Wolfe’s Borough Coffee Inc. – dba - The Black Bear Micro Roastery

16 Burleigh Road, POB 31, Center Tuftonboro, NH 03816

Phone: 603-569-6007   FAX: 603-569-6009

On the WEB at www.BlackBearCoffee.com    E-mail: bbmr@worldpath.net

Wednesday, June 5, 2002

Debra Bertone

Litigation Specialist

Zurich American Insurance Company


Jamaica, NY 11430-00ZZ

Re:      Claim #: 564-0066470-001 CF

Policy #: PAS 30929054

Date of Loss: 7/3/01

Re:      Zurich May 24, 2002 Certified Letter regarding

Starbucks motion for leave to serve an Amended Complaint

No. Ol-CV-5981

Dear Debra,

I would like to respond to the above referenced letter, and make you clearly aware of our situation, and the potential impact on our business that your actions may have.

After months of evasive behavior on the part of Zurich, it now appears that there is no defensible reason for Zurich to cease coverage on the above referenced claim.  I’ll outline your actions, which began on 3/12/02, as follows:

·        When you first notified us as to Zurich’s intent to withdraw coverage, you made reference to a definition of “damages” in our policy.

·        When it became apparent that no such definition exists, you then stated that you had e-mailed your superiors at Zurich, and that they were going to provide “in print” justification for Zurich’s position.

·        When said “in print” justification failed to materialize, you then stated that Zurich’s coverage counsel would research the matter, and provide precise references to court decisions that backup Zurich’s position.

·        Again, nothing materialized.

·        Now you have returned to your original position of threatening to pull coverage without any additional justification to do so.

I will reiterate our position:

·        We have paid premiums to Zurich in good faith.

·        The coverage Zurich provides in this matter protects us against “… sums of the insured becomes legally obligated to pay as damages …”.

·        The word “damages” does not appear in quotes in the policy, and is not defined in the policy, or anywhere else.

·        The only damages covered by the “Personal Injury and Advertising Injury” clause in our policy, are monetary losses, as opposed to physical losses.

·        Should the court grant Starbucks’ motion to amend, Starbucks will still be seeking extensive monetary compensation (damages) in the form of “costs” and “reasonable attorneys’ fees”.  Without insurance coverage, a judgment against us could prove catastrophic to our business.

·        Starbucks would have to drop all claims for monetary compensation, and seek only injunctive relief for Zurich to have any possible justification to pull coverage, however:

·        Should Starbucks only seek injunctive relief, the result of our losing the ability to use the trademark in question would result in monetary damage to our business.

·        Therefore, until Starbucks abandons all claims against us seeking monetary compensation, it would appear Zurich is bound to provide coverage by both the terms contained in our policy, and by the generally accepted insurance industry interpretation of the word “damages”.

Not only has your behavior been evasive, but also Zurich has the appearance of working in concert with Starbucks.  The concerted actions of Zurich and Starbucks are mutually beneficial, while being extremely detrimental to us.  It is possible that such actions could be viewed as a conspiracy, a conspiracy that could result in the elimination of our business.  While you may, or may not, be in direct communication with Starbucks, you are perfectly aware of Starbucks’ actions, and you are perfectly aware of why they are taking such actions.  Starbucks is well aware of our limited financial resources, and Starbucks is well aware that, should its actions prove successful, we will most likely be eliminated as a competitor.  I want to make sure, that from this point forward, that Zurich is clearly aware that your actions are posing a fatal threat to the existence of our business.  While neither Starbucks nor Zurich may have set out with the initial intent of our elimination, continuing to pursue an unjustifiable course of action, with the full knowledge of the catastrophic effects that action could have on our business, can be synonymous with intent.

I want to make Zurich specifically aware that our attorneys are being prevented from prosecuting an aggressive defense, because of your threat to pull coverage.  Beyond said threat, you have specifically restricted their ability to defend us by directly instructing them not to pursue certain essential avenues of a proper defense.  In so doing, you are enhancing Starbucks’ chances of success by actively hindering our defense.

I want to make you aware of a specific event that occurred in the past.  On 11/2/01 Starbucks’ attorney John Rawls directly threatened our attorney, Michael Terry, with the possibility that Starbucks might amend its complaint in an attempt to cause Zurich to pull coverage on our defense, if we refused to agree to an out-of-court with Starbucks.  Another attorney who was present, Mark Kaufman, witnessed this threat.  Attempting to force a party into an agreement with the threat of considerable monetary harm could be construed as an act of “extortion”.  It is important to take note of the fact that the act of Starbucks trying to drop its claim for “damages” is particularly transparent due to the fact that there were no measurable damages to start with.  The sole reason for Starbucks action appears to be an attempt to force us to agree to Starbucks’ terms.  It is possible that Zurich could be viewed as actively participating in said extortion by appearing to be favoring Starbucks’ interests over our interests.

I also want you to be clear that for us to incur the expense of seeking a declarative judgment to compel Zurich to continue providing coverage, could, in itself, put our business at risk of becoming insolvent.

From this point forward, the actions of Zurich will speak more clearly than any possible statements Zurich may make.  From this point forward, you are clearly aware of our very limited financial resources, and of the jeopardy you are putting our business in.

I will close with the following points for your consideration:

·        Our business provides a product that the consuming public deems valuable.

·        The elimination of our business would be detrimental to the consuming public.

·        We are a competitor of Starbucks.

·        Should it be found that Starbucks has knowingly pursued a course of action that would likely result in our elimination, and that said course of action cannot be justified, then Starbucks’ actions could be considered “restraint of trade”.

·        Zurich’s actions could be view as knowingly aiding and abetting Starbucks actions.

·        Given the foregoing, Zurich could be viewed as conspiring with Starbucks in “restraint of trade”.


Jim Clark

cc: Honorable Laura Taylor Swain (S.D.N.Y.)