Country Mutual Insurance Co. v. Livorsi Marine, Inc.

Gaffrig Performance Industries, Inc. and Livorsi Marine, Inc. (defendant) had a trademark dispute related to the use of the “Gaffrig Precision Instruments” name. Both Gaffrig and Livorsi were insured by Country Mutual Insurance Company (plaintiff) under similar policies, which covered each of them for damages due to bodily and advertising injuries. Both policies gave Country Mutual the right and duty to defend the insureds against any lawsuits seeking damages for covered injuries. Both policies required that the insureds provide Country Mutual with written notice of lawsuits as soon as practicable. Before Gaffrig and Livorsi filed their suits against each other, Livorsi’s owner had spoken with the Country Mutual agent who serviced both Gaffrig and Livorsi’s policies and expressed concern about the dispute between the two. Both lawsuits were filed on December 1, 1999, alleging various trademark violations. However, neither Gaffrig nor Livorsi informed Country Mutual of their lawsuits until 18 months after the suits were filed. Once it received notification, Country Mutual sought a declaratory judgment that it owed no duty to defend or indemnify Gaffrig or Livorsi. A state circuit court found that both lawsuits were covered under Gaffrig’s and Livorsi’s respective policies, triggering Country Mutual’s duty to defend both parties. However, the court concluded that neither Gaffrig nor Livorsi had met their policy’s notice requirement. Gaffrig and Livorsi both argued that Country Mutual had not been prejudiced by the notice delay because Country Mutual would have had to hire independent counsel for each insured or else face a conflict of interest representing one against another. The circuit court rendered judgment in favor of Country Mutual because the state did not employ a notice-prejudice rule. Gaffrig and Livorsi appealed. While the appeal was pending, the circuit court granted injunctive relief in favor of Gaffrig, ordering Livorsi to stop using Gaffrig’s trademark. Because no monetary damages were awarded in the underlying suit, the only issue on appeal was Country Mutual’s duty to defend.