Derma Pen et al v. Sentinel Insurance Company

Filing 46

MEMORANDUM DECISION AND ORDER granting 26 Motion for Summary Judgment; denying 18 Motion for Summary Judgment. Signed by Judge David Nuffer on 6/22/21 (alt)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
DERMA PEN, LLC, MICHAEL ANDERER,
JEREMY JONES, MICHAEL J. MORGAN,
CHAD MILTON,
Plaintiffs,
v.
SENTINEL INSURANCE COMPANY,
LTD.,
Defendant.

MEMORANDUM DECISION
AND ORDER GRANTING
SENTINEL’S MOTION
FOR SUMMARY JUDGMENT
AND
DENYING DERMA PEN’S MOTION
FOR SUMMARY JUDGMENT
Case No. 2:16-cv-00823-DN
District Judge David Nuffer

This case involves an insurer’s duty to defend and indemnify an insured against
allegations regarding the insured’s evasion of “contractual right[s] to purchase a trademark and
domain name.” 1 In an Underlying Lawsuit, 2 4EverYoung, Ltd. (“4EverYoung”) asserted
counterclaims against Derma Pen, LLC, Michael Anderer, Jeremy Jones, Michael J. Morgan,
Chad Milton (collectively “Derma Pen”), and others relating to intellectual property rights and
obligations under a Sales Distribution Agreement (“Agreement”) between 4EverYoung and
Derma Pen, LLC (“4EverYoung’s Counterclaim”). 3 In this case, Derma Pen seeks declaratory
judgment against Defendant Sentinel Insurance Company, Ltd. (“Sentinel”) based on Sentinel’s
denial of Derma Pen’s tender under a commercial general liability insurance policy (“Policy”)

Complaint for Declaratory Judgment (“Complaint”), docket no. 45, filed June 3, 2021. The Complaint was
originally filed as docket no. 3-1 on July 22, 2016. However, the document was incomplete—pages 9 and 10 were
missing. The complete Complaint was refiled as docket no. 45 on June 3, 2021.

1

2

Derma Pen, LLC v. 4EverYoung Limited, et al., No. 2:13-cv-00729-DN-EJF (D. Utah) (“Underlying Lawsuit”).

Fourth Amended Counterclaim and Demand for Jury Trial (“4EverYoung’s Counterclaim”), ECF no. 711 in
Underlying Lawsuit, filed Mar. 23, 2015, docket no. 18-3, filed May 15, 2017.

3

for defense and indemnity against 4EverYoung’s Counterclaim. 4 The parties’ dispute turns on
whether Sentinel had a duty to defend and indemnify Derma Pen in the Underlying Lawsuit
based on the Policy’s coverage for advertising injuries. Derma Pen and Sentinel have filed cross
motions for summary judgment. 5
The Undisputed Material Facts demonstrate that 4EverYoung’s Counterclaim does not
allege an advertising injury giving rise to potential liability under the Policy. 4EverYoung’s
allegations do not meet the Policy’s definition of “advertising injury” and, regardless, fall within
the Policy’s exclusions of coverage. Therefore, Sentinel had no duty to defend and indemnify
Derma Pen in the Underlying Lawsuit as a matter of law. Sentinel’s Motion for Summary
Judgment 6 is GRANTED, and Derma Pen’s Motion for Summary Judgment 7 is DENIED.
Contents
BACKGROUND ............................................................................................................................ 3
UNDISPUTED MATERIAL FACTS ............................................................................................ 5
STANDARD OF REVIEW .......................................................................................................... 17
DISCUSSION ............................................................................................................................... 18
The Policy does not permit consideration of extrinsic evidence ...................................... 20
The Policy’s relevant provisions are clear and unambiguous ........................................... 22
4EverYoung’s Counterclaim does not allege an advertising injury covered by the Policy
............................................................................................................................... 27
The allegations in 4EverYoung’s Counterclaim do not meet the Policy’s
definition of “advertising injury” .............................................................. 28
4EverYoung’s Counterclaim is excluded from coverage under the Policy’s Breach
of Contract Exclusion ............................................................................... 32
4EverYoung’s Counterclaim is excluded from coverage under the Policy’s
Intellectual Property Exclusion and Domain Name Exclusion................. 35
Sentinel had no duty to indemnify Derma Pen against 4EverYoung’s
Counterclaim ............................................................................................. 39
Conclusion ........................................................................................................................ 39
ORDER ......................................................................................................................................... 40
4

Complaint ¶¶ 26-39.

Plaintiffs’ Motion for Summary Judgment (“Derma Pen’s Motion for Summary Judgment”), docket no. 18, filed
May 5, 2017; Defendant Sentinel Insurance Company, Ltd.’s Motion for Summary Judgment and Supporting
Memorandum (“Sentinel’s Motion for Summary Judgment”), docket no. 26, filed June 15, 2017.

5

6

Docket no. 26, filed June 15, 2017.

7

Docket no. 18, filed May 5, 2017.

2

BACKGROUND
This case arises out of a lengthy Underlying Lawsuit between Derma Pen and
4EverYoung over a micro-needling device called the “Dermapen.” 8 In early 2011, 4EverYoung
sought a United States distributor for the Dermapen. 9 Once 4EverYoung found possible
distributors, 10 Derma Pen, LLC was formed and an Agreement between Derma Pen, LLC and
4EverYoung was executed. 11 Under the Agreement, Derma Pen, LLC was granted the exclusive
right to distribute 4EverYoung products (such as the Dermapen) within the United States. 12 The
Agreement also stated that although Derma Pen, LLC owned the United States trademark rights
to “Dermapen,” 4EverYoung owned the trademark in the rest of the world. 13
Soon after the Agreement’s execution, Derma Pen, LLC became dissatisfied with its
terms and terminated the Agreement. 14 In turn, 4EverYoung invoked its rights under the
Agreement to acquire all rights in the Dermapen trademark and domain name. 15 By giving notice
to Derma Pen, LLC of its intention to exercise its post-termination rights, 4EverYoung allegedly
became the equitable, beneficial owner of the Dermapen trademark and domain name. 16
However, Derma Pen allegedly continued to use this intellectual property in connection with its

8

Complaint ¶¶ 10, 16, 18.

9

4EverYoung’s Counterclaim ¶ 21.

Plaintiffs Michael Morgan and Chad Milton meet with 4EverYoung’s principal, Stene Marshall, regarding
distribution and became members of Derma Pen, LLC. Id. ¶¶ 9-10, 23-25. Plaintiffs Michael Anderer and Jeremy
Jones also later became members of Derma Pen, LLC. Id. ¶¶ 5, 8.

10

11

Id. ¶¶ 21-35; Complaint ¶ 9; Sales Distribution Agreement (“Agreement”), docket no. 20-1, filed May 15, 2017.

12

4EverYoung’s Counterclaim ¶¶ 37-38; Complaint ¶ 10; Agreement §§ 1.1, 1.4, 2.1, Exhibit A.

13

4EverYoung’s Counterclaim ¶ 41; Complaint ¶ 11; Agreement § 2.2, 12.1.

14

4EverYoung’s Counterclaim ¶¶ 60, 64; Complaint ¶ 15; Agreement § 11.1.

15

4EverYoung’s Counterclaim ¶ 65; Agreement §§ 12.2, 14.6.

16

4EverYoung’s Counterclaim ¶¶ 51, 65, 67; Agreement § 12.2.

3

marketing and sale of 4EverYoung inventory and with new counterfeit products, refusing to
comply with its post-termination obligations under the Agreement. 17
On August 1, 2013, Derma Pen, LLC initiated the Underlying Lawsuit against
4EverYoung and others. 18 4EverYoung filed its Fourth Amended Counterclaim against Derma
Pen and others in that case on May 2, 2014 (“4EverYoung’s Counterclaim”). 19 The Preliminary
Statement in 4EverYoung’s Counterclaim states: “This Action involves ‘4EverYoung’s
contractual right to purchase a trademark and domain name from Derma Pen[, LLC] and
Counterclaim Defendants’ attempts to evade that right.’” 20
Derma Pen tendered 4EverYoung’s Counterclaim to Sentinel by letter dated April 10,
2015, seeking defense and indemnity in the Underlying Lawsuit. 21 In a letter dated June 2, 2015,
Sentinel denied a duty to defend and indemnify against 4EverYoung’s Counterclaim. 22 Derma
Pen then initiated this case in Utah state court on June 20, 2016. 23 The case was later removed to
the United States District Court for the District of Utah on July 21, 2016, based on diversity
jurisdiction. 24 Derma Pen and Sentinel now seek summary judgment on Derma Pen’s claim for

17

4EverYoung’s Counterclaim ¶¶ 66-76, 80, 83-94.

[Underlying] Complaint, ECF no. 2 in Underlying Lawsuit, filed Aug. 1, 2013, docket no. 18-1, filed May 15,
2017.

18

19

4EverYoung’s Counterclaim.

Id. at 1 (quoting Corrected Memorandum Decision and Order Granting in Part 4EverYoung’s Motion for
Preliminary Injunction Against Michael E. Anderer; Denying Michael Anderer’s Motion to Vacate at 3, ECF no.
634 in Underlying Lawsuit, filed Feb. 27, 2015). 4EverYoung’s Counterclaim was ultimately stricken and dismissed
on August 29, 2016, as a sanction for 4EverYoung’s failure to comply with court orders. Memorandum Decision
and Order, ECF no. 928 in Underlying Lawsuit, filed Aug. 29, 2016. Final Judgment entered in favor of Derma Pen,
LLC and against 4EverYoung in the Underlying Lawsuit on May 8, 2017, based on 4EverYoung’s default. Order
Directing Entry of Default and Notice of 55(b)(2) Evidentiary Hearing, ECF no. 1001 in Underlying Lawsuit, filed
Jan. 30, 2017; Final Judgment, ECF no. 1043 in Underlying Lawsuit, filed May 8, 2017.

20

21

Letter to Sentinel, docket no. 19-1, filed May 15, 2017.

22

Denial of Coverage Letter, docket no. 19-2, filed May 15, 2017.

Complaint; Notice of Removal of Action Under 28 U.S.C. §§ 1332, 1441, and 1446 (“Notice of Removal”) ¶ 1,
docket no. 2, filed July 21, 2016.

23

24

Notice of Removal.

4

declaratory judgment that Sentinel owed a duty to defend and indemnify Derma Pen against
4EverYoung’s Counterclaim under the Policy. 25
UNDISPUTED MATERIAL FACTS 26
1.

In late July or early August 2011, Derma Pen, LLC entered a “Sales Distribution

Agreement” with 4EverYoung (“Agreement”). 27
2.

The Agreement granted Derma Pen, LLC the exclusive right to distribute a

product called the “Dermapen” within the United States and addressed ownership of the
“Dermapen” trademark rights between 4EverYoung and Derma Pen, LLC. 28
3.

Derma Pen, LLC terminated the Agreement on May 30, 2013. 29

4.

On August 1, 2013, Derma Pen, LLC initiated a lawsuit against 4EverYoung and

others in the United States District Court for the District of Utah, No. 2:13-CV-00729-DN
(“Underlying Lawsuit”). 30
5.

On May 2, 2014, 4EverYoung filed its Fourth Amended Counterclaim against

Derma Pen and others in the Underlying Lawsuit (“4EverYoung’s Counterclaim”). 31

25

Derma Pen’s Motion for Summary Judgment; Sentinel’s Motion for Summary Judgment.

26
These Undisputed Facts are compiled from the Statement of Undisputed Material Facts in Derma Pen’s Motion
for Summary Judgment and Sentinel’s Motion for Summary Judgment, along with the parties’ respective responses
to those facts. Derma Pen’s Motion for Summary Judgment at iii-xv; Sentinel’s Motion for Summary Judgment at
iv-xvii; Defendant’s Memorandum in Opposition to Plaintiffs’ Motion for Summary Judgment (“Sentinel’s
Response”) at v-xxx, docket no. 23, filed June 12, 2017; Memorandum in Opposition to Defendant’s Motion for
Summary Judgment, and Reply Memorandum in Support of Plaintiffs’ Motion for Summary Judgment (“Derma
Pen’s Response”) at iii-xxi, docket no. 31, filed July 28, 2017. Any facts asserted by the parties that do not appear in
these Undisputed Material Facts are either not material, not sufficiently supported by evidence, or are not facts but
rather are characterizations of facts or legal conclusions.
27

Agreement.

28

Id. §§ 2.1, 12.2.

29

Termination Notice, docket no. 20-2, filed May 15, 2017.

30

[Underlying] Complaint.

31

4EverYoung’s Counterclaim.

5

6.

4EverYoung’s Counterclaim began with a “Preliminary Statement” that stated:

“This action involves ‘4EverYoung’s contractual right to purchase a trademark and domain name
from Derma Pen[, LLC] and Counterclaim Defendants’ attempts to evade that right.” 32
7.

4EverYoung’s Counterclaim asserted 11 causes of action: (1) breach of contract;

(2) breach of covenant of good faith and fair dealing; (3) common law and statutory fraudulent
transfer; (4) unjust enrichment; (5) tortious interference with business relations; (6) conversion;
(7) civil conspiracy; (8) trademark infringement; (9) trade name infringement; (10) unfair
competition pursuant to 15 U.S.C. § 1125(a); and (11) false designation of origin pursuant to
15 U.S.C. § 1125(a). 33
8.

The allegations in the breach of contract counterclaim were realleged and

“incorporated by reference” into each of the other 10 causes of action in 4EverYoung’s
Counterclaim. 34
9.

4EverYoung’s Counterclaim alleged, in part:
a.

Derma Pen advertised and sold a “knock-off Product acquired from a third

party.” 35
b.

“Derma Pen has also included blatantly misleading and/or untrue

statement in its marketing, including asserting that . . . its products are “100% original.” 36

32

Id. at 1.

33

Id. at ¶¶ 219-316.

34

4EverYoung’s Counterclaim ¶¶ 219-28, 237, 251, 259, 267, 273, 280, 290, 296, 307.

35

Id. ¶ 86.

36

Id.

6

c.

Derma Pen intended “to pass off their goods and services as the goods and

services of, approved by, sponsored by, and/or affiliated with [4EverYoung]” and Derma
Pen’s acts “constitute unfair competition and passing off.” 37
10.

The breach of contract counterclaim in 4EverYoung’s Counterclaim alleged, in

part: “Derma Pen[, LLC] has materially breached the Sales Distribution Agreement by . . .
failing to comply with its post-termination obligations, including to offer the Trademark and
Domain Name to 4EverYoung for purchase, continuing to use the Trademark and Domain
Name, and continuing to market and sell Dermapen goods and services.” 38
11.

The breach of covenant of good faith and fair dealing counterclaim in

4EverYoung’s Counterclaim alleged, in part: “Derma Pen[, LLC] has breached in the implied
covenant . . . refusing to comply with the Sales Distribution Agreement’s valuation and transfer
provisions” and “Derma Pen[, LLC]’s conduct is and has been inconsistent with the agreed-upon
common purpose of the Sales Distribution Agreement.” 39
12.

The common law and statutory fraudulent transfer counterclaim in 4EverYoung’s

Counterclaim alleged, in part: “Derma Pen has continually and repeatedly frustrated
4EverYoung’s efforts to exercise its purchase rights, including by without limitation repudiating
its obligations under the Sales Distribution Agreement.” 40
13.

The unjust enrichment counterclaim in 4EverYoung’s Counterclaim alleged, in

part: “4EverYoung conferred a benefit upon Counterclaim Defendants when Derma Pen[, LLC]
failed and refused to comply with its post-termination obligations under the Sales Distribution

37

Id. ¶¶ 299-300.

38

Id. ¶ 222.

39

Id. ¶¶ 232-33.

40

Id. ¶ 239.

7

Agreement” and a “willful and intentional violation of and frustration of 4EverYoung’s rights
under the Sales Distribution Agreement.” 41
14.

The tortious interference with business relations counterclaim in 4EverYoung’s

Counterclaim alleged, in part: “Counterclaim Defendants have caused Derma Pen[, LLC] to
evade its post-termination obligations under the Sales Distribution Agreement.” 42
15.

The conversion counterclaim in 4EverYoung’s Counterclaim alleged, in part: “By

operation of the Sales Distribution Agreement, 4EverYoung is entitled to use and possession of
the Trademark and Domain Name. Counterclaim Defendants have acted to willfully interfere
with the Trademark and Domain name, without lawful justification.” 43
16.

The civil conspiracy counterclaim in 4EverYoung’s Counterclaim alleged, in part:

“Derma Pen formed a combination of two or more persons . . . . There was an object of the
combination to be accomplished, including but not limited to, evading Derma Pen[, LLC]’s
post-termination obligations under the Sales Distribution Agreement.” 44
17.

The trademark infringement counterclaim in 4EverYoung’s Counterclaim alleged,

in part: “4EverYoung has a protectable and enforceable equitable interest in the Trademark by
virtue of . . . Derma Pen[, LLC]’s deliberate breach and repudiation of its . . . obligations under
the Sales Distribution Agreement.” 45
18.

The trade name infringement, unfair competition, and false designation of origin

counterclaims in 4EverYoung’s Counterclaim alleged, in part: “4EverYoung became the

41

Id. ¶¶ 253-55.

42

Id. ¶ 261.

43

Id. ¶¶ 269-70.

44

Id. ¶¶ 275-75.

45

Id. ¶ 283.

8

equitable, beneficial owner of the Trademark and Domain Name . . . under Sections 12.2 and
14.6 of the Sales Distribution Agreement.” 46
19.

Sentinel issued the following commercial general liability insurance policies to

Derma Pen, LLC: Policy No. 34 SBA PK3002 DX, in effect from 08/01/12 to 08/01/13; 47 Policy
No. 34 SBA PK3002 DX, in effect from 08/01/13 to 08/01/14; 48 Policy No. 34 SBA IW9082
DX, in effect from 08/01/14 to 10/10/14 49 (collectively, the “Policy”). 50
20.

The Policy contains the following Insuring Agreement: 51
BUSINESS LIABILITY FORM
***
Throughout this policy the words “you” and “your” refer to the Named
Insured shown in the Declarations. The words “we”, “us” and “our” refer
to the stock insurance company member of Sentinel providing this
insurance.
The word “insured” means any person or organization qualifying as such
under Section C. - Who Is An Insured.
***
A. COVERAGES
1. BUSINESS LIABILITY COVERAGE (BODILY INJURY,
PROPERTY DAMAGE, PERSONAL AND ADVERTISING INJURY)
Insuring Agreement
a. We will pay those sums that the insured becomes legally
obligated to pay as damages because of “bodily injury”,

46

Id. ¶¶ 291, 297, 308.

47

Docket no. 26-2, filed June 15, 2017.

48

Docket no. 26-3, filed June 15, 2017.

49

Docket no. 26-4, filed June 15, 2017.

While the three policies contain the same language, the corresponding docket entries do not contain the same
bates stamp numbers. For ease of reference, all citations to the Policy will refer to the bates stamp “SENT” page
numbers in docket no. 26-2, filed June 15, 2017.

50

51

Policy at 00023.

9

“property damage” or “personal and advertising injury” to
which this insurance applies. We will have the right and duty to
defend the insured against any “suit” seeking those damages.
However, we will have no duty to defend the insured against
any “suit” seeking damages for “bodily injury”, “property
damage” or “personal and advertising injury” to which this
insurance does not apply.
***
b. This insurance applies:
***
(2) To “personal and advertising injury” caused by an offense
arising out of your business, but only if the offense was
committed in the “coverage territory” during the policy
period.
21.

The Policy contains the following definitions: 52
G. LIABILITY AND MEDICAL EXPENSES DEFINITIONS
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 that part of a web site that is about goods,
products or services for the purposes of inducing the sale of goods,
products or services; or 53
c. Any other publication that is given widespread public distribution.

52

Id. at 00042-45.

The Cyberflex Endorsement modifies this subsection for the insured’s “web site and internet related activities.”
Id. at 00049.

53

10

However, “advertisement” does not include:
a. The design, printed material, information or images contained in,
on or upon the packaging or labeling of any goods or products[.]
b. An interactive conversation between or among persons through a
computer network.
2. “Advertising idea” means any idea for an “advertisement.”
***
17. “Personal and advertising injury” means injury, including consequential
“bodily injury”, arising out of one or more of the following offenses:
***
f. Copying, in your “advertisement”, a person’s or organization’s
“advertising idea” or style of “advertisement”; 54
***
21. “Suit” means a civil proceeding in which damages because of “bodily
injury”, “property damage” or “personal and advertising injury” to
which this insurance applies as alleged.
22.

The Policy contains the following exclusions of coverage (“Breach of Contract

Exclusion” and “Domain Name Exclusion”): 55
B. EXCLUSIONS.
1. Applicable To Business Liability Coverage
This insurance does not apply to:
***
p. Personal And Advertising Injury
***

The Cyberflex Endorsement modifies this subsection for the insured’s “web site and internet related activities.”
Id.

54

55

Id. at 00025, 00030.

11

(4) Arising out of any breach of contract, except an implied
contract to use another’s “advertising idea” in your
“advertisement”; 56
***
(10) Arising out of the unauthorized use of another’s name or
product in your e-mail address, domain name or metatags, or
any other similar tactics to mislead another’s potential
customers.
23.

The Policy contains the following endorsement modifying exclusions of coverage

and definitions (“Intellectual Property Exclusion”): 57
AMENDMENT OF EXCLUSIONS AND DEFINITION – PERSONAL &
ADVERTISING INJURY.
This endorsement modifies insurance provided under the following:
BUSINESS LIABILITY COVERAGE FORM.
A. Subparagraph 1.p. (7), (8), (15) of Paragraph 2., of Section B.
Exclusions is deleted and replaced with the following:
p. Personal and Advertising Injury:
(7) (a) Arising out of any actual or alleged infringement or violation
of any intellectual property right, such as copyright, patent,
trademark, trade name, trade secret, service mark or other
designation of origin or authenticity; or 58
(b) Any injury or damage alleged in any claim or “suit” that also
alleges an infringement or violation of any intellectual property
right, whether such allegation of infringement or violation is
made by you or by any other party involved in the claim or
“suit”, regardless of whether this insurance would otherwise
apply.

The Cyberflex Endorsement modifies this subsection for the insured’s “web site and internet related activities.”
Id. at 00049.

56

57

Id. at 00050.

The Cyberflex Endorsement modifies this subsection for the insured’s “web site and internet related activities.”
Id. at 00049.

58

12

However, this exclusion does not apply if the only allegation in the
claim or “suit” involving any intellectual property right is limited
to: 59
(1) Infringement, in your “advertisement”, of:
(a) Copyright;
(b) Slogan; or
(c) Title of any literary or artistic work; or
(2) Copying, in your “advertisement”, a person’s or
organization’s “advertising idea” or style of
“advertisement”.
24.

The Policy also contains the following endorsement modifying exclusions of

coverage and definitions (“Cyberflex Endorsement”): 60
CYBERFLEX COVERAGE
This endorsement modifies insurance provided under the following:
BUSINESS LIABILITY COVERAGE FORM
This endorsement modifies coverage under the Business Liability
Coverage Form for your web site or internet related activities.
A. Exclusion 1.p. “Personal and Advertising Injury” (Section B. –
EXCLUSIONS) is modified as follows:
1. Paragraphs (4), (5) and (7) are deleted and replaced by the
following:
***
(4) Arising out of any breach of contract, except an implied
contract to use another’s “advertising idea” in your
“advertisement” or on “your web site”;
***

The Cyberflex Endorsement modifies this subsection for the insured’s “web site and internet related activities.”
Id.

59

60

Id. at 00049.

13

(7) (a) Arising out of any violation of any actual or alleged
infringement or violation of intellectual property rights
such as copyright, patent, trademark, trade name, trade
secret, service mark or other designation of origin or
authenticity.
(b) Any injury or damage alleged in any claim or “suit” that
also alleges an infringement or violation of any intellectual
property right, whether such allegation of infringement or
violation is made by you or obey any other party involved
in the claim or “suit”, regardless of whether this insurance
would otherwise apply.
However, this exclusion does not apply to infringement, in
your “advertisement” or on “your web site”, of
(a) Infringement in your “advertising” of:
(i) Copyright;
(ii) Slogan; or
(iii) Title of any literary or artistic work; or
(b) Copying in your “advertisement”, a person’s or
organization’s “advertising idea” or style of
“advertisement”.
***
B. Section G. – LIABILITY AND MEDICAL EXPENSES
DEFINITIONS is amended as follows:
1. Paragraph b. of definition 1. “advertisement” is deleted and
replaced by:
“Advertisement” means the widespread public dissemination of
information or images that has the purpose of inducing the sale of
goods, products or services through:
b. The Internet.
2. Paragraphs f. and g. of the definition of “personal and advertising
injury” are deleted and replaced by the following:
“Personal and advertising injury” means injury, including
consequential “bodily injury”, arising out of one or more of the
following offenses:

14

f. Copying, in your “advertisement” or “your web site”, a
person’s or organization’s “advertising idea” or style of
“advertisement”;
***
3. The following is added to the definition of “personal and
advertising injury”:
As used in this definition, oral, written or electronic publication includes
publication of material in your care, custody or control by someone not
authorized to access or distribute that material.
4. The following definition is added:
“Your web site” means a web page or set of interconnected web
pages prepared and maintained by your, or by others on your
behalf, for the purposes of promoting your goods or services, that
is accessible over a computer network.
25.

Through its legal counsel, Derma Pen tendered 4EverYoung’s Counterclaim to

Sentinel for defense and indemnity for the first time by letter dated April 10, 2015. 61
26.

Sentinel denied a duty to defend and indemnify Derma Pen against 4EverYoung’s

Counterclaim in a letter dated June 2, 2015 (“Denial of Coverage Letter”). 62
27.

In the Denial of Coverage Letter, Sentinel stated that the denial was based on,

among other things:
a.

“The claims . . . actually asserted do not trigger personal and advertising

injury coverage because they do not allege one or more enumerated personal and
advertising injury offenses. Even to the extent that . . . allegations could be construed to
allege an enumerated ‘personal and advertising injury’ offense, coverage is excluded.” 63

61

Letter to Sentinel.

62

Denial of Coverage Letter.

63

Id. at 6.

15

b.

“There is an exclusion for personal and advertising injury ‘arising out of

any breach of contract’ . . . [t]his exclusion precludes coverage for all of [4EverYoung’s
Counterclaim] because the claims arise out of the alleged breach of the insured’s
contractual obligations with respect to the Dermapen Trademark, the Domain Name, the
sale and marketing of Dermapen and/or other similar contractual obligations.” 64
c.

“The Intellectual Property Exclusion also applies to preclude coverage for

all of Plaintiff’s claims. The applicable version of the Intellectual Property Exclusion
varies depending upon the type of conduct at issue. Except with respect to the insured’s
web site or internet-related activities, the version of the Intellectual Property Exclusion is
set for in Endorsement SS 41 62 06 11.” 65 “With respect to the insured’s web site or
internet-related activities, the following version of the Intellectual Property Exclusion
applies . . . Endorsement [Form] SS 40 62 06 11.” 66
d.

“There also is an exclusion for personal and advertising injury ‘[a]rising

out of the unauthorized use of another’s name or product in your e-mail address, domain
name or metatags, or any other similar tactics to mislead another’s potential
customers.’ . . . This exclusion applies to preclude coverage for any claims relating to the
use of the ‘Dermapen’ Trademark to attract . . . customers to Derma Pen LLC’s web
site.” 67

64

Id.

65

Id. at 6-7.

66

Id. at 8-9.

67

Id. at 9

16

28.

After Sentinel denied the tender, Derma Pen, LLC’s counsel asked Sentinel to

reconsider its decision in a letter dated June 18, 2015. 68
29.

Sentinel issued a second and final denial of the tender in a letter dated July 20,

30.

Derma Pen’s Complaint alleges that coverage for 4EverYoung’s Counterclaim

2015. 69

and the Underlying Lawsuit is triggered only under the “personal and advertising injury”
language of the Policy for “copying, in your ‘advertisement’ or on ‘your web site’, a person’s or
organization’s ‘advertising idea’ or style of ‘advertisement.’” 70
STANDARD OF REVIEW
Summary judgment is appropriate if “there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.” 71 A factual dispute is genuine when
“there is sufficient evidence on each side so that a rational trier of fact could resolve the issue
either way.” 72 In determining whether there is a genuine dispute of material fact, the district
court “view[s] the factual record and draw[s] all reasonable inferences therefrom most favorably
to the nonmovant.” 73 The moving party “bears the initial burden of making a prima facie
demonstration of the absence of a genuine issue of material fact and entitlement to judgment as a
matter of law.” 74

68

Reconsideration Letter, docket no. 19-3, filed May 15, 2017.

69

Final Denial of Coverage Letter, docket no. 19-4, filed May 15, 2017.

70

Complaint ¶ 30.

71

Fed. R. Civ. P. 56(a).

72

Adler v. Wal-Mart Stores, Inc., 144 F.3d 644, 670 (10th Cir. 1998).

73

Id.

74

Id. at 670-71.

17

Additionally, “[a]t the summary judgment stage, evidence need not be submitted in a
form that would be admissible at trial, but the content or substance of the evidence must be
admissible.” 75 “The requirement is that the party submitting the evidence show that it will be
possible to put the information, the substance or content of the evidence, into an admissible
form.” 76
DISCUSSION
Derma Pen’s Complaint asserts a single cause of action for declaratory judgment that
Sentinel had a duty to defend and indemnify Derma Pen in the Underlying Lawsuit because
4EverYoung’s Counterclaim alleged advertising injuries under the Policy. 77 Derma Pen and
Sentinel seek summary judgment on this claim. 78
In federal diversity cases, “the law to be applied in any case is the law of the state,”
which in this case is Utah. 79 Under Utah law, “an insurer has a duty to defend when the insurer
ascertains facts giving rise to potential liability under the insurance policy.” 80 “Where the
allegations, if proved, show there is no potential liability under the policy, there is no duty to
defend.” 81

75

Tesone v. Empire Mktg. Strategies, 942 F.3d 979, 999 (10th Cir. 2019) (internal citations and quotations omitted).

76

Id. at 999 n.15 (internal citations and quotations omitted).

77

Complaint ¶¶ 28-30.

78

Derma Pen’s Motion for Summary Judgment; Sentinel’s Motion for Summary Judgment.

James River Ins. Co. v. Rapid Funding, LLC, 658 F.3d 1207, 1216-17 (10th Cir. 2011) (quoting Erie v. Tompkins,
304 U.S. 64, 78 (1938).

79

80

Basic Research, LLC v. Admiral Ins. Co., 297 P.3d 578, 580 (Utah 2013) (quotation marks omitted).

81

Id. (internal punctuation and quotations omitted).

18

Courts determine whether an insurer has a duty to defend by comparing the allegations of
the underlying complaint to the terms of the insurance policy. 82 “[T]he general rule is that the
burden of establishing coverage under . . . an insurance policy is on those seeking to come within
the coverage of the policy.” 83 But“[i]t is the insurance company’s burden to demonstrate that
none of the allegations of the underlying claim is potentially covered (or that a policy exclusion
conclusively applies to exclude all potential for such coverage).” 84 “Like other contracts, an
insurance policy is interpreted to give effect to the intent of the parties as expressed by the plain
language of the instrument itself.” 85
“If the language found within [the policy and the underlying complaint] clearly and
unambiguously indicates that a duty to defend does or does not exist, the analysis is complete”
and “extrinsic evidence plays no part in the analysis.” 86 This “eight corners” rule is based on the
fact that most insurance policies condition a defense on the specific allegations asserted in the
complaint. 87 However, an exception applies where a policy more generically conditions a
defense on claims covered by the policy. In this alternate circumstance, “extrinsic evidence
would be relevant” to shed light on facts underlying the complaint’s allegations. 88

Id.; Nova Cas. Co. v. Able Constr., Inc., 983 P.2d 575, 578 (Utah 1999); Headwaters Resources, Inc. v. Illinois
Union Ins. Co., 770 F.3d 885, 891 (10th Cir. 2014); Cincinnati Ins. Co. v. AMSCO Windows, 921 F. Supp. 2d 1226,
1236 (D. Utah 2013).

82

83

Utah Farm Bureau Ins. Co. v. Dairyland Ins. Co., 634 F.2d 1326 (10th Cir. 1980).

84

Headwaters Resources, Inc., 770 F.3d at 891 (internal quotations omitted).

85

Id.

86

Equine Assisted Growth & Learning Ass’n v. Carolina Cas. Ins., 266 P.3d 733, 736 (Utah 2011).

87

Id. at 733 (quoting Fire Ins. Exch. v. Est. of Therkelsen, 27 P.3d 555, 560 (Utah 2001)).

88

Est. of Therkelsen, 27 P.3d at 560.

19

The Policy does not permit consideration of extrinsic evidence
Derma Pen argues that extrinsic evidence should be considered to determine Sentinel’s
duty to defend and indemnify under the Policy because Sentinel “assumed the duty to provide a
defense against any suit that is covered by the Policy.” 89 Specifically, Derma Pen seeks
consideration of motion for temporary restraining order filed by 4EverYoung in the Underlying
Lawsuit (“Motion for TRO”). 90 The threshold evidentiary question is whether Sentinel’s duty to
defend and indemnify under the Policy is triggered by the facial language of 4EverYoung’s
Counterclaim or whether the Policy is such that Sentinel’s duty is triggered by facts underlying
the allegations in 4EverYoung’s Counterclaim.
In Employers Mutual Casualty Co. v. Bartile Roofs, Inc., 91 the Tenth Circuit Court of
Appeals declined to consider extrinsic evidence under a similar insurance policy which granted a
duty to defend “against any ‘suit’ seeking ‘damages because of . . . property damage.’” 92 “Suit”
was defined as “civil proceedings in which a party ‘allege[s]’ the existence of damages within
the coverage of the applicable CGL policy[.]” 93 The insured argued that extrinsic evidence
should be considered because the phrase “to which this insurance applies” made the duty to
defend conditional on claims covered by the policy. 94 The Tenth Circuit disagreed, holding that
the policy’s definition of “suit” “indicate[d] that the duty to defend depends on the ‘allegat[ion]
[of] liability within the coverage afforded by the policy’ rather than on a determination that the

89

Derma Pen’s Motion for Summary Judgment at 4-5.

Defendant’s Motion for Temporary Restraining Order and Preliminary Injunction and Supporting Memorandum
(“Motion for TRO”), ECF no. 141 in Underlying Lawsuit, filed May 2, 2014, docket no. 18-2, filed May 15, 2017.

90

91

618 F.3d 1153 (10th Cir. 2010).

Id. at 1171. The court operated under both Utah and Wyoming law, though it found that no material conflict
existed between the laws of the two states. Id. at 1172.

92

93

Id. at 1171

94

Id.

20

suit is actually covered by the policy.” 95 Thus, the policy’s language limited the inquiry to the
allegations in the underlying complaint. 96
Here, the Policy provides that Sentinel had a duty to (1) pay for “damages because of
‘bodily injury’, ‘property damage’ or ‘personal and advertising injury’ to which this insurance
applies,” and (2) defend “against any ‘suit’ seeking those damages.” 97 “Suit” is defined as “a
civil proceeding in which damages because of ‘bodily injury,’ ‘property damage’ or ‘personal
and advertising injury’ to which this insurance applies are alleged.” 98 This language is
substantially similar to the language in the policy considered in Employers Mutual Casualty Co.
and dictates that the same result is reached.
Because of the Policy’s definition of “suit,” 99 Sentinel’s duty to defend “depends upon
the allegation[s] of liability within the coverage afforded by the policy.” 100 Thus, Sentinel’s duty
is triggered on consideration of the allegations in 4EverYoung’s Counterclaim alone. The Policy
does not permit consideration of extrinsic evidence, such as the Motion for TRO, in determining
Sentinel’s duty to defend. 101
But even if the Policy did permit consideration of 4EverYoung’s Motion for TRO, the
result would be the same. The factual assertions in the Motion for TRO relate to Derma Pen’s
alleged use of 4EverYoung’s intellectual property, including through its web site, in order to pass

Id. at 1172 (internal citations omitted); Hartford Cas. Ins. v. Softwaremedia.com, No. 2:10-cv-01098-BSJ, 2012
WL 965089, *6-7 (D. Utah Mar. 20, 2012).

95

96

Employer’s Mutual, 618 F.3d at 1172.

97

Supra Undisputed Material Facts ¶ 20.

98

Id. ¶ 21 (emphasis added).

99

Id.

100

Employer’s Mutual, 618 F.3d at 1172 (internal punctuation omitted).

That 4EverYoung’s Counterclaim sought injunctive relief does not change the considerations required by the
Policy or alter this analysis.

101

21

off 4EverYoung products. 102 These assertions are largely duplicative of the allegations in
4EverYoung’s Counterclaim. And as discussed below, 103 they are insufficient to trigger
Sentinel’s duty to defend under the Policy.
The Policy’s relevant provisions are clear and unambiguous
The Policy provided coverage to Derma Pen from August 2012 to August 2014. 104 The
Policy’s relevant coverage provision states:
[Sentinel] will pay those sums that [Derma Pen] becomes legally obligated to pay
as damages because of “bodily injury”, “property damage” or “personal and
advertising injury” to which this insurance applies. [Sentinel] will have the right
and duty to defend [Derma Pen] against any “suit” seeking those damages.
However, [Sentinel] will have no duty to defend [Derma Pen] against any “suit”
seeking damages for “bodily injury”, “property damage” or “personal and
advertising injury” to which this insurance does not apply. 105
The Policy defines “Personal and advertising injury” as “injury, including consequential
‘bodily injury’, arising out of one or more of the following offenses: . . . (f) Copying, in [Derma
Pen’s] ‘advertisement’ or on ‘[Derma Pen’s] web site’, a person’s or organization’s ‘advertising
idea’ or style of ‘advertisement[.]’” 106
“Suit” is defined as “a civil proceeding in which damages because of ‘bodily injury,’
‘property damage’ or ‘personal and advertising injury’ to which this insurance applies are
alleged.” 107
“Advertisement” is defined as “the widespread public dissemination of information or
images that has the purpose of inducing the sale of goods, products or services through . . . The

102

Motion for TRO ¶¶ 53, 56-57, 59.

103

Infra Discussion at 26-39.

104

Supra Undisputed Material Facts ¶ 19.

105

Supra Undisputed Material Facts ¶ 20.

106

Id. ¶ 21.

107

Id.

22

Internet [as modified by Cyberflex Coverage Endorsement Form].” 108 However, “advertisement”
does not include “[t]he design, printed material, information or images contained in, on or upon
the packaging or labeling of any goods or products.” 109
And “[a]dvertising idea” is defined as “any idea for an ‘advertisement.’” 110
The Policy also contains three relevant exclusions of coverage for an advertising injury.
First, the Policy’s Breach of Contract Exclusion excludes coverage for any advertising injury
“[a]rising out of any breach of contract, except an implied contract to use another’s ‘advertising
idea’ in [Derma Pen’s] ‘advertisement.’” 111
Second, the Policy’s Intellectual Property Exclusion excludes coverage for any
advertising injury “[a]rising out of any actual or alleged infringement or violation of any
intellectual property right, such as copyright, patent, trademark, trade name, trade secret, service
mark or other designation of origin or authenticity,” or “[a]ny injury or damage alleged in any
claim or ‘suit’ that also alleges an infringement or violation of any intellectual property right.” 112
However, the Intellectual Property Exclusion “does not apply if the only allegation in the claim
or ‘suit’ involving any intellectual property right is limited to: (1) Infringement, in [Derma
Pen’s] ‘advertisement’, of: (a) Copyright; (b) Slogan; or (c) Title of any literary or artistic work;
or (2) Copying, in [Derma Pen’s] ‘advertisement’, a person’s or organization’s ‘advertising idea’
or style of ‘advertisement’.” 113

108

Id.

109

Id.

110

Id.

111

Id. ¶ 22.

112

Id. ¶ 23.

113

Id.

23

And third, the Policy’s Domain Name Exclusion excludes coverage for any advertising
injury “[a]rising out of the unauthorized use of another’s name or product in [Derma Pen’s]
e-mail address, domain name or metatags, or any other similar tactics to mislead another’s
potential customers.” 114
The Policy also includes a Cyberflex Endorsement which modifies the Policy for Derma
Pen’s “web site or internet related activities.” 115 Specifically, the Cyberflex Endorsement
modifies the definitions for “advertisement” and “personal and advertising injury,” and adds a
definition for “[Derma Pen’s] web site.” 116 The Cyberflex Endorsement also expands the
exceptions to the Breach of Contract Exclusion and Intellectual Property Exclusion to cover “an
implied contract to use another’s ‘advertising idea’” and “infringement” “on ‘[Derma Pen’s] web
site.’” 117
Neither party has argued that any language in the Policy’s relevant provisions is
ambiguous. 118 Derma Pen nevertheless argues that if the Cyberflex Endorsement does not lead to
coverage for at least some of the claims in 4EverYoung’s Counterclaim, it is inconsistent with
the Policy’s Intellectual Property Exclusion and Domain Name Exclusion. 119 Derma Pen then

114

Id. ¶ 22.

115

Id. ¶ 24.

116

Id.

117

Id.

In a footnote, Derma Pen suggests without arguing that the term “copying” may be ambiguous because it is not
defined by the Policy. Derma Pen’s Response at 8 n.4. Derma Pen relies on a Fourth Circuit Court of Appeals case
which held that the undefined policy term “misappropriation” is “necessarily ambiguous.” Id. (citing State Auto
Prop. & Cas. Ins. Co. v. Travelers Indem. Co. of Am., 343 F.3d 249, 257 (4th Cir. 2003)). The Fourth Circuit case,
construing a different policy term, is not persuasive. An undefined policy term having a common sense, plain
meaning is not ambiguous. Bear River Mut. Ins. Co. v. Wright, 770 P.2d 1019, 1020-21 (Utah Ct. App. 1989). The
term “copying” is not ambiguous. It has a commonly understood meaning, i.e., to imitate or reproduce.

118

119

Derma Pen’s Motion for Summary Judgment at 7; Derma Pen’s Response at 17-18.

24

argues that this inconsistency creates ambiguity which must be read in favor of coverage. 120
However, this argument misreads the Policy.
The Cyberflex Endorsement does not create inconsistency. Rather, the Cyberflex
Endorsement and the Intellectual Property Exclusion and Domain Name Exclusion coexist and
apply in different circumstances. By its plain language, the Cyberflex Endorsement modifies
coverage (including the Intellectual Property Exclusion) “for [Derma Pen’s] “web site and
internet related activities.” 121 The CyberFlex Endorsement is not applicable in circumstances that
do not involve Derma Pen’s “web site and internet related activities.” Under such circumstances,
the unmodified language of Intellectual Property Exclusion applies. 122
The Cyberflex Endorsement also does not create inconsistency with the Domain Name
Exclusion. The Cyberflex Endorsement applies generally to the insured’s “web site or internet
related activities” and specifically to the circumstances in which it expressly modifies the
Policy’s language, such as with the Intellectual Property Exclusion. 123 The Domain Name
Exclusion applies to specific circumstances “arising out of the unauthorized use of another’s
name or product in [the insured’s] e-mail address, domain name or metatags, or any other similar
tactics to mislead another’s potential customers.” 124 These circumstances may involve the
insured’s “web site or internet related activities.” 125 But the Cyberflex Endorsement does not
purport to alter or affect these specific circumstances. Thus, the Domain Name Exclusion is not
affected by or inconsistent with the Cyberflex Endorsement. The Cyberflex Endorsement’s

120

Derma Pen’s Motion for Summary Judgment at 7; Derma Pen’s Response at 17-18.

121

Supra Undisputed Material Facts ¶ 24.

122

Id. ¶ 23.

123

Id. ¶ 24.

124

Id. ¶ 22.

125

Id. ¶ 24.

25

modifications of coverage for the insured’s “web site or internet related activities” simply do not
apply to the specific “web site or internet related activities” identified in the Domain Name
Exclusion.
The relevant language of the Policy’s coverage, definitions, and exclusions is clear and
unambiguous. And the Policy’s exclusions of coverage “clearly and unmistakably
communicate[] to the insured the specific circumstances under which the expected coverage will
not be provide.” 126 Therefore, the parties’ intent regarding coverage may be determined as a
matter of law through the language of the Policy itself, without resort to extrinsic evidence. And
whether Sentinel had a duty to defend and indemnify Derma Pen in the Underlying Lawsuit will
be determined by comparing the terms of the Policy to the allegations in 4EverYoung’s
Counterclaim. 127
Additionally, even if the Cyberflex Endorsement and Intellectual Property Exclusion
were inconsistent, as Derma Pen argues, construing these provisions in favor of the coverage
afforded by the Cyberflex Endorsement does not change the result in this case. As discussed
below, the allegations of 4EverYoung’s Counterclaim they are insufficient to trigger Sentinel’s
duty to defend under the Policy. 128 Any inconsistency caused by the Cyberflex Endorsement
does not affect the analysis of whether 4EverYoung’s allegations meet the Policy’s definition of
“advertising injury,” 129 or application of the exclusions of coverage under the Policy’s Breach of
Contract Exclusion and Domain Name Exclusion. 130

126

Headwaters Resources, Inc., 770 F.3d at 892 (internal quotations omitted).

127

Id. at 891; Basic Research, 297 P.3d at 580.

128

Infra Discussion at 26-39.

129

Id. at 27-31.

130

Id. at 31-38.

26

4EverYoung’s Counterclaim does not allege
an advertising injury covered by the Policy
Derma Pen argues that 4EverYoung’s Counterclaim alleges an advertising injury that is
covered by the Policy. 131 Specifically, Derma Pen argues that 4EverYoung’s Counterclaim
alleges that Derma Pen advertised in connection with its website and internet-related activities,
and that the implication of such allegations is that Derma Pen’s advertising activities copied or
misappropriated 4EverYoung’s advertising ideas and style of advertising to the public. 132
To determine whether an insurer has a duty to defend an “advertising injury” claim, the
Tenth Circuit Court of Appeals has promulgated a two-part test. First, the complaint must allege
a type of conduct specifically listed in the policy’s definition of “advertising injury.” 133 And
second, there must be a causal connection between the alleged injuries and the insured’s
advertising activities. 134 The factual allegations of 4EverYoung’s Counterclaim are the focus of
the inquiry. 135
Derma Pen points to twelve allegations in 4EverYoung’s Counterclaim to support this
argument that Sentinel had a duty to defend and indemnify under the Policy. 136 The gravamen of
these allegations (and 4EverYoung’s Counterclaim as a whole) is that Derma Pen used
intellectual property owned by 4EverYoung, which Derma Pen was no longer authorized to use

131

Derma Pen’s Motion for Summary Judgment at 5-7; Derma Pen’s Response at 1-12.

132

Derma Pen’s Response at 7-8.

133

Basic Research, 297 P.3d at 580; Novell, Inc. v. Fed. Ins. Co., 141 F.3d 983, 985 (10th Cir. 1998).

134

Novell, Inc., 141 F.3d at 986; Hartford Cas. Ins., 2012 WL 965089, *7.

135

Dish Network Corp. v. Arch Specialty Insurance Co., 659 F.3d 1010, 1020 (10th Cir. 2011).

Derma Pen’s Response at 4-7 (citing 4EverYoung’s Counterclaim ¶¶ 86, 99, 222, 232, 234, 282, 284, 292-93,
298-300). Derma Pen’s Motion for Summary Judgment almost exclusively cites to 4EverYoung’s Motion for TRO
to support their argument. Derma Pen’s Motion for Summary Judgment at 5-7 (citing Motion for TRO ¶¶ 57, 59).

136

27

and in breach of the parties’ Agreement. 137 This conduct was allegedly intended to frustrate
4EverYoung’s rights by passing off 4EverYoung intellectual property and products as Derma
Pen’s own and passing off Derma Pen’s actions, goods, and services as being performed by,
made by, approved by, sponsored by, or affiliated with 4EverYoung. 138 While some allegations
arguably do not fall directly into this general thrust of 4EverYoung’s Counterclaim, these
allegations either arise out of or are inseparably interconnected with the alleged frustration of
4EverYoung’s intellectual property rights by Derma Pen’s conduct of passing off. Therefore, no
separate analysis for these allegations is necessary.
None of the allegations in 4EverYoung’s Counterclaim give rise to potential liability
under the Policy to trigger Sentinel’s duty to defend or indemnify. First, the allegations fail to
meet the Policy’s definition of “advertising injury.” Second, even if an advertising injury is
alleged, coverage for such injury is excluded by the Policy’s Breach of Contract Exclusion,
Intellectual Property Exclusion, and Domain Name Exclusion. And finally, because “[t]he duty
to defend is . . . broader than the duty to indemnify,” where “there is no duty to defend, there can
be no duty to indemnify.” 139
The allegations in 4EverYoung’s Counterclaim do not meet the Policy’s definition of
“advertising injury”
Derma Pen argues that “[t]here is really no other reasonable way to interpret
4EverYoung’s Counterclaim allegations that Derma Pen misled the public by imitating

4EverYoung’s Counterclaim ¶¶ 86, 99, 222, 232, 234, 282, 284, 292-93, 298-300; Supra Undisputed Material
Facts 9-18

137

4EverYoung’s Counterclaim ¶¶ 86, 99, 222, 232, 234, 282, 284, 292-93, 298-300; Supra Undisputed Material
Facts 9-18.

138

Mid-America Pipeline Co., LLC v. Mountain States Mut. Cas. Co., No. 2:05-cv-00153-DB, 2006 WL 1278748,
*1 (D. Utah May 8, 2006) (citing Sharon Steel Corp. v. Aetna Cas. & Surety Co., 931 P.2d 127 (Utah 1997)); see
also Encompass Indem. Co. v. J.H., No. 1:16-cv-00018-DN, 2017 WL 2062868, *9 (D. Utah May 12, 2017).
139

28

4EverYoung’s advertising, than that it ‘copied’ its advertising ideas and style.” 140 This argument
lacks merit.
4EverYoung’s Counterclaim does allege that Derma Pen confused and misled the public.
But this was not accomplished by Derma Pen allegedly imitating or copying 4EverYoung’s
advertisement or advertising ideas and style. Rather, 4EverYoung’s Counterclaim alleges that
Derma Pen confused and misled the public by passing off 4EverYoung’s intellectual property
and products as Derma Pen’s own, and by passing of Derma Pen’s actions, goods, and services
as being performed by, made by, approved by, sponsored by, or affiliated with 4EverYoung. 141
For example, 4EverYoung’s Counterclaim alleges that Derma Pen advertised and sold a
“knock-off Product acquired from a third party;” included blatantly misleading and/or untrue
statement in its marketing, including asserting that . . . its products are “100% original;” and
intended “to pass off their goods and services as the goods and services of, approved by,
sponsored by, and/or affiliated with [4EverYoung].” 142 4EverYoung further alleged that Derma
Pen “improperly altered the packaging on Dermapen products . . . mislead[ing] the public as to
the source and origin of the products.” 143
These types of allegations do not involve copying an “‘advertising idea’ or style of
‘advertisement’” under the Policy. 144 Indeed, the Policy specifically excludes from the definition
of “advertisement” “[t]he design, printed material, information or images contained in, on or
upon the packaging or labeling of any goods or products.” 145 And a product itself is not an

140

Derma Pen’s Response at 8.

141

4EverYoung’s Counterclaim ¶¶ 86, 99, 222, 232, 234, 298-300; Supra Undisputed Material Facts 9-18.

142

Supra Undisputed Material Facts ¶ 9.

143

4EverYoung’s Counterclaim ¶ 87

144

Supra Undisputed Material Facts ¶¶ 20-21.

145

Id. ¶ 21.

29

advertisement or advertising idea. 146 Copying another’s product or its attributes, or “passing off”
one product as another does not constitute copying an “advertising idea” or “style of
advertisement.” 147
Derma Pen nevertheless cites to nonbinding case law from other jurisdictions 148 to argue
that 4EverYoung’s allegations of trademark and trade name infringement, alone, are sufficient to
constitute an advertising injury under the Policy. 149 These cases recognize that “a trademark can
be seen as an ‘advertising idea’ because it is a way of marking goods so that they will be
identified with a particular source.” 150 “Trademarks, therefore, have the same purpose as
advertising,” 151 and “ha[ve] the potential to be an advertising idea.” 152 However, these cases
turned on the specific policy language and trademark infringement allegations at issue in each
case.
The relevant policy language in the cases Derma Pen relies on was “infringement of
trademarked or service marked titles or slogans . . . committed in the course of advertising of [the
insured’s] goods, products, or services;” 153 or “misappropriation of advertising ideas or style of

Westport Reinsurance Management, LLC v. St. Paul, 80 Fed. App’x. 277, 279, 2003 WL 22594407, *2 (3d Cir.
2003); Advance Watch Co. Ltd. v. Kemper Nat. Ins. Co., 99 F.3d 795, 807 (6th Cir. 1996).

146

Novell, Inc., 141 F.3d at 989 (citing Bank of the West v. Superior Court, 833 P.2d 545, 559 (Cal. 1992));
Microtec Research, Inc. v. Nationwide Mut. Ins. Co., 40 F.3d 968 (9th Cir. 1994); Green Mach. Corp. v. ZurichAmerican Ins. Group, 313 F.3d 837, 841 (3d Cir. 2002).

147

Tom Kelley Studios, Inc. v. State Farm Gen. Ins. Co., 462 Fed App’x 740, 741-42 (9th Cir. 2011); Houbigant,
Inc. v. Federal Insurance Co., 374 F.3d 192, 202 (3d Cir. 2004); State Auto Prop. & Cas. Ins. Co., 343 F.3d at
257-58; CAT Internet Services, Inc. v. Providence Washington Ins. Co., 333 F.3d 138, 143 (3d Cir. 2003); Central
Mutual Insurance Co. v. Stunfence, Inc., 292 F. Supp. 2d 1072, 1079 (N.D. Ill. 2003)

148

149

Derma Pen’s Response at 9.

150

Houbigant, Inc., 374 F.3d at 201 (internal punctuation and quotations omitted).

151

Id.

152

State Auto Prop. & Cas. Ins. Co., 343 F.3d at 258.

153

Tom Kelley Studios, Inc., 462 Fed App’x at 741; Houbigant, Inc., 374 F.3d at 195.

30

doing business;” 154 or “the use of another’s advertising idea in [the insured’s] advertisement.’” 155
The policy language in each of those cases is broad and susceptible to construction that results in
allegations of trademark infringement, alone, clearly constituting an advertising injury. But the
relevant policy language and facts of these cases differ greatly for this case. And therefore,
Derma Pen’s cases are not persuasive.
On the other hand, prior District of Utah case law has construed identical language to the
Policy in this case and concluded that an advertising injury was not alleged despite the
complaint’s allegations of trademark and copyright infringement. 156 This was because the
complaint did not allege damages arising out of “copying in [the insured’s] ‘advertisement’ [of] a
person’s or organization’s ‘advertising idea’ or style of ‘advertisement.’” 157 Rather, the
complaint alleged damages caused by a “fraudulent bait-and-switch scheme,” 158 which involved
allegations of the defendants’ unauthorized distribution of unlicensed software. 159 Specifically,
the plaintiff alleged that “by this conduct, including [the defendants’] advertising activities and
unauthorized use of [the plaintiff’s] software, components, screen displays, product packaging
and marks to describe the items that they distribute and sell, [d]efendants misappropriated [the
plaintiff’s] advertising ideas and style of doing business and infringed [the plaintiff’s]
copyrights, titles and slogans and trademarks.” 160 Because the plaintiff’s infringement claims

Tom Kelley Studios, Inc., 462 Fed App’x at 741; State Auto Prop. & Cas. Ins. Co., 343 F.3d at 257; CAT Internet
Services, Inc., 333 F.3d at 140; Stunfence, Inc., 292 F. Supp. 2d at 1075
154

155

Stunfence, Inc., 292 F. Supp. 2d at 1075.

156

Hartford Cas. Ins., 2012 WL 965089, *7, 9-10.

157

Id. *7.

158

Id.

159

Id. *4.

160

Id.

31

were “intrinsically and inseparably tied to the fraudulent bait-and-switch software license
scheme,” the allegations were not covered by the policy as an advertising injury. 161
The analysis of this District of Utah case law is persuasive. The relevant policy language
is identical to the Policy’s language in this case. And the interconnectedness of the fraudulent
bait-and-switch scheme and infringement allegations is substantially similar to the “passing off”
and infringement allegations in 4EverYoung’s Counterclaim.
The allegations in 4EverYoung’s Counterclaim do not meet the Policy’s definition of
“advertising injury.” 162 The allegations and damages sought in 4EverYoung’s Counterclaim are
not premised on copying an “‘advertising idea’ or style of ‘advertisement’” under the Policy. 163
They are premised on Derma Pen’s alleged frustration of 4EverYoung’s contract and intellectual
property rights by passing off 4EverYoung intellectual property and products as Derma Pen’s
own and passing off Derma Pen’s actions, goods, and services as being performed by, made by,
approved by, sponsored by, or affiliated with 4EverYoung. 164
Therefore, because an “advertising injury” under the Policy was not alleged,
4EverYoung’s Counterclaim did not give rise to potential liability under the Policy to trigger
Sentinel’s duty to defend or indemnify.
4EverYoung’s Counterclaim is excluded from coverage under the Policy’s Breach of
Contract Exclusion
Even if 4EverYoung’s Counterclaim alleged an advertising injury under the Policy, it did
not give rise to potential liability under the Policy because coverage was excluded by the
Policy’s Breach of Contract Exclusion. The Policy’s Breach of Contract Exclusion provides that
161

Id. *9

162

Supra Undisputed Material Facts ¶¶ 20-21

163

Id.

164

Id. ¶¶ 9-18; 4EverYoung’s Counterclaim ¶¶ 86, 99, 222, 232, 234, 282, 284, 292-93, 298-300.

32

“[t]his insurance does not apply to . . . ‘Personal and Advertising Injury’ . . . [a]rising out of any
breach of contract, except an implied contract to use another’s ‘advertising idea’ in [the
insured’s] ‘advertisement’” 165 “or on ‘[the insured’s] website.’” 166
Derma Pen cites to several non-binding authorities that apply a “but for” standard when
applying breach of contract exclusions, i.e., that “the injury is only considered to have arisen out
of the contractual breach if the injury would not have occurred but for the breach of contract.” 167
Derma Pen points to Gibbs M. Smith, Inc. v. U.S. Fid. & Guar. Co,. 168 to argue that the Utah
Supreme Court would adopt a narrow “but for” test in applying the Policy’s Breach of Contract
Exclusion. 169 However, Gibbs M. Smith, Inc. involved the applicability of a liability-assumed
exclusion, which excluded coverage when the insured contractually assumed liability or
promised to indemnify or hold harmless another. 170 The Utah Supreme Court adopted a narrow
application of the exclusion because “liability assumed by the insured under a contract or
agreement presents an uncertain risk which cannot be determined in advance for the purpose of
fixing premiums.” And in doing so, the Utah Supreme Court distinguished liability-assumed
exclusions from exclusions for liability that results from breach of contract. 171 Therefore, Gibbs
M. Smith, Inc. does not support Derma Pen’s argument.

165

Supra Undisputed Material Facts ¶ 22.

166

Id. ¶ 24.

167
Looney Ricks Kiss Architects, Inc. v. State Farm Fire & Cas. Co., 677 F.3d 250, 256 (5th Cir. 2012); Houbigant,
Inc., 374 F.3d at 202; Hugo Boss Fashions, Inc. v. Fed. Ins. Co., 252 F.3d 608 (2d Cir. 2001); Bridge Metal
Industries, LLC v. The Travelers Indemn. Co., 812 F. Supp. 2d 527 (S.D.N.Y. 2011); Auto Owners Ins. Co. v. LA
Oasis, Inc., No. 2:04-cv-174, 2005 WL 1313684 (N.D. Ind. May 26, 2005); Aero Corp. v. Am. Int'l Specialty Lines
Ins. Co., 676 F. Supp. 2d 738 (S.D. Ind. 2009).
168

Gibbs M. Smith, Inc. v. U.S. Fid. & Guar. Co., 949 P.2d 337, 341 (Utah 1997).

169

Derma Pen’s Response at 13-16.

170

Gibbs M. Smith, Inc., 949 P.2d at 341-342.

171

Id.

33

Rather, Utah courts define broadly the phrase “arising out of” in insurance contracts. 172
“Arising out of” unambiguously means originating or flowing from, or in connection with, the
item in question, and requires only that there be some causal relationship between the injury and
the risk for coverage is provided. 173 Thus, for the Policy’s Breach of Contract Exclusion to apply
to 4EverYoung’s Counterclaim, the causes of action must have originated from, grown out of,
flowed from, or have been in connection with Derma Pen’s alleged breach of the Agreement
with 4EverYoung. And there must be a causal relationship between 4EverYoung’s alleged
injuries and Derma Pen’s alleged breach.
Here, all of the allegations in 4EverYoung’s Counterclaim arise out of Derma Pen’s
alleged breach of the Agreement with 4EverYoung. This should come as no surprise since the
preliminary statement in 4EverYoung’s Counterclaim states: “This action involves
‘4EverYoung’s contractual right to purchase a trademark and domain name from Derma Pen[,
LLC] and Counterclaim Defendants’ attempts to evade that right.” 174 4EverYoung’s
Counterclaim makes clear that each cause of action was either a direct or closely related result of
Derma Pen, LLC’s alleged breach of the Agreement. 175 The allegations specifically discuss the
Agreement’s formation, terms, and termination; the alleged breach and frustration of
4EverYoung’s post-termination rights under the Agreement; and the damages that flowed
therefrom. Each cause of action realleges and “incorporate[s] by reference” 4EverYoung’s

172

Utah Transit Auth. v. Greyhound Lines, Inc., 355 P.3d 947, 961-62 (Utah 2015).

Id.; Nat’l Farmers Union Prop. & Cas. Co. v. Western Cas. & Surety Co., 577 P.2d 961, 962 (Utah 1978);
Meadow Valley Contractors, Inc. v. Transcon. Ins. Co., 27 P.3d 594, 597 (Utah Ct. App. 2001); Fed. Ins. Co. v.
Tri-State Ins. Co., 157 F.3d 800, 803 (10th Cir. 1998); In the Matter of Doe by & through Bacon v. Farm Bureau
Prop. & Cas. Ins. Co., No. 2:16-cv-00877-JNP-EJF, 2017 WL 5032526, *5 (D. Utah Nov. 1, 2017).
173

174

Supra Undisputed Material Facts ¶ 6.

175

Id. ¶¶ 8-18.

34

breach of contract allegations. 176 And each cause of action references the Agreement and the
alleged breach in order to arrive at 4EverYoung’s request for relief. 177
All of 4EverYoung’s allegations and causes of action originating or flowing from, or are
inseparably connected with the Agreement and the alleged breach of the Agreement. And
4EverYoung’s alleged injuries have a causal relationship to the alleged breach of the
Agreement. 178 Therefore, Policy’s Breach of Contract Exclusion applies to bar coverage for
4EverYoung’s Counterclaim. 179 And the only exception to the exclusion (for “an implied
contract to use another’s ‘advertising idea’ in [the insured’s] ‘advertisement’” 180 “or on ‘[the
insured’s] website.’”) 181 is clearly inapplicable because no implied contact is alleged by
4EverYoung.
Because the Policy’s Breach of Contract Exclusion bars coverage for 4EverYoung’s
Counterclaim, 4EverYoung’s Counterclaim did not give rise to potential liability under the
Policy to trigger Sentinel’s duty to defend or indemnify.
4EverYoung’s Counterclaim is excluded from coverage under the Policy’s Intellectual
Property Exclusion and Domain Name Exclusion
Even if 4EverYoung’s Counterclaim alleged an advertising injury under the Policy, it did
not give rise to potential liability under the Policy because coverage was excluded by the

176

4EverYoung’s Counterclaim ¶¶ 219-227, 228, 237, 251, 259, 267, 273, 280, 290, 296, 307.

177

Id. ¶¶ 222, 232, 239, 253, 261, 269-70, 274-75, 283, 291, 297, 308.

Sport Supply Group, Inc. v. Columbia Cas. Co., 335 F.3d 453, 458-459 (5th Cir. 2003); Callas Enter., Inc. v.
Travelers Indem. Co. of Am., 193 F.3d 952 (8th Cir. 1999); Essex Ins. Co. v. Edizone, LC, No. 2:07-cv-00984-BSJ,
2011 WL 1791643, *5-6 (D. Utah May 10, 2011); Pennsylvania Pulp & Paper Co. v. Nationwide Mut. Ins. Co., 100
S.W.3d 566 (Tex. App. 2003).
178

Charter Oak Fire Ins. Co. v. Hedeen & Companies, 280 F.3d 730 (7th Cir. 2002); Danby of No. America, Inc. v.
Travelers Ins. Co., 25 Fed. App’x 186, 193-194 (4th Cir. 2002); Capitol Specialty Ins. v. Indus. Elects., LLC, 407
Fed. App’x 47 (6th Cir. 2011); Pennsylvania Pulp & Paper Co., 100 S.W.3d 566; Fallon McElligott, Inc. v.
Seaboard Sur. Co., 607 N.W.2d 801, 804 (Minn. App. 2000).

179

180

Supra Undisputed Material Facts ¶¶ 22.

181

Id. ¶ 24.

35

Policy’s Intellectual Property Exclusion and Domain Name Exclusion. The Policy’s Intellectual
Property Exclusion excludes coverage for an advertising injury:
(a) “[a]rising out of any actual or alleged infringement or violation of any
intellectual property right, such as copyright, patent, trademark, trade name, trade
secret, service mark or other designation of origin or authenticity;” or
(b) “[a]ny injury or damage alleged in any claim or ‘suit’ that also alleges an
infringement or violation of any intellectual property right.” 182
4EverYoung’s Counterclaim plainly falls within both subsections of the Intellectual
Property Exclusion. 4EverYoung’s Counterclaim alleges injury “arising out of” (i.e. originating
or flowing from, or in connection with and having a causal relationship to) 183 trademark and
trade name infringement and violation of intellectual property rights 184 for purposes of
subsection (a). It also alleges other damages, such as breach of contract and unjust enrichment, 185
for purposes of subsection (b).
The only exception to the Policy’s Intellectual Property Exclusion states:
[T]his exclusion does not apply if the only allegation in the claim or ‘suit’
involving any intellectual property right is limited to: (1) Infringement, in [the
insured’s] ‘advertisement’, of: (a) Copyright; (b) Slogan; or (c) Title of any
literary or artistic work; or (2) Copying, in [the insured’s] ‘advertisement’, a
person’s or organization’s ‘advertising idea’ or style of ‘advertisement’.” 186
This exception is inapplicable to 4EverYoung’s Counterclaim. 4EverYoung alleges more than
infringement in Derma Pen’s advertisement or copying in Derma Pen’s advertisement of
4EverYoung’s advertising idea or style of advertisement. For example, 4EverYoung alleges

182

Id. ¶ 23.

Utah Transit Auth., 355 P.3d 961-62; Nat’l Farmers Union Prop. & Cas. Co., 577 P.2d at 962; Meadow Valley
Contractors, Inc., 27 P.3d at 597; Fed. Ins. Co., 157 F.3d at 803; In the Matter of Doe by & through Bacon, 2017
WL 5032526, *5.

183

184

4EverYoung’s Counterclaim ¶¶ 83-94, 160-167, 219-316.

185

Id. ¶¶ 219-236, 251-258.

186

Supra Undisputed Material Facts ¶ 23.

36

breach of the Agreement’s post-termination rights and obligations. 187 Additionally,
4EverYoung’s Counterclaim does not allege infringement of 4EverYoung’s copyright, slogan, or
title of any literary or artistic work. And as discussed above, 4EverYoung’s Counterclaim does
not allege copying of 4EverYoung’s “advertising idea” or style of “advertisement” under the
Policy. 188
The Policy’s Cyberflex Endorsement modifies the Intellectual Property Exclusion for
Derma Pen’s “web site or internet related activities” by extending the exception to
“infringement, in [Derma Pen’s] ‘advertisement’ or on ‘[Derma Pen’s] web site.’” 189 But
4EverYoung’s Counterclaim still does not fall into the expanded exception. While 4EverYoung’s
allegations relate to Derma Pen’s web site and internet activities, 4EverYoung does not allege
infringement of 4EverYoung’s copyright, slogan, or title of any literary or artistic work. And
again, as discussed above, 4EverYoung does not allege copying of 4EverYoung’s “advertising
idea” or style of “advertisement” under the Policy. 190 Therefore, the Policy’s Intellectual
Property Exclusion applies to bar coverage for 4EverYoung’s Counterclaim, and the Cyberflex
Endorsement does not change this result.
Nevertheless, even 4EverYoung’s allegations regarding Derma Pen’s web site and
internet related activities fell in the Cyberflex Endorsement’s expanded exception to the
Intellectual Property Exclusion, the Cyberflex Endorsement does not alter the Policy’s Domain
Name Exclusion. The Domain Name Exclusion excludes coverage for any advertising injury
“[a]rising out of the unauthorized use of another’s name or product in [Derma Pen’s] e-mail

187

Id. ¶¶ 8-18; 4EverYoung’s Counterclaim ¶¶ 83-94, 160-167, 219-316.

188

Supra Discussion at 28-32.

189

Id. ¶ 24.

190

Supra Discussion at 28-32.

37

address, domain name or metatags, or any other similar tactics to mislead another’s potential
customers.” 191
Each of 4EverYoung’s allegations regarding Derma Pen’s web site and internet related
activities “aris[es] out of” (i.e. originates or flows from, or is in connection with and has a causal
relationship to) 192 the unauthorized use of “Dermapen” in Derma Pen’s domain name
“www.dermapen.com.” For example, 4EverYoung alleges that Derma Pen refused to comply
with its post-termination obligations under the Agreement by continuing to use the “Dermapen”
trademark and domain name in connection with its sales of inventory acquired from 4EverYoung
and in connection with counterfeit products manufactured and supplied by third parties. 193 And
4EverYoung alleges that in doing so, Derma Pen confused and misled the public by passing off
4EverYoung’s intellectual property and products as Derma Pen’s own, and by passing of Derma
Pen’s actions, goods, and services as being performed by, made by, approved by, sponsored by,
or affiliated with 4EverYoung. 194 Therefore, 4EverYoung’s allegations regarding Derma Pen’s
web site and internet related activities are excluded from coverage by the Policy’s Domain Name
Exclusion.
Because the Policy’s Intellectual Property Exclusion and Domain Name Exclusion bar
coverage for 4EverYoung’s Counterclaim, 4EverYoung’s Counterclaim did not give rise to
potential liability under the Policy to trigger Sentinel’s duty to defend or indemnify.

191

Id. ¶ 22.

Utah Transit Auth., 355 P.3d 961-62; Nat’l Farmers Union Prop. & Cas. Co., 577 P.2d at 962; Meadow Valley
Contractors, Inc., 27 P.3d at 597; Fed. Ins. Co., 157 F.3d at 803; In the Matter of Doe by & through Bacon, 2017
WL 5032526, *5.

192

193

4EverYoung’s Counterclaim ¶ 69, 83, 222.

194

Id. ¶¶ 86, 99, 222, 232, 234, 298-300; Supra Undisputed Material Facts 9-18.

38

Sentinel had no duty to indemnify Derma Pen against 4EverYoung’s Counterclaim
Finally, because “[t]he duty to defend is . . . broader than the duty to indemnify,” where
“there is no duty to defend, there can be no duty to indemnify.” 195 Derma Pen did not respond to
Sentinel’s argument that because no duty to defend exists under the Policy, Sentinel had no duty
to indemnify Derma Pen under the Policy. 196 And Derma Pen’s only arguments regarding
Sentinel’s duty to indemnify come in the context of its analysis of Sentinel’s duty to defend. 197
Therefore, because Sentinel had no duty to defend Derma Pen against 4EverYoung’s
Counterclaim under the Policy, 198 Sentinel had no duty to indemnify Derma Pen under the
Policy.
Conclusion
Viewing the record and all reasonable inferences drawn therefrom in a light most
favorable to Derma Pen, there is no genuine dispute as to any material fact and Sentinel is
entitled to judgment as a matter of law. The Undisputed Material Facts demonstrate that
4EverYoung’s Counterclaim does not allege an advertising injury giving rise to potential liability
under the Policy. 4EverYoung’s allegations do not meet the Policy’s definition of “advertising
injury” and, regardless, fall within the Policy’s exclusions of coverage. Therefore, Sentinel had
no duty to defend and indemnify Derma Pen against 4EverYoung’s Counterclaim in the
Underlying Lawsuit.

Mid-America Pipeline Co., LLC, 2006 WL 1278748, *1 (citing Sharon Steel Corp., 931 P.2d 127); see also
Encompass Indem. Co, 2017 WL 2062868, *9.

195

196

Sentinel’s Motion for Summary Judgment at 24.

197

Derma Pen’s Motion for Summary Judgment; Derma Pen’s Response.

198

Supra Discussion at 26-38.

39

ORDER
IT IS HEREBY ORDERED that Sentinel’s Motion for Summary Judgment 199 is
GRANTED, and Derma Pen’s Motion for Summary Judgment 200 is DENIED. Derma Pen’s
Complaint 201 is DISMISSED with prejudice.
The Clerk is directed to close the case.
Dated June 22, 2021.
BY THE COURT
________________________________________
David Nuffer
United States District Judge

199

Docket no. 26, filed June 15, 2017.

200

Docket no. 18, filed May 5, 2017.

201

Docket no. 45, filed June 3, 2021; docket no. 3-1 on July 22, 2016.

40