Appeals court backs insurer in family intellectual property fight

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

The three-judge panel in Grinnell Mutual Reinsurance Co. v. S.B.C. Flood Waste Solutions Inc. et al. said the insurer correctly shrugged off its defense obligations because a policy application failed to mention that the family dispute involved threats of litigation as well as a cease-and-desist letter regarding the use of the name Flood for one of the businesses.   

The appeals court agreed that the omissions on S.B.C. Flood Waste Solutions’ application constituted a material misrepresentation allowing Grinnell to rescind the 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 dispute emerged in 2017, when Brian, Chris and Shawn were pushed 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 attorneys for Flood Brothers, court records show.

Brian, Chris and Shawn decided to then start their own waste collection and hauling business, SBC Flood, and sought insurance from Grinnell in February 2018. On the policy application, the new company did not indicate any occurrences that could give rise to claims and no other business ventures 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 asked Grinnell to cover the defense costs and the insurer filed a lawsuit challenging its defense obligations.

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

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