The opinion of the court was delivered by: Simandle, District Judge
The plaintiffs in this matter are two entities (Columbus Farmers Market, LLC and Columbus Flea World, LLC) that own and/or operate a large flea market in Burlington County, New Jersey and the principals of these entities (John C. Ackerman, Jr. and Charles F. Pratt)(collectively, the "Plaintiffs").*fn1 The Plaintiffs are also defendants in a related case pending before this Court, Arista Records, Inc. v. Flea World No. 03-2670 (D.N.J. June 3, 2003)(the "Arista Litigation"), in which they face potentially millions of dollars in damages for contributory copyright infringement and vicarious liability related to the sale of counterfeit and contraband compact discs by third-party vendors at the flea market. The present matter is an insurance case in which Plaintiffs (1) seek a declaration that the insurance policies at issue give rise to a duty to defend Plaintiffs in the Arista Litigation, (2) claim that the insurers breached their respective insurance contracts with Plaintiffs, and (3) seek a declaratory judgment that the insurers have a duty to indemnify Plaintiffs against all claims in the Arista Litigation.
Presently before the Court are the following motions: (1) Plaintiffs' motion for partial summary judgment on the issue of whether the defendant-insurers have a duty to defend Plaintiffs in the Arista Litigation [Docket Item No. 12]; (2) defendant-insurer Lead Underwriter of Certain Underwriters at Lloyd's London ("Lloyd's") motion for summary judgment [Docket Item No. 14];*fn2 and (3) defendant-insurer Farm Family Casualty Insurance Company's ("Farm Family") cross-motion for summary judgment [Docket Item No. 17]. Central to these three motions is whether the insurance policies at issue provide coverage under the "advertising injury" provision for the contributory copyright infringement and vicarious liability claims alleged in the Arista Litigation. A second and related issue is whether coverage is excluded under a variety of defenses raised by Lloyd's and/or Farm Family. Third, if the Court holds that Lloyd's and Farm Family have a duty to defend, the Court must determine how the amount payable to Plaintiffs should be allocated between the underwriters who issued the policies. Finally, the Court must address Lloyd's and Farm Family's arguments that, because Lloyd's and Farm Family have no duty to Plaintiffs in the Arista Litigation, summary judgment is appropriate on the issue of Lloyd's and Farm Family's duty to indemnify.
For the reasons expressed in this Opinion, Plaintiffs' motion for partial summary judgment will be granted in part and denied in part. The Court will grant Plaintiffs' motion pertaining to Lloyd's and Farm Family's duty to defend Plaintiffs in the Arista Litigation under the insurance policies in effect from July 1, 1999 through July 1, 2003. However, Plaintiffs' motion will be denied relating to the policy in place from July 1, 2003 to July 1, 2004 because, as Plaintiffs concede, there is no coverage under the policy that was in place between July 1, 2003 through July 1, 2004. The Court will also deny Plaintiffs' motion as to the issues of (a) whether Columbus Flea World, LLC is covered by the Farm Family insurance policy (it is not) and (b) whether the defense costs should be allocated equally among the three underwriters (they will not be and the Court will require additional submissions from the parties as discussed in Section III.D, infra.) In addition, Farm Family's motion for summary judgment on the issue of the duty to indemnify will be denied as to Columbus Farmers Market, LLC and granted as to Columbus Flea World, LLC; and Lloyd's motion for summary judgment will be denied with respect to its three policies pre-dating July 1, 2003 and granted with respect to the July 1, 2003 - July 1, 2004 policy.
This action is a diversity action brought pursuant to 28 U.S.C. §§ 1332(a)(1) and (2). Plaintiffs include Columbus Farmers Market, LLC, Columbus Flea World, LLC and the principals of these limited liability companies, John C. Ackerman, Jr. and Charles F. Pratt. The Plaintiffs operate the Columbus Farmers Market (the "Market"), one of the largest flea markets on the east coast. The ownership and operation of the Market is divided between the two Corporate Plaintiffs. See Arista Records, Inc. v. Flea World, Inc., No. 03-2670, 2006 U.S. Dist. LEXIS 14988, *8 (D.N.J. Mar. 31, 2006). Currently, the outdoor market is operated and maintained by Columbus Flea World, LLC, while the indoor portion of the market is operated by Columbus Farmers Market, LLC. Id. Defendants are Farm Family Casualty Insurance Company and two underwriters affiliated with Lloyd's, London ---J.A. Tweedie ("Tweedie") and M.W. Lawrence ("Lawrence").*fn3
B. The Insurance Policies
In 1999, Farm Family issued a commercial lines insurance policy with comprehensive general liability ("CGL") coverage to Columbus Farmers Market, LLC for the period of July 1, 1999 to July 1, 2000. Tweedie was an underwriter of an insurance policy with CGL coverage issued for the period July 1, 2000 to July 1, 2001 and another policy covering the period of July 1, 2001 to July 1, 2002. Lawrence was an underwriter on the policy of July 1, 2002 to July 1, 2003.
All policies (whether issued by Farm Family, Tweedie or Lawrence) were issued on forms prepared by Insurance Services Office, Inc. ("ISO"). Specifically, Farm Family issued CGL Policy No. 2903x0155 to Columbus Farmers Market, LLC. (Plaintiffs' Br. at Ex. 7.) The Farm Family CGL Policy states, in relevant part:
COVERAGE B. PERSONAL AND ADVERTISING INJURY LIABILITY
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of . . . "advertising injury" to which this coverage part applies. We will have the right and duty to defend any "suit" seeking those damages. We may at our discretion investigate any "occurrence" or offense and settle any claim or "suit" that may result.... But
1. The amount we will pay for damages is limited as described in LIMITS of INSURANCE
b. This insurance applies to: . . .
1. "Personal injury" caused by an offense arising out of your business, excluding advertising, publishing, broadcasting or telecasting done by or for you;
2. "Advertising injury" caused by an offense committed in the course of advertising your goods, products or services....
This insurance does not apply to:
a. "Personal injury" or "advertising injury":
(1) Arising out of oral or written publication of material, if done by or at the direction of the insured with knowledge of its falsity;
(2) Arising out of oral or written publication of material whose first publication took place before the beginning of the policy period;
(3) Arising out of the willful violation of a penal statute or ordinance committed by or with the consent of the insured;...
1. "Advertising injury" means injury arising out of one or more of the following offenses:
a. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;
b. Oral or written publication of material that violates a person's right of privacy;
c. Misappropriation of advertising ideas or styles or doing business; or
d. Infringement of copyright, title or slogan
(Id.)(emphasis added). Columbus Farmers Market is the applicant and a named insured on the policies. In addition, the parties do not dispute that Ackerman and Pratt are insured as members of Columbus Farmers Market, LLC under ...