Two insurance companies that covered companies in a patent and trademark infringement case should divide costs based on their time on the risk, not equally, the U.S. Court of Appeals for the 10th Circuit has ruled.

On Jan. 18, a unanimous panel reversed a District of Utah ruling that Ohio Casualty Insurance Co. and Unigard Insurance Co. should each foot the bill for half the costs of defending Cloud Nine LLC, Easy Seat LLC, Blaine Ford and Rodney Ford in a patent and trademark infringement action. Barbara Berrett of Berrett & Associates in Salt Lake City, Utah, one of Ohio Casualty’s lawyers on the case, said the total costs were close to $2 million.

The order in Ohio Casualty Ins. Co. v. Cloud Nine, authored by Chief Judge Mary Beck Briscoe and joined by judges Paul Kelly Jr. and Carlos Lucero relied on an opinion the 10th Circuit sought from the Utah Supreme Court.

The state high court opinion explained how its 1997 decision in Sharon Steel Corp. v. Aetna Cas. and Surety Co. should be modified. The Utah Supreme Court stated that the companies should pay defense costs based on the number of years each covered the risk and the respective policy limits. If the insureds lacked coverage for any time period, the Sharon Steel formula called for costs accrued during that time to be apportioned the same way as the other defense costs.

Briscoe remanded the case to the district court for a judgment consistent with the ruling. “As the Utah Supreme Court has now made clear, the costs of defense for the Edizone suit are to be apportioned between Unigard and Ohio Casualty under the modified Sharon Steel formula,” Briscoe wrote.

Cloud Nine and Easy Seat were covered by West American Insurance Co., which is affiliated with Ohio Casualty, from June 1998 to June 2001.

From June 10, 2001, to June 10, 2002, Cloud Nine and Easy Seat were covered by an Ohio Casualty commercial insurance policy. They were uninsured between June 10, 2002, and Dec. 12, 2002. The companies then got coverage from Unigard Insurance Co. for three years starting on Dec. 12, 2002.

Edizone LC sued Cloud Nine, Easy Seat, the Fords, and several related individuals and entities in August 2004 in the District of Utah. Edizone’s legal claims in the case, Edizone v. Cloud Nine, included patent infringement, breach of contract, constructive fraud, fraudulent nondisclosure, trademark infringement, common law trade name infringement and unfair competition, deceptive trade practices, misrepresentation and false designation of origin, and conspiracy.

Berrett said of the decision, “I think it represents the correct interpretation of the policies.”

Unigard’s lawyer, Rebecca Hill, a partner at Christensen & Jensen in Salt Lake City, did not respond to a request for comment. Unigard did not immediately respond.

The defendants’ lawyer Michael Ford, a partner at Strong & Hanni in Salt Lake City, also did not respond. The defendants could not be immediately located for comment.

Sheri Qualters can be contacted at squalters@alm.com.