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Scout, LLC v. Truck Insurance Exchange

Supreme Court of Idaho

January 29, 2019

SCOUT, LLC, an Idaho limited liability company, dba Double Tap Pub, Plaintiff-Appellant,
v.
TRUCK INSURANCE EXCHANGE, an inter-insurance exchange organized under the laws of the State of California, Defendant-Respondent, and FARMERS GROUP, INC., a California corporation, Defendant.

          Appeal from the District Court of the Fourth Judicial District of the State of Idaho, Ada County. Hon. Steven Hippler, District Judge.

         The decision of the district court is affirmed.

          Simmons Townsend, PLLC, Boise, for appellant. Chynna C. Simmons argued.

          Elam & Burke, P.A., Boise, for respondent. Jeffrey A. Thomson argued.

          BRODY, Justice.

         This case stems from Truck Insurance's refusal to defend its insured, Scout, LLC, in a trademark infringement action brought over Scout's use of the trademark ROGUE in the advertisement of its restaurant, Gone Rogue Pub. Scout claims that its use of ROGUE constituted an advertising injury that was covered by the insurance it purchased from Truck Insurance. Truck Insurance does not dispute that ordinarily Scout's advertising injury would be covered and it would accordingly have a duty to defend, but contends that in this situation coverage was properly declined based on a prior publication exclusion found in the policy. The district court granted summary judgment to Truck Insurance after determining that a Facebook post of Scout's Gone Rogue Pub logo before insurance coverage began triggered the prior publication exclusion, thereby relieving Truck Insurance of the duty to defend Scout. Scout appeals the district court's decision granting Truck Insurance summary judgment. We affirm the judgment of the district court.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         On October 1, 2012, Scout, an Idaho limited liability company, purchased Casa Del Sol, a downtown restaurant in Boise. The members of Scout decided to renovate the restaurant into a pub and brand it as Gone Rogue Pub. On October 10, Scout posted a public picture of the Gone Rogue logo on Facebook, accompanied by the words, "Here is our new logo! Signs are going up today and tomorrow! Hope everyone likes it! Let us know what you guys think!" In the same month, Scout registered Gone Rogue Pub as an assumed business name with the Idaho Secretary of State. No other advertising or logos were displayed until after November 7, 2012.

         On November 7, 2012, Scout requested a commercial business insurance policy through Truck Insurance and a policy was issued by Farmers Insurance. Scout then began the process of opening Gone Rogue Pub: obtaining an alcohol license, hanging signs, and ordering merchandise and glassware emblazoned with the Gone Rogue Pub logo. Gone Rogue Pub officially opened sometime around November 21, 2012.

         All was well with Gone Rogue Pub until the Oregon Brewing Company (OBC) noticed Gone Rogue's similarity to its federally registered ROGUE trademarks. In January 2013, OBC informed Gone Rogue that it believed Gone Rogue was infringing on five of its registered ROGUE trademarks, including use of the mark in connection with: (1) beer and ale; (2) restaurant, pub and catering services; (3) beverage glassware; (4) beer; and, (5) clothing. All registrations predated Gone Rogue's use by at least two years. For a year-and-a-half OBC attempted to negotiate a deal with Gone Rogue, but to no avail.

         In October 2014, OBC filed suit against Scout, alleging in part that "[i]n October 2012, long after OBC's first use and registration of the mark ROGUE, [Gone Rogue Pub] commenced use of the mark ROGUE as the name of their restaurant and bar." OBC asserted six different claims against Scout: (1) trademark counterfeiting under the Lanham Act; (2) trademark infringement; (3) unfair competition and false designation of origin under the Lanham Act; (4) cyber-squatting under the Lanham Act; (5) unfair business practices under Idaho law; and, (5) common law trademark infringement. Exhibits were attached to the complaint featuring a host of screenshots from Scout's Facebook page showing Gone Rogue's marks. OBC sought injunctive relief, attorney fees and costs, and treble damages.

         On December 3, 2013, Scout informed Truck Insurance of the OBC lawsuit and requested coordination for legal representation. Scout's liability policy included coverage for any "'advertising injury' . . . caused by an offense committed in the course of advertising your goods, products or services; but only if the offense was committed in the 'coverage territory' during the policy period." An advertising injury was defined as "[m]isappropriation of advertising ideas or style of doing business; or [i]nfringment of copyright, title or slogan." However, the policy was clear that Truck Insurance would "have no duty to defend the insured against any 'suit' seeking damages for . . . 'advertising injury'" to which the insurance did not apply.

         Truck Insurance took the position that Scout's claim was not covered under the liability policy because of an exclusionary provision in the policy that denied coverage for any "'advertising injury' [a]rising out of oral or written publication of material whose first publication took place before the beginning of the policy period." The OBC complaint stated that the infringing activity began in October 2012-a month before Scout's liability coverage commenced--when Scout posted the Gone Rogue Pub logo on its Facebook page.

         Not wanting to scuffle with OBC without assistance from Truck Insurance, Scout settled with OBC, agreeing to cease using ROGUE as a mark. Scout then rebranded "Gone Rogue Pub" as "Double-Tap Pub." A suit was thereafter brought by Scout against Truck Insurance alleging breach of contract, breach of the covenant of good faith and fair dealing, and bad faith failure to defend. After the parties conducted written discovery, Truck Insurance moved for summary judgment, arguing that there was no duty to defend, ergo no breach of contract. Scout countered with its own motion for summary judgment, contending that the prior publication exclusion was inapplicable to the OBC complaint, thus Truck Insurance breached its duty to defend Scout in the OBC suit.

         The district court concluded that there was no duty to defend on Truck Insurance's part. A judgment was then entered dismissing Scout's claims with prejudice. Scout timely appealed the judgment. We affirm the judgment of the district court.

         II. ISSUES ON APPEAL

         A. Whether the district court properly granted summary judgment dismissing the breach of contract claims on its determination that no duty to defend existed because of the insurance contract's prior publication exclusion.

         B. Whether the district court properly granted summary judgment dismissing the breach of implied covenant of good faith and fair dealing and bad faith claims on the grounds that there was no breach of contract.

         C. Whether Scout is entitled to attorney fees on appeal under Idaho Code section 41-1839.

         III. STANDARD OF REVIEW

         When reviewing a grant of a motion for summary judgment, this Court applies the same standard used by the district court in ruling on the motion. Farm Bureau Inc. Co. of Idaho v. Kinsey, 149 Idaho 415, 418, 234 P.3d 739, 742 (2010). "Summary judgment is properly granted when 'the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.'" Id.; see Idaho R. Civ. P. 56. This Court liberally construes all disputed facts and draws all reasonable inferences from the record in favor of the nonmoving party. Nettleton v. Canyon Outdoor Media, LLC, 163 Idaho 70, 72-73, 408 P.3d 68, 70-71 (2017). "The moving party carries the burden of proving the absence of a genuine issue of material fact." Id. at 73, 408 P.3d at 71. Each party's motion for summary judgment is evaluated on its own merits; the filing of cross-motions for summary judgment does not establish the absence of genuine issues of material fact, nor does it transform the trial court that hears the motions into the trier of fact. Id.

         IV. ANALYSIS

         A. A duty to defend was not triggered because the prior publication exclusion removed any liability from Truck Insurance.

         The district court held that the prior publication exclusion in Truck Insurance's liability policy clearly and unambiguously excluded coverage for the allegations found in the OBC complaint when read broadly. The parties do not dispute that the allegations in the OBC complaint are advertising injuries covered by the business liability policy, but only dispute whether the prior publication exclusion allowed Truck Insurance to deny the duty to defend. The relevant portions of the insurance policy pertaining to coverage are as follows:

         A. ...


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