Insurer on hook for plaintiff’s $212K legal bill

Listen to this article

An insurance company is on the hook for over $212,000 in legal fees a policyholder owes to a designer of home building plans after a federal judge rejected its arguments in a declaratory judgment motion.

Builders Mutual found itself embroiled in a suit between its policyholder, Cambridge Builders of Johnston County, N.C., and Greer-based Allora LLC, which sells and licenses home plans to builders across the country. Allora complained of copyright violations after Cambridge allegedly used some Allora-owned building plans to build its townhomes. Allora also alleged that Cambridge incorporated the copyrighted material into its advertising for the townhomes.

In March 2011, a federal district court agreed with Allora and awarded it summary judgment on Cambridge’s liability. After a trial, a jury awarded Allora over $99,000 in damages and over $212,000 in attorneys’ fees. Builders Mutual, which had defended Cambridge at trial, asked the court to declare that it had no duty to cover Cambridge for the jury’s verdict, arguing that the policy explicitly excluded damages arising out of infringement of copyrights. Allora in return asked the court to declare the Builders Mutual was indeed liable.

On Aug. 12, U.S. District Court Judge Malcolm J. Howard ruled in favor of Allora, saying that the jury’s verdict fell within the insurance policy. The part of the policy excluding copyright violations itself contained an exception for infringement within an advertisement, and at trial, Allora had claimed that Cambridge had shown pictures in its brochures of the homes built using the copyrighted plans and that homebuyers were influenced by these ads to buy Cambridge’s townhomes.

Builders Mutual claimed that the exception should only apply if the infringement occurred within the ad, and not for advertisements of a product that was itself an infringement. However, Howard found that this was too restrictive of an interpretation. Because Allora proved that Cambridge profited from copyright violations that later appeared in an advertisement, the damages fell with the policy.

Howard also rejected arguments that the policy excluded knowing and willful violations of another’s rights, because no there was no evidence that Cambridge had committed its violations willfully, and that the policy excluded breach of contract because even though Allora and Cambridge had a licensing agreement that was violated, Allora’s claims would have been valid even without the contract.

Mark Bakker and Wallace Lightsey of Wyche in Greenville, S.C. represented Allora. John Malone Jr. and David G. Harris of Nelson Levine de Luca & Hamilton in Greensboro, N.C., represented Builders Mutual.

Follow David Donovan on Twitter @SCLWDonovan

VERDICT REPORT: DECLARATORY JUDGMENT

Case name: Builders Mutual Ins. Co. v. Allora, LLC

Case number: 4:11-CV-210

Court: U.S. District Court for the Eastern District of North Carolina.

Judge: Malcolm J. Howard

Date of judgment: Aug. 12

Amount: $99,565 in damages and $212,322 in legal fees (insurer‘s liability)

Attorneys for the plaintiff: Mark Bakker and Wallace Lightsey (Greenville, S.C.)

Attorneys for the defendant: John Malone Jr. and David G. Harris (Greensboro)