty to defend. See
Peterson, 724 N.W.2d at 773-74; Hartford Casualty, 876 A.2d at 1146.
1. Express Language of the TMI Complaint
Slander, libel, and disparagement are each “a species of defamation.” QSP, 773
A.2d at 916-18; see also Moats v. Republican Party of Nebraska, 796 N.W.2d 584, 594
(Neb. 2011). To prove defamation, a plaintiff must show “(1) a false and defamatory
statement concerning the plaintiff, (2) an unprivileged publication to a third party, (3)
fault amounting to at least negligence on the part of the publisher, and (4) either
actionability of the statement irrespective of special harm or the existence of special
harm caused by the publication.” Moats, 796 N.W.2d at 593; see also QSP, 773 A.2d at
916. “Where a plaintiff cannot prove a fundamental element of the underlying tort, e.g.,
defamation, a claim for personal injury coverage will be denied.” QSP, 773 A.2d at 916;
see also Reliance Ins. Co. v. Newton, 81 F.3d 789, 792 (8th Cir. 1996) (stating that
where underlying plaintiff had not pled facts stating a claim for defamation, no
defamation offense was alleged for insurance purposes).
TMI did not expressly allege that Plaintiffs made false or defamatory statements.
TMI alleged that, in breach of the franchise and other agreements with TMI, and in
breach of other alleged duties, Maids on Call “conspired to operate a competing
residential maintenance and cleaning service business under the name ‘Two Sisters
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Cleaning Services.’” TMI Compl. ¶ 1, ECF No. 33-2. TMI alleged that the Scussel
Defendants, who were former principals and employees of a TMI franchise, abandoned
their franchised operations, “pirated TMI’s goodwill,” and began operating a new
business in the same location as their old one using the same customer list. Id. ¶¶ 1,
52-56. TMI further alleged that Maids on Call was “using TMI’s trademarks and email
address in the operation of their competing business in violation of the Franchise
Agreements and federal trademark law.” Id. ¶¶ 1, 57-63. TMI thus alleged breach of
contract, trademark infringement, false designation of origin and unfair competition
under the Lanham Act, tortious interference with contract, and civil conspiracy. Id. ¶¶
64-122. None of these claims expressly alleges the elements of defamation, libel,
slander, or any similar action, nor could any of the claims in the TMI complaint be
interpreted to allege that Maids on Call or any Plaintiff published a defamatory, false
statement to a third party.1 Because TMI did not plead facts stating a claim for

1

Plaintiffs suggest that TMI need not have alleged that Plaintiffs made a false or defamatory
statement. However, the highest courts of Nebraska and Connecticut, as well as the vast majority of courts
to address the issue, have concluded that coverage on the basis of disparagement/defamation requires a
false statement published to a third party, harming the underlying claimant. QSP, 773 A.2d at 918 (“[T]he
torts of trade libel and commercial disparagement, like defamation, require that [an] alleged damaging
statement be made concerning the plaintiff.”); Moats, 796 N.W.2d at 594 (publication of a false statement
to another is an element of defamation). See also Norton v. Kanouff, 86 N.W.2d 72, 74 (Neb. 1957) (stating
that in general, claim for disparagement of property rights is based upon a “false and malicious statement,
oral or written, made in disparagement of a person’s title to real or personal property, resulting in special
damage”); Reliance Ins. Co. v. Newton, 81 F.3d 789, 792 (8th Cir. 1996) (where underlying plaintiff had not
pled facts stating a claim for defamation, no defamation offense was alleged for insurance purposes); Crisp
Enterprises Inc. v. Golden Eagle Ins. Co., 698 F. App'x 910 (9th Cir. 2017) (holding that to create a duty to
defend, the insured “must be able to point to a false or misleading statement”); S. Bertram, Inc. v. Citizens
Ins. Co. of Am., 657 F. App’x 477, 481 (6th Cir. 2016) (“[A] disparagement claim requires a company to
make false, derogatory, or disparaging communications.”); Bullpen Distribution, Inc. v. Sentinel Ins. Co.,
584 F. App’x 769, 771 (9th Cir. 2014) (insurer did not have a duty to defend claim that did not allege
insured “directly cast aspersions” on underlying claimant, as required by the defamation tort); Novell, Inc. v.
Vigilant Ins. Co., 421 F. App’x 872, 875 (10th Cir. 2011) (where no express defamatory statement was
pled, no coverage for defamation); BASF AG v. Great Am. Assur. Co., 522 F.3d 813, 820 (7th Cir. 2008)
(facts in underlying complaints were “simply insufficient to sketch a claim for the common-law offenses of
libel, slander, or disparagement”); Great Am. Ins. Co. v. Riso, Inc., 479 F.3d 158, 161 (1st Cir. 2007)
(looking to elements of common-law torts and concluding that express disparagement is required); Elite

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defamation, the language of the complaint in the TMI action did not trigger coverage
under the Policy.
2. Implied Cause of Action for Disparagement
Plaintiffs argue that even if the TMI complaint did not explicitly allege the
elements of defamation, they are entitled to coverage under the theory of “implied” or
“implicit” disparagement. As noted above, an insurer must defend where a reasonable
investigation of facts outside the complaint would reveal the possibility of coverage. See
Peterson, 724 N.W.2d at 773-74; Hartford Casualty, 876 A.2d at 1146. Plaintiffs argue
that implicit disparagement arises where allegations are made concerning “statements
about a competitor or its products, goods, or services that suggest ‘equivalence,’ as well
as ‘superiority,’ where they give rise to negative comparative inferences.” Pl. Br. at 24,
ECF No. 13, Page ID 532 (citing JAR Labs., LLC v. Great Am. E&S Ins. Co., 945 F.
Supp. 2d 937, 944 (N.D. Ill. 2013)). Plaintiffs assert that a claim for implicit
disparagement under California law has two elements: “A false or misleading statement
(1) must specifically refer to the plaintiff’s product or business, and (2) must clearly
derogate that product or business.” Hartford Cas. Ins. Co. v. Swift Distrib., Inc., 326
P.3d 253, 261 (Cal. 2008). These elements may be satisfied “by express mention or by
clear implication.” Id.
Plaintiffs argue that both elements were satisfied in Timothy Scussel’s December
2016, letter (the “Retirement Letter”) to customers of the former Maids franchises. The
Retirement Letter informed the former customers that Scussel was retiring from the

Brands, Inc. v. Penn. Gen. Ins. Co., 164 F. App’x 60, 62 (2d Cir. 2006) (disparagement claim must contain
“specific assertions of unfavorable facts reflecting upon the rival product”).

12

residential cleaning business, and announced that Rock and Garon were establishing
Two Sisters Cleaning Service that would not be associated with The Maids. The letter
also stated that Rock and Garon were “ready to take over. (They really have been
running the business for many years).” ECF No. 12-6, Page ID 456. The Retirement
Letter described how Two Sisters intended to continue the services formerly provided
under The Maids franchise:
With the company that they are starting (TWO SISTER [sic] CLEANING
SERVICE) most everything will be the same as you know it today. We will
have the same employees that you may know cleaning your home, using
the same products to clean your home, the same cleaning schedule, we
have the same insurance, (workers comp, liability & bonding) that we
currently have.
Now, you have a choice to make. 1. Choose TWO SISTERS CLEANING
SERVICE as your cleaning company, and everything remains the same as
you know it today. 2. Choose another cleaning service, or 3. Which may or
may not happen is The Maids may start another franchise in this area.
Hopefully you have been happy with our service and will remain with us.
I said that most everything will remain the same. There is one item that is
going to change. Now this was going to change regardless of the start up
of our new company or not. That item that is changing is our pricing. As
many of you know the minimum wage is going up again beginning Jan. 1,
2017. In Massachusetts the minimum wage is going from the current
$10.00 per hour to $11.00, and in Connecticut from the current $9.60 to
$10.10. When the minimum wage goes up our workers comp, liability
insurance and payroll tax all go up because they are all based upon our
payroll. Our price increase is an average 2.7% per customer. For those of
you that have been with us for many years know that we have not raised
our price VEREY [sic] much over the years.
ECF No. 12-6, Page ID 456-57.
Even if Nebraska or Connecticut law were to recognize “implied disparagement”
as a basis for coverage, Plaintiffs have failed to demonstrate that the Retirement Letter
contained any actual or implied statement of disparagement. The statements in the
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Retirement Letter were not defamatory or disparaging because they did not make a
false statement about TMI, nor did they “clearly derogat[e] its business.” Swift, 326 P.3d
at 256. The Retirement Letter simply suggests that customers would receive the same
high level of service with Two Sisters that they did with TMI.
The authorities Plaintiffs cite in support of their position demonstrate that
coverage for implied disparagement is not present in this case. For example, in Michael
Taylor Designs, Inc. v. Travelers Prop. Cas. Co. of Am., 761 F. Supp. 2d 904 (N.D. Cal.
2011), aff’d, 495 F. App’x 830 (9th Cir. 2012), the court found that coverage was
triggered where the insured’s web advertisements misled consumers about the true
origins and nature of products and were intended to “entice customers interested in [the
plaintiff’s] products into [the insured’s] showrooms, where they would then be ‘steered
instead’ to the imitation products.” Id. at 911-12. Plaintiffs argue that, similar to the
plaintiff in Michael Taylor, TMI’s complaint implied that Timothy Scussel made
statements intended to steer customers away from TMI. However, under the reasoning
in Michael Taylor, steering customers away is insufficient on its own to trigger coverage
for implied disparagement. The court in Michael Taylor distinguished the facts in that
case from the allegations in Aetna Cas. & Surety Co., Inc. v. Centennial Ins. Co., 838
F.2d 346 (9th Cir.1988). In Aetna, as in Michael Taylor, the defendant had been
accused of trade dress infringement. However, the court in Michael Taylor recognized
that
in Aetna there were no allegations in the underlying complaint that the
infringer was damaging the reputation of the plaintiff's goods by passing
off copies of inferior quality. 838 F.2d at 352. Moreover, as described in
Aetna, the “gravamen” of the underlying claims against the alleged
infringers was “that they ‘palmed off’ [the plaintiffs’] products as their own.”
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838 F.2d at 351 (emphasis added). Here, in stark contrast, [the underlying
plaintiff’s] original complaint made clear that her charge was that [the
insured] was leading people to believe its “cheap synthetics” were [the
insured’s] own products.
Michael Taylor Designs, Inc. v. Travelers Prop. Cas. Co. of Am., 761 F. Supp. 2d 904,
911 (N.D. Cal. 2011), aff'd, 495 F. App'x 830 (9th Cir. 2012); see also Microtec
Research, Inc. v. Nationwide Mut. Ins. Co., 40 F.3d 968, 972 (9th Cir. 1994) (holding
that a complaint did not trigger coverage for trade disparagement, slander, or libel
because there was no allegation of a false or injurious statement about the quality of the
underlying plaintiff’s product).
Here, TMI never alleged that Plaintiffs passed off inferior services as those of
TMI, or that Plaintiffs made an injurious statement about the quality of TMI’s work. The
only specific reference to TMI was that it “may or may not” establish another business in
the area. The Retirement Letter did not disparage TMI, nor did it steer TMI customers to
Two Sisters on the false premise that an inferior service offered by Two Sisters was that
of TMI.
CONCLUSION
To demonstrate that Ohio had a duty to defend in the TMI action, Plaintiffs must
establish that “the pleadings allege a covered occurrence.” QSP, 773 A.2d at 914; see
also Allstate Ins. Co., 313 N.W.2d at 641. Here, the TMI complaint did not allege a
covered occurrence, express or implied.

Accordingly, Plaintiffs did not meet their

burden of demonstrating that Ohio had a duty to defend.
IT IS ORDERED:
1.

Plaintiffs’ Motion for Partial Summary Judgment, ECF No. 11, is denied;
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2.

The Motions for Summary Judgment, ECF Nos. 31 and 36, filed by
Defendant Ohio Security Insurance Company and Third Party Plaintiff
Ohio Casualty Insurance Company, respectively, are granted;

3.

The Objection to Supplemental Authority, ECF No. 44, is overruled as
moot;

4.

This case is dismissed, with prejudice; and

5.

A separate judgment will be entered.

Dated this 2nd day of January, 2018.

BY THE COURT:
s/Laurie Smith Camp
Chief United States District Judge

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