Court of appeals backs insurer in family intellectual property fight

The 7th U.S. Circuit Court of Appeals on Thursday upheld a Grinnell, Iowa-based insurer’s win in a coverage dispute involving a battle over the use of the name “Flood” in connection with a family’s waste collection and trucking businesses.

The panel consisting of three judges in Grinnell Mutual Reinsurance Co. v. SBC Flood Waste Solutions Inc. et al. said the insurer properly shrugged off its defense obligations because a policy application failed to mention that the family dispute involved threats of litigation, and a cease and desist letter regarding the use of Flood’s name for a between businesses.

The appeals court agreed that the omissions in SBC Flood Waste Solutions’ claim constituted a material misrepresentation that allowed Grinnell to void its commercial general liability and commercial auto policy.

Brian Flood and his two sons, Chris and Shawn, worked in sales at Flood Brothers Waste Disposal Co., owned by Brian’s father, Mike Flood. Chris also owned and operated Flood Inc. which also provided waste collection and hauling services. A family feud arose in 2017 when Brian, Chris and Shawn were kicked out of the Flood Brothers business and Chris was told to stop using the family name for his side business. Chris later received a cease and desist letter from Flood Brothers attorneys, court records show.

Brian, Chris and Shawn then decided to start their own waste collection and hauling business, SBC Flood, and sought insurance from Grinnell in February 2018. In the policy application, the new company did not indicate any event that could giving rise to claims and not other business that could be covered.

Less than three months after obtaining the policy from Grinnell, Flood Brothers sued SBC Flood, alleging improper and unfair use of the Flood name. SBC Flood required Grinnell to cover defense costs, and the insurer filed suit challenging its defense obligations.

A federal judge in Chicago granted summary judgment to Grinnell after one of its underwriters testified that if he had known about the cease and desist letter and the threat of litigation from Flood Brothers, he would not have issued the policy.

Representatives for the parties did not respond to requests for comment.