Catlin Specialty Insurance Company v. Jafrum International, Inc. et al

Filing 65

ORDER granting in part and denying in part 49 Motion for Judgment on the Pleadings; granting 51 Motion for Judgment on the Pleadings; granting 53 Motion for Summary Judgment. Signed by Senior Judge Graham Mullen on 1/19/2017. (eef)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
CIVIL ACTION NO. 3:14-CV-00607-GCM-DCK
CATLIN SPECIALTY INSURANCE
COMPANY,
Plaintiffs,
v.
TEGOL, INC.
HELMET VENTURE, INC.
JAFRUM INTERNATIONAL, INC.,
Defendants.

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ORDER

THIS MATTER is before the Court on Plaintiff Catlin Specialty Insurance Company’s
Motion for Summary Judgment (Doc. No. 53), Third Party Defendant Sentinel Insurance
Company’s Motion for Judgment on the Pleadings (Doc. No. 51), and Third Party Defendant
Consolidated Marketing Group Inc.’s Motion for Judgment on the Pleadings (Doc. No. 49).
Defendant Jafrum International Inc. has filed its Responses in Opposition (Doc. Nos. 55, 61, 62),
and each movant has filed a Reply (Doc. Nos. 58, 63, 64). 1 Accordingly, the parties’ motions are
ripe for disposition.
For the following reasons, Plaintiff Catlin Specialty Insurance Company’s Motion for
Summary Judgment (Doc. No. 53) will be GRANTED, Third Party Defendant Sentinel Insurance
Company’s Motion for Judgment on the Pleadings (Doc. No. 51) will be GRANTED, and Third
Party Defendant Consolidated Marketing Group Inc.’s Motion for Judgment on the Pleadings
(Doc. No. 49) will be GRANTED IN PART AND DENIED IN PART.

On Catlin Specialty Insurance Company’s Motion (Doc. No. 29), the Clerk of Court entered an Entry of Default
against Defendants Helmet Venture, Inc. and Tegol, Inc. on April 9, 2015 (Doc. No. 31).
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I.

BACKGROUND

Defendant Jafrum International Inc. (“Jafrum”) designs, manufactures, and sells
motorcycle helmets, clothing, bags, and apparel. (Compl. at 3, ¶ 17, Doc. No. 1) Jafrum began
using the trademark “REBEL HELMETS” on its products beginning in 2009. (Id. at 4, ¶ 18) It
began the process of registering this mark with the United States Patent and Trademark Office on
September 20, 2011. (Id. at 4, ¶ 19) Around this time, Jafrum learned that one of its
competitors, Defendant Helmet Venture, Inc. (“Helmet Venture”) was using the same mark on
its motorcycle gear.
On February 21, 2014, Helmet Venture filed a complaint in the United States District
Court for the Central District of California. (Id. at 4, ¶ 23) Helmet Venture’s Complaint
contained the following claims: (1) trademark infringement, in violation of § 32 of the Lanham
Act; (2) unfair competition and false designation of origin, in violation of § 43(a) of the Lanham
Act; (3) federal trademark dilution, in violation of § 43(c) of the Lanham Act; (4) common law
and statutory trade name infringement, in violation of California law; (5) unfair competition, in
violation of California Business and Professions Code § 17200; (6) common law unfair
competition; and (7) trademark dilution, in violation of California Business and Professions
Code § 14247. (Helmet Venture Complaint at 10-14, ¶¶ 27-58, Doc. No. 1-1) Helmet Venture
filed an Amended Complaint on August 21, 2014, asserting the same claims but adding
Defendant Tegol, Inc. as a party. 2 (Doc. No. 1-2)
According to its Amended Complaint (Doc. No. 1-2), Helmet Venture brought suit
against Jafrum “for trademark and trade name infringement, and unfair competition arising from

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On June 10, 2014, Helmet Venture assigned its interest in its REBEL family of trademarks to Tegol, Inc., which
has subsequently taken over as the manufacturer and distributor of the contested motorcycle gear. (Helmet Venture
Complaint at ¶ 18, Doc. No. 1-2). However, because the various filings in this case refer to Hemet Venture, rather
than Tegol, this order refers to the adverse party in the underlying action as “Helmet Venture.”

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[Jafrum’s] willful and intentional infringement of [Helmet Venture’s] trademarks, as well as its
continued efforts to trade on [Helmet Venture’s] . . . reputation and goodwill” (Id. at ¶ 1).
Helmet Venture alleged that it manufactured, distributed, and sold a “REBEL line of motorcycle
goods,” for which it obtained four U.S. Trademark Registrations.3 (Id. at ¶¶ 2-3) The company
claimed to have “used its family of REBEL trademarks to promote and sell” its products as early
as 2009, and represented that “these trademarks and the products they are associated with have
gained, individually and collectively, a high degree of fame and recognition within the industry.”
(Id. at ¶¶ 9-10)
Helmet Venture further alleged that Jafrum had “undertaken a scheme to illegally trade
upon Helmet’s reputation, good will, and intellectual property by, inter alia, incorporating the
REBEL Mark in the brand name for its line of motorcycle helmets in order to sell the same style
and type of helmets sold by Helmet [Venture] to Helmet [Venture’s] customer base.” (Id. at
¶ 20) According to the Complaint, the companies exchanged cease and desist letters, each
demanding that the other discontinue all use of the “REBEL” mark on its goods. (Id. at
¶¶ 25-26) When negotiations were unsuccessful, Jafrum “file[d] a Petition for Cancellation
before the United States Patent and Trademark Office of [Helmet Venture’s] REBEL HELMETS
trademark registration.” (Id. at ¶ 28)
The instant dispute arises over whether Jafrum’s insurers—Catlin Specialty Insurance
Company (“Catlin”) and Sentinel Insurance Company (“Sentinel”)—had a duty to defend the
company during the Helmet Venture litigation. Both insurance polies were procured by Third
Party Defendant Consolidated Marketing Group, Inc., doing business as “Charlotte Insurance,”
which served as the agent and/or broker. (Charlotte Insurance Memorandum in Support at 4,

Specifically, Hemet Venture obtained registrations for “REBEL HELMETS,” “REBEL,” “REBEL MOTORCYLE
BOOTS,” and “REBEL ADVANCE MOTORCYCLE GEAR.” (Helmet Venture Complaint at ¶3, Doc. No. 1-2)
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Doc. No. 50) Jafrum claims that it specifically requested that the policies include coverage for
trademark infringement. (Second Amended Third Party Complaint at 4, ¶ 21, Doc. No. 38)
A. The Catlin Policy
On February 12, 2010, Catlin issued an insurance policy to Jafrum providing insurance
coverage for, among other things, personal and advertising injury. (Catlin Memorandum in
Support at 12, Doc. No. 54; Catlin Policy at 17, 21, Doc. No. 1-3) Under the terms of the policy,
Catlin had “the right and duty to defend the insured against any ‘suit’ seeking those damages.”
(Catlin Policy at 21, Doc. No. 1-3) The policy defined “personal and advertising injury” in the
following terms:
1. “Advertisement” means a notice that is broadcast or published to the general public or
specific market segments about your goods, products or services for the purpose of
attracting customers or supporters. For the purposes of this definition:
a. Notices that are published include material placed on the Internet or on similar
electronic means of communication; and
b. Regarding web-sites, only that part of a web-site that is about your goods, products
or services for the purposes of attracting customers or supporters is considered an
advertisement.
....
14. “Personal and advertising injury” means injury, including consequential “bodily
injury”, arising out of one or more of the following offenses:
....
d. Oral or written publication, in any manner, of material that slanders or libels a
person or organization or disparages a person’s or organization’s goods or services;
....
f. The use of another’s advertising idea in your “advertisement”; or
g. infringing upon another’s copyright, trade dress, or slogan in your “advertisement”.
(Catlin Memorandum in Support at 13-14, Doc. No. 54; Catlin Policy at 28, 30, Doc. No. 1-3)
The Catlin Policy further provided that certain types of personal and advertising injury were not
covered. (Catlin Policy at 22, Doc. No. 1-3) Relevant to the instant action, “‘[p]ersonal and
advertising injury’ arising out of the infringement of copyright, patent, trademark, trade secret, or

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other intellectual property rights,” was not covered, unless the insured was sued for
“infringement, in [its] ‘advertisement’, of copyright, trade dress, or slogan.” (Id.)
B. The Sentinel Policy
On March 12, 2011, Sentinel issued an insurance policy to Jafrum that provided limited
business liability coverage for bodily injury, property damage, and personal and advertising
injury. (Sentinel Memorandum in Support at 6, Doc. No. 52; Sentinel Policy at 48, Doc. No. 211) In January 2012, Charlotte Insurance renewed the policy on Jafrum’s behalf. (Second
Amended Third Party Complaint at 5, ¶ 19, Doc. No. 38)
Relevant to the instant dispute, the policy stated that Sentinel would “have the right and
duty to defend the insured against any ‘suit’ seeking damages for . . . ‘personal and advertising
injury.’” (Sentinel Memorandum in Support at 6, Doc. No. 52; Sentinel Policy at 48, Doc. No.
21-1) “Personal and advertising injury” was defined under the policy in the following terms:
1. “Advertisement” means the widespread public dissemination of information or images
that has the purpose of inducing the sale of goods, products or services through:
a. (1) Radio;
(2) Television;
(3) Billboard;
(4) Magazine;
(5) Newspaper;
b. The Internet, but only the part of a website that is about goods, products or services
for the purposes of inducing the sale of goods, products or services; or
c. Any other publication that is given widespread public distribution.
However, “advertisement” does not include
a. The design, printed material, information or images contained in, or upon the
packaging or labeling of any goods or products . . . .
2. “Advertising idea” means any idea for an “advertisement”.
....
17. “Personal or advertising injury” means injury, including consequential “bodily
injury”, arising out of one or more of the following offenses:
....
d. Oral, written, or electronic publication of material that slanders or libels a person or
organization or disparages a person’s or organization’s goods, products, or
services;
....
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f. Copying, in your “advertisement” a person’s or organization’s “advertising idea” or
style of “advertisement”
g. Infringement of copyright, slogan, or title of any literary or artistic work, in your
“advertisement”. . . .
(Sentinel Memorandum in Support at 8-9, Doc. No. 52; Sentinel Policy at 67, 69-70)
The Sentinel Policy also provided that several “personal and advertising” injuries were
excluded from coverage. Specifically, the policy excluded: (1) injuries “arising out of oral,
written or electronic publication of material whose first publication took place before the
beginning of the policy period” (“the prior publication exclusion”); and (2) injuries “arising out
of any intellectual property rights such as copyright, patent, trademark, trade name, trade secret,
service mark, or other designation of origin or authenticity” (“the intellectual property
exclusion”). (Sentinel Memorandum in Support at 7-8, Doc. No. 52; Sentinel Policy at 50, 55,
Doc. No. 21-1)
Notably, the intellectual property exclusion contained the following additional language:
“this exclusion does not apply to infringement, in your advertisement, of (a) Copyright; (b)
Slogan, unless the slogan is also a trademark, trade name, service mark, or other designation of
origin or authenticity; or (c) Title of any literary or artistic work.” (Sentinel Memorandum in
Support at 8, Doc. No. 52; Sentinel Policy at 55, Doc. No. 21-1)
C. Procedural History
Catlin filed a one-count Complaint against Jafrum in this Court on October 30, 2014,
seeking a declaratory judgment that it was not obligated to defend Jafrum in the Helmet Venture
litigation under the terms of its policy. (Doc. No. 1) On November 18, 2014, Jafrum filed an
Answer, Third Party Complaint against Sentinel Insurance Company, and Counterclaim against
Catlin. (Doc. No. 3) Jafrum’s Third Party Complaint also named Charlotte Insurance as a Third

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Party Defendant. Jafrum filed an Amended Third Party Complaint on December 12, 2014, (Doc.
No. 15), and a Second Amended Third Party Complaint on September 15, 2015. (Doc. No. 38)
Jafrum’s Counterclaim against Catlin seeks a declaratory judgment that Catlin was
obligated to defend Jafrum in the Helmet Venture litigation. (Jafrum Answer and Counterclaim
at 9, Doc. No. 3) Jafrum’s Second Amended Third Party Complaint against Sentinel and
Charlotte Insurance seeks a declaratory judgment that Sentinel was also obligated to provide a
defense. (Second Amended Third Party Compl. at 2-4, ¶¶ 5-14, Doc. No. 38) Additionally, the
Second Amended Third Party Complaint includes an unfair and deceptive trade practices claim
against Sentinel (Id. at 4, ¶¶ 15-17), and claims against Charlotte Insurance for negligence and
breach of fiduciary duty (Id. at 4-6, ¶¶ 18-29).
On April 18, 2016, Plaintiff and Third Party Defendants filed dispositive motions. Catlin
filed a Motion for Summary Judgment (Doc. No. 53) and Memorandum in Support (Doc. No.
54), requesting that the Court grant summary judgment on its declaratory judgment claim.
Charlotte Insurance filed a Motion for Judgment on the Pleadings (Doc. No. 49) and
Memorandum in Support (Doc. No. 50). Sentinel also filed a Motion for Judgment on the
Pleadings (Doc. No. 51) and Memorandum in Support (Doc. No. 52). Both Third Party
Defendants request that this Court dismiss Jafrum’s claims against them with prejudice.
Jafrum filed its Responses in Opposition to the dispositive motions on May 4, 2016 (Doc.
No. 55) and May 26, 2016 (Doc. Nos. 61, 62). Charlotte Insurance filed its Reply on May 16
(Doc. No. 58), and Sentinel and Catlin filed Replies on June 8 (Doc. No. 63) and June 9 (Doc.
No. 64) respectively. Accordingly, the parties’ motions are ripe for disposition.

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II.

LEGAL STANDARD

A Rule 12(c) motion for judgment on the pleadings is subject to the same standards as a
Rule 12(b)(6) motion to dismiss for failure to state a claim. Portales Place Prop., LLC v. Guess,
No. 3:08CV143, 2009 WL 112847, at *1 (W.D.N.C. Jan. 15, 2009) (citing Burbach
Broadcasting Co. v. Elins Radio Corp., 278 F.3d 401, 405-06 (4th Cir. 2002)). When faced with
a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court must
accept as true all well-pleaded allegations and view the complaint in the light most favorable to
the nonmoving party. Mylan Labs, Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). The
Court “assume[s] the[] veracity” of these factual allegations, and “determine[s] whether they
plausibly give rise to an entitlement to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).
Thus, a “complaint may proceed even if it strikes a savvy judge that actual proof of [the facts
alleged] is improbable, and that a recovery is very remote and unlikely.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 556 (2007) (internal quotation marks and citation omitted). However,
the Court “need not accept as true unwarranted inferences, unreasonable conclusions, or
arguments.” Eastern Shore Mkts., Inc. v. J.D. Assocs. LLP, 213 F.3d 175, 180 (4th Cir. 2000).
The Court will grant summary judgment “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). A dispute is genuine “if the evidence is such that a reasonable jury could return
a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
“The mere existence of a scintilla of evidence” in support of the non-movant’s position is not
sufficient to establish a genuine dispute. Id. at 252. A material fact affects the outcome of the
suit under the applicable substantive law. See id. at 248. When determining whether a dispute is
genuine or a fact is material, courts are required to view the facts and draw reasonable inferences

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in the light most favorable to the party opposing the summary judgment motion. Scott v. Harris,
550 U.S. 372, 378 (2007). Unsupported speculation, however, is insufficient to defeat a motion
for summary judgment. Evans v. Techs. Applications & Serv. Co., 80 F.3d 954, 960 (4th Cir.
1996).
III.

DISCUSSION

A. Catlin’s Motion for Summary Judgment
Catlin argues that it is entitled to summary judgment because its policy terms exempted
“‘[p]ersonal and advertising injury’ arising out of the infringement of copyright, patent,
trademark, trade secret, or other intellectual property rights,” from coverage. (Memorandum in
Support at 13, Doc. No. 54) It submits that “[e]very claim in the California lawsuit arises out of
allegations that Jafrum committed trademark infringement with respect to the trademark REBEL
HELMETS.” (Id. at 18) By contrast, Jafrum argues that ambiguity in the policy’s language, and
in Helmet Venture’s complaint, require that Catlin provide a defense in the suit. (Response in
Opposition at 4-12, Doc. No. 61) In the alternative, it argues that the suit can be construed as
one for “slogan” infringement, which is specifically covered by the policy. (Id. at 12-13)
Because this Court’s jurisdiction is based on diversity of citizenship, North Carolina’s
substantive law applies. Twin City Fire Ins. Co. v. Ben Arnold-Sunbelt Beverage Co. of S.C.,
433 F.3d 365, 369 (4th Cir. 2005). Under North Carolina law, a reviewing court uses the
“comparison test” to determine whether an insurer has the obligation to defend its insured under
the terms of the relevant policy. Harleysville Mut. Ins. Co. v. Buzz Off Insect Shield, L.L.C., 692
S.E.2d 605, 610 (N.C. 2010) (citing Waste Mgmt. of Carolinas, Inc. v. Peerless Ins. Co., 340
S.E.2d 374, 377 (N.C. 1986)). The comparison test requires that the Court read the underlying
complaint “side-by-side with the policy to determine whether the events as alleged are covered

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or excluded.” Waste Mgmt. of Carolinas, Inc., 340 S.E.2d at 377. The insured bears the burden
of establishing that a loss is covered, but the insurer bears the burden of showing that a particular
exclusion applies. Erie Ins. Exch. v. First United Methodist Church, 690 F. Supp. 2d 410, 413
(W.D.N.C. 2010). Provisions that extend coverage to the insured are construed liberally, while
exclusions, if ambiguous, are construed against the insurer. N.C. Farm Bureau Mut. Ins. Co. v.
Stox, 412 S.E.2d 318, 321 (N.C. 1992)
In analyzing the extent of coverage, the Court attempts to “arrive at the insurance
coverage intended by the parties.” Harleysville Mut. Ins. Co., 692 S.E.2d at 612 (quoting
Wachovia Bank & Tr. Co. v. Westchester Fire Ins. Co., 172 S.E.2d 518, 522 (N.C. 1970)). For
this reason, the Court defers to definitions included in the policy by the parties. Id. For
undefined, non-technical terms, the Court reads them consistent with “the way they are used in
ordinary speech, unless the context clearly requires otherwise.” Id. (citation omitted). Although
any doubt as to whether coverage exists must be resolved in favor of the insured, Waste Mgmt. of
Carolinas, Inc., 340 S.E.2d at 377, “language is not ambiguous merely because the parties
‘contend for differing meanings to be given,’” Erie Ins. Exch., 690 F. Supp. 2d at 413 (quoting
Allstate Ins. Co. v. Runyon Chatterton, 518 S.E.2d 814, 816 (N.C. Ct. App. 1999)). Rather, “to
be ambiguous, the language of an insurance policy provision must, ‘in the opinion of the court,
[be] fairly and reasonably susceptible to either of the constructions for which the parties
contend.’” Harleysville Mut. Ins. Co., 692 S.E.2d at 612 (quoting Wachovia, 172 S.E.2d at
522)).
Thus, the Court begins its analysis with an interpretation of the Catlin Policy’s
intellectual property exclusion. According to the policy, coverage did not extend to “‘[p]ersonal
and advertising injury’ arising out of the infringement of copyright, patent, trademark, trade

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secret, or other intellectual property rights,” unless the insured was sued for “infringement, in
[its] ‘advertisement’, of copyright, trade dress, or slogan.” (Catlin Policy at 22, Doc. No. 1-3)
It appears to the Court that the Helmet Venture complaint contains only allegations that
fall within the exclusion, although it pleads causes of action other than strict trademark
infringement. The Court is principally guided in this analysis by the Fourth Circuit’s opinion in
Superformance International, Inc. v. Hartford Casualty Insurance, 332 F.3d 215 (4th Cir. 2003).
In Superformance, the registrants of trademarks relating to the “Cobra” classic car sued a
manufacturer of car kits that purported to replicate the Cobra’s design. Id. at 217. The
manufacturer, which had purchased “personal and advertising injury” insurance coverage,
tendered the defense of the litigation to its insurer. Id. at 218. The insurer denied coverage
citing, among other policy provisions, the intellectual property exclusion exempting suits
“arising out of the infringement of a trademark, trade name, service mark or other designation of
origin.” Id. at 218. When the manufacturer sued for breach of contract, the Fourth Circuit found
that the pleadings in the underlying litigation only included allegations of trademark
infringement. Id. at 222. 4
Importantly, the Court rejected the plaintiff’s proffered distinctions between underlying
complaint allegations and the exclusion’s operative language. Specifically, the plaintiff argued
that the complaint contained claims for dilution and trade dress infringement that were “not the
same as trademark infringement and therefore . . . not barred by the trademark infringement
exclusion.” Id. at 219. The Court rejected this argument, explaining: “[a]lthough there are, to
be sure, different legal avenues available . . . to pursue a trademark claim, at bottom all protect

The Fourth Circuit’s opinion in Superformance applied Virginia law. Superformance Intern., Inc., 332 F.3d at
220. However, as Jafrum argues in its briefs, “the pertinent principles of insurance law are substantially the same in
North Carolina.” (Response in Opposition at 8 n.4, Doc. No. 61).
4

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the owner of a trademark against loss of, or damage to, his trademark interests.” Id. at 222. It
found that “[a]ll of the claims made in the complaints against Superformance—trademark
infringement, trade dress infringement, and trademark dilution, as well as unfair competition
based on those violations—are varieties of the trademark claims protected by the Lanham Act
and State analogues.” Id. at 223.
Here, as in Superformance, the Helmet Venture complaint does not allege any conduct by
Jafrum that can be extricated from its trademark infringement allegations. As the Court will
explain, the complaint simply does not indicate that Jafrum engaged in any wrongdoing besides
its use of the REBEL HELMETS trademark, and allegations of trademark infringement clearly
fall within the language of the policy exclusion. Further, Jafrum’s various arguments to the
contrary are all unavailing.
1. Trade name infringement
First, Jafrum argues that the complaint references “trade name” infringement, which
Catlin’s intellectual property exclusion does not mention. (Response in Opposition at 8-9, Doc.
No. 61) Specifically, the complaint’s first paragraph describes the action as one “for trademark
and trade name infringement, and unfair competition arising from [Jafrum’s] willful and
intentional infringement of [Helmet Venture’s] trademarks, as well as its continued efforts to
trade on [Helmet Venture’s] . . . reputation and goodwill.” (Helmet Venture Complaint at ¶ 1,
Doc. No. 1-2) Additionally, Helmet Venture’s Fourth Claim for Relief alleges common law and
statutory trade name infringement, in violation of California law. (Id. at ¶ 47-51)
However, by including a claim for trade name infringement, Helmet Venture simply used
a “different legal avenue[]” available for protecting its trademark interest in the REBEL marks.
See Superformance Intern., Inc., 332 F.3d at 222. And as Catlin points out, the facts in the

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Helmet Venture complaint allege only that Jafrum infringed the REBEL HELMET trademark.
(Catlin Reply at 7, Doc. No. 64) Indeed, Jafrum fails to identify any conduct in the complaint, or
legal claim, that can be separated from the allegations of trademark infringement. Accordingly,
as the Fourth Circuit explained in Superformance, Helmet Venture’s decision to alternatively
plead trade name infringement in its attempt to obtain relief is not dispositive.
Similarly, any definitional differences that may in some circumstances exist between
trade names and trademarks are not implicated in this case, because the only arguable trade name
that appears in the complaint is the REBEL trademark. See Harleysville Mut. Ins. Co., 692
S.E.2d at 611 (“[T]he question is not whether some interpretation of the facts as alleged could
possibly bring the injury within the coverage provided by the insurance policy; the question is,
assuming the facts as alleged to be true, whether the insurance policy covers that injury”). Thus,
the fact that the Helmet Venture complaint alleges trade name infringement does not support
Jafrum’s claim for coverage.
2. Slogan Infringement
Jafrum next argues that the Helmet Venture allegations fall within the policy’s explicit
coverage of “slogan infringement.” (Response in Opposition at 12-13, Doc. No. 61) It argues
that the policy failed to define “slogan,” and thus that term must be broadly defined. (Id. at 12)
Moreover, the Fourth Circuit has explained that a slogan may, under some circumstances, “serve
as a trademark.” MicroStrategy Inc. v. Motorola, Inc., 245 F.3d 335, 342 (4th Cir. 2001) (citing
1 J. Thomas McCarthy on Trademarks and Unfair Competition § 7:20 (4th ed. 2000)).
Again, this argument misses the mark. The question before the Court is not whether the
Catlin Policy would provide coverage in the event that Jafrum were sued for infringing a
trademarked slogan, but rather whether the REBEL HELMETS trademark constitutes a slogan.

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While it is true that the Court gives the term “slogan” its ordinary meaning, that meaning cannot
be construed to include the phrase REBEL HELMETS. If the term “slogan” is afforded its
ordinary usage, it means “a phrase expressing the aims or nature of an enterprise, and
organization, or a candidate; a motto,” or “a phrase used repeatedly, as in advertising or
promotion.” Slogan, The American Heritage Dictionary of English Language (3d. ed.1992); see
also 1 McCarthy on Trademarks § 7:19 (“A ‘slogan’ is usually defined as an advertising phrase
which accompanies other marks such as house marks and product line marks.”). Here, REBEL
HELMETS is not a motto about Helmet Venture’s product, or a short phrase repeatedly used for
its advertising purposes, but a mark that designates a particular brand of Helmet Venture
products.
Moreover, federal trademark law, which provides a background against which the
contract operates, distinguishes between slogans and brand names. It is well-established that
“‘trademarked slogans’ are phrases used to promote or advertise a house mark or product mark,
in contradistinction to the house or product mark itself.” Hugo Boss Fashions, Inc. v. Fed. Ins.
Co., 252 F.3d 608, 619 (2d Cir. 2001); accord. Cincinnati Ins. Co. v. Zen Design Grp., Ltd., 329
F.3d 546, 556-57 (6th Cir. 2003). Indeed, this distinction makes sense. If courts were “to say
that the trademarked name of a brand, product, or company constitutes a ‘trademarked slogan’
merely because it ‘remind[s] the consumer of the brand,’ . . . all house, product, or brand names
would qualify as slogans.” Hugo Boss, 252 F.3d at 619. For these reasons, it is apparent that the
Helmet Venture complaint does not contain claims for slogan infringement.
3. “Unfair competition”
Finally, Jafrum argues that the Helmet Venture complaint contains allegations of unfair
competition that are factually distinguishable from its claims of trademark infringement.

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(Response in Opposition at 9-12, Doc. No. 61) However, the facts section of the Helmet Venture
complaint gives only one reason for its claims that Jafrum’s behavior was unfair. Namely,
Jafrum engaged in “a scheme to illegally trade upon [Helmet Venture’s] reputation, goodwill,
and intellectual property by, inter alia, incorporating the REBEL Mark in the brand name for its
line of motorcycle helmets.” (Helmet Venture Complaint ¶ 20, Doc. No. 1-2) Accordingly, in
its claim for Federal Unfair Competition, the Complaint alleges “[Jafrum’s] unlawful copying
and use of the REBEL Marks in connection with its clothing products and trade name constitute
false and misleading designations of origin and false and misleading representations of facts.”
(Id. at ¶ 38) In short, the allegations of unfair competition are coextensive with allegations of
trademark infringement.
Jafrum focuses on the complaint’s claim for unfair competition in violation of California
Business and Professions Code § 17200, emphasizing that the paragraphs in that count do not
contain the word “trademark.” (Response in Opposition at 9, Doc. No. 61) However, Helmet
Venture’s use of the general term “misconduct” to summarize the factual allegations does not
change the fact that complained-of conduct is still Jafrum’s alleged trademark infringement. See
Citizens Ins. Co. of Am. v. Uncommon, LLC, 812 F. Supp. 2d 905, 911 (N.D. Ill. 2011) (“[T]he
IP exclusion applies if the underlying claim, regardless of the legal theory under which it is
styled, could not proceed independently of an allegation of trademark infringement.”).
Moreover, the Court’s interpretation is consistent with the Fourth Circuit’s analysis in
Superformance, in which it classified “[a]ll of the claims made in the complaints”—including
trademark infringement, trade dress infringement, and trademark dilution, as well as unfair
competition based on those violations—as “varieties of trademark claims protected by the
Lanham Act and State analogues.” Id. (emphasis added). Because the Helmet Venture

15

complaint presents the same circumstance, the unfair competitions claims therein do not trigger a
duty to defend.
B. Sentinel’s Motion for Judgment on the Pleadings
Sentinel argues that two exclusions in its policy establish that it had no duty to defend
Jafrum in the Helmet Venture Complaint. First, Sentinel points to its intellectual property
exclusion, which disclaims coverage for injuries “arising out of any intellectual property rights
such as copyright, patent, trademark, trade name, trade secret, service mark, or other designation
of origin or authenticity.” (Sentinel Policy at 50, 55, Doc. No. 21-1) This language, which is
broader than the Catlin Policy’s similar exclusion, applies to the allegations in the Helmet
Venture complaint. Jafrum’s counterarguments, for the most part, reiterate its arguments in
opposition to Catlin’s Motion, and are unavailing for the same reasons.5
One contention, however, is unique to the Sentinel Policy. Specifically, Jafrum claims
that the policy provides coverage in the event that the insured is sued for infringement of “Title
of any literary or artistic work.” (Response in Opposition at 8-9, Doc. No. 62) This argument is
frivolous. There is simply no basis for concluding that the REBEL HELMET mark has ever
been used as the title of a literary or artistic work. Thus, the intellectual property exclusion
applies to Helmet Venture’s complaint, and Sentinel was not required to provide a defense in the
ensuing litigation.6

For example, Jafrum argues that Helmet Venture’s allegations can be construed as claims for slogan infringement
(Response in Opposition at 10-11, Doc. No. 62), that the unfair competition claims fall outside the intellectual
property exclusion (id. at 9-10), and that the complaint contains facts extricable from its central trademark
infringement assertion (id. at 6-8).
5

Because the intellectual property exclusion applies, the Court need not consider Sentinel’s argument that the prior
publication exclusion also bars coverage.
6

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C. Charlotte Insurance’s Motion for Judgment on the Pleadings
Jafrum alleges in its Second Amended Third Party Complaint that at the times it
purchased the Catlin and Sentinel Policies, it informed its agent, Charlotte Insurance, that it
required insurance coverage for trademark infringement. (Second Amended Third Party
Complaint at 4, ¶ 21, Doc. No. 38) Jafrum further alleges that Charlotte Insurance provided a list
of exclusions in the Catlin Policy and omitted the intellectual property exclusion from that list.
(Id. at 4, ¶ 22) Jafrum argues that, if this Court finds that the Catlin and Sentinel policies did not
require the insurers to provide coverage during the Helmet Venture suit, Charlotte Insurance
should be held liable for negligence and breach of fiduciary duty. (Id. at 4-5, ¶¶ 24, 29)
Charlotte Insurance, by contrast, argues that Jafrum’s claims are barred by the applicable statute
of limitations. (Memorandum in Support, Doc. No. 50)
1. Jafrum’s Negligence Claim
Jafrum’s negligence claim is governed by the three year statute of limitations set forth in
N.C. Gen. Stat. § 1-52(5). White v. Consolidated Planning, Inc., 603 S.E.2d 147, 164 (N.C. Ct.
App. 2004). “A cause of action for negligence begins to accrue when the wrong giving rise to
the right to bring suit is committed, even if the damages at that time are nominal and the injuries
cannot be discovered until a later date.” Birtha v. Stonemor, North Carolina, LLC, 727 S.E.2d 1,
7 (N.C. Ct. App. 2012).
Here, the alleged wrong giving rise to the right to bring the negligence claim is Charlotte
Insurance’s failure to procure the requested trademark infringement insurance coverage, but the
parties disagree about the correct accrual date. Jafrum alleges that the most recent instance of
Charlotte Insurance’s negligent failure to procure the appropriate coverage occurred on March
12, 2012, when it obtained a second Sentinel Policy on Jafrum’s behalf. (Response in

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Opposition at 7, Doc. No. 55; see Second Amended Third Party Complaint at 5, ¶ 19, Doc. No.
38) Charlotte Insurance argues that the Court should look only to the dates on which it procured
the first Catlin and Sentinel Policies. (Memorandum in Support at 5-7, Doc. No. 50) Jafrum
apparently concedes that these dates fall outside the three-year limitations period. (Response in
Opposition at 7, Doc. No. 55)
At the Motion for Judgment on the Pleadings stage, the Court must construe the facts in
the Complaint in the light most favorable to the non-moving party. Here, Jafrum alleges that it
insisted on trademark infringement coverage and the Charlotte Insurance negligently failed to
procure it. Jafrum further claims that such negligence occurred on at least one instance that falls
outside the applicable three-year limitations period. Accordingly, the Court will grant Charlotte
Insurance’s Motion to the extent it pertains to the first Catlin and Sentinel Policies, but deny the
Motion as to the subsequent Sentinel Policy, procured on March 12, 2012.
2. Jafrum’s Breach of Fiduciary Duty Claim
“Allegations of breach of fiduciary duty that do not rise to the level of constructive fraud
are governed by the three year statute of limitations applicable to contract actions contained in
N.C. Gen. Stat. § 1-52(1).” Shallotte Partners, LLC v. Berkadia Commercial Mortg., LLC, 2015
WL 4081963, at *11 (N.C. Ct. App. July 7, 2015) (quoting Toomer v. Branch Banking & Trust
Co., 614 S.E.2d 328, 335 (N.C. Ct. App. 2005)). However, Jafrum and Charlotte Insurance
again disagree about the correct accrual date. The North Carolina Supreme Court apparently has
not opined on whether breach of fiduciary duty claims begin to accrue at the time of the breach
or when it is discovered. Thus, this Court must “predict how that court would rule if presented
with the issue.” Private Mortgage Inv. Servs., Inc. v. Hotel & Club Associates, Inc., 296 F.3d
308, 312 (4th Cir. 2002). In making its determination, the “Court of Appeals’ decisions, as the

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state’s intermediate appellate court, ‘constitute the next best indicia of what state law is.’” Id.
(quoting Liberty Mut. Ins. Co. v. Triangle Indus., Inc., 957 F.2d 1153, 1156 (4th Cir. 1992)).
When considering this issue, the North Carolina Courts of Appeals have frequently
determined that “[b]reach of fiduciary duty claims accrue upon the date when the breach is
discovered and are subject to a three year statute of limitations.” Trillium Ridge Condo. Assoc.,
Inc. v. Trillium Links & Village LLC, 764 S.E.2d 203, 219 (N.C. Ct. App. 2014) (citing Toomer,
614 S.E.2d at 335); Dawn v. Dawn, 470 S.E.2d 341, 343 (N.C. Ct. App. 1996); Shallotte
Partners, 2015 WL 4081963, at *11. Federal district courts in North Carolina have also taken
this position. See Hetzel v. JPMorgan Chase Bank, N.A., 2014 WL 7336863, at*3 (E.D.N.C.
December 22, 2014) (citing Pittman v. Barker, 452 S.E.2d 326, 332 (N.C. Ct. App. 1995))
(“Discovery of the breach accrues when the claimant knew or, by due diligence, should have
known of the facts constituting the basis for the claim.”).
Charlotte Insurance argues that these cases are distinguishable because they do not
involve the insurance agent-client fiduciary relationship. (Reply at 3-4, Doc. No. 58) However,
it appears to the Court that the same principles would apply in the insurance agent context, and
Charlotte Insurance has failed to provide persuasive legal or policy grounds for extending
different treatment to this particular relationship. Indeed, the North Carolina Courts of Appeals
have reviewed several claims of breach of fiduciary duty brought against insurance agents. And
in each instance, the court considered when the client ought to have been aware by reasonable
diligent discovery that the agent had breached his duty. See State Farm & Casualty Co. v.
Darsie, 589 S.E.2d 391, 549 (N.C. Ct. App. 2003); Piles v. Allstate Ins. Co., 653 S.E.2d 181, 185
(N.C. Ct. App. 2007). Charlotte Insurance argues that these cases are distinguishable because
the breach of fiduciary duty arguably rose to the level of fraud. However, in Piles v. Allstate

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Insurance Co., the court separately considered the claims of fraud and breach of fiduciary duty,
and determined that “[t]he breach of fiduciary duty claims also accrued when [the plaintiff]
allegedly discovered that her policy did not include [the sought after] coverage.” 653 S.E.2d at
186 (emphasis added).
Thus, this Court finds that Jafrum’s claims for breach of fiduciary duty began to accrue
when it discovered, or ought to have discovered, through reasonable diligence that its insurance
policies did not include coverage for trademark infringement. This question is fact bound, and
thus inappropriate for resolution on a motion for judgment on the pleadings. See Piles, 653
S.E.2d. at 184. Accordingly, Charlotte Insurance’s Motion will be denied as to Jafrum’s breach
of fiduciary duty claim.
IV.

CONCLUSION

Both the Catlin and Sentinel policies explicitly provided that trademark infringement
disputes were excluded from coverage. Because the Helmet Venture complaint contains no
allegations distinct from its trademark infringement claims, neither insurer was obligated to
defend Jafrum in the underlying lawsuit. Accordingly, their motions will be granted. By
contrast, Jafrum’s claims against Charlotte Insurance are not entirely barred by the statute of
limitations. Thus, Charlotte Insurance’s Motion for Judgment on the Pleadings will be granted in
part and denied in part.
ORDER
For the foregoing reasons, Plaintiff Catlin Specialty Insurance Company’s Motion for
Summary Judgment (Doc. No. 53) will be GRANTED, Third Party Defendant Sentinel Insurance
Company’s Motion for Judgment on the Pleadings (Doc. No. 51) will be GRANTED, and Third
Party Defendant Consolidate Marketing Group Inc.’s Motion for Judgment on the Pleadings (Doc.

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No. 49) will be GRANTED IN PART AND DENIED IN PART. Jafrum will be permitted to
proceed on its negligence claim regarding procurement of the 2012 Sentinel Policy and its breach
of fiduciary duty claims.
SO ORDERED.

Signed: January 19, 2017

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