No Insurance Policy Covers Everything

The Gravamen of the Claim Fits the Exclusion

Although everyone wants an insurance policy that covers every potential liability that desire is a pipe dream. No insurance policy covers everything. Insurance policies provide a broad initial coverage and then limits the coverage with exclusions.

In Sterngold Dental, LLC v. HDI Global Insurance Company, No. 18-2084, United States Court of Appeals For the First Circuit (July 2, 2019) the appeal gave the First Circuit Court of Appeal, an opportunity to deal with what it believed was a sophisticated insurance coverage question: “the scope of the so-called intellectual property exclusion (IP exclusion) to the personal and advertising injury coverage under a standard commercial general liability policy (the Policy) issued by HDI Global Insurance Company (HDI) to Sterngold Dental, LLC (Sterngold).” What the First Circuit found, however, was that the issue was one of contract interpretation that caused it little difficulty and needed no sophistication.


Sterngold manufactures and sells dental products. The Policy obtained by Sterngold obligated HDI to defend and indemnify Sterngold against claims arising out of “personal and advertising injury.” A specific exclusion — the IP exclusion — pretermitted coverage for personal and advertising injury “arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights.”

In May of 2016, Intra-Lock International, Inc. (Intra-Lock), a competitor in the market for dental products, sued Sterngold in the United States District Court for the Southern District of Florida. Count 3 of its complaint alleged, inter alia, that Sterngold infringed Intra-Lock’s registered OSSEAN trademark — a trademark denoting a component of its osseointegrative dental implant coating product — by using nearly identical marks, OSSEO and OSSEOs, for a nearly identical product. Sterngold asked HDI to defend the suit and provide indemnification pursuant to the Policy. HDI refused Sterngold’s request, denying coverage under the Policy.

Sterngold proceeded to settle the Intra-Lock suit. At that point, it made a third attempt to engage HDI. This time around, Sterngold asserted that the Policy required that HDI reimburse Sterngold for the settlement amount. Once again, HDI refused.


In Massachusetts, an insurer’s duty to defend arises when the facts — in the complaint and known to the insurer — generally demonstrate a possibility that the liability claim falls within the scope of the insurance policy. An inquiring court is duty-bound to its insured, should compare the allegations of the triggering complaint against the insured to the provisions of the insurance policy.

The insured must be given the benefit of any reasonable doubt. An insurer’s duty to indemnify the insured is narrower than its duty to defend. The scope of the duty to indemnify hinges on whether the judgment — or in this case, the settlement — is for a covered claim.

As a general matter, it is the insured’s burden to show that the insuring agreements — that is, the overall coverage provisions of a policy — apply in a given situation. Once such a showing is made, the burden then shifts to the insurer, which has the opportunity to show that some exclusion places the claim outside the scope of coverage.

Applying conventional rules of contract interpretation a straightforward question about the meaning and effect of the IP exclusion was presented to the First Circuit. Sterngold’s claim is that Intra-Lock’s complaint asserted an advertising injury within the scope of the coverage afforded by the Policy. As such, Sterngold insisted that HDI was obligated to defend it in the Intra-Lock suit and furnish indemnification for any resulting damages (including the eventual settlement). HDI rejoined that, even if the injury alleged falls within the general language of the insuring agreements, the injury was squarely within the meaning of the IP exclusion and, thus, was excluded from coverage.

Sterngold’s use of “confusingly similar marks OSSEO and OSSEOs with osseointegrative dental implant coatings in internet advertising . . . [was] likely to cause confusion, mistake, and deceive third parties” with respect to an imagined affiliation between Intra-Lock and Sterngold. Given these allegations, Sterngold contends that the sums it paid in settlement were for its appropriation of Intra-Lock’s advertising idea and, therefore, fell within the coverage of the Policy.

Here the court had no need to decide the question of whether Intra-Lock’s mark, as described in its complaint, constituted an “advertising idea.”  The court simply assumed that Intra-Lock’s complaint advanced a claim for an advertising injury. Even with this favorable assumption in place, the most formidable obstacle that blocks its way is the IP exclusion, which provides that: “This insurance does not apply to: . . . ‘Personal and advertising injury’ arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. Under this exclusion, such other intellectual property rights do not include the use of another’s advertising idea in your ‘advertisement’.”

Given the gravamen of Intra-Lock’s claim, the IP exclusion fits.. Consequently, the conclusion of the First Circuit was irresistible that HDI owed no duty either to defend or indemnify Sterngold with respect to Intra-Lock’s claim.

Reality, and a straightforward reading of the language, defeated Sterngold’s proposed construction. The first sentence of the IP exclusion lists a series of IP-related claims, including trademark infringement. Each specifically articulated claim is separated from the next by a comma. The list concludes with the catchall phrase “or other intellectual property rights.” The catchall phrase is repeated in the second sentence of the exclusion. It is only in connection with this phrase — not in connection with the listed IP-related claims — that the “use of another’s advertising idea” is excepted from the reach of the exclusion. Just as “[e]very word in an insurance contract must be presumed to have been employed with a purpose so too every item of punctuation in the contract likewise must be presumed to have been employed with a purpose.”

The short of it is that even if a trademark infringement claim involves an injury stemming from the use of an advertising idea, the catchall phrase “other intellectual property rights” will not encompass the claim. Any other reading

The First Circuit noted that all good things come to an end and at the finish line, to the extent that Intra-Lock’s complaint can be said to have alleged an advertising injury, that injury unquestionably arose out of Intra-Lock’s trademark infringement claim. The Policy made it luminously clear that such an injury is excluded from the scope of coverage.


Contrary to the hopes of Intra-Lock the First Circuit read the policy and found that in clear and unambiguous language it did not provide coverage to Intra-Lock for the trademark infringement suit which was excluded.

© 2019 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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