Eighth Circuit Finds Duty to Defend Under Media Liability Policy Despite Broad Related Acts Provision

The United States Court of Appeals for the Eight Circuit, applying Minnesota law, has held that a media liability insurer had a duty to defend a reseller of computer networking products against a trademark infringement lawsuit alleging infringement both before and after the policy’s retroactive date. Dexon Computer, Inc. v. Travelers Prop. Cas. Co. of Am., 2024 WL 2267372 (8th Cir. May 20, 2024).

The insured computer networking products reseller sourced new and used brand name products from multiple suppliers for resale. A manufacturer sued the reseller for trademark infringement, alleging in the complaint specific instances of trademark infringement between 2006 and 2010 that constituted the basis of a previous suit, which was dismissed with prejudice in 2011, as well as 35 alleged instances of infringement between 2015 and 2020. The reseller tendered defense of the lawsuit to its media liability insurer, which denied coverage on the grounds that all of the alleged instances of trademark infringement were “related” wrongful acts, the first of which occurred well before the policy’s May 18, 2019 retroactive date. The policy at issue defined “related” as wrongful acts “connected, tied or linked by any fact, circumstance, event, transaction, cause of series of related facts, circumstances, situations, events, transaction or causes.” The reseller disputed the denial, arguing that the alleged instances of infringement related to different products, purchased at different times, from different sources, by different employees, and sold to different customers. The insurer maintained its denial, and the insured initiated coverage litigation. The trial court denied the insurer’s motion to dismiss, holding the insurer had a duty to defend.

The Eighth Circuit affirmed on appeal. As an initial matter, the appellate court held that in evaluating the duty to defend, Minnesota law requires that insurers rely not only on the four corners of the underlying complaint but also on “independent knowledge of facts that there may be a covered claim,” even when “the insured tells the insurer such facts.” Having determined that the insurer “was aware that the alleged acts of infringement occurred at different times, involved different customers who were sold different products sourced from different suppliers, and that [the insured] had received no prior claims involving products sourced from any of these suppliers,” the appellate court held that the insurer was obligated to take this information into account when considering the duty to defend. Based on this information, the court determined the “claim is not clearly outside coverage,” noting that the insurer knew that the alleged trademark infringements related to different products sourced from different suppliers, and no prior claims involved these products. Thus, the Eighth Circuit concluded that it “cannot say, as a matter of law, that every act of infringement committed after the Retroactive Date is related to a pre-Retroactive Date act of infringement.” As a result, the insurer had a duty to defend the entire underlying lawsuit.