On Wisconsin, Part II
In Guaranty Bank v. Chubb Corp., No. 07-3367 (7th Cir. July 17, 2008), the Midwest Guaranty Bank sued “Guaranty Bank” for alleged violation’s of Michigan’s unfair competition law and for infringing the plaintiff’s trademark by announcing its intent to enter the same geographic market with such a similar name. Guaranty Bank sought coverage from Chubb under a Great Northern CGL policy that covered injury “caused by an offense of infringing, in that particular part of your advertisement about your goods, products or services upon their registered collective mark, registered service mark or other registered trademarked name, slogan, symbol or title.” Since the plaintiff’s claim was for the infringement of an unregistered trademark and as Midwest Guaranty Bank was not claiming such an infringement, the Seventh Circuit ruled that Great Northern would not have had a duty to defend.
While this aspect of the court’s ruling might be subject to reconsideration in light of the Wisconsin Supreme Court recent Acuity opinion, the ruling may yet stand in light of the Seventh Circuit’s independent declaration that coverage was barred by the insured’s failure to provide timely notice to Chubb. In this case, Guaranty Bank did not give notice for over a year, during which time a preliminary injunction had entered against the insured.
The District Court had granted summary judgment to Great Northern based upon the Wisconsin statute that places the burden of disproving prejudice on a policyholder where notice is delayed by more than a year. The Seventh Circuit noted, moreover, that even if this burden shifting had not occurred, prejudice likely existed in this case owing to the momentum that the plaintiff’s claims had received as the result of the injunctive remedy as well as the inability of Great Northern to engage the case earlier and undertake a defense or otherwise attempt to resolve it. In dicta, the Seventh Circuit also noted that the “lenity” that the Wisconsin legislature and courts might exhibit to policyholders was for the benefit of individual insureds. The court observed that businesses and other sophisticated insureds would have well aware of the requirement of timely notice and should not be permitted to avoid the insurer taking control of the defense by “spending generously for counsel on the insurer’s dime even though the insurer might be able to defend the suit more cheaply.”
It should come as no surprise to those who follow the Seventh Circuit that the author of Guaranty Bank is Judge Posner.
