Bay Electric Supply, Inc. and FAE, Inc. v. The Travelers Lloyds Ins. Co., 61 F. Supp. 2d 611 (S.D. Tex. 1999)

Bay Electric Supply, Inc. and FAE, Inc. v. The Travelers Lloyds Ins. Co., 61 F. Supp. 2d 611 (S.D. Tex. 1999).  The underlying case sought recovery for violation of federal and state laws prohibiting trademark and trade dress infringement, trademark dilution and unfair competition. The allegations were based upon the sale by Bay and FAE of circuit breakers bearing trademarks and configurations allegedly identified with and owned by ACB. The court noted that since ACB specifically alleged importation, marketing, and/or sale of circuit breakers bearing the infringing reproductions of the Configuration Marks and/or which bear or are packaged with infringing reproductions of the trademark STAB-LOK, and this is likely to confuse or deceive the public as the source, sponsorship and/or approval of Defendants' circuit breakers, the causal nexus is met and a duty of the defense was owed by the insurer. The court rejected the knowledge of falsity exclusion, which "is not a requirement for a finding of liability in the underlying action." The "prior publication" exclusion was inapplicable because, although FAE's coverage with Travelers commenced one month after FAE began selling the allegedly infringing circuit breakers, no claim against FAE could arise until registration of its trademarks in 1997, "well after the inception of Travelers' coverage for FAE."