Federal Court Rules Nationwide General Insurance Not Required to Defend Arizona Venue Owners in Trademark Dispute

A federal judge in the District of Arizona 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 concerning the use of the Warehouse 215 name. The decision grants summary judgment to Nationwide, concluding that the insurer’s commercial general liability policies exclude coverage for intellectual property claims.

The dispute arose after Heather Lennon and Atkins & Lennon Libations LLC purchased the Warehouse 215 event venue in downtown Phoenix in 2021 from Bentley Projects, LLC, owned by David J. Calverley and the Bentley Dillard Family Trust. While the sale included intangible assets such as the venue’s website and goodwill, Bentley Projects retained ownership of the registered trade name Warehouse 215.

Following the acquisition, Lennon and her company continued operating the venue under the Warehouse 215 name, using it in promotional materials, liquor license applications, and business filings. Bentley Projects subsequently filed suit in Arizona state court, alleging unauthorized use of the trade name, unfair competition, and trademark infringement under both state law and the federal Lanham Act.

At the time of the lawsuit, Lennon and Atkins & Lennon Libations were insured under Nationwide’s commercial general liability policies. These policies covered damages related to personal and advertising injury but contained explicit exclusions for claims arising from infringement of intellectual property rights, including trademarks.

The core issue was whether Nationwide’s policies provided coverage for Bentley Projects’ claims. The policies included 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 contained a breach-of-contract exclusion, which excepted coverage only for implied contracts involving the use of another party’s advertising idea in an advertisement.

Nationwide initially provided a defense under a reservation of rights but later filed a declaratory judgment action seeking to confirm it had no obligation to defend or indemnify Lennon and her company.

The defendants argued that an exception to the intellectual property exclusion applied, asserting their use of the Warehouse 215 name qualified as the use of another’s advertising idea and was thus covered. However, U.S. District Judge Krissa M. Lanham rejected this argument, finding that the defendants failed to show their use constituted an advertisement or advertising idea as defined by the policies.

Judge Lanham emphasized that the claims clearly arose from the alleged unauthorized use of a registered trade name, which is an intellectual property right explicitly excluded under the policies. The court also dismissed the defendants’ contention that trade name infringement should not fall under the intellectual property exclusion, holding that trade names are considered intellectual property rights covered by the exclusion.

Additionally, the court rejected the argument that an exception within the breach-of-contract exclusion applied, noting that the exception pertains solely to implied contracts concerning advertising ideas in advertisements, which was not relevant here.

In conclusion, the court determined that Bentley Projects’ claims were based on intellectual property violations and that Nationwide had no duty to defend or indemnify Lennon and Atkins & Lennon Libations.

This ruling highlights the critical importance of carefully reviewing insurance policy language, particularly intellectual property exclusions, when businesses engage in transactions or branding that may trigger such claims. It also underscores how courts interpret these exclusions strictly, limiting coverage for trademark and trade name disputes.

Nationwide declined to comment on the ruling. Attorneys representing Lennon and Atkins & Lennon Libations did not immediately respond to requests for comment.