Hugo Boss Fashions, Inc. and Hugo Boss USA, Inc., Plaintiffs v. Federal Insurance Company, Defendant

In January 1990, Hugo Boss Fashions, Inc. and Hugo Boss USA, Inc. entered into a written contract with Boss Manufacturing Co. (BMC), the two parties being unrelated companies. The contract stated that Hugo Boss Fashions, Inc. agreed not to sell any item also manufactured by Boss Manufacturing Co. with the word "Boss" on it, as to avoid customer confusion. Hugo Boss Fashions, Inc., did not obey the contract, leaving BMC to file suit for trademark infringement, among other things. Before beginning this case, Federal Insurance Co.’s involvement must be determined.

The companies were both covered under insurance policies issued by Federal stating that the policies would "pay damages the insured becomes legally obligated to pay" for any "advertising injury" caused by the insured. However, the policy goes on to say that this does not include injury caused by "breech of contract." The policies also include an Intellectual Property exclusion which states that it will not cover injury that is claimed as an infringement, violation, or defense of trademark or trade names, except for trademarked titles or slogans.

This is where the problem lies. The wording of the policy is somewhat ambiguous, making it unclear as to how much coverage the companies actually have with relation to this case. Federal defends that its breech of contract exclusion releases Federal of any financial liability. The court disagreed on the basis that, besides vague wording, trademark rights exist for both companies and it is illegal to violate them, regardless of the contract they entered into.

Federal also defends that the intellectual property exclusion specifically removes coverage in claims made based on the wrongful use of trademarks and trade names, other than titles or slogans. Therefore, unless BMC can classify "Boss" as their title or slogan, Federal is not liable to pay damages. Federal argues that the word "Boss" can not be considered a title or slogan.

While the court agreed with Federal that "Boss" can not be characterized as a title, based on a definition of the word that defines a "slogan" as an "attention-getting device", the court feels Federal is responsible to defend BMC. Being that the word is used by BMC to promote its products and distinguish them from others, "Boss" can be considered a slogan.

There must be a causal connection between the alleged liability and the advertising activities of the insured before there is coverage or an obligation to defend. The court found that there is a link between the marketing of these products with the "Boss" name on them and the injuries caused by the sale of these items. Therefore, it is the legal duty of Federal Insurance Company to defend its clients, Hugo Boss Fashions, Inc. and Hugo Boss USA, Inc., against Boss Manufacturing Co.’s lawsuit.