American Guarantee & Liability Insurance Co. has filed a lawsuit against Payless ShoeSource Inc. in the U.S. District Court of Kansas, seeking a declaration that the $305 million in damages the discount shoe retailer recently incurred from a legal battle with adidas Group is not covered under its policy.
New York-based American Guarantee & Liability, a subsidiary of Zurich Financial Services Group, filed its suit in response to the verdict, which was handed down in May. According to court documents, the insurer claims that Payless’ policy doesn’t cover numerous aspects of the jury’s decision, including the charge that Payless “willfully intended” to trade on adidas’ reputation.
The jury stated that Payless “deliberately copied” in an “intentional attempt to capitalize.”
The battle between Payless, which is owned by Topeka, Kan.-based Collective Inc., and adidas goes back to 1994, when the two companies reached a settlement when Payless admitted it had infringed on adidas’ trademark by selling shoes with four parallel double serrated-edged stripes that closely resembled adidas’ three-stripe design.
In 2001, adidas filed another suit against Payless, claiming the shoe store chain had violated that agreement. The jury’s recent decision concluded that case.
In American Guarantee & Liability’s suit, the insurer alleges that coverage is not available because Payless was aware of claims being made by adidas before the 2001 suit went to trial.
Further, the suit states that the $137 million in punitive damages awarded to adidas is not insurable under Kansas law.