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The Franchise Memorandum

The Franchise Memorandum

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A federal court in Illinois has recently concluded that an insurer may have a duty to cover a franchisor’s costs of defending a COVID-19-related injunction. In McDonald’s Corp. v. Austin Mutual Insurance Co., (N.D. Ill. Feb. 22, 2021), McDonald’s claimed that Austin Mutual had a duty to defend McDonald’s in an ancillary case brought by employees of a McDonald’s franchisee alleging McDonald’s was liable for public nuisance and negligence as the result of its decision to allow its franchisee to remain open during the COVID-19 pandemic without enhanced health and safety ...

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A federal court in Michigan dismissed all of a franchisee’s counterclaims and defenses that were based on the franchisee’s claim that the franchise agreements between the parties were unenforceable due to indemnification provisions that lacked mutuality. L.A. Ins. Agency Franchising, LLC. v. Montes, 2016 WL 4415238 (E.D. Mich. Aug. 19, 2016). Claudia Montes entered into several franchise agreements with L.A. Insurance Agency Franchising, LLC. LA Insurance subsequently sued Montes for breach of the franchise agreements. In turn, Montes asserted several counterclaims ...

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The United States District Court for the District of Colorado has granted an insurer's motion for summary judgment, holding that it had no duty to defend its insured, Carpet World, in an underlying lawsuit brought by a group of Carpet World's current and former franchisees. AMCO Ins. Co. v. Carpet Direct Corp., 2016 WL 284827 (D. Colo. Jan. 22, 2016). The franchisees alleged that while they were initially promised they would "become independent business owners, with rights of ownership" in the Carpet World businesses in which they were investing, they subsequently learned that they ...

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In connection with a lawsuit by a franchisor against former franchisees for injunctive relief, a federal court in Wisconsin granted a motion by the former franchisees' insurer seeking a declaration that the former franchisees were not entitled to coverage because their policy only covered suits for damages. Paul Davis Restoration, Inc. v. Everett, 2014 U.S. Dist. LEXIS 172227 (E.D. Wis. Dec. 12, 2014). The franchisor, Paul Davis Restoration, initiated the suit against former franchise owners, the Everetts, and their businesses, to enjoin them from disseminating misleading ...

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A federal court in Michigan granted summary judgment to an insurance carrier following its denial of liability coverage and refusal to defend a franchisor based on the policy’s contractual liability exclusion. In Certified Restoration Drycleaning Network, LLC v. Federal Ins. Co., 2013 U.S. Dist. LEXIS 54457 (E.D. Mich. Apr. 16, 2013), the franchisor (CRDN) sought defense coverage under its general liability insurance policy for an underlying lawsuit by a franchisee. The lawsuit arose after CRDN sold a franchise to a company named East Coast Garment Restoration and then ...

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A federal district court in Wisconsin granted partial summary judgment to a franchisor’s directors and officers (D&O) insurance carrier following its denial of liability coverage based on key policy exclusions. In Cousins Submarines, Inc. v. Federal Ins. Co., 2013 U.S. Dist. LEXIS 17306 (E.D. Wis. Feb. 8, 2013), citing the corporate liability coverage that supplemented its standard D&O liability coverage, a sandwich shop franchisor asked its insurer (Federal) to defend it in an underlying lawsuit. The underlying lawsuit alleged that Cousins and its representatives enticed ...

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A federal court in California denied a commercial general liability insurance carrier’s motion for summary judgment seeking a declaration that it had no duty to defend a former franchisee sued for trademark violations by the franchisor. Tower Ins. Co. of New York v. Capurro Ent., Inc., 2011 U.S. Dist. LEXIS 144436 (N.D. Cal. Dec. 15, 2011). Certa Pro, a national franchisor of painting and decorating services franchises, had entered into a franchise agreement with defendant Capurro. After termination, Capurro began marketing a new business using Certa Pro’s marks, including ...

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A franchisor is not obligated to contact its franchisee’s insurance company directly in order to invoke the franchisee’s obligation to defend and indemnify the franchisor, the Michigan Court of Appeals ruled late last month. Basset v. Burger King Corp., 2010 Mich. App. LEXIS 2091 (Mich. App. Oct. 28, 2010). This decision arose out of a personal injury case in which only the franchisor was sued originally. It notified the franchisee of the lawsuit and demanded defense and indemnity under the franchise agreement. When the franchisee failed to assume defense of the case, BKC was ...

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About this Publication

The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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