Tennessee Court Finds Duty to Defend Lanham Act Claims

By David A. Gauntlett*

Introduction

This week, a case litigated by Gauntlett Law returned a verdict in favor of the insured. In Cincinnati Ins. Co. v. Select-Tech, Inc.,[1] Cincinnati sought declaratory judgment stating that (1) it had no duty to defend the underlying action, (2) it had no duty to indemnify any settlements resolving the underlying action, and (3) Select-Tech had no right to independent counsel. The court granted Select-Tech’s Motion to Dismiss as to the first issue and determined the remaining two were not yet ripe for determination.

Underlying Allegations 

In the underlying action, Grover Products LLC (“Grover”) alleged that Select-Tech manufactured counterfeit versions of Grover products, thereby violating several statutes. The most pertinent allegations for coverage purposes were that Select-Tech had been “openly and falsely describing its products as ‘Grover’ products and using Grover model numbers since at least as early as 2016” and openly using Grover Trademarks and model numbers since 2011. Based on these allegations, Grover asserted several causes of action, including (1) Trademark Counterfeiting under 15 U.S.C. § 1114; (2) Trademark Infringement under 15 U.S.C. § 1114; and (3) False Designation of Origin/False Advertising under the Lanham Act, 15 U.S.C. § 1125(a).

Grover further alleged that Select-Tech’s actions were intentional, willful, and in bad faith. Critically, however, it offered no evidence to support this alleged scienter.

Duty to Defend Triggered by “Advertising Injury” Claims

The court determined that potential coverage was triggered under policy’s “personal and advertising injury” provision for “use of another’s advertising idea in your ‘advertisement’.” Though no prior Tennessee case law had provided a conclusive definition for the term “advertising idea,” other courts typically define that term broadly as “any idea or concept related to the promotion of a product to the public.”[2]

This definition of “advertising injury” was met by Select-Tech’s alleged copying of product codes. Grover stated that “[t]he Grover horn has, for decades, been promoted with the model numbers 1600, 1601, and 1609.” Grover alleged that these are “famous numbers known to indicate Grover model horns” to potential customers. Thus, it was alleged that this system of numbering is a “concept related to the promotion of a product to the public,” as is required by judicially accepted definitions of “advertising idea.” Grover went on to assert that Select-Tech used this advertising idea for its own products by advertising various items with product codes “Grover 1136,” “GROVER1522,” and “Grover-1720.”

In concluding Cincinnati had a duty to defend, the court primarily relied on Union Insurance Company v. Delta Casket Company, Inc., Case No. 06-2090, 2009 WL 10665134 (W.D. Tenn. Dec. 4, 2009). There, a casket manufacturer sued one of its distributors alleging that the distributor imported duplicate caskets and then advertised, marketed, and sold them as if they were the manufacturer's caskets. The Delta Casket court ruled that the insurer owed a duty to defend based on the same two “personal and advertising injury” offenses asserted by Select-Tech.

Grover specifically alleges, among other things, that: (1) “Select-Tech is-and has been for years-engaged in the advertising and sale of counterfeit Grover products;” (2) Select-Tech's website markets counterfeit products as Grover products; and (3) Select-Tech’s website “falsely and repeatedly claimed that [it] is a distributor of genuine Grover products.” (See Doc. 1-4, at 13-22.) Like the underlying claims in Delta Casket, the claims Grover asserts against Select-Tech include allegations that its advertising contains false designations and descriptions of goods that are likely to cause confusion, mistake, or deception as to the source and true status of the products being marketed.[3] 

 No Exclusions Applied to Preclude Potential Coverage

The court then turned to the various exclusions asserted by Cincinnati as purportedly eliminating all potential coverage and thus precluding any duty to defend. In particular, Cincinnati asserted five exclusion, none of which were deemed applicable by the court.

First, the “Knowing Violation” exclusion for “‘Personal and advertising injury’ caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict ‘personal and advertising injury.’” The court followed the majority trend for interpreting this exclusion.[4] It concluded this exclusion could not apply where “Grover can nonetheless succeed on its Lanham Act claim against Select-Tech without proving an intent to deceive or knowledge of falsity.”[5]

Second, the “Knowledge of Falsity” exclusion for “‘Personal or advertising injury’ arising out of oral or written publication of material, if done by or at the direction of the insured with knowledge of its falsity.” The court determined this was subject to the same analysis as the “Knowing Violation” exclusion and dismissed it for the same reasons.

Third, the “Prior Publication” exclusion for “‘Personal and advertising injury’ arising out of oral or written publication of material whose first publication took place before [the policy’s inception].” The court determined this exclusion could defeat potential coverage for same claims, but not all them, thereby leaving Cincinnati’s duty to defend intact. “[A]lthough the amended complaint in the Grover Action alleges that Select-Tech took certain actions and made certain representations prior to the inception of the policy and prior to the coverage term, the amended complaint also asserts a Lanham Act claim based on actions taken after inception of the policy and during the coverage term.”[6]

Fourth, the “Failure to Conform” exclusion for “‘Personal and advertising injury’ arising out of the failure of goods, products or services to conform with any statement of quality or performance made in your ‘advertisement’.” This exclusion did not apply because the underlying complaint only asserted that Select-Tech’s goods were counterfeit, not that they were inferior in quality. “The allegation that Select-Tech sold counterfeit Grover products does not necessarily mean that the products it sold were of an inferior quality or failed to perform as advertised by Select-Tech.”[7]

Fifth, “Intellectual Property” exclusion for “‘Personal and advertising injury’ arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights.” The court observed that this exclusion could apply to the trademark infringement claims of the underlying action, but that did nothing to relieve Cincinnati’s duty with regard to the other causes of action. “[Grover] has also alleged that Select-Tech engaged in false advertising and unfair competition under the Lanham Act that could potentially result in liability without a finding of trademark infringement.”[8] The court did not even reach the fact that offense “f” for “use of another’s advertising idea in your ‘advertisement’” is an explicit exception to the “Intellectual Property” exclusion, which would have been an independent basis to disregard the exclusion in this case.

Next Step – Settlement Reimbursement

Given the adjudication regarding Cincinnati’s duty to defend, the next step will be addressing the insurer’s obligation to reimburse payments made by the insured toward a settlement that resolved the underlying action. Under Tennessee law, an insurer contesting its duty to defend is obligated to reimburse the insured for any reasonable settlement payments plus 10% interest accruing from the date of payment. York v. Vulcan Materials Co., 63 S.W.3d 384, 390 (Tenn. Ct. App. 2001).

Conclusion

Because “personal and advertising injury” cases present niche issues rarely encountered by most judges, many struggle to properly analyze the issues. It is critical to retain expert counsel with experience in such cases as they will understand that victory requires a two-step process of (1) educating the court as to the proper law (which often runs counter to a judge’s instincts) and (2) persuasively explaining how those principles lead to potential coverage on the present facts.

*David A. Gauntlett is a principal of Gauntlett Law and represents policyholders in insurance coverage disputes regarding intellectual property, antitrust, and business tort claims, as well as in the underlying actions. Mr. Gauntlett can be reached at (949) 514-5662 or dag@gauntlettlaw.com. For more information, visit Gauntlett Law at www.gauntlettlaw.com.

[1] Cincinnati Ins. Co. v. Select-Tech, Inc., No. 4:25-cv-40, 2026 U.S. Dist. LEXIS 7275 (E.D. Tenn. Jan. 14, 2026).

[2] Hyman v. Nationwide Mut. Fire Ins. Co., 304 F.3d 1179, 1188 (11th Cir. (Fla.) 2002).

[3] Select-Tech, Inc., 2026 U.S. Dist. LEXIS 7275 at *10.

[4] See, e.g., CGS Indus. v.Charter Oak Fire Ins. Co., 720 F.3d. 71, 83 (2d Cir. (N.Y.) 2013) (“Despite the boilerplate allegation of willful misconduct, Five Four’s Lanham Act section 43(a) [15 U.S.C. § 1125] claim did not require it to prove that CGS intended to infringe on its trademark, as such a claim does ‘not require proof of intent to deceive.’”); KM Strategic Mgt., LLC v. Am. Cas. Co. of Reading PA, 156 F. Supp. 3d 1154, 1170 (C.D. Cal. 2015) (same conclusion).

[5] Select-Tech, Inc., 2026 U.S. Dist. LEXIS 7275 at *12.

[6] Id. at *12–13.

[7] Id. at *14.

[8] Id.