7th Circuit upholds dismissal of trailer company’s suit against insurer

A trailer company’s lawsuit brought against its insurer after the company was sued by a competitor for breach of contract was properly dismissed, the 7th Circuit Court of Appeals has affirmed.

In October 2014, Aluminum Trailer Company, located in Nappanee, contracted with BizBox to manufacture trailers using BizBox’s design. ATC had promised not to use BizBox’s design for any other purpose and it manufactured roughly 70 trailers for BizBox customers over the next three years.

Meanwhile, ATC purchased a commercial general liability insurance policy from Westchester Fire Insurance Company in 2016. The policy provided coverage against liability incurred because of an “advertising injury.” That defined term included trade dress infringement.

BizBox then sued ATC for breach of contract and interference with its business expectancies, alleging that ATC manufactured and sold a knock-off trailer using BizBox’s design and sold the trailer directly to a BizBox customer for a lower price using the ATC name and logo.

When Westchester denied coverage to ATC, the latter filed suit seeking coverage relating to BizBox’s complaint, including a defense and indemnity for any liability ATC might incur.

Westchester moved to dismiss ATC’s complaint for failure to state a claim, arguing that BizBox’s underlying suit was not covered under the insurance policy because BizBox did not allege an infringement of its trade dress in ATC’s advertising.

ATC countered that BizBox’s complaint could be construed to plausibly allege a trade dress infringement claim against ATC even though BizBox never alleged as such.

The U.S. District Court for the Northern District of Indiana dismissed ATC’s complaint, finding that BizBox’s complaint did not trigger Westchester’s duty to defend or indemnify ATC under the “personal and advertising” provision of the policy.

In affirming The Aluminum Trailer Company d/b/a ATC Trailers v. Westchester Fire Insurance Company, 21-1538, the 7th Circuit held that the policy did not cover any of the claims BizBox raised in its suit against ATC.

“ATC attempts to read such a claim where none plausibly exists. The district court found ATC’s argument — that its logo affixed to the knock-off trailer is an advertisement as defined under the Policy—unpersuasive because no facts from the BizBox complaint could be construed to support the assertion that the injury stemmed from the alleged advertisement. We agree with the district court,” Circuit Judge Michael Kanne wrote. “Therefore, Westchester’s duty to defend under the ‘personal and advertising injury’ provision of the Policy was never triggered.”

“ATC thus fails to state a claim upon which relief can be granted, so its suit was properly dismissed under Rule 12(b)(6),” it concluded, finding the district court did not err in granting Westchester’s motion to dismiss.

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