PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY Plaintiff - Appellee
BEACH MART, INC. Defendant-Appellant and L&L WINGS, INC. Defendant
Argued: May 7, 2019
from the United States District Court for the Eastern
District of North Carolina, at Elizabeth City. Terrence W.
Boyle, Chief District Judge. (2:14-cv-00008-BO)
Stephen Forest Shaw, WOMBLE BOND DICKINSON (US) LLP,
Greensboro, North Carolina, for Appellant.
Michael Duane Jones, HEDRICK GARDNER KINCHELOE &
GAROFALO, LLP, Charlotte, North Carolina, for Appellee.
Charles A. Burke, WOMBLE BOND DICKINSON (US) LLP, Raleigh,
North Carolina, for Appellant.
L. Levy, HEDRICK GARDNER KINCHELOE & GAROFALO, LLP,
Charlotte, North Carolina, for Appellee.
KEENAN, WYNN, and FLOYD, Circuit Judges.
appeal, Pennsylvania National Mutual Casualty Insurance
Company ("Penn National") contends that it has no
duty to defend its insured, Beach Mart, Inc. ("Beach
Mart"), in an underlying lawsuit against L&L Wings,
Inc. ("L&L"). Penn National argues that its
duty to defend was eliminated by the "prior
publication" exclusions in the insurance policies, which
preclude an insured from obtaining coverage for injuries
caused to third parties through continuous conduct that began
prior to coverage. The district court agreed but for the
reasons that follow, we reverse and remand.
resolve this issue of whether Penn National has a duty to
defend Beach Mart in the underlying lawsuit against, L&L.
we look to: (A) L&L's pleadings in the underlying
action, and (B) the insurance policies that Penn National
issued to Beach Mart.
September 2011, Beach Mart brought the underlying action
against L&L in the United States District Court for the
Eastern District of North Carolina to determine who could use
the WINGS trademark. L&L answered the complaint and
asserted several counterclaims, including claims for breach
of contract and breach of the implied covenant of good faith
and fair dealing. Beach Mart subsequently amended its
complaint, and L&L in turn amended its answer and
reasserted its counterclaims for breach of contract and
breach of the implied covenant of good faith and fair
dealing. For purposes of this appeal, the factual
allegations supporting L&L's counterclaims and
amended counterclaims are taken as true. See, e.g., Bain
v. Unitrin Auto & Home Ins. Co., 708 S.E.2d 410, 413
( N.C. Ct. App. 2011). Those allegations are materially
indistinguishable, so we jointly discuss them below.
and Beach Mart each operate retail stores that sell beach
apparel in beachfront communities. Since 1978, L&L has
continuously operated and marketed its stores under the WINGS
trademark, and in 2008, it registered that mark with the
United States Patent and Trademark Office for use in
"retail apparel stores; retail clothing stores; [and]
retail discount store services in the field of beachwear
clothing." J.A. 663.
to 1995, L&L employed Israel Golassa to work in its
retail stores. But on January 1, 1995, Golassa left L&L
to found Beach Mart. That same day, L&L and Beach Mart
executed a one-year agreement wherein L&L licensed the
WINGS mark to Beach Mart for use in two North Carolina stores
"to sell beach-related apparel, beach toys, souvenirs
and other related items under the WINGS trademark." J.A.
664, 788. At the end of the year, the parties reached an oral
understanding that allowed Beach Mart to continue using the
mark for an annual fee. That oral licensing agreement
continued "for a number of years," but at ...