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The Hanover Insurance Co. v. Anova Food, LLC

United States District Court, D. Hawaii

March 24, 2016

THE HANOVER INSURANCE COMPANY; MASSACHUSETTS BAY INSURANCE COMPANY, Plaintiffs,
v.
ANOVA FOOD, LLC; ANOVA FOOD, INC. Defendants. ANOVA FOOD, INC.; ANOVA FOOD, LLC, Counter-Claimants,
v.
THE HANOVER INSURANCE COMPANY; MASSACHUSETTS BAY INSURANCE COMPANY, Counter-Defendants.

ORDER GRANTING, IN PART, AND DENYING, IN PART, DEFENDANT/COUNTER-CLAIMANT ANOVA FOOD, LLC’S MOTION FOR PARTIAL SUMMARY JUDGMENT (ECF No. 64)

Helen Gillmor United States District Judge

Plaintiffs/Counter-Defendants The Hanover Insurance Company and Massachusetts Bay Insurance Company (“Hanover Companies”) have filed a declaratory judgment action against Defendants/Counter-Claimants Anova Food, LLC and Anova Food, Inc.

Defendant/Counter-Claimant Anova Food, LLC (“Anova LLC”) filed a Counterclaim against the Hanover Companies for breach of contract and bad faith relating to the insurance contracts at issue.

The declaratory judgment action seeks to determine the Hanover Companies’ duty to defend and duty to indemnify pursuant to insurance policies that were issued to Anova Holding USA, LLC. The duties are sought in connection with an underlying lawsuit that has since been settled in the United States District Court for the District of Hawaii, Kowalski v. Anova Food, LLC, et al., Civ. No. 11-00795HG-RLP (“Underlying Lawsuit”).

The Underlying Lawsuit was brought against Anova Food, LLC and Anova Food, Inc. for patent infringement and false advertising. The Hanover Companies tendered a defense and provided counsel for Anova Food, LLC in the Underlying Lawsuit. The Underlying Lawsuit was settled and ordered dismissed as to all claims and all parties, and was closed on April 23, 2015.

The Summary Judgment Motion Before the Court:

Anova LLC has filed the Motion before the Court for Partial Summary Judgment. Anova LLC argues the Hanover Companies owed it a duty to defend in the Underlying Lawsuit and seeks summary judgment on the issue of their duty to defend in Counts I, II, and III of the First Amended Complaint.

Anova LLC asserts that Florida law applies to the interpretation of the insurance policies at issue and claims that pursuant to Florida law, it was owed a duty to defend.

Anova LLC also seeks summary judgment on the issue of liability as stated in Count I of its Counterclaim for Breach of Contract. Anova LLC asserts that the Hanover Companies breached the insurance policies by failing to pay for all of Anova LLC’s attorneys’ fees and defense costs incurred in defending the Underlying Lawsuit.

The Court finds that Florida law applies to the interpretation of the insurance policies at issue and Anova LLC was owed a duty to defend by the Hanover Companies.

The Court finds that Anova LLC is not entitled to pre-tender attorneys’ fees.

There are genuine issues of material fact that preclude entering summary judgment as to the Counterclaim for breach of contract concerning payment of Anova LLC’s post-tender attorneys’ fees.

Defendant/Counter-Claimant Anova Food, LLC’s MOTION FOR PARTIAL SUMMARY JUDGMENT ESTABLISHING PLAINTIFFS/COUTNERCLAIM DEFENDANTS’ DUTY TO DEFEND (ECF No. 64) is GRANTED, IN PART, AND DENIED, IN PART.

PROCEDURAL HISTORY

On June 19, 2014, the Hanover Companies filed a Complaint. (ECF No. 1).

On October 2, 2014, Anova LLC and Anova Food, Inc. filed an Answer and Counterclaim. (ECF No. 14).

On May 29, 2015, the Hanover Insurance Companies filed a First Amended Complaint. (ECF No. 39).

On June 12, 2015, Anova LLC filed a Counterclaim in Response to the First Amended Complaint. (ECF No. 40-1).

On December 23, 2015, Anova LLC filed DEFENDANT ANOVA FOOD LLC’S MOTION FOR PARTIAL SUMMARY JUDGMENT ESTABLISHING PLAINTIFFS/COUNTERCLAIM DEFENDANTS’ DUTY TO DEFEND. (ECF No. 64). Anova LLC also filed a MEMORANDUM IN SUPPORT OF ITS MOTION (ECF No. 65), a CONCISE STATEMENT OF MATERIAL FACTS (ECF No. 74), and a Declaration of Darren Zobrist. (ECF No. 75).

On January 20, 2016, the Hanover Insurance Companies filed PLAINTIFFS THE HANOVER INSURANCE COMPANY AND MASSACHUSETTS BAY INSURANCE COMPANY’S MEMORANDUM IN OPPOSITION TO DEFENDANT ANOVA FOOD, LLC’S MOTION FOR PARTIAL SUMMARY JUDGMENT ESTABLISHING PLAINTIFFS/COUNTERCLAIM DEFENDANTS’ DUTY TO DEFEND. (ECF No. 79). They also filed PLAINTIFFS THE HANOVER INSURANCE COMPANY AND MASSACHUSETTS BAY INSURANCE COMPANY’S RESPONSE TO THE CONCISE STATEMENT OF MATERIAL FACTS IN SUPPORT OF ANOVA LLC’S MOTION FOR PARTIAL SUMMARY JUDGMENT ESTABLISHING PLAINTIFFS/COUNTERCLAIM DEFENDANTS’ DUTY TO DEFEND. (ECF No. 80).

On February 11, 2016, Anova LLC filed DEFENDANT ANOVA FOOD LLC’S REPLY MEMORANDUM IN SUPPORT OF ITS MOTION FOR PARTIAL SUMMARY JUDGMENT ESTABLISHING PLAINTIFFS/COUNTERCLAIM DEFENDANTS’ DUTY TO DEFEND. (ECF No. 83). Anova LLC also filed the SECOND DECLARATION OF DARREN ZOBRIST IN SUPPORT OF DEFENDANT ANOVA FOOD, LLC’S MOTION FOR PARTIAL SUMMARY JUDGMENT ESTABLISHING PLAINTIFFS/COUNTERCLAIM DEFENDANTS’ DUTY TO DEFEND. (ECF No. 84).

On February 23, 2016, the Parties submitted a Proposed Stipulation to the Court to continue the hearing date for Anova LLC’s Motion for Partial Summary Judgment. (ECF No. 88). The Proposed Stipulation was denied. (Id.)

On February 29, 2016, the Court held a hearing on Anova LLC’s Motion for Partial Summary Judgment. (ECF No. 94).

BACKGROUND

ANOVA FOOD, LLC

Defendant/Counter-Claimant Anova Food, LLC (“Anova LLC”) is a company that sells and markets fish. (Declaration of Darren Zobrist, Chief Executive Officer of Anova LLC (“Zobrist Decl.”) at ¶ 2, ECF No. 75).

Anova LLC is a Virginia limited liability company with its principal place of business in Tampa, Florida. (Id.)

ANOVA FOOD, INC.

Anova Food, Inc. is a co-defendant in this case but is not a party to the Motion for Partial Summary Judgment filed by Anova LLC. Anova Food, Inc. ceased operations in May 2010, before the start of the insurance policies at issue in this case. (Zobrist Decl. at ¶ 2, ECF No. 75).

Anova Food, Inc. had separate insurers and separate counsel from Anova LLC in the Underlying Lawsuit. (Id. at ¶¶ 8-9). Anova Food, Inc. reached a separate settlement from Anova LLC in the Underlying Lawsuit. (Id. at ¶¶ 8-10).

INSURANCE POLICIES AT ISSUE

The Declaratory Judgment action filed by the Plaintiffs/Counterclaim-Defendants The Hanover Insurance Company and Massachusetts Bay Insurance Company (hereinafter “Hanover Companies”)[1] concerns four insurance policies that covered Anova LLC.

The Parties agree that the Hanover Companies were responsible for four insurance policies issued to Anova Holding USA, LLC, which insured Anova LLC. (Def.’s Concise Statement of Facts at ¶ 3, ECF No. 74; Pla.’s Concise Statement of Facts in Opposition at ¶ 3, ECF No. 80).

The four insurance policies were issued and delivered to Anova LLC at its principal place of business in Florida. (Zobrist Decl. at ¶ 6, ECF No. 75).

Each of the four policies provided coverage for claims of “personal and advertising injury.” Each of the policies included a number of standard exclusions for personal and advertising injuries. The policies also stated that insurance did not apply to personal and advertising injury “arising out of” infringement or violation of copyright, patent, trademark, trade secret, or other intellectual property rights or laws.

The Hanover Companies do not seek to apply the exclusion for injuries “arising out of” infringement of intellectual property to the issue of their duty to defend, but the Hanover Companies maintain that they may seek to apply the exclusion to the issues of indemnity and reimbursement. (Pla.’s Memo. in Opp. at pp. 28-30, ECF No. 79).

The OneBeacon Policies

The first two policies were a primary commercial liability policy and an umbrella commercial liability policy that were issued by OneBeacon Insurance Company to Anova Holding USA, LLC, Policy No. 713-00-91-51-0002, effective from July 1, 2010 to July 1, 2011 (“OneBeacon Policies”). (OneBeacon Policies attached as Exhibit B to Pla.’s First Amended Complaint, ECF Nos. 39-2-4).

The policies included coverage for claims of “personal and advertising injury.” (OneBeacon Primary Policy at p. 9, Coverage B Personal and Advertising Injury Liability, ECF No. 39-3; OneBeacon Umbrella Policy at p. 22, Coverage B. Personal and Advertising Injury Liability, ECF No. 39-4).

The Hanover Companies state that they purchased the renewal rights to the OneBeacon Policies and assumed the adjustment and payment of claims within the OneBeacon Policies. (Pla.’s Memo. in Opp. at p. 4, n.1, ECF No. 79).

The Massachusetts Bay Policy

The third policy at issue is a primary commercial liability policy issued by Massachusetts Bay Insurance Company to Anova Holding USA, LLC, Policy No. LDY 9192618 00, effective July 1, 2011 to July 1, 2012 and renewed through and including July 11, 2014 (“The Massachusetts Bay Policy”). (Massachusetts Bay Insurance Company Policy attached as Ex. C to Pla.’s Amended Complaint, ECF No. 39-5). The policy also covered claims of “personal and advertising injury.” (Massachusetts Bay Policy at p. 36, Coverage B Personal and Advertising Injury Liability, ECF No. 39-5).

The Hanover Policy

The final policy at issue is a commercial umbrella liability policy issued by The Hanover Insurance Company to Anova Holding USA, LLC, Policy No. UHY 9124369 00, effective from July 1, 2011 to July 1, 2012 (“Hanover Policy”). (The Hanover Bay Insurance Company Policy attached as Ex. D to Pla.’s Amended Complaint, ECF No. 39-6). The Hanover Policy, just as the first three policies, included coverage for claims of “personal and advertising injury.” (Hanover Policy at p. 14, Coverage B - Personal and Advertising Injury Liability, ECF No. 39-6).

THE UNDERLYING LAWSUIT

The coverage dispute arises from allegations in a patent infringement and false advertising case that was filed in the United States District Court for the District of Hawaii.

On December 29, 2011, the Underlying Lawsuit, William R. Kowalski; Hawaii International Seafood, Inc. v. Anova Food, LLC; Anova Food, Inc., et al., Civ. No. 11-00795HG-RLP, was filed against Anova Food, LLC and Anova Food, Inc.

The First Amended Complaint in Kowalski alleged patent infringement claims and false advertising claims, asserting that “Defendants [Anova Food, Inc. and Anova Food, LLC] falsely, misleadingly, deceptively advertised, promoted, and sold fish.” (Kowalski v. Anova Food, LLC, et al., 11-cv-0079HG-RLP, First Amended Complaint filed Jan. 2, 2012, ECF No. 6; attached as Ex. A to Pla.’s Amended Complaint, ECF No. 39-1).

The allegations in the Kowalski First Amended Complaint covered a period of time between 1999 and 2012, a portion of which time Anova LLC was covered by the Hanover Companies’ insurance policies. (Id. at ¶¶ 8-9, 16).

Anova LLC began operations in May 2010 after it acquired certain assets from Anova Food, Inc., which had ceased operations. (Zobrist Decl. at ¶ 2, ECF No. 75). The Motion before the Court pertains only to the duty to defend Anova LLC and the Order does not include the issue of a duty to defend Anova Food, Inc. in the Underlying Lawsuit.

Anova LLC was covered by the insurance policies at issue beginning on July 1, 2010. (See Policies attached as Exs. B, C, D to Pla.’s First Amended Complaint, ECF Nos. 39-2-6).

After the Underlying Lawsuit was filed on December 29, 2011, Anova LLC retained the Zobrist law firm, located in Charlottesville, Virginia, to defend it in the Underlying Suit. (Zobrist Decl. at ¶ 5, ECF No. 75).

Anova LLC also retained Attorney Gary Grimmer as local counsel in Hawaii to represent it in the proceedings before the U.S. District Court for the District of Hawaii. (Id.)

On October 12, 2012, more than nine months after the Underlying Lawsuit was filed, Anova LLC requested the Hanover Companies provide it a defense to the Underlying Suit pursuant to the relevant insurance policies. (Zobrist Decl. at ¶ 6, ECF No. 75).

A few days later the Hanover Companies acknowledged receipt of the request for a defense by letter dated October 15, 2012. (Letter from Hanover Insurance Group to counsel for Anova LLC dated October 15, 2012, attached as Ex. 2 to Pla.’s Concise Statement of Fact, ECF No. 80-3).

On December 4, 2012, the Hanover Companies agreed to provide a defense to Anova LLC, but included a reservation of rights statement. (Letter from Hanover Regional Liability Adjuster Stephen E. Colville, dated December 4, 2012, to counsel for Anova LLC, attached as Ex. 3 to Pla.’s Concise Statement of Facts, ECF No. 80-4).

A week later, on December 11, 2012, the Zobrist law firm filed its appearance as pro hac vice counsel of record in the Underlying Lawsuit. (Kowalski v. Anova Food, LLC, et al., 11-cv-00795HG-RLP, Order Granting Application to ...


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