A federal judge has ruled that Nationwide General Insurance Company and Nationwide Mutual Insurance Company are not obligated to defend or indemnify two Arizona business owners in a trademark dispute involving the use of the name Warehouse 215, finding that the insurance policies at issue explicitly exclude coverage for intellectual property claims.
The ruling, issued by the United States District Court for the District of Arizona, grants summary judgment in favor of Nationwide, concluding that the insurer’s policies do not extend to the claims brought against the policyholders by the former owners of the venue.
The case arose after Heather Lennon and Atkins & Lennon Libations LLC purchased the Warehouse 215 event venue in downtown Phoenix in 2021 from Bentley Projects, LLC, which was owned by David J. Calverley and the Bentley Dillard Family Trust. The purchase included various intangible assets such as the venue’s website and goodwill, but Bentley Projects retained ownership of the registered trade name Warehouse 215.
Following the sale, Lennon and her company continued to operate the venue under the Warehouse 215 name, using it in promotional materials, liquor license applications, and business filings. Bentley Projects filed a suit in Arizona state court, accusing them of unauthorized use of the trade name, unfair competition, and trademark infringement under both Arizona law and the federal Lanham Act.
At the time, Lennon and her business were insured under commercial general liability policies issued by Nationwide. The policies covered damages related to personal and advertising injury but included explicit exclusions for claims arising from intellectual property violations.
The dispute centered on whether Nationwide’s policies provided coverage for Bentley Projects’ claims.
The policies contained a key exclusion barring coverage for injuries “arising out of the infringement of copyright, patent, trademark, trade secret, or other intellectual property rights.” They also included a breach-of-contract exclusion, which excluded coverage for claims arising from contractual breaches, except in cases where an implied contract involved the use of another party’s advertising idea in an advertisement.
Nationwide initially undertook the defense under a reservation of rights but filed a suit seeking a declaratory judgment that it had no obligation to defend or indemnify Lennon and her company in the underlying litigation.
The defendants argued that an exception to the intellectual property exclusion applied, contending that their use of the Warehouse 215 name qualified as the use of another’s advertising idea and was therefore covered under the policies.
Judge Krissa M. Lanham rejected the argument, holding that the defendants had failed to demonstrate that their use of the name constituted an advertisement or advertising idea as defined by the policies. The judge noted that the claims clearly arose from the alleged unauthorized use of a registered trade name, which is an intellectual property right expressly excluded under the policies’ terms.
The defendants also asserted that Bentley Projects’ claims were improperly characterized as trademark infringement, arguing instead that trade name infringement should not fall under the intellectual property exclusion. The court disagreed, finding that trade names are considered intellectual property rights and are explicitly excluded under the policy language.
Further, the court dismissed the argument that an exception within the breach-of-contract exclusion applied, observing that the exception pertains only to implied contracts concerning advertising ideas in advertisements, which was not relevant to the case.
Concluding that Bentley Projects’ claims were based on intellectual property violations, the court determined that Nationwide had no duty to defend or indemnify the defendants.
The ruling underscores how courts interpret insurance policy exclusions, particularly in intellectual property disputes. It highlights the importance of closely reviewing policy language and understanding the scope of coverage limitations, especially when businesses are involved in transactions or branding that may give rise to such claims.
Nationwide declined to comment on the ruling. Attorneys for Lennon and Atkins & Lennon Libations did not immediately respond to requests for comment.
