                                                                 2019 WI 19

                  SUPREME COURT             OF   WISCONSIN
CASE NO.:               2017AP909
COMPLETE TITLE:         West Bend Mutual Insurance Company,
                                  Plaintiff-Respondent-Petitioner,
                             v.
                        Ixthus Medical Supply, Inc. and Karl Kunstman,
                                  Defendants-Appellants,
                        Abbott Laboratories, Abbott Diabetes Care Inc.
                        and Abbott Diabetes Care Sales Corp.,
                                  Defendants-Co-Appellants.

                           REVIEW OF DECISION OF THE COURT OF APPEALS
                          Reported at 381 Wis. 2d 472, 915 N.W.2d 456
                                      (2018 – unpublished)

OPINION FILED:          February 28, 2019
SUBMITTED ON BRIEFS:
ORAL ARGUMENT:          December 11, 2018

SOURCE OF APPEAL:
   COURT:               Circuit
   COUNTY:              Racine
   JUDGE:               David W. Paulson

JUSTICES:
   CONCURRED:
   DISSENTED:
   NOT PARTICIPATING:   ZIEGLER, J. did not participate.

ATTORNEYS:


       For        the   plaintiff-respondent-petitioner,   the     initial
supreme court brief was filed by Kris Bartos and the reply brief
was filed by Danielle N. Rousset, with whom on the briefs was
Jeffrey Leavell and Jeffrey Leavell, S.C., Racine. There was an
oral argument by Jeffrey L. Leavell.


       For the defendants-appellants, there was a brief filed by
Jason Pilmaier, Albert Solochek, and Howard, Solochek & Weber,
S.C., Milwaukee. There was an oral argument by Jason Pilmaier.
       For the defendants-co-appellants, there was a brief filed
by Michael P. Mayer, Linda T. Coberly, and Winstron & Strawn
LLP,   Chicago,   IL.   There   was    an    oral   argument    by   Linda    T.
Coberly.


       An amicus curiae brief was filed on behalf of Wisconsin
Insurance   Alliance    by   James    A.    Friedman,   Amber   Coisman,     and
Godfrey & Kahn, S.C., Madison.




                                       2
                                                                           2019 WI 19
                                                                   NOTICE
                                                     This opinion is subject to further
                                                     editing and modification.   The final
                                                     version will appear in the bound
                                                     volume of the official reports.
No.     2017AP909
(L.C. No.     2016CV1414)

STATE OF WISCONSIN                               :            IN SUPREME COURT

West Bend Mutual Insurance Company,

              Plaintiff-Respondent-Petitioner,

      v.                                                                FILED
Ixthus Medical Supply, Inc. and Karl Kunstman,
                                                                   FEB 28, 2019
              Defendants-Appellants,
                                                                      Sheila T. Reiff
                                                                   Clerk of Supreme Court
Abbott Laboratories, Abbott Diabetes Care Inc.
and Abbott Diabetes Care Sales Corp.,

              Defendants-Co-Appellants.




      REVIEW of a decision of the Court of Appeals.                   Affirmed.


      ¶1      REBECCA GRASSL BRADLEY, J.              In this duty to defend
case, West Bend Mutual Insurance Company asks us to reverse the
court    of    appeals'     decision   holding       that   the    allegations         in
Abbott      Laboratories' complaint      against       Ixthus     Medical      Supply,
Inc. alleged a potentially covered advertising injury, and as a

result,       triggered     West   Bend's   duty       to     defend      under      the
                                                                      No.     2017AP909



commercial general liability policy West Bend issued to Ixthus.1
West Bend argues the court of appeals erred when it determined:
(1) Abbott's complaint2 alleged a causal connection between the
advertising activity and injury; and (2) the knowing violation
exclusion did not apply.          West Bend further contends that the
criminal acts exclusion applies, thereby removing any duty to
defend,    or   alternatively      that      application       of    the     fortuity
doctrine, public policy, and the reasonable expectation of an
insured each independently eliminates its duty to defend.
      ¶2   We    hold    the   allegations      in   Abbott's       complaint       fall
within the initial grant of coverage under the "personal and
advertising     injury     liability"        provision    of    the         commercial

general liability insurance policy West Bend issued to Ixthus.
We   further    hold    that   neither    the   knowing    violation          nor   the
criminal acts exclusions apply to remove West Bend's duty to


      1For ease of reference, we refer to West Bend Mutual
Insurance Company as "West Bend."        We refer to Abbott
Laboratories, Abbott Diabetes Care Inc., and Abbott Diabetes
Care Sales Corporation collectively as "Abbott."  We refer to
Ixthus Medical Supply, Inc. and Karl Kunstman collectively as
"Ixthus."

     The court of appeals opinion in this case was an
unpublished per curiam decision. See West Bend Mut. Ins. Co. v.
Ixthus Med. Supply, Inc., No. 2017AP909, unpublished slip op.,
(Wis. Ct. App. Mar. 28, 2018) (per curiam).
      2All references to Abbott's "complaint" are to the Second
Amended Complaint from the underlying lawsuit Abbott filed in
federal district court in New York against Ixthus and many other
defendants. See Abbott Laboratories, et.al. v. Adelphia Supply
USA, et al., No. 15 Civ. 05826 (E.D.N.Y. Nov. 2015).


                                         2
                                                                 No.   2017AP909



defend.       Finally, we do not address West Bend's argument that
the    fortuity     doctrine,     public    policy,    and    the   reasonable
expectation of an insured eliminate its duty to defend because
West       Bend   failed    to   adequately    raise     or     develop   these
contentions.3      We affirm the decision of the court of appeals.
                                 I.   BACKGROUND
       ¶3     Ixthus   is   a    medical    supply    company    operating   in
Wisconsin.        At all times relevant to this action, Ixthus was
insured under a commercial general liability insurance ("CGL")
policy with West Bend, which provided coverage for "personal and
advertising injury."        Specifically, the CGL policy provided:

       COVERAGE B PERSONAL AND ADVERTISING INJURY LIABILITY

       1. Insuring Agreement

            a. We will pay those sums that the insured becomes
              legally obligated to pay as damages because of
              "personal and advertising injury" to which this
              insurance applies.   We will have the right and
              duty to defend the insured against any "suit"
              seeking those damages. However, we will have no
              duty to defend the insured against any "suit"
              seeking damages for "personal and advertising
              injury"   to  which   this  insurance  does  not
              apply . . . .


       3
       See State v. Dowdy, 2012 WI 12, ¶5, 338 Wis. 2d 565, 808
N.W.2d 691 ("As a general rule, issues not raised in the circuit
court will not be considered for the first time on appeal.");
Wirth v. Ehly, 93 Wis. 2d 433, 443, 287 N.W.2d 140 (1980) ("It
is the often repeated rule in this State that issues not raised
or considered in the trial court will not be considered for the
first time on appeal."); Raasch v. City of Milwaukee, 2008 WI
App 54, ¶8, 310 Wis. 2d 230, 750 N.W.2d 492 (appellate court
justified in rejecting undeveloped arguments).


                                        3
                                                         No.   2017AP909


       b. This   insurance  applies   to   "personal  and
         advertising injury" caused by an offense arising
         out of your business but only if the offense was
         committed in the "coverage territory" during the
         policy period.
"SECTION      V——DEFINITIONS"   of       the   CGL   policy    defines
"advertisement" and "personal and advertising injury" as:

     1. "Advertisement" means a notice that is broadcast or
       published to the general public or specific market
       segments about your goods, products or services for
       the purpose of attracting customers or supporters.
       For the purposes of this definition:

       a. Notices that are published include material
         placed on the Internet or on similar electronic
         means of communication; and

       b. Regarding web-sites, only that part of a web-
         site that is about your goods, products or
         services for the purposes of attracting customers
         or supporters is considered an advertisement.

           . . . .

     14.   "Personal and advertising injury" means injury,
     including consequential "bodily injury," arising out
     of one or more of the following offenses:

           . . . .

        f. The use of another's advertising idea in your
     advertisement," or

        g. Infringing upon another's copyright, trade dress
     or slogan in your "advertisement."
Under "COVERAGE B," the CGL policy contains exclusions for both
"Knowing Violation of Rights of Another" and "Criminal Acts":

     2. Exclusions

     This insurance does not apply to:

     a. Knowing Violation of Rights of Another



                                     4
                                                                                No.     2017AP909


           "Personal and advertising injury" caused by or at
           the direction of the insured with the knowledge that
           the act would violate the rights of another and
           would inflict "personal and advertising injury."

            . . . .

      d. Criminal Acts

           "Personal and advertising injury" arising out of a
           criminal act committed by or at the direction of the
           insured.
      ¶4        Abbott is a health care company that manufactures and
sells      blood    glucose      test    strips       in     both       the     domestic     and

international markets.               Abbott's strips are trademarked under
the     name     "FreeStyle."            The       test     strips       are     functionally
identical regardless of the intended market, but the labeling
and instructional inserts as well as price and available rebates
are      substantially         different            between        the         domestic      and
international packaged boxes.                  For a variety of reasons, Abbott
sells test strips for use in international markets at a much
lower cost.
      ¶5        In November 2015, Abbott filed a lawsuit in New York
federal     court      against      Ixthus     and        over    100     other       defendants
asserting thirteen federal statutory and common law claims for
relief      based       on    its       belief       that        the      defendants        were

"import[ing],          advertis[ing]      and      subsequent[ly]          distribut[ing]"
boxes      of   Abbott's     international           test        strips    in     the     United
States.          The    thirteen     claims         alleged       were:          (1)     Federal
Trademark Infringement under Section 32 of the Lanham Act; 15
U.S.C. § 1114(1); (2) Federal Unfair Competition under Section
43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(i)(A); (3) Common

                                               5
                                                                               No.        2017AP909



Law Unfair Competition (New York law); (4) Federal Trademark
Dilution       under     Section        43(c)    of     the    Lanham    Act,        15    U.S.C.
§ 1125(c);        (5)    State    Law     (New       York)    Trademark    Dilution;           (6)
State Law (New York) Deceptive Business Practices; (7) Unjust
Enrichment; (8) Violation of Federal RICO, 18 U.S.C. § 1962(c);
(9) Conspiracy to Violate Federal RICO, 18 U.S.C. § 1962(d);
(10)       Importation     of    Goods     Bearing          Infringing    Marks       under     15
U.S.C. § 1124; (11) Fraud and Fraudulent Inducement; (12) Aiding
and        Abetting       Fraud;         and         (13)     Contributory           Trademark
Infringement.4
       ¶6      Upon being served, Ixthus tendered its defense to West
Bend.        In   a     March    2016    letter       to     Ixthus,    West    Bend       denied

Ixthus's tender, and explained why it took the position that the
Abbott lawsuit was not covered by the CGL policy.                                    In August
2016, West Bend filed a complaint in the circuit court seeking a
declaratory judgment that West Bend had no duty to defend or
indemnify Ixthus in Abbott's lawsuit.                         In March 2017, West Bend
filed a motion for summary judgment.                         The circuit court granted

West Bend's motion, concluding that although the allegations in
Abbott's complaint fell within the initial grant of coverage,
the knowing violation exclusion applied, thereby eliminating any
duty West Bend had to defend Ixthus.5

       4
       It is undisputed that the federal district court dismissed
the two RICO claims and the unjust enrichment claim, leaving
ten alleged claims.
       5
       The Honorable David W. Paulson of Racine County Circuit
Court presiding.


                                                 6
                                                                   No.    2017AP909



       ¶7   Both   Ixthus   and   Abbott     appealed   to    the        court   of
appeals, which reversed the circuit court's decision.                    The court
of appeals agreed with the circuit court that the allegations in
Abbott's complaint fell within the initial grant of coverage,
but disagreed with the circuit court as to the applicability of
the knowing violation exclusion.           See West Bend Mut. Ins. Co. v.

Ixthus Med. Supply, Inc., No. 2017AP909, unpublished slip op.,
¶¶10, 12-14 (Wis. Ct. App. Mar. 28, 2018) (per curiam).                          The
court of appeals concluded the knowing violation exclusion did
not apply because several of the claims alleged in the complaint
could be established without having to prove Ixthus's actions
were intentional; therefore, the court of appeals held that the

complaint asserted potentially covered claims not consumed by
the knowing violation exclusion.           Id.   Accordingly, the court of
appeals concluded West Bend had a duty to defend Ixthus.                      Id.,
¶20.
       ¶8   West Bend petitioned for review by this court, which
we granted.
                        II.   STANDARD OF REVIEW
       ¶9   "We independently review a grant of summary judgment
using the same methodology of the circuit court and the court of
appeals."     Water Well Sols. Serv. Grp., Inc. v. Consolidated
Ins.   Co., 2016 WI 54,       ¶11,   369    Wis. 2d 607,     881    N.W.2d 285.
"Summary    judgment   is   appropriate      when   there    is     no     genuine
dispute of material fact and the moving party is entitled to




                                      7
                                                                   No.   2017AP909



judgment   as    a   matter     of    law."      Id.     (citing    Wis.    Stat.

§ 802.08(2)     (2013-14)).6          Declaratory      judgments    determining
whether an insurer has a duty to defend require interpretation
of the insurance policy, which also presents questions of law
reviewed de novo.     Water Well Sols. Serv. Grp., 369 Wis. 2d 607,
¶12; Air Eng'g, Inc. v. Industrial Air Power, LLC, 2013 WI App
18, ¶9, 346 Wis. 2d 9, 828 N.W.2d 565.7
                               III.     ANALYSIS
     A. General Insurance Principles——Advertising Injury
     ¶10   The sole issue presented is whether West Bend has the
duty to defend its insured, Ixthus, under the terms of the CGL
policy——specifically      the        "Personal     and   Advertising       Injury

Liability" provision.         In assessing whether a duty to defend
exists, we "compare the four corners of the underlying complaint
to the terms of the entire insurance policy."                Water Well Sols.
Serv. Grp., 369 Wis. 2d 607, ¶15.             In doing so, "a court must
liberally construe the allegations contained in the underlying
complaint, assume all reasonable inferences from the allegations
made in the complaint, and resolve any ambiguity in the policy


     6 All subsequent references to the Wisconsin Statutes are to
the 2017-18 version unless otherwise indicated.
     7 The final order from the circuit court both "adjudged and
declared" that West Bend had no duty to defend.    This judgment
followed West Bend's motion for summary judgment within a
declaratory judgment action.     The circuit court merged the
summary judgment and declaratory judgment into a single order,
granting West Bend's summary judgment motion by issuing a
declaration.


                                        8
                                                                                No.     2017AP909



terms    in    favor          of    the    insured."       Id.        The    purpose     of   the

analysis       is        to    determine         whether    the       allegations       in    the
complaint contain any claims, which if proven true, would be
covered       by    the       policy.        See    id.,    ¶¶16-17      &   n.11.       Stated
otherwise,         if     there      are     any   potentially        covered    claims——any
allegations in the complaint that "give rise to the possibility
of coverage"——the insurer has a duty to defend.                                See Fireman's
Fund    Ins.       Co.    v.       Bradley      Corp.,    2003   WI    33,    ¶¶19,     26,    261
Wis. 2d 4, 660 N.W.2d 666.                      The duty to defend is "necessarily
broader than the duty to indemnify because the duty to defend is
triggered by arguable, as opposed to actual, coverage."                                       Id.,
¶20.

       ¶11     We use a three-step process in duty-to-defend cases:

       (1)     "First, a reviewing court determines whether                            the
               policy language grants initial coverage for                             the
               allegations set forth in the complaint.   If                            the
               allegations set forth in the complaint do                               not
               fall within an initial grant of coverage,                               the
               inquiry ends."

       (2)     Second, "if the allegations fall within an
               initial grant of coverage, the court next
               considers whether any coverage exclusions in the
               policy apply."

       (3)     Third, "[i]f any exclusion applies, the court
               next considers whether an exception to the
               exclusion applies to restore coverage."
Water    Well       Sols.      Serv.       Grp.,    369    Wis. 2d 607,       ¶16     (internal
citations omitted).
       ¶12     Additionally, in analyzing the first step of the duty-
to-defend      analysis            when    an    insured    seeks     coverage        under   the
advertising provision of a CGL policy, we ask three questions to

                                                   9
                                                                              No.     2017AP909



determine whether the allegations in the complaint fall under
the initial grant of coverage.                     See Acuity v. Bagadia, 2008 WI

62, ¶16, 310 Wis. 2d 197, 750 N.W.2d 817; Fireman's Fund Ins.
Co.,     261      Wis. 2d 4,       ¶26;     see     also    Air     Eng'g,      Inc.,      346
Wis. 2d 9, ¶11; Acuity v. Ross Glove Co., 2012 WI App 70, ¶9,
344    Wis. 2d 29,         817    N.W.2d 455.          This    three-question            test,
unique       to      advertising     injury        cases,     assesses        whether      the
allegations in          a complaint         "give    rise to the possibility                of
coverage under the CGL insurance polic[y's] advertising injury
provision."           Fireman's Fund Ins. Co., 261 Wis. 2d 4, ¶26.                         The
three questions are:               (1) Does the complaint allege a covered
offense under the advertising injury provision? (2) Does the

complaint         allege    that     the     insured        engaged      in    advertising
activity? and (3) Does the complaint allege a causal connection
between        the     plaintiff's        alleged     injury       and   the        insured's
advertising activity?              Id.     Answering yes to all three questions
completes the first step in the duty-to-defend analysis, the
policy    provides an            initial    grant    of    coverage,     and        the court
proceeds to the second and third steps in the process.
       ¶13     The     second      part      of     the     duty-to-defend           analysis
involves       determining         whether    any     of    the    insurance         policy's
exclusions apply.           Water Well Sols. Serv. Grp., 369 Wis. 2d 607,
¶16.     "Exclusions are narrowly or strictly construed against the
insurer if their effect is uncertain."                         American Family Mut.
Ins. Co. v. American Girl, Inc., 2004 WI 2, ¶24, 268 Wis. 2d 16,
673 N.W.2d 65.          Only if a policy exclusion removes coverage does
the    court      proceed    to     the    third     step     of   the    duty-to-defend
                                              10
                                                                       No.       2017AP909



analysis, which entails consideration of whether an exception to
the exclusion restores coverage.               Water Well Sols. Serv. Grp.,

369 Wis. 2d 607, ¶16.
      ¶14   "If the policy, considered in its entirety, provides
coverage for at least one of the claims in the underlying suit,
the insurer has a duty to defend its insured on all the claims
alleged in the entire suit."              Water Well Sols. Serv. Grp., 369
Wis. 2d 607, ¶16.        Stated otherwise, if even one covered offense
alleged in the underlying complaint, if proven, would give rise
to recovery under the terms of the policy, the insurance company
has   a   duty   to    defend.        Id.;    Fireman's    Fund   Ins.       Co.,     261
Wis. 2d 4, ¶21; Air Eng'g, Inc., 346 Wis. 2d 9, ¶10; Ross Glove

Co., 344 Wis. 2d 29, ¶19.
                                 B.    Application
      ¶15   West Bend argues:          (1) the complaint does not allege a
causal connection and (2) even if it does, exclusions in the
policy apply to eliminate its duty to defend.                   Because West Bend
does not challenge the court of appeals' answers to the first or
second questions of the advertising injury test, we need not
specifically     analyze    whether      the    complaint    alleges         a   covered
offense under the advertising injury provision or whether the
complaint    alleges      that    the     insured     engaged     in     advertising
activity.        The    court    of     appeals     correctly     held       that     the
complaint sufficiently alleged both a covered offense and that
Ixthus engaged in advertising activity.                   We adopt the court of




                                         11
                                                                             No.     2017AP909



appeals' analysis on those two questions.8                          See West Bend Mut.

Ins. Co., No. 2017AP909, unpublished slip op., ¶¶12-13.
           1. Advertising Injury Coverage——Causal Connection
     ¶16    West Bend asserts the complaint lacks any allegations
suggesting       a    causal     connection          between    Abbott's          injury   and
Ixthus's actions.           Specifically, West Bend argues the complaint
does not allege any advertising activity by Ixthus that caused
injury     to    Abbott.          Instead,          West    Bend    insists        that    the
allegations          in   the     complaint          against       Ixthus     focused      on
importation and distribution, not advertising.                          Therefore, West
Bend says the complaint's allegations as to Ixthus do not fall
within     the       initial     grant    of        coverage    under       the    insurance

policy's        advertising       provision.               We   reject       West     Bend's
contentions       and     hold    the    complaint         sufficiently       alleges      the
required causal connection.


     8 The court of appeals concluded both that Abbott's
complaint alleged a covered offense under the advertising
provision and that Ixthus engaged in an advertising activity:

     [T]he complaint alleges a covered offense because it
     alleges that Abbott suffered an advertising injury
     caused   by  an   offense  arising   out   of  Ixthus's
     business. . . . The complaint alleges that the test
     strips are functionally the same whether for domestic
     or international sale but that the diverted ones are
     not labeled to comply with FDA requirements and that
     there   are  numerous   material   differences  between
     packaging intended for international and domestic
     markets. Packaging itself is an advertisement.

See West Bend Mut. Ins. Co., No. 2017AP909, unpublished slip
op., ¶¶12-13.


                                               12
                                                                            No.     2017AP909



       ¶17    The   test    for   whether         a   causal    connection         has   been
sufficiently alleged focuses not on "whether 'the injury could

have   taken    place      without    the     advertising,'"          but   whether        the
allegations     sufficiently         assert       that   "the    advertising         did    in
fact contribute materially to the injury."                       Fireman's Fund Ins.
Co., 261 Wis. 2d 4, ¶52 (quoting R.C. Bigelow, Inc. v. Liberty
Mut.   Ins.    Co.,   287    F.2d     242,    248      (2d     Cir.   2002)       (citations
omitted)).      With this causation test in mind, we examine the
complaint's allegations relevant to causation.
       ¶18    First, in paragraphs 5 and 6, the complaint alleges
that the "Defendants" "caused——and continue to cause——Abbott to
pay out, wrongfully, millions of dollars in rebates."                               Second,

in paragraph 15, the complaint alleges:

       Defendants' unauthorized importation, advertisement
       and subsequent distribution causes, or is likely to
       cause, consumer confusion, mistake, and deception to
       the detriment of Abbott . . . .    When such patients
       encounter the diverted international FreeStyle test
       strips, which bear certain of Abbott's trademarks but
       which are materially different from what U.S. patients
       expect, they are likely to be confused and, indeed,
       disappointed. . . .  And the advertisement and sales
       of diverted international FreeStyle test strips cause
       great damage to Abbott and the goodwill of Abbott's
       valuable trademarks.
Third, in paragraph 385, the complaint alleges:                        "Using Abbott's
trademarks and trade dress, Defendants advertise to consumers
and    the    marketplace     their     ability          and    willingness        to    sell
FreeStyle test strips.            These advertisements are made through,
inter alia, websites, emails, facsimiles, point-of-sale displays
and other media."


                                             13
                                                                            No.     2017AP909



       ¶19   West Bend admits that the complaint's references to
"Defendants" include Ixthus, but contends that Ixthus was not
really an "advertising" defendant——but instead a "distributing"
defendant who did not advertise or sell products directly to end
users.       As    a   result,    West       Bend    argues    that    these       causation
paragraphs are insufficient to connect Ixthus's activity to the
coverage     afforded       in    the    advertising          provision       of    the   CGL
policy.      West Bend's post-hoc spin on these causation paragraphs
cannot    eliminate       coverage      at    the    duty-to-defend         stage.        The
insurer in Ross Glove Co. advanced a similar argument in that

case, suggesting that the manufacturer of infringing packaged
products could not also be viewed as having advertised those

goods.       The court of appeals rightly rejected this argument,
concluding that the complaint alleged the manufacturer engaged
in     covered         advertising       activity        because        its        packaging
constituted        a    "published       advertisement"         notwithstanding           the
advertising activity of other defendants                        in    the   case.         Ross
Glove Co., 344 Wis. 2d 29, ¶16.                     Just like the manufacturer in
Ross Glove Co., Ixthus need not be "the first, last or only,
entity" alleged to advertise in order to be engaged in covered
advertising activity.            Id.
       ¶20   The       allegations      in    Abbott's    complaint         very     plainly
allege that Ixthus, as a "Defendant," engaged in advertising
that   caused substantial injury                   to Abbott.         Fleshing      out the
factual allegations at trial may affect indemnification under
the    policy,      but    at    the    duty-to-defend         stage,       we     liberally
construe      the      allegations       in    the     complaint,       and        make   all
                                              14
                                                                                  No.     2017AP909



reasonable    inferences         from      the     allegations.           See       Water      Well

Sols. Serv. Grp., 369 Wis. 2d 607, ¶15.                         Further, "advertising
need not be the sole cause of harm.                         Rather, the advertising
activity     must      merely     'contribute           materially'          to    the     harm."
Bagadia,     310       Wis. 2d 197,          ¶50        (emphasis       added;           citation
omitted).
      ¶21    We    conclude       the      allegations       in     the      complaint         are
sufficient to satisfy the test for causation.                                 The complaint
says the "Defendants" (including Ixthus) engaged in advertising
activity    that    caused       a    variety      of    injuries       to    Abbott.           The
complaint alleges the defendants used Abbott's trademarks and
trade   dress     in    advertising         to     consumers      and     the      marketplace

through websites, emails, facsimiles, point-of-sale displays and
other   media.         The complaint         alleges the          defendants caused               a
variety of serious injuries to Abbott including loss of millions
of dollars in rebates, great damage to Abbott's goodwill and
valuable     trademarks,         and       consumer       confusion,          mistake,          and
disappointment.            Consumer          confusion          alone        satisfies          the
"contribute        materially"            causation       test.           See           id.,    ¶56
("Advertising          activity       can        contribute       materially              to    the
trademark     infringement            if    the     advertising         activity           likely
creates consumer confusion.").
      ¶22    The third question in the advertising-injury test on
causation     undoubtedly         must      be     answered       affirmatively:                the
complaint alleges a causal connection between Abbott's alleged
injury and Ixthus's advertising activity.                        Given the allegations
in   the    complaint,      it       is    reasonable      to     infer       that       Ixthus's
                                              15
                                                                   No.    2017AP909



alleged advertising activity contributed materially to Abbott's
alleged injuries.       Accordingly, the allegations in the complaint
fall within the initial grant of coverage.
                               2.    Exclusions
     ¶23   Having concluded the allegations in the complaint fall
within   the   initial grant        of   coverage    under   the   personal and
advertising provision of the CGL policy, we move to the second
step in the duty-to-defend analysis to determine whether any of
the exclusions in the CGL policy apply to eliminate West Bend's
duty to defend Ixthus.
     ¶24   West Bend's policy contains two exclusions it believes
applies:       (1)   knowing   violation       and   (2)   criminal    acts.    We

address each in turn.
                            a. Knowing Violation
     ¶25   West      Bend   argues       the   knowing     violation     exclusion
applies to preclude its duty to defend because the complaint
alleges Ixthus acted intentionally and with knowledge that it
was defrauding Abbott by buying international test strips at the

lower price and selling them domestically to increase profit.
West Bend points to the repeated allegations in the complaint
that the defendants knew what they were doing and that Ixthus
had done this before.
     ¶26   The knowing violation exclusion in Ixthus's CGL policy
says:

     This insurance [meaning the coverage for personal and
     advertising injury] does not apply to:

     a. Knowing Violation of Rights Of Another

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             "Personal and advertising injury" caused by or at
             the direction of the insured with the knowledge
             that the act would violate the rights of another
             and   would  inflict   "personal  and  advertising
             injury."
       ¶27     The knowing violation exclusion has eluded review in
this     court,      but   our    court      of    appeals       has    considered        its
application.         In Acuity v. Ross Glove Co., 344 Wis. 2d 29, the

court     of    appeals     considered        whether      the     knowing          violation
exclusion       in    Acuity's      CGL    policy     with       Ross    Glove        Company

precluded coverage for advertising injury alleged in a third-
party     complaint        against        Ross     Glove     for       "alleged        patent
infringements        and    trade     dress       infringement."              Id.,     ¶¶1-2.
Acuity argued the exclusion applied based on allegations in the
complaint that Ross Glove's actions were "willful and done with
the intent to cause harm."                Id., ¶19.     The court of appeals held
the exclusion did not preclude Acuity's duty to defend because
the complaint also alleged liability under the Lanham Act, a

strict       liability     statute,       where    "intent       is     not    a     required
element of trade dress infringement, but rather is required only
to justify a request for enhanced damages or attorney fees."
Id.     Applying the rule that when "even one covered offense is
alleged in the underlying complaint, the insurance company has a
duty to defend" the court of appeals held the exclusion did not
preclude coverage.          Id.
       ¶28     The court of appeals reached a similar conclusion in
Air Eng'g, Inc. v. Industrial Air Power, LLC, 346 Wis. 2d 9.
Industrial Air Power had a CGL policy with Acuity that provided
advertising       injury     coverage,       but    also     included         the     knowing

                                            17
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violation exclusion.            Id., ¶¶1, 12, 23.                Air Engineering sued

Industrial Air Power alleging various causes of action based on
"misappropriation and use of Air Engineering's website source
code and site content and an internet advertising system[.]"
Id., ¶1.     Acuity argued the knowing violation exclusion in its
policy   eliminated       any      duty     to      defend     because    the      complaint
alleged its insured "knew the misappropriated information was
confidential,      misappropriated             it    in   a    willful    and      malicious
manner," and did so to obtain business from Air Engineering's
customers.       Id., ¶23.          Acuity pointed out that "each claim in
the complaint includes an allegation of conduct that is 'willful
and malicious.'"         Id.        The court of appeals, relying on Ross

Glove Co., concluded that "an allegation of willful conduct in a
complaint . . . does          not    destroy        potential      coverage" when          the
complaint contains a covered claim that does not require proof
of a knowing violation.                Air Eng'g, Inc., 346 Wis. 2d 9, ¶24.
Because the complaint involved in Air Eng'g, Inc. set forth at
least    three    "potentially            covered      claims      that      do    not    base
liability    on   a    showing       of    a     knowing      violation      of    another's
rights and infliction of advertising injury," the exclusion did
not remove Acuity's duty to defend its insured.                        Id., ¶25.
     ¶29    The   court       of    appeals'        analyses      in   Air    Engineering,
Inc. and Ross Glove Co. were correct.                         It properly compared the
allegations in each complaint to the language of the exclusion.
The knowing violation exclusion will preclude coverage at the
duty-to-defend        stage     only      when      every      claim   alleged       in    the
complaint requires the plaintiff to prove the insured acted with
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knowledge that its actions "would violate the rights of another
and would inflict 'personal and advertising injury.'"                                          If the
complaint alleges any claims that can be proven without such a
showing, the insurer will be required to provide a defense.
       ¶30   West          Bend   urges        us     to    apply       the    knowing      violation
exclusion based on the "story" this 156-page complaint tells——
that     Ixthus       "deliberately             and        willfully"         participated         in    a
"fraudulent           scheme."            We     do        not    base        insurance       coverage
decisions        on    stories         or      themes.            We     apply       the    law,        and
applicable        law       in     this        case        requires      us     to    compare        the
allegations in the complaint to the words of the exclusion to
ascertain     whether            Abbott     makes          any   claims       that    do     not     base

liability     on       a    showing       of     a    knowing          violation      of     another's
rights and infliction of advertising injury.                                      See Air Eng'g,

Inc., 346 Wis. 2d 9, ¶25.                      Unless an exclusion knocks out every
pleaded claim, leaving no potentially covered advertising-injury
claim for which the insured could be liable, the duty to defend
remains.      See generally Marks v. Houston Cas. Co., 2016 WI 53,
¶41, 369 Wis. 2d 547, 881 N.W.2d 309 (applying policy exclusions
at     the   duty-to-defend            stage          will       not    typically          relieve      an
insurer of its duty to defend).
       ¶31   A     review         of   Abbott's            ten    remaining       claims       in    the
complaint quickly reveals that the complaint contains multiple
claims that fall within West Bend's personal and advertising
injury coverage provision and do not require proof that Ixthus
acted with knowledge or with intent to violate Abbott's rights
and inflict injury.
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        ¶32      Abbott's claim for trademark dilution under Section
43(c)    of     the   Lanham    Act,       15       U.S.C.       § 1125(c)(1)——a        strict
liability       statute——does       not    require             proof   that    Ixthus     acted
knowingly or intentionally.               See Ross Glove Co., 344 Wis. 2d 29,

¶19.     For relief under this section of the Lanham Act, Abbott
need     only    show:        (1)   Abbott          had    a     "famous      mark   that    is
distinctive"; and (2) after its mark became distinctive, the
defendants commenced use of the "mark or trade name in commerce
that is likely to cause dilution by blurring or dilution by
tarnishment of the famous mark regardless of the presence or
absence of actual or likely confusion, of competition, or of
actual economic injury."            15 U.S.C. § 1125(c)(1).

        ¶33   Likewise, Abbott's claim for trademark dilution under
New York General Business Law § 360-1 does not require Abbott to
prove Ixthus acted knowingly or intentionally.                                Rather, Abbott
must show "(1) its trademark 'is of truly distinctive quality or
has acquired secondary meaning' and (2) 'there is a likelihood
of dilution.'"         N.Y. Gen. Bus. Law § 360-1; West Bend Mut. Ins.
Co., unpublished slip op., ¶18 (quoting Johnson & Johnson v.
American Nat'l Red Cross, 552 F. Supp. 2d 434, 447 (S.D.N.Y.
2008) (citation omitted)).
        ¶34   Both Abbott's federal and state law causes of action
for trademark dilution include allegations that Ixthus infringed
upon    Abbott's      trade    dress      in    Ixthus'         advertisements,       thereby
alleging covered claims for personal and advertising injury that
do not require proof of knowing or intentional action on the
part     of     Ixthus.       Specifically,               in    paragraph      385   of     the
                                               20
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complaint, Abbott alleges that "[u]sing Abbott's trademarks and
trade    dress,         Defendants       advertise       to    consumers           and    the
marketplace their ability and willingness to sell FreeStyle test
strips."      In paragraph 585, Abbott alleges that Ixthus "utilized
marks    that     are    likely     to   cause    dilution      by    blurring        and/or
tarnishment       of    Abbott's     famous     FreeStyle      Marks       and     FreeStyle
Trade Dress."           And in paragraph 590, Abbott alleges that Ixthus
and the other Defendants "have diluted and are continuing to
dilute      the   distinctive        quality     of     the   FreeStyle           Marks   and
FreeStyle     Trade Dress,          in   violation of         state    law."         Because
neither cause of action requires proof of intentional conduct,
the knowing violation exclusion does not apply.

      ¶35    Similarly, Abbott's claim alleging deceptive business
practices under New York General Business Law § 349 does not
require Abbott to establish "intent to defraud or mislead" to
prove its case, but allows the district court to award treble
damages if Abbott proves the defendants' actions were done with
such intent.          N.Y. Gen. Bus. Law § 349; West Bend Mut. Ins. Co.,

unpublished slip op., ¶19 (citing Oswego Laborers' Local 214
Pension Fund v. Marine Midland Bank, N.A., 647 N.E.2d 741, 744-
45   (Ct.    App.       N.Y.    1995)).        Abbott    alleges       Ixthus'       acts——
including       the     use    of   Abbott's     trade    dress       to   advertise      to
consumers and the marketplace——were "materially misleading" and
caused injury to Abbott, thereby falling squarely within the
grant of coverage for "personal and advertising injury" claims.
Because intent is not an element of this cause of action, the
knowing violation exclusion does not apply.
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       ¶36       Even    though     the       complaint          generally        asserts      Ixthus
acted      wrongfully       and     with          knowledge        that    it     was       defrauding
Abbott, West Bend is not relieved of its duty to defend because
this       complaint       alleges           at     least        one      potentially         covered
advertising-injury              claim,       which        does      not    depend       on    whether
Ixthus      acted       with     knowledge         that       it    was    violating          Abbott's
rights      or    with     knowledge         that        it   was      inflicting       advertising
injury.9          When    "even    one        covered         offense      is     alleged      in   the
underlying         complaint,          the    insurance            company      has     a    duty    to
defend."         Ross Glove Co., 344 Wis. 2d 29, ¶19.

       ¶37       Despite        Abbott's          general          allegations          of    knowing
violations, Abbott could prevail on several covered advertising

injury       claims        without       establishing               that     Ixthus          knowingly
violated Abbott's rights.                     It is this possible coverage that
triggers West Bend's duty to defend.                                   "An insurer's duty to
defend      the    insured        in    a     third-party           suit     is    predicated        on
allegations in a complaint which, if proven, would give rise to
the    possibility         of    recovery          that       falls     under     the       terms   and
conditions of the insurance policy."                               Fireman's Fund Ins. Co.,


       9
       We are not persuaded by the argument attempting to
analogize this case to Talley v. Mustafa, 2018 WI 47, 381
Wis. 2d 393, 911 N.W.2d 55, Schinner v. Gundrum, 2013 WI 71, 349
Wis. 2d 529, 833 N.W.2d 685, Estate of Sustache v. American
Family Mut. Ins. Co., 2008 WI 87, 311 Wis. 2d 548, 751
N.W.2d 845, or C.L. v. School Dist. of Menomonee Falls, 221
Wis. 2d 692, 704-05, 585 N.W.2d 826 (Ct. App. 1998).     None of
those cases involved analysis of whether an insurer had the duty
to defend its insured under a CGL advertising-injury coverage
provision.


                                                    22
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261 Wis. 2d 4, ¶19.           While a finder of fact could determine
Ixthus    acted    knowingly,      thereby        relieving       West    Bend     of    its
indemnification          obligation        under        the       knowing        violation
exclusion,   the    duty    to     defend       is   "broader      than   the     duty    to
indemnify because the duty to defend is triggered by arguable,
as opposed to actual, coverage."                Id., ¶20.

                                 b. Criminal Acts
     ¶38    West    Bend    also    argues        the      criminal    acts     exclusion
precludes    coverage.             West     Bend        contends       the       complaint
specifically alleges some of Ixthus's acts constituted crimes,
such as illegal mail, wire, and insurance fraud.                             The criminal
acts exclusion precludes coverage for "'Personal and advertising

injury' arising out of a criminal act committed by or at the
direction of the insured."            West Bend's policy does not define
criminal    act    and    this   court      has      not    yet   decided       whether    a
defendant must have been only charged with or actually convicted
of a crime in order for the criminal acts exclusion to apply.
This issue of first impression was not fully addressed in the
courts below and West Bend's motion for summary judgment in the
circuit court relied solely on the knowing violation exclusion.
Accordingly, we decline to address it.10
     ¶39    The    application        of    the       criminal        acts      exclusion,
however, can be resolved without deciding the issue of first

     10See Lamar Co., LLC v. Country Side Rest. Inc., 2012 WI
46, ¶31 n.15, 340 Wis. 2d 335, 814 N.W.2d 159 ("As a general
rule, we will not consider for the first time on appeal an issue
not raised in the circuit court[.]").


                                           23
                                                                        No.     2017AP909



impression.       The complaint alleges claims that are not dependent
on a showing of criminal conduct.                   Lanham Act violations, for
example, are not criminal.             "[W]hen an insurance policy provides
coverage for even one claim made in a lawsuit, the insurer is
obligated to defend the entire suit."                    Fireman's Fund Ins. Co.,

261 Wis. 2d 4, ¶21.          Further, allegations in the complaint are
to   be    construed     liberally     in   favor       of   the    insured,    and   any
doubts     as to coverage        at    the duty-to-defend            stage should      be
resolved in favor of the insured.                 Id., ¶20.        Because claims not
premised on a criminal act are alleged in the complaint, the
criminal acts exclusion does not relieve West Bend of its duty
to defend Ixthus.11

                                 IV.    CONCLUSION
      ¶40    We   hold     the   allegations       in    Abbott's     complaint       fall
within the initial grant of coverage under the "personal and
advertising       injury     liability"          provision     of     the     commercial
general liability insurance policy West Bend issued to Ixthus.
The claims in the complaint are sufficient to allege a causal
connection between         Ixthus's     advertising          activity   and Abbott's

      11  The third step of the duty-to-defend analysis——
evaluating whether any exceptions to the exclusions apply——is
not implicated in this case and therefore will not be addressed.
Because we conclude that Abbott's complaint alleges covered
claims and no coverage exclusion applies to remove coverage,
logically we do not consider whether an exception to any
exclusion would restore coverage.    Once a court determines the
policy provides an initial grant of coverage, the court must
consider whether any exclusions apply; if none apply, the
analysis stops and the insurer has a duty to defend its insured
against all of the claims asserted in the complaint.


                                            24
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injuries.          We further hold that neither the knowing violation
nor the criminal acts exclusions apply to remove West Bend's
duty   to    defend     because    the   complaint       alleges   at         least   one
potentially covered claim unaffected by either exclusion.                              We
affirm the decision of the court of appeals.
       By    the    Court.—The    decision    of   the    court    of     appeals     is
affirmed.
       ¶41    ANNETTE KINGSLAND ZIEGLER, J., did not participate.




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