Full Opinion

25-2505 Scholastic Inc. v. St. Paul Fire & Marine Ins. Co. UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL. At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 6th day of November, two thousand twenty-six. PRESENT: DEBRA ANN LIVINGSTON, SUSAN L. CARNEY, MICHAEL H. PARK, Circuit Judges. _________________________________________ Scholastic Inc., Plaintiff-Appellee, v. 25-2505 St. Paul Fire and Marine Insurance Company, Defendant-Appellant. _________________________________________ FOR PLAINTIFF-APPELLEE: DIANA SHAFTER GLIEDMAN (Cort T. Malone, Thomas Dupont, Amy Weiss, on the brief), Anderson Kill P.C., New York, NY. FOR DEFENDANT-APPELLANT: LAURA BESVINICK, Besvinick Nevins LLP, Coral Gables, FL; Joanne M. Engeldrum, on the brief, Rivkin Radler LLP, Uniondale, NY. Appeal from a judgment of the United States District Court for the Southern District of New York (Furman, J.). UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment is AFFIRMED. Plaintiff-Appellee Scholastic Inc. sued Defendant-Appellant St. Paul Fire and Marine Insurance Company (“Travelers”) for reimbursement of the settlement and defense costs incurred in an action brought by Vanderbilt University. Vanderbilt had alleged that Scholastic “improperly used [Vanderbilt’s] intellectual property to develop” certain products “without paying royalties” under their license agreement. Scholastic Inc. v. St. Paul Fire & Marine Ins. Co., No. 23-cv-3485, 2025 WL 2643981, at *1 (S.D.N.Y. Sept. 15, 2025). The parties to that action settled Vanderbilt’s claims for breach of 2 contract and trademark infringement. Scholastic’s primary insurer, AIG, covered the settlement and defense costs up to its policy limit. Travelers, Scholastic’s excess insurer, denied coverage for the remaining balance. Scholastic then brought this suit. The district court granted summary judgment for Scholastic, ruling that the excess insurance policy covered both the settlement and defense costs. Travelers appealed, challenging the district court’s interpretation of the insurance contract. We assume the parties’ familiarity with the underlying facts, the procedural history of the case, and the issues on appeal. I. Standard of Review “A district court’s grant of summary judgment is reviewed by a court of appeals de novo.” Ezrasons, Inc. v. Travelers Indem. Co., 89 F.4th 388, 394 (2d Cir. 2023). “The parties agree that New York law governs the Travelers policy.” Scholastic, 2025 WL 2643981, at *4. “When a dispute arises involving the terms of an insurance contract, New York insurance law provides that an insurance contract is interpreted to give effect to the intent of the parties as expressed in the clear language of the contract.” Parks Real Est. Purchasing Grp. v. St. Paul Fire & Marine Ins. Co., 472 F.3d 33, 42 (2d Cir. 2006) (internal quotation marks omitted). “An insurance policy should be read in light of common speech and the reasonable expectations of a businessperson.” Id. 3 Ambiguous policy terms “must be construed in favor of the insured and against the insurer.” White v. Cont’l Cas. Co., 878 N.E.2d 1019, 1021 (N.Y. 2007). II. Coverage for Settlement Amount The Travelers policy covers loss “caused by” a “rendering of, or failure to render, any professional service” by Scholastic. Joint App’x at 131–32. In determining whether an insured rendered a professional service, “courts should look to the nature of the conduct under scrutiny . . . as well as to the underlying complaint.” David Lerner Assocs., Inc. v. Phila. Indem. Ins. Co., 934 F. Supp. 2d 533, 541 (E.D.N.Y. 2013) (cleaned up) (quoting Reliance Ins. Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA., 262 A.D.2d 64, 65 (1st Dep’t 1999)), aff’d, 542 F. App’x 89 (2d Cir. 2013). “The question of whether one is engaged in a professional service depends on whether those individuals acted with the special acumen and training of professionals when they engaged in the acts.” Beazley Ins. Co. v. ACE Am. Ins. Co., 880 F.3d 64, 71 (2d Cir. 2018) (cleaned up) (quoting David Lerner, 934 F. Supp. 2d at 541). The entire Vanderbilt settlement amount is covered by the Travelers policy because it was “caused by” a “rendering of” a “professional service.” Vanderbilt’s complaint principally alleged that “Scholastic . . . had long been creating new [d]erivative [p]roducts from the [Vanderbilt intellectual property] . . . without paying Vanderbilt its 4 rightful share of the proceeds.” Joint App’x at 157. Scholastic has special acumen and training in “the design, publication, and sale” of “educational technology products.” Scholastic, 2025 WL 2643981, at *5. Thus, Scholastic was engaged in professional services when it developed, published, and sold its allegedly royalty-bearing products in purported violation of its license agreement with Vanderbilt. See, e.g., David Lerner, 934 F. Supp. 2d at 541 (underwriter “engaged in the due diligence and sale of financial products” is “engaged in professional services”). Those professional activities “caused” the breach-of-contract litigation over whether the products were derivative or independently created. Travelers’s cited failure-to-pay cases do not apply because those cases involved pure failures to pay money owed, such as withheld co-counsel fees or employee stock compensation. See Napoli Shkolnik, PLLC v. Greenwich Ins. Co., 193 A.D.3d 620 (1st Dep’t 2021); Women’s Integrated Network, Inc. v. U.S. Specialty Ins. Co., No. 08 CIV. 10518, 2012 WL 13070116, at *6–7 (S.D.N.Y. Oct. 26, 2012); Evanston Ins. Co. v. Napoli Bern Ripka & Assocs. LLP, No. 18-cv-7027, 2019 WL 10966201, at *1, *5 (S.D.N.Y. June 28, 2019). As the district court noted, Scholastic’s underlying conduct is more than a mere failure to pay 5 under a contract because “Vanderbilt would have been entitled to relief even if the License Agreement did not exist.” Scholastic, 2025 WL 2643981, at *5. 1 Travelers’s reliance on Albert J. Schiff Associates, Inc. v. Flack, 417 N.E.2d 84 (N.Y. 1980), is also misplaced. There, the New York Court of Appeals held that a life insurance agency’s “willful and malicious usurpation” of a competitor’s “novel insurance program” did not constitute the “performance of services in the professional capacity.” Id. at 85–87. The court analogized the agency’s willful misappropriation to disputes over a “merger agreement,” a “commercial tenancy,” and “the engagement of employees,” treating all as business activities rather than professional services. Id. at 88. Here, by contrast, Vanderbilt explained that it “licensed its intellectual property” to Scholastic “to permit the commercial development and availability” of Vanderbilt’s education technology. Joint App’x at 137. The dispute turned on whether certain products commercially developed by Scholastic had incorporated the licensed intellectual property and thus triggered royalty obligations. Developing and selling educational products are core professional services of Scholastic. The fact that Vanderbilt’s claims 1 Travelers also argues that Vanderbilt’s royalties claim arises out of the “gaining of any profit or advantage to which [Scholastic is] not legally entitled,” which the policies exclude from coverage. Appellant’s Br. at 33; Joint App’x at 63. Travelers did not make this argument about the royalties before the district court, so we decline to address it. See In re Nortel Networks Corp. Sec. Litig., 539 F.3d 129, 133 (2d Cir. 2008). 6 were premised on alleged misappropriation does not, by itself, remove Scholastic’s conduct from the scope of “professional services” under Schiff. Travelers asks us to remand this case to the district court to “resolve . . . how the settlement should be allocated” between the settled claims. Appellant’s Br. at 36. There is no need to remand, however, because we conclude that the Travelers insurance policy covers both the breach-of-contract claim and the trademark infringement claim. 2 III. Coverage for Defense Costs The second issue on appeal is the claim that Travelers “ha[s] no obligation to pay” Scholastic’s outstanding legal defense costs incurred prior to exhaustion of the AIG policy. Appellant’s Br. at 36–37. But the Travelers policy provides that it “will continue in force as underlying insurance” upon “exhaustion of the limits of” the AIG policy. Joint App’x at 95. The best reading of this clause is that Travelers has the same obligations with respect to covered costs as AIG had at the time of exhaustion. See Continue, Merriam-Webster Dictionary (defining “continue” as “to maintain without interruption a condition, course, or action”); see also Allstate Ins. Co. v. St. Paul Fire & Marine Ins. Co., No. 83 CIV. 3198, 1984 WL 1969, at *1 (S.D.N.Y. Nov. 30, 1984) (Leval, J.) 2 On appeal, Travelers does not dispute that the settled trademark infringement claim is covered. 7 (“[T]he defendants’ policy is an excess policy. Its coverage begins where the responsibility of the primary policy ends. If the primary policy had provided a cap on its responsibility for legal fees . . ., it is clear that the excess insurer would have been liable for legal expenses incurred in excess of the cap.”). Even if the terms of the policy were ambiguous on this issue, we would construe them in favor of the insured. See White, 878 N.E.2d at 1021. Travelers contends that “shifting the payment of defense costs incurred prior to the exhaustion of the AIG policy to Travelers” will “effectively increase[]” Scholastic’s insurance coverage. Appellant’s Br. at 38. This argument fails at the threshold because it was forfeited, not having been presented to the district court. * * * We have considered Travelers’s remaining arguments and find them to be without merit. Accordingly, we AFFIRM the judgment of the district court. FOR THE COURT: Catherine O’Hagan Wolfe, Clerk of Court 8