Mid-Continent Casualty Co. v. Kipp Flores Architects, LLC

602 F. App'x 985
Court of Appeals for the Fifth Circuit·Decided February 26, 2015·No. Nos. 14-50649, 14-50673·Published·Cited by 11 cases

Opinion

PER CURIAM: *

Following a jury trial in a prior lawsuit, Defendant-Appellee Kipp Flores Architects, LLC (“KFA”), an architecture firm, obtained a judgment against a builder, Hallmark Design Homes, L.P. (“Hallmark”), for copyright infringement, for building hundreds of buildings from its designs without licensing them. Plaintiff-Appellant Mid-Continent Casualty Company (“Mid-Continent”), Hallmark’s insurer, filed this declaratory judgment action against KFA, seeking a declaration that it has no duty to indemnify under the applicable policies. Mid-Continent claimed the policies did not cover copyright infringement directly, only advertising injury arising out of copyright infringement, and that the prior judgment did not establish advertising injury. The parties filed cross motions for summary judgment. The judge granted KFA’s motion and denied Mid-Continent’s, rendering judgment against the Mid-Continent in the amount of the prior judgment plus attorney’s fees. Mid-Continent appealed, arguing that it has no duty to indemnify but, in the event it does, the attorney’s fees award is not supported under Texas law.1 For the reasons set out below, we affirm.

1. BACKGROUND2

KFA is an architecture firm that designs homes and then licenses those designs to other companies to build. Hallmark, a homebuilder in the Houston, Texas area, entered into several architectural services and license agreements with KFA. Under these agreements, KFA agreed to supply Hallmark with 11 different house designs, each of which Hallmark was authorized to build once. If Hallmark wished to build any copy after that first licensed copy, it was required to pay KFA in advance for a [1116] license. Under the agreements, Hallmark’s failure to pay for a license for reuse of a plan rendered null and void KFA’s grant of the right to reuse it.

After building the first licensed copy of each of the 11 house plans, Hallmark built several hundred more copies without paying KFA. When KFA discovered Hallmark’s actions, it sued Hallmark for copyright infringement, seeking actual damages or, in the alternative, statutory damages for the infringement under 17 U.S.C. § 504. In its Second Amended Complaint, KFA specifically asserted:

Defendants have created, published and used non-pictorial depictions of structures based on KFA’s Copyrighted Works in promotional and advertising materials. Defendants have published and used these infringing materials in the course of advertising their infringing structures. Furthermore, defendants have used the structures themselves to advertise their infringing structures. These infringing advertising activities have resulted in the sales of infringing structures described above. Furthermore, these infringing advertising activities, and the resulting infringing sales, are and have been a substantial factor in the value of any infringing structures that defendants have not yet sold, and the prices that buyers would be willing to pay for such structures.

Hallmark filed for bankruptcy before trial, but the trial went forward because Hallmark was potentially covered by the Mid-Continent policies at issue in this action. The jury returned a verdict in favor of KFA on September 12, 2012, finding that Hallmark had infringed all 11 of KFA’s designs and finding the amount of profit attributable to the infringement. The district court entered a final judgment on October 4, 2012, establishing that Hallmark had infringed KFA’s copyrights and allowing KFA an unsecured claim in Hallmark’s bankruptcy in the amount of $3,231,084 plus taxable costs of $8,604.40. The Fifth Circuit affirmed.3

On January 23, 2012, Mid-Continent filed this action seeking a declaratory judgment that it had no duty to indemnify under the policies it issued to Hallmark. The policies, discussed in detail below, generally exclude coverage for copyright infringement, but they exempt from that exclusion — i.e., cover — an “advertising injury” arising out of infringement in Hallmark’s “advertisement,” as defined in the policies. The policies also provide that the holder of a judgment against Hallmark may recover under the policies.

Mid-Continent filed a motion for summary judgment, seeking a judgment that the policies do not provide coverage for the judgment of copyright infringement for a number of reasons. Most notably, Mid-Continent argued that the prior judgment was not for a covered “advertising injury” because the infringement did not take place in an “advertisement” as defined in the policies. KFA filed a cross-motion for partial summary judgment claiming the policies do cover the prior judgment. The district court granted KFA’s motion and denied Mid-Continent’s, and it awarded attorney’s fees to KFA under Texas law based on KFA’s contingency fee arrangement with its attorneys.

Mid-Continent appealed both the coverage and attorney’s fees issues on a number of grounds. For the reasons set out below, we affirm.

[1117] II. DISCUSSION

A. Applicable Law And Policy Language

This court “review[s] a district court’s grant of summary judgment de novo,” applying the usual standards under Fed. R.Civ.P. 56.4 The parties agree that Texas law governs this insurance dispute, so we must look to state law for the rules of policy interpretation and the burden of proof.

1. Interpretation of Insurance Contracts

Texas’s rules for interpreting insurance contracts are straightforward:

Texas courts “construe insurance policies according to the same rules of construction that apply to contracts generally.” When interpreting insurance contracts, courts seek “to ascertain the true intentions of the parties as expressed in the instrument.” To this end, Texas courts “examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless,” give policy terms “their ordinary and commonly understood meaning unless the policy itself shows the parties intended a different, technical meaning,” and “strive to honor the parties’ agreement and not remake their contract by reading additional provisions into it[.]”
Moreover, courts must decide if a contract contains ambiguous provisions. If the contract “can be given a definite or certain meaning as a matter of law,” courts will not consider the contract to be ambiguous. A provision is not ambiguous “simply because the parties interpret a policy differently.” Rather, a court will find a term ambiguous if “the language of a policy or contract is subject to two or more reasonable interpretations.” If a contract is ambiguous, such ambiguity will be construed against the insurer.5
2. Burden of Proof on Coverage and Exclusions

Free access — add to your briefcase to read the full text and ask questions with AI

Mid-Continent Casualty Co. v. Kipp Flores Architects, LLC, 602 F. App'x 985 (5th Cir. 2015).

602 F. App'x 985 (Mid-Continent Casualty Co. v. Kipp Flores Architects, LLC) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

Related