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Hansen v. Sentry Ins. Co.

United States Court of Appeals, First Circuit

June 25, 2014

MARK A. HANSEN, Plaintiff, Appellant,
v.
SENTRY INSURANCE COMPANY, Defendant, Appellee

As Amended July 9, 2014

Page 54

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE. Hon. Joseph A. DiClerico, Jr., U.S. District Judge.

Todd A. Sullivan, with whom Hayes Soloway, P.C. was on brief, for appellant.

Michael F. Aylward, with whom Morrison Mahoney LLP was on brief, for appellee.

Before Torruella, Circuit Judge, Souter, Associate Justice, [*] Thompson, Circuit Judge.

OPINION

Page 55

THOMPSON, Circuit Judge.

Some years ago, Appellant Mark Hansen served as a vice president of Wilcox Industries Corp. (" Wilcox" ) before striking out on his own and founding his own company, Advanced Life Support Technologies, Inc. (" ALST" ). Although his departure may have been amicable at first, it did not remain so for long. Wilcox sued Hansen in the New Hampshire district court for, allegedly, poaching its customers and spreading false, damaging information about its products.

Hansen, who had not purchased liability insurance to cover his new business, found himself face-to-face with the prospect of funding his legal defense and satisfying any judgment against him out-of-pocket. Necessity being the mother of invention, Hansen hit upon an ingenious solution to his conundrum--or so he thought. He demanded that Wilcox's insurer, appellee Sentry Insurance Company (" Sentry" ), defend and indemnify him against his former employer's claims. Sentry declined, and this coverage action followed.

Although Hansen crafts some creative arguments, a da Vinci he is not. We conclude Sentry does not owe any duty to defend or indemnify Hansen against Wilcox's claims. Accordingly, we affirm the district court's grant of Sentry's motion for summary judgment.

I. BACKGROUND

Because the contours of our analysis are governed in large part by the allegations in Wilcox's November 28, 2011, complaint against Hansen (the " Underlying Complaint" ), we set forth those allegations, supplemented as necessary with uncontested evidence adduced during discovery in the underlying litigation.

Wilcox is a New Hampshire corporation that designs, manufactures, and sells " tactical equipment" to the United States military and other federal and local government agencies. One of the products it has manufactured over the past decade-plus is a self-contained breathing apparatus (think of SCUBA gear used on land) originally referred to as SCOUT but known today as PATRIOT. According to the Underlying Complaint, PATRIOT utilizes highly-specialized technology and offers features not available in competing products.

Hansen entered the picture in 2003, when Wilcox hired him as a consultant. He began working full-time directly for Wilcox in March of 2005, and served as one of Wilcox's vice presidents until leaving Wilcox's employ on June 15, 2007. As a vice president, Hansen had access to confidential information regarding Wilcox's development of the next-generation PATRIOT, along with knowledge of Wilcox's current and potential customers, and its marketing strategies. He also signed a Nondisclosure and Nonsolicitation Agreement in which he agreed that he would not disclose Wilcox's " confidential information," including " all tangible and intangible trade secrets, proprietary information, inventions, discoveries, processes, methods, formulas," and the like.

Although their employer-employee relationship ceased in June 2007, Hansen's involvement with Wilcox continued, as Wilcox hired him and ALST as consultants. In this role, Hansen was expected to market PATRIOT to potential new customers and provide post-sale support and training to PATRIOT customers. Wilcox also paid him to attend internal meetings regarding the next-generation PATRIOT. His consulting role again provided Hansen with access to Wilcox's confidential and proprietary information, up to the time he and Wilcox parted ways in February 2009. As the Underlying Complaint puts it, during this time Hansen " referred to himself to

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Wilcox's customers as President of ALST, and marketed his own products and company to these customers."

The gravamen of the Underlying Complaint is Wilcox's claim of unfair competition against Hansen. According to the Underlying Complaint, Hansen used his knowledge of Wilcox's trade secrets and proprietary information to develop his own competing self-contained breathing device, " SHIELD" , which he based on Wilcox's technology and unique product features. Hansen then began selling SHIELD through ALST. More than that, Wilcox claims, Hansen used his knowledge of Wilcox's customer base to go out and, essentially, steal Wilcox's customers. The Underlying Complaint specifically alleges that Hansen signed a contract with the Los Angeles County Sheriff's Department for the manufacture and sale of SHIELD, despite his knowledge that Wilcox had been in the middle of marketing PATRIOT to that very department. Wilcox goes on to assert that this is not the only example of Hansen's unfair competition.

The Underlying Complaint sets forth a panoply of counts against Hansen and ALST: breach of contract; breach of the implied covenant of good faith and fair dealing; common law and statutory unfair competition; misappropriation of trade secrets; breach of fiduciary duty; unjust enrichment; and intentional interference with contractual relations. Count VIII is especially significant to the insurance coverage issues we address here, as it states that " Hansen is . . . making harmful false statements about Wilcox and its technology while marketing his own products to Wilcox customers." [1]

Wilcox filed the Underlying Complaint on or about November 28, 2011. Hansen tendered his defense to Wilcox's insurer, Sentry, which insured Wilcox under a Commercial General Liability Policy effective from November 2, 2006, to November 2, 2007 (the " Policy" ). Sentry denied coverage on March 13, 2012. Sentry said it did not have to defend or indemnify Hansen because (among other reasons) the Policy only covered Hansen during the time he was a Wilcox officer or employee, while the Underlying Complaint sought to recover damages Wilcox suffered after June 15, 2007, Hansen's last day as a Wilcox employee. Hansen did not immediately pursue his coverage claims request against Sentry.

Discovery proceeded in the usual course, and Wilcox's CEO, James Teetzel, was deposed on June 5, 2012. Hansen's counsel asked Teetzel about the dates on which Hansen made false and disparaging statements about Wilcox, and Teetzel initially responded with uncertainty. But after some follow-up questions, Teetzel testified Hansen " absolutely" made derogatory statements about Wilcox and its products during the time Hansen served as vice president. Teetzel also testified that Wilcox filed suit against Hansen in part because of these statements, but primarily because of Hansen's " disregard to trade secrets that Wilcox owns."

During the course of his deposition, Teetzel detailed Hansen's personal business activities. Teetzel testified that Hansen formed ALST during the time he worked for Wilcox, and that through ALST Hansen " [sold] other products that are completely unrelated to the PATRIOT line." These unrelated products included things like " jump bottles for skydiving and oxygen consoles for holding oxygen for --

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it's like a large reservoir of oxygen for skydivers to jam before they jump out of an aircraft." According to Teetzel, ALST's logo is " a guy jumping out of a plane," and on at least one occasion while " on [Wilcox's] payroll or as a consultant he showed up with that logo that he has on his shirt."

Armed with Teetzel's deposition testimony, Hansen renewed his coverage demand on August 14, 2012. Hansen said that this testimony now made him eligible for insurance coverage, as it showed Wilcox was actually claiming that he made derogatory statements about Wilcox during the course of his employment there. Sentry disagreed and again denied coverage. Key to its denial this time was its position that Hansen still failed to qualify for coverage because, in making such disparaging statements, Hansen was not " carrying out his duties as an executive officer of Wilcox or otherwise acting" on Wilcox's behalf or to further its interests.

Sentry's continued denial precipitated this suit. Grounding federal jurisdiction on diversity pursuant to 28 U.S.C. § 1332, Hansen seeks a declaration (under state and federal law) that Sentry owes a duty to defend and indemnify him with respect to the Underlying Complaint. He also asserts that Sentry's denial of coverage constitutes a breach of contract.

After dismissing the state law declaratory judgment claim as untimely, the district court concluded that Hansen does not qualify as an " insured" given the nature of the allegations against him, and granted Sentry's ...


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