98 Alr5th 1 (Originally Published in 2002)

Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002)

98 A.L.R.5th 1 (Originally published in 2002)

Advertising Injury Insurance

Elizabeth D. Lauzon, J.D.

American Law Reports ALR5th The ALR databases are made current by the weekly addition of relevant new cases.

Commercial general liability (CGL) insurance policies often provide coverage for "advertising injury," which means an insured is covered for certain acts, such as defamation, invasion of privacy, and copyright infringement, that may result from its "advertising activities." Courts have held that in order to be covered for an "advertising injury," the insured must prove the following: (1) it was engaged in "advertising activities"; (2) the underlying action constituted an enumerated "advertising injury" offense within the insurance policy; (3) the underlying "advertising injury" was caused by the insured's "advertising activities"; and (4) no insurance policy exclusions applied. For example, the court in Charter Oak Fire Ins. Co. v. Hedeen & Companies, 280 F.3d 730, 61 U.S.P.Q.2d (BNA) 1557, 98 A.L.R.5th 687 (7th Cir. 2002), reh'g and reh'g en banc denied, (Mar. 12, 2002) (applying Wisconsin law), held that the advertising injury provision of a commercial general liability (CGL) insurance policy, which extended to injuries arising out of infringement of a copyright, title, or slogan, encompassed claims of trademark infringement asserted by a toy manufacturer against the insured companies that developed and marketed toy concepts, even though the policy did not expressly refer to trademark infringement, and the alleged use of the manufacturer's trademark by companies that developed a toy concept by sending business letters on a letterhead that included the manufacturer's trademark, which allegedly created actual confusion among the commercial public and resulted in unlawful profits for the companies, was arguably a use in the course of the companies' advertising. This annotation collects and analyzes cases dealing with construction and application of "advertising injury" insurance provisions.

TABLE OF CONTENTS Article Outline Index Table of Cases, Laws, and Rules Research References

ARTICLE OUTLINE

I PRELIMINARY MATTERS § 1[a] Introduction—Scope § 1[b] Introduction—Related annotations § 2 Summary and comment II WHAT CONSTITUTES "ADVERTISING ACTIVITY" § 3 Affirmative self–promotion or solicitation of business § 4 Widespread distribution of promotional material to the public § 5 One–on–one or targeted group solicitations III WHAT CONSTITUTES "ADVERTISING INJURY" § 6[a] Libel, slander, or disparagement—"Advertising injury" found § 6[b] Libel, slander, or disparagement—"Advertising injury" not found § 7[a] Unfair competition—"Advertising injury" found § 7[b] Unfair competition—"Advertising injury" not found § 8[a] Copyright infringement—"Advertising injury" found § 8[b] Copyright infringement—"Advertising injury" not found

§ 9 Invasion of privacy § 10[a] Misappropriation of advertising ideas or style of doing business—"Advertising injury" found § 10[b] Misappropriation of advertising ideas or style of doing business—"Advertising injury" not found § 11[a] Patent infringement—Constitutes "advertising injury" § 11[b] Patent infringement—Does not constitute "advertising injury" § 12[a] Trademark or trade dress infringement—Constitutes "advertising injury" § 12[b] Trademark or trade dress infringement—Does not constitute "advertising injury" § 13[a] Unfair competition or other unfair business practices violations—Constitutes "advertising injury" § 13[b] Unfair competition or other unfair business practices violations—Does not constitute "advertising injury" § 14[a] Misappropriation of trade secrets—Constitutes "advertising injury" § 14[b] Misappropriation of trade secrets—Does not constitute "advertising injury" § 15 Negligent misrepresentation § 15.5 Other acts IV WHETHER "ADVERTISING INJURY" WAS CAUSED BY "ADVERTISING ACTIVITY" § 16[a] Libel, slander, or disparagement—Caused by "advertising activity" § 16[b] Libel, slander, or disparagement—Not caused by "advertising activity" § 17[a] Copyright infringement—Caused by "advertising activity" § 17[b] Copyright infringement—Not caused by "advertising activity" § 18[a] Patent infringement—Caused by "advertising activity" § 18[b] Patent infringement—Not caused by "advertising activity" § 19[a] Trademark or trade dress infringement—Caused by "advertising activity" § 19[b] Trademark or trade dress infringement—Not caused by "advertising activity" § 20[a] Unfair competition or other unfair business practices violations—Caused by "advertising activity" § 20[b] Unfair competition or other unfair business practices violations—Not caused by "advertising activity" § 20.5 Emotional distress § 21[a] Misappropriation of trade secrets—Caused by "advertising activity" § 21[b] Misappropriation of trade secrets—Not caused by "advertising activity" V WHETHER COVERAGE EXCLUSIONS APPLY § 22[a] Prior publication or acts—Exclusion applied § 22[b] Prior publication or acts—Exclusion did not apply § 23[a] Knowledge of falsity—Exclusion applied § 23[b] Knowledge of falsity—Exclusion did not apply § 24[a] Breach of contract—Exclusion applied § 24[b] Breach of contract—Exclusion did not apply § 25 Intellectual property § 26[a] Quality of goods—Exclusion applied § 26[b] Quality of goods—Exclusion did not apply § 27 Publishing business § 28 Professional services § 29[a] Willful violation of penal statute—Exclusion applied § 29[b] Willful violation of penal statute—Exclusion did not apply § 30 Failure of performance § 31 "Arises out of contract" exclusion § 32 Arising out of offense committed by insured whose business is advertising exclusion § 33 Arising out of termination of employment or employment-related practices exclusion § 33.5 Interactive conversation between or among persons through a computer network VI ENFORCEABILITY OF ADVERTISING INJURY COVERAGE IN LIGHT OF PUBLIC POLICY AGAINST INSURANCE COVERAGE FOR INTENTIONAL ACTS § 34 Advertising injury coverage enforceable

Research References

INDEX

Acid-washed processes, § 18[b] Acting on behalf of competitor, claim to be, § 7[a] Adhesive, § 20[b] Advertising activity, what constitutes, §§ 3- 5 Advertising ideas, misappropriation of, §§ 10, 11[b]- 14, 22 Advertising injury, what constitutes, §§ 6- 15 Aerosol products, §§ 6[a], 7[b] Affirmative self-promotion or solicitation of business, §§ 3- 5 Air Force contracts, § 7[b] Ambulance service, § 7[a] Animal food, §§ 18[b], 19[a] Apartment building, architectural plans for, § 17[b] Architectural plans, copying and use of, § 17[b] Artwork, copied, § 17[a] Artwork, display of, § 3 Asbestos, representations that adhesive was free of, § 20[b] Atlases and maps, design and printing of, § 27 Attorneys, soliciting of business by, §§ 6[a], 28 Automobile loan financing, § 7[a] Automobile sales program, § 20[b] Aviation, §§ 10[a], 21[b] Back projector, § 18[b] Bathroom faucets and fixtures, § 19[a] Bath stickers, § 19[a] Battery pack rebuilding services, § 19[a] Beauty salon, §§ 3, 10[a], 20[a] Belittlement, §§ 6[a], 11[a] Bicycle, § 19[b] Breach of contract, coverage exclusion, § 24 Breach of fiduciary duty, § 23[a] Bribery, §§ 7[b], 29[a] Bridal dresses, § 17[a] Carpets, §§ 17[a], 24[a] Catalogue containing photographs of competitor's products, § 19[a] Catfish products, § 20[b] Causation, §§ 16- 21 Christmas tree stand, § 19[a] Circuit breakers, §§ 19[a], 20[b] Clinical studies, §§ 5, 18[a] Clothing, §§ 17, 18[b] Comment and summary, § 2 Competitive bidding process, § 5 Computer code, § 6[b] Computers and related products, §§ 6, 10[b], 12[b], 17, 18[b], 20[b], 21[b], 26[b], 27 Concrete slip forms, § 18[b]

Conductive surface coating for corrugated boxes, §§ 6[b], 21[b] Confidentiality agreement, breach of, § 24[a] Consulting and consultants, §§ 3, 24[a] Contact lenses, § 19[b] Continuous tort, § 22[a] Copier, § 18[a] Copyright infringement, §§ 7[b], 8, 17, 22[b], 23[b], 24, 29[b] Coverage exclusions, §§ 22- 29 Credit card system regional clearinghouse, § 16[a] Credit Suisse, § 19[b] Criminal conspiracy, § 7[b] Customer lists, misappropriation and use of, §§ 10, 14, 20[b], 21[a] Decoiler machine, § 18[b] Dino Fuzzles, § 8[a] Disparagement, libel, or slander, §§ 6, 7, 16, 22, 23, 24[a], 26[b], 28 Display of artwork, § 3 Disposable liquid container, § 18[b] Dissolution agreement, breach of, § 24[a] Distribution agreements, §§ 6[b], 7[b] Doctor of audiology credential, § 23[b] Doghouse, § 19[a] Drainage area subject to flooding, sale of residence in, § 7[b] Drugs, §§ 6[a], 16[a], 18[a] Dry cleaning and laundry supplies, § 20[b] Earrings, § 17[b] Electronic fuel-injection system for snowmobile, §§ 7[a], 20[a], 21[b] Electronic trading system, § 20[b] Emissions control, § 6[a] Exclusions, §§ 22- 29 Fabric, § 17[b] Facsimile, § 5 FDA requirements for use of certain advertising terms, § 13[b] Fiduciary duty, breach of, § 23[a] Film companies, §§ 6[b], 23[a] Fire, hotel, § 6[b] Flooding, sale of residence in drainage area subject to, § 7[b] Floor matting, § 24[a] Florists, § 20[b] Flue gas desulferization, process for, § 18[b] Former employer, misrepresentation of acting on behalf of, § 20[a] Fraud, § 23[a] Fraudulent misrepresentation, § 24[a] Free sample, § 17[b] Frequent flyer mile program, § 10[a] Fruit-cutting devices and processes, §§ 18[b], 21[b] Fund-raising market, school and youth group, monopolization of, §§ 7[b], 20[a] Funeral home, § 7[a] Fuzzle products, §§ 8[a], 19[a] Gas prices, § 20[b]

Going-out-of-business letter, § 6[b] Greta Gecko, § 8[a] Hairdressers and beauty salons, §§ 3, 10[a], 20[a] Handbags, § 19[a] Handles, § 19[a] Heating units, § 7[b] Help wanted advertisements, § 3 Higher prices as injury, § 16[a] Hiring of competitor's former employee, § 10[b] Hotel fire, § 6[b] Hotels, §§ 7[b], 20[b] House, purchase and sale of, §§ 7[b], 9 Houses and housing, plans and designs, §§ 17, 22[b] Hypertension drug, advertising of clinical studies of, § 18[a] Indian Arts and Crafts Act, § 29[b] Indian-made goods, §§ 19[a], 24[a], 26[b], 29[b] Individual contacts or solicitations, §§ 4, 5 Industry testing standard, false advertising of compliance with, § 13[b] Intellectual property exclusion, § 25 Intraocular lens, § 18[b] Introduction to annotation, § 1 Invasion of privacy, §§ 9, 22[b] Investors, §§ 7[b], 20[b] Iron ore, transportation of, § 20[b] Jewelry, §§ 17, 19[a] Job, advertising, § 3 Knock-off products, §§ 17[a], 18[b], 19[a] Knowledge of falsity, coverage exclusion, § 23 Labeling of product, § 3 Laboratory animal food, § 19[a] Latch assembly, § 19[a] Legal business, letter soliciting, §§ 6[a], 28 Libel, slander, or disparagement, §§ 6, 7, 16, 22, 23, 24[a], 26[b], 28 Library equipment, § 6[a] Licensing agreement, termination of, § 13[b] Liquid storage containers, § 18[a] Magnetic device, § 18[a] Mail, §§ 3- 5, 21[a] Manufacture and sale of products, § 3 Maps and atlases, design and printing of, § 27 Marketing plan, failure to pay value of, § 10[b] Master audio recordings, illegal purchase of leases of, § 7[b] Medical center company, § 22[a] Metals, precious, scheme involving purchase of, § 7[b] Misappropriation of advertising ideas or style of doing business, §§ 10, 11[b]- 14, 22, 24[a] Misappropriation of trade secrets, §§ 14, 21 Monopolization of school and youth group fund-raising market, §§ 7[b], 20[a] Motor vehicle loan financing, § 7[a] Motor vehicle sales program, § 20[b]

Movie deal, § 6[b] Movie service, § 20[b] Music, §§ 6[b], 7[b], 8[a], 17, 24[b] Mutual fund company, § 19[b] Negligent misrepresentation, § 15 Newcomer in business, advertising that competitor was, § 6[a] Newspaper advertising, § 3 Newspaper publishing business, § 27 Offer to sell, §§ 3, 11[a], 18[a], 19[a] Oil products, § 22[a] One-on-one contacts or solicitations, §§ 4, 5 One potential buyer, mailing solicitation letters to, § 4 Oven, § 21[b] Pail filling machine, § 21[a] Palming off, §§ 7[b], 19[a] Paper products, § 17[a] Passing off, §§ 7, 11[b], 13[a], 15, 16[a], 18[b], 19[a], 25 Patent application, § 3 Patent infringement, §§ 3, 6, 11, 18, 23[b], 24[a], 26[b] Patent pending, § 6[b] Patient, letter to soliciting legal business, §§ 6[a], 28 Peanuts, § 7[b] Penal statute, willful violation of, § 29 Person-to-person contacts or solicitations, §§ 4, 5 Pet products, §§ 18[b], 19[a], 22[a] Piracy, §§ 11, 12[b], 14[a], 18[b] Plastic disk packages, § 18[b] Plastic fasteners, § 18[b] Plywood panels, § 7[b] Pool cleaners, § 19[a] Prefabricated promotional material, §§ 4, 5 Preliminary matters, §§ 1, 2 Price-fixing, §§ 7[b], 20[b], 29[b] Printers, § 3 Prior publication or acts, coverage exclusion, § 22 Privacy, invasion of, §§ 9, 22[b] Professional services, coverage exclusion, § 28 Proposals on one-to-one basis, § 4 Prosthetic hip replacement device, § 18[b] Publishing business, coverage exclusion, § 27 Quality of goods, coverage exclusion, § 26 Radio device, § 16[a] Railroads, § 20[b] Reasonable expectations of insured, §§ 5, 11[a], 13[a], 15, 18[b] Record company, §§ 7[b], 8[a] Refuse container, § 18[b] Related annotations, § 1[b] Residence, purchase and sale of, §§ 7[b], 9 Residences, plans and designs, §§ 17, 22[b]

Restrictive covenants, §§ 9, 10[b] Retention of copies of drawings and software for machine, § 14[b] Revenue enhancement services, § 20[a] RICO action, § 7[b] Sabotaging deal for purchase of hotel, § 20[b] Savings and loan association, § 7[b] School and youth group fund-raising market, monopolization of, §§ 7[b], 20[a] Scooter, § 18[b] Scope of annotation, § 1[a] Securities, § 7[b] Security device, § 6[a] Sewer, drain, and pipe cleaning services, § 19[a] Shoes, §§ 7[b], 20[b] Single potential buyer, §§ 4, 5 Site and architectural plans, copying and use of, § 17[b] Slander, libel, or disparagement, §§ 6, 7, 16, 22, 23, 24[a], 26[b], 28 Slip forms, § 18[b] Slogan, intellectual property exclusion, § 25 Snowmobiles, §§ 7[a], 20[a], 21[b] Software, §§ 6[a], 10[b], 17, 18[b], 20[b], 21[b], 27 Software company, § 25 Software driver, § 17[b] Soil additive products, mislabeling, § 26[a] Stock, purchase at inflated prices, § 7[b] Style of doing business, misappropriation of, §§ 10, 11[b]- 13, 14[b], 22, 24[a] Summary and comment, § 2 Sunglasses, §§ 19[b], 21[b] Surface coating for corrugated boxes, §§ 6[b], 21[b] Targeted groups and individuals, § 5 Tariffs, public filing of, § 3 Tax shelters, §§ 7[b], 20[b] Technical drawings, § 17[b] Telephone calls, § 3 Telephone jack, wireless, § 23[b] Television commercials, § 7[b] Textiles, § 17[b] Theater, mismanagement of, § 6[b] Thyroid problems, drug for, § 6[a] Tire company, § 7[a] Title documents, preparing and recording, § 7[b] Title insurance, §§ 7[a], 28 Title or slogan, infringement of, §§ 8[a], 11- 13, 22[a] Toner, § 21[b] Toys, §§ 8[a], 12[a], 17[a], 19[a] Trademark or trade dress infringement, §§ 12, 19, 22[b], 23[b]- 25, 29[b] Trade secrets, misappropriation of, §§ 6[a], 14, 21, 22[a], 23[a], 24[a] Transmission services, § 7[b] Tubasaurs, § 8[a] Unfair competition or other unfair business practices, §§ 7, 13, 20, 22[a], 23[b], 24[a], 25, 29[b]

Uniform Deceptive Trade Practices Act, § 7[a] Uninsured bonds, palming off of as federally insured deposits, § 7[b] Video games, § 18[b] Videotapes, §§ 8[a], 17[a] Waterbed, § 18 Water bowls, § 18[b] Waterpark, injury at, § 7[b] Wheelchair manufacturer, § 18[b] Widespread distribution of promotional material to public, § 4 Willful violation of penal statute, § 29 Wireless telephone jack, § 23[b] Writing instruments, § 19[b]

Table of Cases, Laws, and Rules

United States 7 U.S.C.A. § 106A. See 3 15 U.S.C.A. §§ 1051 et seq.. See 23[a], 25 15 U.S.C.A. § 1114(1)(a). See 23[b] 15 U.S.C.A. § 1125. See 6[a] 15 U.S.C.A. § 1125(a). See 3, 10[a], 29[b] 17 U.S.C.A. § 1201(a)(2). See 8[b] 47 U.S.C.A. § 227. See 29[b] 47 U.S.C.A. § 227(b)(1). See 9 47 U.S.C.A. §§ 227(b)(1)(C) and (b)(2)(B)(ii)(I). See 9

Supreme Court IDG, Inc. v. Continental Cas. Co., 536 U.S. 940, 122 S. Ct. 2622, 153 L. Ed. 2d 805 (2002) — 17[b]

First Circuit Open Software Foundation, Inc. v. U.S. Fidelity and Guar. Co., 307 F.3d 11 (1st Cir. 2002) — 7[b]

Second Circuit Elite Brands, Inc. v. Pennsylvania Gen. Ins. Co., 164 Fed. Appx. 60 (2d Cir. 2006) — 20[b] J.A. Brundage Plumbing & Roto-Rooter, Inc. v. Massachusetts Bay Ins. Co., 818 F. Supp. 553 (W.D. N.Y. 1993) — 12[a], 19[a] Nationwide Mut. Ins. Co. v. Mortensen, 222 F. Supp. 2d 173 (D. Conn. 2002) — 4, 19[b] PCB Piezotronics, Inc. v. Kistler Instrument Corp., 1997 WL 800874 (W.D. N.Y. 1997) — 6[a]

Third Circuit Westport Reinsurance Management, LLC v. St. Paul Fire & Marine Ins. Co., 80 Fed. Appx. 277 (3d Cir. 2003) — 10[b]

Fourth Circuit Premier Pet Products, LLC v. Travelers Property Cas. Co. of America, 678 F. Supp. 2d 409 (E.D. Va. 2010) — 12[b] Solers, Inc. v. Hartford Cas. Ins. Co., 36 Fed. Appx. 740 (4th Cir. 2002) — 4 Solers, Inc. v. Hartford Cas. Ins. Co., 146 F. Supp. 2d 785 (E.D. Va. 2001) — 4 Superformance Intern., Inc. v. Hartford Cas. Ins. Co., 203 F. Supp. 2d 587 (E.D. Va. 2002) — 22[a] Teletronics Intern., Inc. v. CNA Ins. Co./Transportation Ins. Co., 120 Fed. Appx. 440 (4th Cir. 2005) — 8[a]

Fifth Circuit American Safety & Risk Services, Inc. v. Legion Indem. Co., 153 F. Supp. 2d 869 (E.D. La. 2001) — 5, 6[a], 23[b]

America's Recommended Mailers, Inc. v. Maryland Cas. Co., 579 F. Supp. 2d 791 (E.D. Tex. 2008) — 19[b] Constitution State Ins. Co. v. Dibidale of Louisiana, Inc., 1991 WL 110393 (E.D. La. 1991) — 24[a] Delta Computer Corp. v. Frank, 196 F.3d 589 (5th Cir. 1999) — 17[b] Dugger v. Upledger Inst., 795 F. Supp. 184 (E.D. La. 1992) — 15 Industrial Molding Corp. v. American Mfrs. Mut. Ins. Co., 17 F. Supp. 2d 633 (N.D. Tex. 1998) — 2, 12[a], 19[a] Rymal v. Woodcock, 896 F. Supp. 637 (W.D. La. 1995) — 11[a]

Sixth Circuit Advance Watch Co., Ltd. v. Kemper Nat. Ins. Co., 99 F.3d 795, 1996 FED App. 0350P (6th Cir. 1996) — 12[b], 19[b]

Seventh Circuit Platinum tech., inc. v. Federal Ins. Co., 2000 WL 875881 (N.D. Ill. 2000) — 22[b], 24[b] Aearo Corp. v. American Intern. Specialty Lines Ins. Co., 676 F. Supp. 2d 738 (S.D. Ind. 2009) — 12[a] Discover Financial Services LLC v. National Union Fire Ins. Co. of Pittsburgh, PA, 527 F. Supp. 2d 806 (N.D. Ill. 2007) — 18[b] Flodine v. State Farm Ins. Co., 2001 WL 204786 (N.D. Ill. 2001) — 19[a] Heritage Mut. Ins. Co. v. Advanced Polymer Technology, Inc., 97 F. Supp. 2d 913 (S.D. Ind. 2000) — 2 Kreuger Intern., Inc. v. Federal Ins. Co., 637 F. Supp. 2d 604 (E.D. Wis. 2008) — 12[b] Native American Arts, Inc. v. Hartford Cas. Ins. Co., 435 F.3d 729 (7th Cir. 2006) — 25 Rhein Bldg. Co. v. Gehrt, 21 F. Supp. 2d 896 (E.D. Wis. 1998) — 17[b] Santa's Best Craft, LLC v. St. Paul Fire and Marine Ins. Co., 611 F.3d 339 (7th Cir. 2010) — 2 Skylink Technologies, Inc. v. Assurance Company of America, 400 F.3d 982 (7th Cir. 2005) — 6[b], 8[b], 10[b] Westowne Shoes, Inc. v. City Ins. Co., 82 F.3d 420 (7th Cir. 1996) — 7[b]

Eighth Circuit American Simmental Ass'n v. Coregis Ins. Co., 282 F.3d 582 (8th Cir. 2002) — 23[b] John Deere Ins. Co. v. Shamrock Industries, Inc., 696 F. Supp. 434 (D. Minn. 1988) — 22[a]

Ninth Circuit American States Ins. Co. v. Dastar Corp., 2004 WL 2324688 (D. Or. 2004) — 12[a] Clark Mfg. Inc. v. Northfield Ins. Co., 187 F.3d 646 (9th Cir. 1999) — 14[b] Cooper Engineering, Inc. v. Westchester Fire Ins. Co., 126 Fed. Appx. 808 (9th Cir. 2005) — 12[b] Everett Associates, Inc. v. Transcontinental Ins. Co., 35 Fed. Appx. 450 (9th Cir. 2002) — 11[b] Federal Ins. Co. v. Microsoft Corp., 1993 WL 371416 (W.D. Wash. 1993) — 17[a] Hayward v. Centennial Ins. Co., 430 F.3d 989 (9th Cir. 2005) — 5, 13[b] Homedics, Inc. v. Valley Forge Insurance Company, a Pennsylvania Coporation, 315 F.3d 1135 (9th Cir. 2003) — 11[a] Hudson Ins. Co. v. Colony Ins. Co., 624 F.3d 1264 (9th Cir. 2010) — 15.5 Hyundai Motor America v. National Union Fire Ins. Co. of Pittsburgh, PA, 600 F.3d 1092 (9th Cir. 2010) — 11[a] Paper Recovery of Northern California v. Travelers Cas. and Sur. Co. of Illinois, 92 Fed. Appx. 478 (9th Cir. 2004) — 24[a] Philips Oral Healthcare Inc. v. Federal Insurance Co., 83 Fed. Appx. 963 (9th Cir. 2003) — 6[a] Tradewind Products, Inc. v. Hartford Fire Ins. Co., 314 Fed. Appx. 2 (9th Cir. 2008) — 8[a] Twin City Fire Ins. Co. v. Ennen, 64 Fed. Appx. 47 (9th Cir. 2003) — 10[b] U.S. Fidelity & Guar. Co. v. Star Technologies, Inc., 935 F. Supp. 1110 (D. Or. 1996) — 11[a]

Tenth Circuit Chimera Inv. Co. v. State Farm Fire & Cas. Co., 268 Fed. Appx. 793 (10th Cir. 2008) — 15.5 Dish Network Corp. v. Arch Specialty Ins. Co., 734 F. Supp. 2d 1173 (D. Colo. 2010) — 11[b] Idg, Inc. v. Continental Cas. Co., 275 F.3d 916 (10th Cir. 2001) — 17[b] OMI Holdings, Inc. v. Chubb Ins. Co. of Canada, 1997 WL 30861 (D. Kan. 1997) — 5

Eleventh Circuit Colony Ins. Co. v. Corrosion Control, Inc., 390 F. Supp. 2d 1337 (M.D. Ga. 2005) — 22[b]

Hyman v. Nationwide Mut. Fire Ins. Co., 304 F.3d 1179 (11th Cir. 2002) — 3, 19[a], 22[b], 23[b], 29[b] Lazzara Oil Co. v. Columbia Cas. Co., 683 F. Supp. 777 (M.D. Fla. 1988) — 20[b] State Nat. Ins. Co. v. Affordable Homes of Troy, LLC, 368 F. Supp. 2d 1281 (M.D. Ala. 2005) — 33

Federal Circuit U.S. Test, Inc. v. NDE Environmental Corp., 196 F.3d 1376, 40 U.C.C. Rep. Serv. 2d 67 (Fed. Cir. 1999) — 11[a], 11[b]

Alaska Delta Airlines v. State Farm Fire and Cas. Co., 96 F.3d 1451 (9th Cir. 1996) (applying Alaska law) — 22[a]

Arkansas Tri-State Ins. Co. v. B & L Products, Inc., 61 Ark. App. 78, 964 S.W.2d 402 (1998) — 5, 17[a] Union Ins. Co. v. Knife Co., Inc., 897 F. Supp. 1213 (W.D. Ark. 1995) (applying Arkansas law) — 12[a], 23[b]

California A–Mark Financial Corp. v. CIGNA Property & Casualty Companies, 34 Cal. App. 4th 1179, 40 Cal. Rptr. 2d 808 (2d Dist. 1995) — 7[b] AC Circuit Breakers v. Hartford Fire Ins. Co., 28 F.3d 104 (9th Cir. 1994) (applying California law) — 12[b], 20[b] Aetna Cas. & Sur. Co. v. Trans World Assur. Co., 745 F. Supp. 1524 (N.D. Cal. 1990) (applying California law) — 7[b] Aetna Cas. and Sur. Co. v. Watercloud Bed Co., Inc., 1988 WL 252578 (C.D. Cal. 1988) (applying California law) — 11[b] Aetna Casualty & Surety Co. v. Superior Court, 19 Cal. App. 4th 320, 23 Cal. Rptr. 2d 442, 28 U.S.P.Q.2d (BNA) 1424 (4th Dist. 1993) — 11[b], 18[b] Alliance Ins. Co. v. Colella, 995 F.2d 944 (9th Cir. 1993) (applying California law) — 7[b] Aloha Pacific, Inc. v. California Ins. Guarantee Ass'n, 79 Cal. App. 4th 297, 93 Cal. Rptr. 2d 148 (2d Dist. 2000) — 25 Alpina USA Eyewear, L.L.C. v. Reliance Ins. Co., 122 F.3d 1069 (9th Cir. 1997) (applying California law) — 12[b] American Economy Ins. Co. v. Reboans, Inc., 900 F. Supp. 1246 (N.D. Cal. 1994) (applying California law) — 12[a], 12[b] American Services, Inc. v. Hartford Acc. & Indem. Co., 1993 WL 219291 (N.D. Cal. 1993) (applying California law) — 7[b], 24[a] American States Ins. Co. v. Canyon Creek, 786 F. Supp. 821 (N.D. Cal. 1991) (applying California law) — 5, 7[b] Ameron, Inc. v. Insurance Co. of North America, 51 F.3d 279 (9th Cir. 1995) (applying California law) — 11[b] Aqua Queen Mfg. Co., Inc. v. Charter Oak Fire Ins. Co., 46 F.3d 1138 (9th Cir. 1995) (applying California law) — 11[b] Ark Telecommunications, Inc. v. State Farm Fire and Cas. Co., 162 F.3d 1167 (9th Cir. 1998) (applying California law) — 21[b] Arnette Optic Illusions, Inc. v. ITT Hartford Group, Inc., 43 F. Supp. 2d 1088 (C.D. Cal. 1998) (applying California law) — 12[a], 21[b], 22[b] Atlapac Trading Co., Inc. v. American Motorists Ins. Co, 1997 WL 1941512 (C.D. Cal. 1997) (applying California law) — 13[a] Bank of the West v. Superior Court, 2 Cal. 4th 1254, 10 Cal. Rptr. 2d 538, 833 P.2d 545 (1992) — 2, 7[b] Bergen Brunswig Corp. v. Safety Mut. Cas. Corp., 985 F.2d 571 (9th Cir. 1993) (applying California law) — 7[b] Big Sur Waterbeds, Inc. v. Maryland Cas. Co., 33 F.3d 58 (9th Cir. 1994) (applying California law) — 11[b] Cables & Accessories, Inc. v. Hartford Ins. Co., 2002 WL 77114 (Cal. App. 6th Dist. 2002) — 12[b] Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336 (9th Cir. 1996) (applying California law) — 15 Chatton v. National Union Fire Ins. Co., 10 Cal. App. 4th 846, 13 Cal. Rptr. 2d 318 (1st Dist. 1992) — 7[b] Clark Mfg. Inc. v. Northfield Ins. Co., 187 F.3d 646 (9th Cir. 1999) (applying California law) — 11[b], 18[b] Clary Corp. v. Union Standard Ins. Co, 33 Cal. Rptr. 2d 486 (App. 4th Dist. 1994) — 11[b] Classic Corp. v. Charter Oak Fire Ins. Co., 35 U.S.P.Q.2d 1726, 1995 WL 295824 (C.D. Cal. 1995) (applying California law) — 11[b] CNA Casualty of California v. Seaboard Surety Co., 176 Cal. App. 3d 598, 222 Cal. Rptr. 276 (1st Dist. 1986) — 7[b], 14[a], 16[a] Continental Ins. Co. v. Del Astra Industries, Inc., 35 F.3d 570 (9th Cir. 1994) (applying California law) — 11[b] Copart, Inc. v. Travelers Ins. Co., 11 Fed. Appx. 815 (9th Cir. 2001) (applying California law) — 5, 17[a] Cort v. St. Paul Fire and Marine Ins. Companies, Inc., 311 F.3d 979 (9th Cir. 2002) (applying California law) — 3

Cubic Corp. v. Insurance Co. of North America, 33 F.3d 34 (9th Cir. 1994) (applying California law) — 7[b], 29[a] Demonet Industries v. Transamerica Ins. Co., 278 Cal. Rptr. 178 (App. 1st Dist. 1991) — 7[b] Dogloo, Inc. v. Northern Ins. Co. of New York, 907 F. Supp. 1383 (C.D. Cal. 1995) (applying California law) — 12[a], 19[a], 22[b] El–Com Hardware, Inc. v. Fireman's Fund Ins. Co., 92 Cal. App. 4th 205, 111 Cal. Rptr. 2d 670 (1st Dist. 2001) — 19[a] Envirotech Industries, Inc. v. United Capitol Ins. Co., 141 F.3d 1175 (9th Cir. 1998) (applying California law) — 22[a] Everest and Jennings, Inc. v. American Motorists Ins. Co., 23 F.3d 226 (9th Cir. 1994) (applying California law) — 11[b], 18[b] Everett Associates, Inc. v. Transcontinental Ins. Co., 159 F. Supp. 2d 1196 (N.D. Cal. 2001) (applying California law) — 11[b] Federal Ins. Co. v. Learning Group Intern., Inc., 56 F.3d 71 (9th Cir. 1995) (applying California law) — 22[a] Federal Ins. Co. v. National Union Fire Ins. Co. of Pittsburg, 928 F.2d 408 (9th Cir. 1991) (applying California law) — 22[b] Federated Mut. Ins. Co. v. Power Lift, 152 F.3d 925 (9th Cir. 1998) (applying California law) — 12[a] Fireman's Fund Ins. Co. v. National Bank for Cooperatives, 849 F. Supp. 1347 (N.D. Cal. 1994) (applying California law) — 7[b] Franklin Miller, Inc. v. Commerce and Industry Insurance Co., 242 F.3d 381 (9th Cir. 2000) (applying California law) — 11[b] FRI Holdings, Inc. v. Hartford Casualty Ins. Co., 83 Cal. Rptr. 2d 29 (App. 4th Dist. 1999) — 10[a] Gitano Group, Inc. v. Kemper Group, 26 Cal. App. 4th 49, 31 Cal. Rptr. 2d 271 (2d Dist. 1994) — 18[b] Hameid v. National Fire Ins. of Hartford, 31 Cal. 4th 16, 1 Cal. Rptr. 3d 401, 71 P.3d 761 (2003) — 5 Hameid v. National Fire Ins. of Hartford, 94 Cal. App. 4th 1155, 114 Cal. Rptr. 2d 843 (4th Dist. 2001) — 2, 3, 10[a], 20[a] Heidarinia v. Chubb Group of Ins. Companies, 163 F.3d 606 (9th Cir. 1998) (applying California law) — 22[a] Homedics, Inc. v. Valley Forge Insurance Company, a Pennsylvania Coporation, 315 F.3d 1135 (9th Cir. 2003) (applying California law) — 11[b] Hyundai Motor America v. National Union Fire Ins. Co. of Pittsburgh, PA, 600 F.3d 1092 (9th Cir. 2010) (applying California law) — 10[a], 18[a] Industrial Indem. Co. v. Apple Computer, Inc., 79 Cal. App. 4th 817, 95 Cal. Rptr. 2d 528 (1st Dist. 1999) — 12[b], 25 Intex Plastics Sales Co. v. United Nat. Ins. Co., 23 F.3d 254 (9th Cir. 1994) (applying California law) — 11[b], 18[b] Iolab Corp. v. Seaboard Sur. Co., 15 F.3d 1500 (9th Cir. 1994) (applying California law) — 11[b], 18[b] J.I.P., Inc. v. Reliance Ins. Co., 165 F.3d 35 (9th Cir. 1998) (applying California law) — 17[a] Katersky v. State Farm Fire and Cas. Co., 203 F.3d 831 (9th Cir. 1999) (applying California law) — 20[b] Keating v. National Union Fire Ins. Co. of Pittsburgh, Pa., 995 F.2d 154 (9th Cir. 1993) (applying California law) — 7[b] Kemmer Agr. Mfg. Co. v. Finova Capital Corp., 221 F.3d 1348 (9th Cir. 2000) (applying California law) — 11[b] Kim Seng Co. v. Great American Ins. Co. of New York, 179 Cal. App. 4th 1030, 101 Cal. Rptr. 3d 537 (2d Dist. 2009) — 12[a], 22[a] Lebas Fashion Imports of USA, Inc. v. ITT Hartford Ins. Group, 50 Cal. App. 4th 548, 59 Cal. Rptr. 2d 36, 40 U.S.P.Q.2d (BNA) 1809 (2d Dist. 1996) — 12[a], 12[b] Letro Products, Inc. v. Liberty Mut. Ins. Co., 114 F.3d 1194 (9th Cir. 1997) (applying California law) — 12[a], 19[a] Liberty Mut. Ins. Co. v. Consolidated Capital Equities Corp., 878 F.2d 386 (9th Cir. 1989) (applying California law) — 7[b] Maxconn Inc. v. Truck Ins. Exchange, 74 Cal. App. 4th 1267, 88 Cal. Rptr. 2d 750 (6th Dist. 1999) — 11[b] Maxtech Holding, Inc. v. Federal Ins. Co., 202 F.3d 278 (9th Cir. 1999) (applying California law) — 22[a] McLaughlin v. National Union Fire Ins. Co., 23 Cal. App. 4th 1132, 29 Cal. Rptr. 2d 559 (1st Dist. 1994) — 7[b] Mez Industries, Inc. v. Pacific Nat. Ins. Co., 76 Cal. App. 4th 856, 90 Cal. Rptr. 2d 721, 53 U.S.P.Q.2d (BNA) 1167 (2d Dist. 1999) — 2, 11[b] Microtec Research, Inc. v. Nationwide Mut. Ins. Co., 40 F.3d 968 (9th Cir. 1994) (applying California law) — 6[b] Monarch E & S Ins. Services, Inc. v. State Farm Fire and Cas. Co., 38 F. Supp. 2d 841 (C.D. Cal. 1999) (applying California law) — 14[b], 21[b] Murphy v. Federal Ins. Co., 2001 WL 902551 (N.D. Cal. 2001) (applying California law) — 4, 14[b] National Union Fire Ins. Co. of Pittsburgh, Pa. v. Siliconix Inc., 729 F. Supp. 77 (N.D. Cal. 1989) (applying California law) — 11[b], 18[b] Nationwide Mut. Ins. Co. v. Dynasty Solar, Inc., 753 F. Supp. 853 (N.D. Cal. 1990) (applying California law) — 7[b] New Hampshire Ins. Co. v. Foxfire, Inc., 820 F. Supp. 489 (N.D. Cal. 1993) (applying California law) — 5, 7[a], 20[a]

New Hampshire Ins. Co. v. R.L. Chaides Const. Co., Inc., 847 F. Supp. 1452 (N.D. Cal. 1994) (applying California law) — 5, 11[b], 18[b] Omnitel v. Chubb Group of Ins. Companies, 26 U.S.P.Q.2d 1933, 1993 WL 438839 (Cal. Super. Ct. Trial Div. 1993) — 11[a] 1-800 Lens-Now, Inc. v. Milbank Ins. Co., 1998 WL 556574 (N.D. Cal. 1998) (applying California law) — 19[b] Owens-Brockway Glass Container, Inc. v. International Ins. Co., 884 F. Supp. 363 (E.D. Cal. 1995) (applying California law) — 11[b] Pacific Group v. First State Ins. Co., 70 F.3d 524 (9th Cir. 1995) (applying California law) — 20[b] Palmer v. Truck Ins. Exchange, 21 Cal. 4th 1109, 90 Cal. Rptr. 2d 647, 988 P.2d 568 (1999) — 12[b] Peerless Lighting Corp. v. American Motorists Ins. Co., 82 Cal. App. 4th 995, 98 Cal. Rptr. 2d 753 (1st Dist. 2000) — 5 Pennsylvania General Ins. Co. v. Disctronics, Inc., 5 F.3d 538 (9th Cir. 1993) (applying California law) — 3 Peterson Tractor Co. v. Travelers Indem. Co. of Ill., 156 Fed. Appx. 21 (9th Cir. 2005) (applying California law) — 10[a] Phoenix American, Inc. v. Atlantic Mut. Ins. Co., 2001 WL 1649243 (Cal. App. 1st Dist. 2001) — 3, 24[b] Pierce Companies, Inc. v. Wausau Underwriters Ins. Co., 201 F.3d 444 (9th Cir. 1999) (applying California law) — 21[b] Proxima Corp. v. Federal Ins. Co., 26 F.3d 132 (9th Cir. 1994) (applying California law) — 11[b], 13[b] Rombe Corp. v. Allied Ins. Co., 128 Cal. App. 4th 482, 27 Cal. Rptr. 3d 99 (4th Dist. 2005) — 4, 5 Rosco, Inc. v. TIG Ins. Co., 1996 WL 724896 (N.D. Cal. 1996) (applying California law) — 12[a] Sachs v. Industrial Indem. Ins. Co., 1993 WL 93562 (C.D. Cal. 1993) (applying California law) — 7[b] San Juan Dupont Plaza Hotel Fire Litigation, In re, 802 F. Supp. 624 (D.P.R. 1992) (applying California law) — 6[b], 7[b] S.B.C.C., Inc. v. St. Paul Fire & Marine Ins. Co., 186 Cal. App. 4th 383, 112 Cal. Rptr. 3d 40 (6th Dist. 2010) — 8[b] Sentex Systems, Inc. v. Hartford Acc. & Indem. Co., 93 F.3d 578 (9th Cir. 1996) (applying California law) — 14[a] Simply Fresh Fruit, Inc. v. Continental Ins. Co., 94 F.3d 1219 (9th Cir. 1996) (applying California law) — 18[b], 21[b] Standard Fire Ins. Co. v. Peoples Church of Fresno, 985 F.2d 446 (9th Cir. 1993) (applying California law) — 7[b] Stenbock v. Hartford Fire Ins. Co., 217 F.3d 846 (9th Cir. 2000) (applying California law) — 19[b] St. Paul Fire & Marine Ins. Co. v. Advanced Interventional Systems, Inc., 21 F.3d 424 (4th Cir. 1994) (applying California law) — 11[b] Surgin Surgical Instrumentation, Inc. v. Truck Ins. Exchange, 76 Cal. Rptr. 2d 303 (App. 4th Dist. 1998) — 11[b] Techmedica, Inc. v. Vanguard Underwriters Ins. Co., 59 F.3d 176 (9th Cir. 1995) (applying California law) — 18[b] Ticor Title Ins. Co. v. Employers Ins. of Wausau, 40 Cal. App. 4th 1699, 48 Cal. Rptr. 2d 368 (1st Dist. 1995) — 7[b] Tigera Group, Inc. v. Commerce and Industry Ins. Co., 753 F. Supp. 858 (N.D. Cal. 1991) (applying California law) — 7[b] Title Homedics, Inc. v. Valley Forge Ins. Co., 53 U.S.P.Q.2d 1155, 1999 WL 33301457 (C.D. Cal. 1999) (applying California law) — 11[a], 18[a] Travelers Indem. Co. v. Levi Strauss & Co., 30 F.3d 140 (9th Cir. 1994) (applying California law) — 11[b] Travelers Ins. Co. v. Lesher, 187 Cal. App. 3d 169, 231 Cal. Rptr. 791 (1st Dist. 1986) — 27 Twin City Fire Ins. Co. v. Ennen, 2000 WL 558525 (E.D. Cal. 2000) (applying California law) — 10[b] Westfield Ins. Co. v. TWT, Inc., 723 F. Supp. 492 (N.D. Cal. 1989) (applying California law) — 7[b] Ziman v. Fireman's Fund Ins. Co., 73 Cal. App. 4th 1382, 87 Cal. Rptr. 2d 397 (2d Dist. 1999) — 3 Zurich Ins. Co. v. Amcor Sunclipse North America, 241 F.3d 605 (7th Cir. 2001) (applying California law) — 4, 14[b] Zurich Ins. Co. v. Sunclipse, Inc., 85 F. Supp. 2d 842 (N.D. Ill. 2000) (applying California law) — 4, 6[b], 21[b] Zurich Ins. Co. (U.S. Branch) v. Killer Music, Inc., 998 F.2d 674 (9th Cir. 1993) (applying California law) — 24[b]

Colorado Alpina USA Eyewear, L.L.C. v. Reliance Ins. Co., 122 F.3d 1069 (9th Cir. 1997) (applying Colorado law) — 19[b] Tynan's Nissan, Inc. v. American Hardware Mut. Ins. Co., 917 P.2d 321 (Colo. App. 1995) — 20[b]

Connecticut Julian v. Liberty Mut. Ins. Co., 43 Conn. App. 281, 682 A.2d 611 (1996) — 11[b], 18[b] Lumbermens Mut. Cas. Co. v. Dillon Co., Inc., 9 Fed. Appx. 81 (2d Cir. 2001) (applying Connecticut law) — 11[b] Nationwide Mut. Ins. Co. v. Bartlett, 27 Conn. L. Rptr. 237, 2000 WL 767878 (Conn. Super. Ct. 2000) — 4, 17[b] Nationwide Mut. Ins. Co. v. Mortensen, 222 F. Supp. 2d 173 (D. Conn. 2002) — 12[b] QSP, Inc. v. Aetna Cas. and Sur. Co., 256 Conn. 343, 773 A.2d 906 (2001) (applying Connecticut law) — 4, 7[b], 20[b]

R.C. Bigelow, Inc. v. Liberty Mut. Ins. Co., 287 F.3d 242 (2d Cir. 2002) (applying Connecticut law) — 12[a]

Delaware ABB Flakt, Inc. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 731 A.2d 811 (Del. 1999) — 18[b] ABB Flakt, Inc. v. National Union Fire Ins. Co. of Pittsburgh, P.A., 1998 WL 437137 (Del. Super. Ct. 1998) — 11[b] Liggett Group, Inc. v. Ace Property and Cas. Ins. Co., 798 A.2d 1024 (Del. 2002) — 20.5 Swfte Intern., Ltd. v. Selective Ins. Co. of America, 1994 WL 827812 (D. Del. 1994) (applying Delaware law) — 12[a]

Florida Amerisure Ins. Co. v. Gold Coast Marine Distributors, Inc., 771 So. 2d 579 (Fla. Dist. Ct. App. 4th Dist. 2000) — 6[b] Bear Wolf, Inc. v. Hartford Ins. Co. of Southeast, 819 So. 2d 818 (Fla. Dist. Ct. App. 4th Dist. 2002) — 13[a] Gencor Industries, Inc. v. Wausau Underwriters Ins. Co., 857 F. Supp. 1560 (M.D. Fla. 1994) (apparently applying Florida law) — 11[b], 18[b] Irons Home Builders, Inc. v. Auto-Owners Ins. Co., 839 F. Supp. 1260 (E.D. Mich. 1993) (applying Florida law) — 22[b], 29[b] Penzer v. Transportation Ins. Co., 545 F.3d 1303 (11th Cir. 2008) (applying Florida law) — 31 Practice Management Associates, Inc. v. Old Dominion Ins. Co., 601 So. 2d 587 (Fla. Dist. Ct. App. 1st Dist. 1992) — 7[b] Tire Kingdom, Inc. v. First Southern Ins. Co., 573 So. 2d 885 (Fla. Dist. Ct. App. 3d Dist. 1990) — 7[a] Vector Products, Inc. v. Hartford Fire Ins. Co., 397 F.3d 1316 (11th Cir. 2005) (applying Florida law) — 6[a]

Georgia Elan Pharmaceutical Research Corp. v. Employers Ins. of Wausau, 144 F.3d 1372 (11th Cir. 1998) (applying Georgia law) — 5, 18[a] Hooters of Augusta, Inc. v. American Global Ins. Co., 272 F Supp. 2d 13655 (S.D. Ga. 2003) (applying Georgia law) — 29[b] Hooters of Augusta, Inc. v. American Global Ins. Co., 272 F. Supp. 2d 1365 (S.D. Ga. 2003) (applying Georgia law) — 9 Interface, Inc. v. Standard Fire Ins. Co., 2000 Copr. L. Dec. ¶28164, 2000 WL 33194955 (N.D. Ga. 2000) (applying Georgia law) — 17[a], 23[b], 24[b] McGregor v. Columbia Nat. Ins. Co., 298 Ga. App. 491, 680 S.E.2d 559 (2009) — 15.5 North Metro Directories Pub., LLC v. Cotton States Mut. Ins. Co., 279 Ga. App. 492, 631 S.E.2d 726 (2006) — 6[b] Robert Bowden, Inc. v. Aetna Cas. & Sur. Co., 977 F. Supp. 1475 (N.D. Ga. 1997) (applying Georgia law) — 17[b] Transportation Ins. Co. v. Freedom Electronics, Inc., 264 F. Supp. 2d 1214 (N.D. Ga. 2003) (applying Georgia law) — 10[b]

Idaho Construction Management Systems, Inc. v. Assurance Co. of America, 135 Idaho 680, 23 P.3d 142 (2001) — 17[b]

Illinois Platinum tech., inc. v. Federal Ins. Co., 2000 WL 875881 (N.D. Ill. 2000) (applying Illinois law) — 12[a] Amerisure Ins. Co. v. Laserage Technology Corp., 2 F. Supp. 2d 296 (W.D. N.Y. 1998) (applying Illinois law) — 6[a] Attorneys' Title Guar. Fund, Inc. v. Maryland Cas. Co., 1991 WL 171339 (N.D. Ill. 1991) (applying Illinois law) — 5, 7[a], 28 Capitol Indem. Corp. v. Elston Self Service Wholesale Groceries, Inc., 551 F. Supp. 2d 711 (N.D. Ill. 2008) (applying Illinois law) — 12[a] Central Mut. Ins. Co. v. StunFence, Inc., 292 F. Supp. 2d 1072 (N.D. Ill. 2003) (applying Illinois law) — 10[a], 12[b], 19[a], 23[b] Davila v. Arlasky, 857 F. Supp. 1258 (N.D. Ill. 1994) (applying Illinois law) — 18[b] Del Monte Fresh Produce N.A., Inc. v. Transportation Ins. Co., 500 F.3d 640 (7th Cir. 2007) (applying Illinois law) — 10[b], 23[a] Federal Ins. Co. v. Binney & Smith, Inc., 393 Ill. App. 3d 277, 332 Ill. Dec. 448, 913 N.E.2d 43 (1st Dist. 2009) — 13[a] First State Ins. Co. v. Alpha Delta Phi Fraternity, 39 U.S.P.Q.2d 1905, 1995 WL 901452 (Ill. App. Ct. 1st Dist. 1995) — 5, 12[a], 19[a] Flodine v. State Farm Ins. Co., 2001 WL 204786 (N.D. Ill. 2001) (applying Illinois law) — 4, 12[a], 24[b], 26[b], 29[b] Greenwich Ins. Co. v. RPS Products, Inc., 379 Ill. App. 3d 78, 318 Ill. Dec. 79, 882 N.E.2d 1202 (1st Dist. 2008) — 11[b] Home Ins. Co. v. American Nat. Can Co., 1997 WL 467180 (N.D. Ill. 1997) (applying Illinois law) — 11[b]

International Ins. Co. v. Florists' Mut. Ins. Co., 201 Ill. App. 3d 428, 147 Ill. Dec. 7, 559 N.E.2d 7 (1st Dist. 1990) — 4, 20[b] Knoll Pharmaceutical Co. v. Automobile Ins. Co. of Hartford, 152 F. Supp. 2d 1026 (N.D. Ill. 2001) (applying Illinois law) — 4, 6[a], 16[a] Konami (America) Inc. v. Hartford Ins. Co. of Illinois, 326 Ill. App. 3d 874, 260 Ill. Dec. 721, 761 N.E.2d 1277 (2d Dist. 2002) — 18[b] Lexmark Intern., Inc. v. Transportation Ins. Co., 327 Ill. App. 3d 128, 260 Ill. Dec. 658, 761 N.E.2d 1214 (1st Dist. 2001) — 3 McDonald's Corp. v. American Motorists Ins. Co., 321 Ill. App. 3d 972, 255 Ill. Dec. 67, 748 N.E.2d 771 (2d Dist. 2001) — 21[b] Pekin Ins. Co. v. Phelan, 343 Ill. App. 3d 1216, 278 Ill. Dec. 805, 799 N.E.2d 523 (3d Dist. 2003) — 5, 6[a] Santa's Best Craft, L.L.C. v. Zurich American Ins. Co., 346 Ill. Dec. 733, 941 N.E.2d 291 (App. Ct. 1st Dist. 2010) — 13[b] Sun Elec. Corp. v. St. Paul Fire and Marine Ins. Co., 1995 WL 270230 (N.D. Ill. 1995) (applying Illinois law) — 6[a], 23[b] Tews Funeral Home, Inc. v. Ohio Cas. Ins. Co., 832 F.2d 1037 (7th Cir. 1987) (applying Illinois law) — 7[a] Valley Forge Ins. Co. v. Swiderski Electronics, Inc., 359 Ill. App. 3d 872, 296 Ill. Dec. 5, 834 N.E.2d 562 (2d Dist. 2005) — 9 Winklevoss Consultants, Inc. v. Federal Ins. Co., 991 F. Supp. 1024 (N.D. Ill. 1998) (applying Illinois law) — 14[b], 21[b] Winklevoss Consultants, Inc. v. Federal Ins. Co., 11 F. Supp. 2d 995 (N.D. Ill. 1998) (applying Illinois law) — 6[a]

Indiana Erie Ins. Group v. Sear Corp., 102 F.3d 889 (7th Cir. 1996) (applying Indiana law) — 3 Heritage Mut. Ins. Co. v. Advanced Polymer Technology, Inc., 97 F. Supp. 2d 913 (S.D. Ind. 2000) (applying Indiana law) — 3, 6[b], 11[b] Hoosier Ins. Co. v. Audiology Foundation of America, 745 N.E.2d 300 (Ind. Ct. App. 2001) — 13[a], 23[b] Liberty Mut. Ins. Co. v. OSI Industries, Inc., 831 N.E.2d 192 (Ind. Ct. App. 2005) — 34

Iowa IMT Ins. Co. v. Paper Systems, Inc., 2001 WL 98545 (Iowa Ct. App. 2001) — 3, 11[b], 18[b] Nieman's, Ltd. v. Travelers Ins. Cos., 210 F.3d 379 (8th Cir. 2000) (apparently applying Iowa law) — 14[b]

Kansas Aselco, Inc. v. Hartford Ins. Group, 28 Kan. App. 2d 839, 21 P.3d 1011 (2001) — 14[a] Guardian Trust Co. v. American States Ins. Co., 1996 WL 509638 (D. Kan. 1996) (applying Kansas law) — 6[a], 22[b], 23[b]

Kentucky Educational Training Systems, Inc. v. Monroe Guar. Ins. Co., 129 S.W.3d 850 (Ky. Ct. App. 2003) — 23[a] National Union Fire Ins. Co. of Pittsburgh, PA v. United Catalysts, Inc., 182 F. Supp. 2d 608 (W.D. Ky. 2002) (applying Kentucky law) — 11[b]

Louisiana Carnival Brands, Inc. v. American Guarantee and Liability Ins. Co., 726 So. 2d 496 (La. Ct. App. 5th Cir. 1999) — 12[a], 22[b] Finnie v. LeBlanc, 856 So. 2d 208 (La. Ct. App. 3d Cir. 2003) — 23[a] Graham Resources, Inc. v. Lexington Ins. Co., 625 So. 2d 716 (La. Ct. App. 1st Cir. 1993) — 7[b]

Maine American Employers' Ins. Co. v. DeLorme Pub. Co., Inc., 39 F. Supp. 2d 64 (D. Me. 1999) (applying Maine law) — 12[a], 19[a], 27 Foundation for Blood Research v. St. Paul Marine and Fire Ins. Co., 1999 ME 87, 730 A.2d 175 (Me. 1999) — 11[a]

Maryland Monumental Life Ins. Co. v. U.S. Fidelity and Guar. Co., 94 Md. App. 505, 617 A.2d 1163 (1993) — 4 Perdue Farms Inc. v. National Union Fire Ins. Co. of Pittsburgh, P.A., 197 F. Supp. 2d 370 (D. Md. 2002) (applying Maryland law) — 21[b], 30 State Farm Fire & Cas. Co. v. Housing Authority of Crisfield, 1995 WL 131295 (D. Md. 1995) (applying Maryland law) — 3, 4 Teletronics Intern., Inc. v. CNA Ins. Co., 302 F. Supp. 2d 442 (D. Md. 2004) (applying Maryland law) — 4

Massachusetts Liberty Mutual Ins. Co. v. Metropolitan Life Ins. Co., 260 F.3d 54 (1st Cir. 2001) (applying Massachusetts law) — 4 Smartfoods, Inc. v. Northbrook Property and Cas. Co., 35 Mass. App. Ct. 239, 618 N.E.2d 1365 (1993) — 4, 7[b]

Michigan American States Ins. Co. v. Hayes Specialties, Inc., 1998 WL 1740968 (Mich. Cir. Ct. 1998) — 12[a], 12[b] Amway Distributors Benefits Ass'n v. Federal Ins. Co., 990 F. Supp. 936 (W.D. Mich. 1997) (applying Michigan law) — 5, 7[b], 8[a], 17[a] Amway Distributors Benefits Ass'n v. Northfield Ins. Co., 323 F.3d 386, 2003 FED App. 0082P (6th Cir. 2003) (applying Michigan law) — 8[a] Assurance Co. of America v. J.P. Structures, Inc., 132 F.3d 32 (6th Cir. 1997) (applying Michigan law) — 24[b] Cincinnati Ins. Co. v. Zen Design Group, Ltd., 329 F.3d 546, 2003 FED App. 0158P (6th Cir. 2003) (applying Michigan law) — 12[a] Citizens Ins. Co. v. Pro-Seal Service Group, Inc., 477 Mich. 75, 730 N.W.2d 682 (2007) — 15.5 Citizens Insurance Company v. Pro-Seal Service Group, Inc., 268 Mich. App. 542, 710 N.W.2d 547 (2005) — 3, 12[a], 19[a], 23[b] Farmington Cas. Co. v. Cyberlogic Technologies, Inc., 996 F. Supp. 695 (E.D. Mich. 1998) (applying Michigan law) — 5, 17[b] GAF Sales & Service, Inc. v. Hastings Mut. Ins. Co., 224 Mich. App. 259, 568 N.W.2d 165 (1997) — 4, 14[b], 17[b] Herman Miller, Inc. v. Travelers Indem. Co., 162 F.3d 454, 1998 FED App. 0373P (6th Cir. 1998) (applying Michigan law) — 11[b] National Union Fire Ins. Co. of Pittsburgh, Pa. v. Amway Corp., 1993–2 Trade Cas. (CCH) ¶70351, 1993 WL 398397 (W.D. Mich. 1993) (applying Michigan law) — 13[b], 20[b] Parameter Driven Software, Inc. v. Massachusetts Bay Ins. Co., 25 F.3d 332, 1994 FED App. 0181P (6th Cir. 1994) (applying Michigan law) — 25 Poof Toy Products, Inc. v. U.S. Fidelity and Guar. Co., 891 F. Supp. 1228 (E.D. Mich. 1995) (applying Michigan law) — 8[a], 12[a], 19[a] Sentry Ins. A Mut. Co. v. Flom's Corp., 818 F. Supp. 187 (E.D. Mich. 1993) (applying Michigan law) — 20[b]

Minnesota Callas Enterprises, Inc. v. Travelers Indem. Co. of America, 193 F.3d 952 (8th Cir. 1999) (applying Minnesota law) — 12[b], 23[a], 24[a] Fallon McElligott, Inc. v. Seaboard Sur. Co., 607 N.W.2d 801 (Minn. Ct. App. 2000) — 8[b], 24[a] Fluoroware, Inc. v. Chubb Group of Ins. Companies, 545 N.W.2d 678 (Minn. Ct. App. 1996) — 11[b], 18[b] General Cas. Co. of Wisconsin v. Wozniak Travel, Inc., 762 N.W.2d 572 (Minn. 2009) — 12[a] Home Ins. Co. v. National Union Fire Ins. of Pittsburgh, 658 N.W.2d 522 (Minn. 2003) — 10[a] Home Ins. Co. v. Waycrosse, Inc., 990 F. Supp. 720 (D. Minn. 1996) (applying Minnesota law) — 6[a], 16[a], 24[b] John Deere Ins. Co. v. Shamrock Industries, Inc., 696 F. Supp. 434 (D. Minn. 1988) (applying Minnesota law) — 4, 21[a] New Hampshire Ins. Co. v. Power-O-Peat, Inc., 907 F.2d 58 (8th Cir. 1990) (applying Minnesota law) — 26[a] Polaris Industries, L.P. v. Continental Ins. Co., 539 N.W.2d 619 (Minn. Ct. App. 1995) — 7[a], 20[a], 21[b] Ross v. Briggs and Morgan, 540 N.W.2d 843 (Minn. 1995) — 24[a] Tschimperle v. Aetna Cas. & Sur. Co., 529 N.W.2d 421 (Minn. Ct. App. 1995) — 4, 20[b] Virtual Home Care, Inc. v. St. Paul Fire & Marine Ins. Co., 2001 WL 1002639 (Minn. Ct. App. 2001) — 6[b] Williamson v. North Star Companies, 1997 WL 53029 (Minn. Ct. App. 1997) — 12[a], 12[b]

Mississippi Delta Pride Catfish, Inc. v. Home Ins. Co., 697 So. 2d 400 (Miss. 1997) — 4, 7[b], 20[b] Merchants Co. v. American Motorists Ins. Co., 794 F. Supp. 611 (S.D. Miss. 1992) (applying Mississippi law) — 14[a], 21[a] Mulberry Square Productions, Inc. v. State Farm Fire and Cas. Co., 101 F.3d 414 (5th Cir. 1996) (applying Mississippi law) — 6[b], 23[a]

Nationwide Mut. Ins. Co. v. Lake Caroline, Inc., 515 F.3d 414 (5th Cir. 2008) (applying Mississippi law) — 6[b]

Missouri American States Ins. Co. v. Vortherms, 5 S.W.3d 538 (Mo. Ct. App. E.D. 1999) (applying Missouri law) — 14[b] Capitol Indem. Corp. v. 1405 Associates, Inc., 340 F.3d 547 (8th Cir. 2003) (applying Missouri law) — 33 Kirk King, King Cons., Inc. v. Continental Western Ins. Co., 123 S.W.3d 259 (Mo. Ct. App. W.D. 2003) — 8[a] Reliance Ins. Co. v. Shenandoah South, Inc., 81 F.3d 789 (8th Cir. 1996) (applying Missouri law) — 6[b] State Farm Fire and Cas. Co. v. National Research Center for College and University Admissions, 445 F.3d 1100 (8th Cir. 2006) (applying Missouri law) — 9

Montana American Simmental Ass'n v. Coregis Ins. Co., 282 F.3d 582 (8th Cir. 2002) (applying Montana law) — 10[a], 20[a] American Simmental Ass'n v. Coregis Ins. Co., 75 F. Supp. 2d 1023 (D. Neb. 1999) (applying Montana law) — 13[a]

Nebraska GRE Ins. Group/Tower Ins. Co., Inc. v. Complete Music, Inc., 271 F.3d 711 (8th Cir. 2001) (applying Nebraska law) — 17[b] John Markel Ford, Inc. v. Auto-Owners Ins. Co., 249 Neb. 286, 543 N.W.2d 173 (1996) — 7[b] Union Ins. Co. v. Land and Sky, Inc., 247 Neb. 696, 529 N.W.2d 773 (1995) — 11[a], 18[a]

Nevada Associated Aviation Underwriters, Inc. v. Vegas Jet, L.L.C., 106 F. Supp. 2d 1051 (D. Nev. 2000) (applying Nevada law) — 21[b]

New Hampshire Ekco Group, Inc. v. Travelers Indem. Co. of Illinois, 273 F.3d 409 (1st Cir. 2001) (applying New Hampshire law) — 11[b] First Bank and Trust Co. v. New Hampshire Ins. Group, 124 N.H. 417, 469 A.2d 1367 (1983) — 4 P.J. Noyes Co. v. American Motorists Ins. Co., 855 F. Supp. 492 (D.N.H. 1994) (applying New Hampshire law) — 19[a]

New Jersey Amer. Nat. Fire Ins. Co. v. Methods Research Corp., 2000 WL 1785519 (N.D. Ill. 2000) (applying New Jersey law) — 12[b], 13[b], 19[b] Filenet Corp. v. Chubb Corp., 324 N.J. Super. 419, 735 A.2d 1170 (App. Div. 1999) — 11[b], 18[b] Information Spectrum, Inc. v. The Hartford, 182 N.J. 34, 860 A.2d 926 (2004) — 10[b] Tradesoft Technologies, Inc. v. Franklin Mut. Ins. Co., Inc., 329 N.J. Super. 137, 746 A.2d 1078 (App. Div. 2000) — 11[b], 14[a], 20[b]

New York A.J. Sheepskin and Leather Co., Inc. v. Colonia Ins. Co., 273 A.D.2d 107, 709 N.Y.S.2d 82 (1st Dep't 2000) — 23[a] Allou Health & Beauty Care, Inc. v. Aetna Cas. and Sur. Co., 269 A.D.2d 478, 703 N.Y.S.2d 253 (2d Dep't 2000) — 12[a] American Mfrs. Mut. Ins. Co. v. Quality King Distributors, Inc., 16 A.D.3d 607, 792 N.Y.S.2d 555 (2d Dep't 2005) — 12[b] American Mfrs. Mut. Ins. Co. v. Quality King Distributors, Inc., 287 A.D.2d 527, 731 N.Y.S.2d 234 (2d Dep't 2001) — 12[a] A. Meyers & Sons Corp. v. Zurich American Ins. Group, 74 N.Y.2d 298, 546 N.Y.S.2d 818, 545 N.E.2d 1206 (1989) — 11[b], 18[b] Atlantic Mut. Ins. Co. v. Terk Technologies Corp., 309 A.D.2d 22, 763 N.Y.S.2d 56 (1st Dep't 2003) — 23[a] A Touch of Class Imports, Ltd. v. Aetna Cas. and Sur. Co., 901 F. Supp. 175 (S.D. N.Y. 1995) (apparently applying New York law) — 12[a], 19[a] Ben Berger & Son, Inc. v. American Motorist Ins. Co., 36 U.S.P.Q.2d 1105, 1995 WL 386560 (S.D. N.Y. 1995) (applying New York law) — 12[a], 13[a] Berman v. General Acc. Ins. Co. of America, 176 Misc. 2d 13, 671 N.Y.S.2d 619 (Sup 1998) — 5, 23[b] B.H. Smith, Inc. v. Zurich Ins. Co., 285 Ill. App. 3d 536, 221 Ill. Dec. 700, 676 N.E.2d 221 (1st Dist. 1996) (applying New York law) — 12[a], 19[a]

Century 21, Inc. v. Diamond State Ins. Co., 442 F.3d 79 (2d Cir. 2006) (applying New York law) — 13[a] Cosser v. One Beacon Ins. Group, 15 A.D.3d 871, 789 N.Y.S.2d 586 (4th Dep't 2005) — 12[a] Elite Brands, Inc. v. Pennsylvania Gen. Ins. Co., 164 Fed. Appx. 60 (2d Cir. 2006) (applying New York law) — 3, 6[b] Energex Systems Corp. v. Fireman's Fund Ins. Co., 1997 WL 358007 (S.D. N.Y. 1997) (applying New York law) — 11[b], 12[a], 19[a] GRE Ins. Group v. GMA Accessories, Inc., 180 Misc. 2d 927, 691 N.Y.S.2d 244 (Sup 1998) — 17[a], 23[b] Hosel & Anderson, Inc. v. ZV II, Inc., 2001 Copr. L. Dec. ¶28252, 2001 WL 392229 (S.D. N.Y. 2001) (applying New York law) — 17[b] Hugo Boss Fashions, Inc. v. Federal Ins. Co., 252 F.3d 608 (2d Cir. 2001) (applying New York law) — 24[b], 25 Jerry Madison Enterprises, Inc. v. Grasant Mfg. Co., Inc., 1990 WL 13290 (S.D. N.Y. 1990) (applying New York law) — 17[b] JMZ USA, Inc. v. Lumbermens Mut. Cas. Co., 36 A.D.3d 555, 828 N.Y.S.2d 385 (1st Dep't 2007) — 6[b] Massachusetts Bay Ins. Co. v. Penny Preville, Inc., 1996 WL 389266 (S.D. N.Y. 1996) (applying New York law) — 12[a], 17[a], 19[a], 23[b] PCB Piezotronics, Inc. v. Kistler Instrument Corp., 1997 WL 800874 (W.D. N.Y. 1997) (applying New York law) — 26[b] PG Ins. Co. of New York v. S.A. Day Mfg. Co., Inc., 251 A.D.2d 1065, 674 N.Y.S.2d 199 (4th Dep't 1998) — 23[b] Professional Product Research Inc. v. General Star Indem. Co., 623 F. Supp. 2d 438 (S.D. N.Y. 2008) (applying New York law) — 12[a] Quitman Mfg. Co., Inc. v. Northbrook Nat. Ins., Co., 266 A.D.2d 105, 698 N.Y.S.2d 469 (1st Dep't 1999) — 17[b] Ruder & Finn Inc. v. Seaboard Sur. Co., 52 N.Y.2d 663, 439 N.Y.S.2d 858, 422 N.E.2d 518 (1981) — 6[a], 7[b] Simply Lite Food Corp. v. Aetna Cas. & Sur. Co. of America, 245 A.D.2d 500, 666 N.Y.S.2d 714 (2d Dep't 1997) — 23[b] Stratford Homes, Inc. v. Lorusso, 1995 WL 780977 (W.D. N.Y. 1995) (applying New York law) — 17[a] Structural Building Products Corp. v. Business Ins. Agency, Inc., 281 A.D.2d 617, 722 N.Y.S.2d 559 (2d Dep't 2001) — 20[b] Western American Ins. Co. v. Moonlight Design, Inc., 95 F. Supp. 2d 838 (N.D. Ill. 2000) (applying New York law) — 17[a]

North Carolina Danby of North America, Inc. v. Travelers Ins. Co., 25 Fed. Appx. 186 (4th Cir. 2002) (applying North Carolina law) — 13[b] Harleysville Mut. Ins. Co. v. Buzz Off Insect Shield, L.L.C., 364 N.C. 1, 692 S.E.2d 605 (2010) — 26[a] Henderson v. U.S. Fidelity & Guar. Co., 346 N.C. 741, 488 S.E.2d 234 (1997) — 7[b] State Auto Property and Casualty Insurance Company v. Travelers Indemnity Company of America, 343 F.3d 249 (4th Cir. 2003) (applying North Carolina law) — 12[a], 23[b], 32

North Dakota Central Dakota Radiologists, P.C. v. Continental Cas. Co., 769 F. Supp. 323 (D.N.D. 1991) (apparently applying North Dakota law) — 4

Ohio Acme Const. Co., Inc. v. Continental Nat. Indem. Co., 2003-Ohio-434, 2003 WL 194879 (Ohio Ct. App. 8th Dist. Cuyahoga County 2003) — 6[b] Heritage Mut. Ins. Co. v. Ricart Ford, Inc., 105 Ohio App. 3d 261, 663 N.E.2d 1009 (10th Dist. Franklin County 1995) — 13[b] Holloway Sportswear, Inc. v. Transportation Ins. Co., 58 Fed. Appx. 172 (6th Cir. 2003) (applying Ohio law) — 6[b] Motorists Mut. Ins. Co. v. Natl. Dairy Herd Improvement Assn., Inc., 141 Ohio App. 3d 269, 750 N.E.2d 1169 (10th Dist. Franklin County 2001) — 6[b] Synergystex Intern., Inc. v. Motorists Mut. Ins. Co., 1994 WL 395626 (Ohio Ct. App. 9th Dist. Medina County 1994) — 18[b] United Nat. Ins. Co. v. SST Fitness Corp., 182 F.3d 447, 1999 FED App. 0234P (6th Cir. 1999) (applying Ohio law) — 11[b] Weiss v. St. Paul Fire and Marine Ins. Co., 283 F.3d 790, 52 Fed. R. Serv. 3d 355, 2002 FED App. 0093P (6th Cir. 2002) (applying Ohio law) — 11[b] Westfield Companies v. Pins & Needles, Inc., 1996 WL 575977 (Ohio Ct. App. 5th Dist. Tuscarawas County 1996) — 6[b] Westfield Cos. v. O.K.L. Can Line, 155 Ohio App. 3d 747, 2003-Ohio-7151, 804 N.E.2d 45 (1st Dist. Hamilton County 2003) — 12[a], 22[b], 29[b]

Westfield Ins. Co. v. Factfinder Marketing Research, Inc., 168 Ohio App. 3d 391, 2006-Ohio-4380, 860 N.E.2d 145 (1st Dist. Hamilton County 2006) — 14[b], 19[a], 23[b]

Oklahoma Idg, Inc. v. Continental Cas. Co., 275 F.3d 916 (10th Cir. 2001) (applying Oklahoma law) — 17[b]

Oregon Mutual of Enumclaw Ins. Co. v. Jonas, 35 Fed. Appx. 556 (9th Cir. 2002) (applying Oregon law) — 13[b] Precision Automation, Inc. v. West American Ins. Co., 203 F.3d 832 (9th Cir. 1999) (applying Oregon law) — 11[a], 11[b] U.S. Fidelity & Guar. Co. v. Star Technologies, Inc., 935 F. Supp. 1110 (D. Or. 1996) (applying Oregon law) — 11[a], 18[b]

Pennsylvania Atlantic Mut. Ins. Co. v. Brotech Corp., 857 F. Supp. 423 (E.D. Pa. 1994) (applying Pennsylvania law) — 11[b], 18[b] Cat Internet Services, Inc. v. Providence Washington Ins. Co., 333 F.3d 138 (3d Cir. 2003) (applying Pennsylvania law) — 10[a] CAT Internet Systems, Inc. v. Providence Washington Ins. Co., 153 F. Supp. 2d 755 (E.D. Pa. 2001) (applying Pennsylvania law) — 12[a], 19[a] DecisionOne Corp. v. ITT Hartford Ins. Group, 942 F. Supp. 1038 (E.D. Pa. 1996) (applying Pennsylvania law) — 6[a], 23[b], 26[b] Elcom Technologies v. Hartford Ins. Co. of Midwest, 991 F. Supp. 1294 (D. Utah 1997) (applying Pennsylvania law) — 13[a], 23[b], 26[b] Frog, Switch & Mfg. Co., Inc. v. Travelers Ins. Co., 193 F.3d 742 (3d Cir. 1999) (applying Pennsylvania law) — 14[b] Granite State Ins. Co. v. Aamco Transmissions, Inc., 57 F.3d 316 (3d Cir. 1995) (applying Pennsylvania law) — 7[b] Green Mach. Corp. v. Zurich-American Ins. Group, 313 F.3d 837 (3d Cir. 2002) (applying Pennsylvania law) — 11[b] Green Machine Corp. v. Zurich American Ins. Group, 2001 WL 1003217 (E.D. Pa. 2001) (applying Pennsylvania law) — 11[b] I.C.D. Indus., Inc. v. Federal Ins. Co., 879 F. Supp. 480 (E.D. Pa. 1995) (applying Pennsylvania law) — 11[b] International Communication Material Inc. v. Employer's Ins. of Wausau, 1996 WL 1044552 (W.D. Pa. 1996) (applying Pennsylvania law) — 13[a], 18[a], 22[b] Sorbee Intern. Ltd. v. Chubb Custom Ins. Co., 1999 PA Super 178, 735 A.2d 712 (1999) — 13[b] Toffler Associates, Inc. v. Hartford Fire Ins. Co., 651 F. Supp. 2d 332 (E.D. Pa. 2009) (applying Pennsylvania law) — 3, 4, 33.5 USX Corp. v. Adriatic Insurance Co., 99 F. Supp. 2d 593 (W.D. Pa. 2000) (applying Pennsylvania law) — 3, 7[b], 20[b] Weinstein Supply Corp. v. Home Ins. Companies, 1999 WL 310590 (E.D. Pa. 1999) (applying Pennsylvania law) — 16[b]

Rhode Island Nortek, Inc. v. Liberty Mut. Ins. Co., 858 F. Supp. 1231 (D.R.I. 1994) (applying Rhode Island law) — 12[a], 19[a]

South Carolina Super Duper Inc. v. Pennsylvania Nat. Mut. Cas. Ins. Co., 385 S.C. 201, 683 S.E.2d 792 (2009) — 12[a]

Tennessee Ralph v. Pipkin, 183 S.W.3d 362 (Tenn. Ct. App. 2005) — 11[b] ShoLodge, Inc. v. Travelers Indem. Co. of Illinois, 168 F.3d 256, 1999 FED App. 0043P (6th Cir. 1999) (applying Tennessee law) — 12[b]

Texas American Guarantee and Liability Ins. Co. v. Shel-Ray Underwriters, Inc., 844 F. Supp. 325 (S.D. Tex. 1993) (applying Texas law) — 23[a], 29[a] America's Recommended Mailers Inc. v. Maryland Cas. Co., 339 Fed. Appx. 467 (5th Cir. 2009) (applying Texas law) — 12[b] ANR Production Co. v. American Guarantee & Liability Ins. Co., 981 S.W.2d 889 (Tex. App. Houston 1st Dist. 1998) — 4 Atlantic Lloyd's Ins. Co. of Texas v. Susman Godfrey, L.L.P., 982 S.W.2d 472 (Tex. App. Dallas 1998) — 6[a], 28 Bay Elec. Supply, Inc. v. Travelers Lloyds Ins. Co., 61 F. Supp. 2d 611 (S.D. Tex. 1999) (applying Texas law) — 4, 12[a], 19[a], 22[b], 23[b]

Cigna Lloyds Ins. Co. v. Bradleys' Elec., Inc., 33 S.W.3d 102 (Tex. App. Corpus Christi 2000) — 11[b] Continental Cas. Co. v. Consolidated Graphics, Inc., 656 F. Supp. 2d 650 (S.D. Tex. 2009) (applying Texas law) — 10[b] Doskocil, Inc. v. Fireman's Fund Ins. Co., 1999 WL 430755 (N.D. Cal. 1999) (applying Texas law) — 18[b], 22[a] Essex Ins. Co. v. Redtail Products, Inc., 1998 WL 812394 (N.D. Tex. 1998) (applying Texas law) — 22[a] Gemmy Industries Corp. v. Alliance General Ins. Co., 190 F. Supp. 2d 915 (N.D. Tex. 1998) (applying Texas law) — 12[a], 19[a] Mid-Continent Cas. Co. v. Camaley Energy Co., Inc., 364 F. Supp. 2d 600 (N.D. Tex. 2005) (applying Texas law) — 13[b] Pennsylvania Pulp & Paper Co., Inc. v. Nationwide Mut. Ins. Co., 100 S.W.3d 566 (Tex. App. Houston 14th Dist. 2003) — 10[b] Reagan Nat. Advertising v. Hartford Cas. Ins. Co., 190 Fed. Appx. 608 (10th Cir. 2006) (applying Texas and Utah law) — 13[a] Sentry Ins. v. R.J. Weber Co., Inc., 2 F.3d 554 (5th Cir. 1993) (applying Texas law) — 17[b] Southstar Corp. v. St. Paul Surplus Lines Ins. Co., 42 S.W.3d 187 (Tex. App. Corpus Christi 2001) — 24[a] Sport Supply Group, Inc. v. Columbia Cas. Co., 335 F.3d 453 (5th Cir. 2003) (applying Texas law) — 24[a] Western Rim Inv. Advisors, Inc. v. Gulf Ins. Co., 269 F. Supp. 2d 836 (N.D. Tex. 2003) (applying Texas law) — 9

Utah Nova Cas. Co. v. Able Const., Inc., 1999 UT 69, 983 P.2d 575 (Utah 1999) — 9 Novell, Inc. v. Federal Ins. Co., 141 F.3d 983 (10th Cir. 1998) (applying Utah law) — 10[b], 20[b] Ohio Cas. Ins. Co. v. Cloud Nine, LLC, 464 F. Supp. 2d 1161 (D. Utah 2006) (applying Utah law) — 12[a]

Vermont Applied Bolting Technology Products, Inc. v. U.S. Fidelity & Guar. Co., 942 F. Supp. 1029 (E.D. Pa. 1996) (applying Vermont law) — 13[b], 22[a] Select Designs, Ltd. v. Union Mut. Fire Ins. Co., 165 Vt. 69, 674 A.2d 798 (1996) — 4

Virginia Solers, Inc. v. Hartford Cas. Ins. Co., 36 Fed. Appx. 740 (4th Cir. 2002) (applying Virginia law) — 4 Solers, Inc. v. Hartford Cas. Ins. Co., 146 F. Supp. 2d 785 (E.D. Va. 2001) (applying Virginia law) — 4 Superformance Intern., Inc. v. Hartford Cas. Ins. Co., 203 F. Supp. 2d 587 (E.D. Va. 2002) — 12[b] Superformance Intern. Inc. v. Hartford Casualty Ins. Co., 332 F.3d 215 (4th Cir. 2003) (applying Virginia law) — 25

Washington Aetna Cas. and Sur. Co. v. M & S Industries, Inc., 64 Wash. App. 916, 827 P.2d 321 (Div. 2 1992) — 7[b] Amazon.com Intern., Inc. v. American Dynasty Surplus Lines Ins. Co., 120 Wash. App. 610, 85 P.3d 974 (Div. 1 2004) — 10[a] Australia Unlimited, Inc. v. Hartford Cas. Ins. Co., 147 Wash. App. 758, 198 P.3d 514 (Div. 1 2008) — 12[a], 19[a] Boggs v. Whitaker, Lipp & Helea, Inc., P.S., 56 Wash. App. 583, 784 P.2d 1273 (Div. 2 1990) — 7[b] Epoch Pharmaceuticals, Inc. v. Federal Ins. Co., 201 F.3d 443 (9th Cir. 1999) (applying Washington law) — 11[b] Globe Indem. Co. v. First American State Bank, 720 F. Supp. 853 (W.D. Wash. 1989) (applying Washington law) — 7[b] Microsoft Corporation v. Zurich American Insurance Co., 2002-2 Trade Cas. (CCH) ¶ 73840, 2001 WL 765871 (W.D. Wash. 2001) (applying Washington law) — 13[b] Pine Top Ins. Co. v. Public Utility Dist. No. 1 of Chelan County, 676 F. Supp. 212 (E.D. Wash. 1987) (applying Washington law) — 7[b]

West Virginia Mylan Laboratories Inc. v. American Motorists Ins. Co., 226 W. Va. 307, 700 S.E.2d 518 (2010) — 10[b]

Wisconsin Acme United Corp. v. St. Paul Fire & Marine Ins. Co., 214 Fed. Appx. 596 (7th Cir. 2007) (applying Wisconsin law) — 6[a] Acuity v. Bagadia, 2008 WI 62, 310 Wis. 2d 197, 750 N.W.2d 817 (2008) — 3, 5, 12[a], 17[a], 19[a] Acuity v. Bagadia, 302 Wis. 2d 228, 2007 WI App 133, 734 N.W.2d 464 (Ct. App. 2007) — 3, 4, 8[a] Atlantic Mut. Ins. Co. v. Badger Medical Supply Co., 191 Wis. 2d 229, 528 N.W.2d 486 (Ct. App. 1995) — 10[b] Bruner v. Heritage Companies, 225 Wis. 2d 728, 593 N.W.2d 814 (Ct. App. 1999) — 13[b]

Charter Oak Fire Ins. Co. v. Hedeen & Companies, 280 F.3d 730, 98 A.L.R.5th 687 (7th Cir. 2002) (applying Wisconsin law) — 12[a], 19[a] Curtis-Universal, Inc. v. Sheboygan Emergency Medical Services, Inc., 43 F.3d 1119 (7th Cir. 1994) (applying Wisconsin law) — 7[a], 23[b], 29[b] Custom Machinery Design, Inc. v. West Bend Mut. Ins. Co., 182 Wis. 2d 511, 514 N.W.2d 879 (Ct. App. 1994) — 24[a] Diversified Investments Corp. v. Regent Ins. Co., 226 Wis. 2d 563, 596 N.W.2d 502 (Ct. App. 1999) — 19[b] Fireman's Fund Ins. Co. of Wis. v. Bradley Corp., 2003 WI 33, 261 Wis. 2d 4, 660 N.W.2d 666 (2003) — 3 Heil Co. v. Hartford Acc. and Indem. Co., 937 F. Supp. 1355 (E.D. Wis. 1996) (applying Wisconsin law) — 11[b], 18[b] Kinko's, Inc. v. Shuler, 255 Wis. 2d 834, 2002 WI App 134, 646 N.W.2d 855 (Ct. App. 2002) — 10[a], 31 Krueger Intern., Inc. v. Federal Ins. Co., 647 F. Supp. 2d 1024 (E.D. Wis. 2009) (applying Wisconsin law) — 5, 8[b] Regent Ins. Co. v. Tanner, 232 Wis. 2d 555, 2000 WI App 32, 608 N.W.2d 436 (Ct. App. 1999) — 23[a] Western States Ins. Co. v. Wisconsin Wholesale Tire, Inc., 184 F.3d 699 (7th Cir. 1999) (applying Wisconsin law) — 20[b] Westowne Shoes, Inc. v. City Ins. Co., 82 F.3d 420 (7th Cir. 1996) (applying Wisconsin law) — 3, 4, 20[b]

I. PRELIMINARY MATTERS

§ 1[a] Introduction—Scope

This annotation collects and analyzes cases in which courts have construed and applied provisions in insurance policies that insured against liability arising out of an insured's "advertising activities." Cases determining an insurer's duty to indemnify as well as an insurer's duty to defend the insured are included, but only cases involving policy provisions expressly providing coverage for "advertising injuries" are within the scope of this annotation. 1 In addition, this annotation does not include cases in which the decision is unclear as to whether it was based on the "personal injury" or "advertising injury" provision of an insurance contract.

A number of jurisdictions have rules, regulations, constitutional provisions, or legislative enactments directly bearing on this subject. These provisions are discussed herein only to the extent that they are reflected in the court opinions that fall within the scope of this annotation. The reader is consequently advised to consult the appropriate statutory or regulatory compilations to ascertain the current status of all statutes discussed herein, including those listed in the Jurisdictional Table of Cited Statutes and Cases.

Some opinions discussed in this annotation may be restricted by court rule as to publication and citation in briefs; readers are cautioned to check each case for restrictions.

§ 1[b] Introduction—Related annotations

Related Annotations are located under the Research References heading of this Annotation.

§ 2. Summary and comment

[Cumulative Supplement]

Standard versions of commercial general liability (CGL) insurance policies, written by the Insurance Services Organization (ISO) and issued since the 1970s, have normally included "advertising injury" coverage. 2 While some insurers alter the ISO forms based on the unique coverages requested by their insureds, insurers often adopt the ISO forms verbatim. The ISO periodically revises and clarifies the coverage offered by its standard insurance forms and alters, deletes, or adds language accordingly. 3 For instance, the 1986 version of the CGL form replaced the 1976 version, and the 1986 version was modified by the 1998 ISO CGL policy form. In regard to "advertising injury" coverage in the CGL, until the 1986 version, coverage was provided for offenses described as "piracy" and "unfair competition" but also included an exclusion for trademark

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 20 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) infringement. 4 The 1986 CGL version eliminated coverage for the offense of "unfair competition" in favor of "misappropriation of advertising ideas and style of doing business." In addition, the trademark exclusion was eliminated. 5

Each unique version of the CGL has spawned considerable litigation over the scope of its coverage and exclusion provisions. In regard to CGL "advertising injury" coverage, courts have concluded that four elements must be met for a claim to be covered: (1) the insured must have engaged in "advertising activity"; (2) the underlying action must fit into one of the enumerated offenses of "advertising injury"; (3) the "advertising injury" to the underlying plaintiff must have arisen solely out of the insured's "advertising activities"; and (4) no policy exclusions must apply. 6 As otherwise stated, coverage for advertising injuries under a commercial general liability (CGL) insurance policy requires the presence of each of the following: (1) the insured must have been engaged in advertising activity; (2) the victim's allegations and the underlying facts must have conveyed a potential for liability for one of the insured offenses; and (3) there must be a causal connection between the injury alleged and the insured's advertising activity. 7

In construing the first element, most courts have held that the insured's activity must involve "affirmative self–promotion" or "solicitation of business," to be considered "advertising activity" (§ 3). In addition, courts are split as to whether such "advertising activity" requires widespread distribution of promotional material to the public (§ 4) or can include one–on–one or targeted group solicitations (§ 5). As to the second element, where the underlying action alleged an enumerated "advertising injury" offense, courts have found that an "advertising injury" existed for "libel, slander or disparagement" (§ 6[a]); "unfair competition" (§ 7[a]); "copyright infringement" (§ 8[a]); and "misappropriation of advertising ideas or style of doing business (§ 10[a]). On the other hand, courts have also found that an "advertising injury" did not exist for "libel, slander or disparagement" (§ 6[b]); "unfair competition" (§ 7[b]); "copyright infringement" (§ 8[b]); "invasion of privacy" (§ 9); and "misappropriation of advertising ideas or style of doing business (§ 10[b]). As to the second element, where the underlying action did not allege an enumerated "advertising injury" offense, courts have construed that "advertising injury" encompasses the following: "patent infringement" (§ 11[a]); "trademark or trade dress infringement" (§ 12[a]); "unfair competition" or other unfair business practices violations (§ 13[a]); and "misappropriation of trade secrets" (§ 14[a]). Other courts have construed that "advertising injury" does not encompass the following: "patent infringement" (§ 11[b]); "trademark or trade dress infringement" (§ 12[b]); "unfair competition" or other unfair business practices violations (§ 13[b]); "misappropriation of trade secrets" (§ 14[b]); and negligent misrepresentation (§ 15). As to the third element, courts have found that the insured's "advertising activity" caused the "advertising injury" of "libel slander or disparagement" (§ 16[a]), "copyright infringement" (§ 17[a]), "patent infringement" (§ 18[a]), "trademark or trade dress infringement" (§ 19[a]), "unfair competition" or other unfair business practices violations (§ 20[a]), and "misappropriation of trade secrets" (§ 21[a]). Other courts have found that the insured's "advertising activity" did not cause the "advertising injury" of "libel slander or disparagement" (§ 16[b]), "copyright infringement" (§ 17[b]), "patent infringement" (§ 18[b]), "trademark or trade dress infringement" (§ 19[b]), "unfair competition" or other unfair business practices violations (§ 20[b]), and "misappropriation of trade secrets" (§ 21[b]). Finally, as to the fourth element, courts have found that coverage did not exist because the following policy exclusions applied: "prior publication or acts" (§ 22[a]); "knowledge of falsity" (§ 23[a]); "breach of contract" (§ 24[a]); "intellectual property" (§ 25); "quality of goods" (§ 26[a]); "publishing business" (§ 27); and "willful violation of a penal statute" (§ 29[a]). Other courts have found that coverage did exist because the following policy exclusions did not apply: "prior publication or acts" (§ 22[b]); "knowledge of falsity" (§ 23[b]); "breach of contract" (§ 24[b]); "quality of goods" (§ 26[b]); "professional services" (§ 28); and "willful violation of a penal statute" (§ 29[b]).

CUMULATIVE SUPPLEMENT

Cases:

Under Illinois law, competitor's claim that insured copied competitor's slogans was potentially covered by provision of insured's commercial general liability (CGL) policy covering unauthorized use of a slogan of others in the insured's advertising, triggering the insurer's duty to defend insured in competitor's suit for trademark infringement, false designation of origin, false advertising, trademark dilution, and deceptive trade practices. Santa's Best Craft, LLC v. St. Paul Fire and Marine Ins. Co., 611 F.3d 339 (7th Cir. 2010).

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II. WHAT CONSTITUTES "ADVERTISING ACTIVITY"

§ 3. Affirmative self–promotion or solicitation of business

[Cumulative Supplement]

In the following cases, the courts held that the insured's activity must involve "affirmative self–promotion" or "solicitation of business" to be considered "advertising activity" in the context of insurance policies that provide coverage for "advertising injury."

The court held in Ziman v. Fireman's Fund Ins. Co., 73 Cal. App. 4th 1382, 87 Cal. Rptr. 2d 397 (2d Dist. 1999), reh'g denied, (Aug. 25, 1999), that in a CGL insurance policy that provides coverage for "advertising injury," the term "advertising activity" does not constitute the mere display of artwork with no self–promotion or "solicitation of business" involved. The court stated that the display of artwork to make the lobby of an office building more attractive to potential tenants is not "advertising activity" when the artwork itself does not promote that there is space available for lease in the building.

The court in Hameid v. National Fire Ins. of Hartford, 94 Cal. App. 4th 1155, 114 Cal. Rptr. 2d 843 (4th Dist. 2001), opinion modified, 2002 WL 59444 (Cal. App. 4th Dist. 2002), held that a start–up, community beauty salon engaged in "advertising activity" for purposes of the advertising injury coverage of its commercial general liability (CGL) insurance policy where it advertised in the local paper, sent mailers, and telephoned competitors' clients. The court noted that the activities called public attention to the product through widespread promotional activities. The court noted that where the insured's business is one with a small customer base and that base, or a significant part of it, is the target audience, the reach is extensive enough to constitute advertising injury for purposes of the advertising injury coverage of a commercial general liability (CGL) insurance policy, as to hold otherwise would effectively preclude small businesses from ever invoking their rights to coverage for advertising injury liability.

In Pennsylvania General Ins. Co. v. Disctronics, Inc., 5 F.3d 538 (9th Cir. 1993) (applying California law), the court held that the mere manufacture and sale of products with no accompanying "self–promotion" or "solicitation of business" does not constitute "advertising activity" within the context of a CGL insurance policy providing "advertising injury" coverage. The court noted that to allow "advertising activity" to constitute products that "speak for themselves," insurance companies would be liable for every injury resulting from the manufacture and sale of products, which goes beyond the protection the insured reasonably has a right to expect.

The court in Phoenix American, Inc. v. Atlantic Mut. Ins. Co., 2001 WL 1649243 (Cal. App. 1st Dist. 2001) nonpublished/ nonciteable, held that contrary to the insurer's contention, advertising activity was clearly evident in the third–party complaint. The court noted that the generally accepted definition of "advertising" as used in advertising injury coverage is the act of calling public attention to one's product through widespread promotional activities. The court noted that although the underlying complaint referred only once to the term "advertis[ing]," the complaint was replete with the term "marketing." The court noted that according to the Oxford English Dictionary, "marketing" is defined as including the "action, business or process of promoting and selling a product, etc., including market research, advertising, and distribution." Thus, the term "marketing," as used in the complaint, could be construed to include advertising, especially because the complaint makes a specific request that the court enjoin the insured from advertising the infringing software.

The court in Lexmark Intern., Inc. v. Transportation Ins. Co., 2001 WL 1636680 (Ill. App. Ct. 1st Dist. 2001), noted that the first obstacle to the insured's success for obtaining advertising injury coverage concerned the question of advertising activity. The court noted that there was no generally accepted definition of "advertising activity" in the reported decisions, but this court, in a duty to defend context, said: "The term 'advertising' has been held to refer to the widespread distribution of promotional

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 22 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) material to the public at large." The insured contended it was accused of engaging in advertising activity by the allegation that it promoted and marketed its printer to potential customers. Despite the court's doubts about the soundness of the insured's position, the court assumed that the insured's promotional and marketing efforts constituted "advertising."

In the context of an insurance policy providing "advertising injury" coverage, the phrase "advertising activity" does not encompass the providing of professional services that do not actively solicit business, the court held in Erie Ins. Group v. Sear Corp., 102 F.3d 889 (7th Cir. 1996) (applying Indiana law). The court noted that in the course of fulfilling business services, such as professional consulting, if no "affirmative self–promotion" or "solicitation of business" is involved, the conduct does not constitute "advertising activity" under an "advertising injury" insurance policy.

By way of dictum, the court stated in Heritage Mut. Ins. Co. v. Advanced Polymer Technology, Inc., 97 F. Supp. 2d 913 (S.D. Ind. 2000) (applying Indiana law), that the term "advertising activity" in a CGL insurance policy providing "advertising injury" coverage does not mean the filing of a patent application. The court noted that its circuit had interpreted the phrase "advertising activity" to refer unambiguously to "active solicitation of business" and "actual, affirmative self–promotion" of goods or services, categories into which a patent application filed with the PTO cannot reasonably be collapsed.

In IMT Ins. Co. v. Paper Systems, Inc., 2001 WL 98545 (Iowa Ct. App. 2001), the court by way of dictum stated that an "offer to sell" a patented product does not constitute "advertising activity" under a CGL insurance policy providing "advertising injury" coverage because it does not involve "affirmative self–promotion" of the product. The court noted that an "offer to sell" as used in patent infringement claims is a term of art, which contemplates an actual sale rather than general words of praise or self– promotion about a product to members of the public.

The court held in State Farm Fire & Cas. Co. v. Housing Authority of Crisfield, 1995 WL 131295 (D. Md. 1995) (applying Maryland law), that in an "advertising injury" insurance policy the term "advertising activity" does not include the placement of advertisements that do not promote one's own services. The court noted that a company's advertisement for a job position does not constitute "advertising activity" because the company is not advertising its own services when it seeks to employ someone, and thus there is no coverage under "advertising injury" insurance.

In USX Corp. v. Adriatic Insurance Co., 99 F. Supp. 2d 593 (W.D. Pa. 2000) (applying Pennsylvania law), the court held that the public filing of tariffs required by statute is not "advertising activity," within the context of "advertising injury" insurance, because public filing of the tariffs is a mere act of acquiring legal approval to charge requested rates, not an activity designed to generate business from potential customers. The court went on to say that advertising and "advertising activity" must involve actual, "affirmative self–promotion" of goods or services, and a mere motive to maintain business relations or increase business in some tangential way is insufficient to bring them within the context of "advertising activity" as that term is defined in "advertising injury" insurance coverage.

Because no "affirmative self–promotion" is involved, the definition of "advertising activity," as construed in an insurance policy providing "advertising injury" coverage does not encompass mere product labeling, the court held in Westowne Shoes, Inc. v. City Ins. Co., 82 F.3d 420 (7th Cir. 1996), reh'g and suggestion for reh'g en banc denied, (May 14, 1996) (applying Wisconsin law). The court noted that a business decision to sell products with a brand name is more properly seen as product identification than "advertising activity"; otherwise any effort to sell a product would transform into open–ended coverage under "advertising injury" insurance.

CUMULATIVE SUPPLEMENT

Cases:

Distribution of catalogs to equipment manufacturers by insured manufacturer of mountings for outdoor lights, in attempt to sell the mountings, was "advertising," for purpose of claim that judgment obtained by third party against insured manufacturer for violation of Lanham Act was advertising injury covered by insured's commercial general liability (CGL) policy. 15 U.S.C.A. § 1125(a). Hyman v. Nationwide Mut. Fire Ins. Co., 304 F.3d 1179, 64 U.S.P.Q.2d (BNA) 1411 (11th Cir. 2002).

Under California law, insureds' act of covering mural on side of their building could not be construed as "advertising" within meaning of advertising injury coverage in general liability insurance policy, and thus did not provide coverage for artists' suit against owners under Visual Artists' Rights Act of 1991 (VARA) and California Art Preservation Act (CAPA), that mural was widely known in area did not make act of covering mural advertisement for building, use of mural itself did not constitute advertising injury, and displaying blank wall in lieu of mural did not, under facts, constitute advertisement for available wall space on building. 17 U.S.C.A. § 106A; West's Ann.Cal.Civ.Code § 987. Cort v. St. Paul Fire and Marine Ins. Companies, Inc., 311 F.3d 979 (9th Cir. 2002) (applying California law).

Insured's alleged use of competitor's trademarks to identify its products and its alleged shipment of its own seal in a box with competitor's label were "advertisement" for purposes of advertising injury coverage of commercial general liability (CGL) policy; the insured's alleged acts were a notice published to the specific market segment for the purpose of attracting customers or supporters. Citizens Insurance Company v. Pro-Seal Service Group, Inc., 268 Mich. App. 542, 710 N.W.2d 547 (2005).

Complaints and allegations in patent-infringement proceeding before International Trade Commission (ITC) in which insured was respondent concerned importation and sale of infringing products, but did not raise allegations about advertising activity, under New York law, as was required to trigger coverage under provision of insurance policies covering advertising injury. Elite Brands, Inc. v. Pennsylvania Gen. Ins. Co., 164 Fed. Appx. 60 (2d Cir. 2006) (applying New York law).

Under Pennsylvania law, e-mail newsletter that employee of insured consulting firm published for clients and prospective clients, and which bore insured's name, was distributed for "purpose of inducing the sale of goods, products or services" within definition of covered "advertisement" in business liability insurance policy's advertising injury coverage; subjective intent with newsletter was business development/networking/exposure, and reasonable person in insured's position would understand policy definition to include publication having subjective purpose of inducing sale of consulting services. Toffler Associates, Inc. v. Hartford Fire Ins. Co., 651 F. Supp. 2d 332 (E.D. Pa. 2009) (applying Pennsylvania law).

Insured, found liable to software company in federal copyright and trademark infringement suit, was engaged in "advertising" activity, within meaning of "advertising injury" provision of commercial general liability (CGL) insurance policy, with respect to software company's copyrights; insured solicited business by supplying sample software disks to interested buyers, and by this method, selling over 117,000 disks containing software company's copyrights within less than three years. Acuity v. Bagadia, 2008 WI 62, 750 N.W.2d 817 (Wis. 2008).

Insured engaged in "advertising" within the meaning of the advertising injury coverage of its comprehensive general liability (CGL) policies when it allegedly created promotional brochures for its thermostatic mixing valves and displayed products at a trade show; this involved the widespread announcement or distribution of promotional materials and called the attention of the public to the emergency shower systems by proclaiming their qualities in order to increase sales or arouse a desire to buy. Fireman's Fund Ins. Co. of Wis. v. Bradley Corp., 261 Wis. 2d 4, 2003 WI 33, 660 N.W.2d 666 (2003) (citing annotation).

Generally speaking, "advertising," in the advertising injury coverage of a liability insurance policy, refers to calling the public's attention to a product or business by proclaiming its qualities or advantages in order to increase sales or arouse a desire to buy or patronize. Acuity v. Bagadia, 2007 WI App 133, 734 N.W.2d 464 (Wis. Ct. App. 2007).

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§ 4. Widespread distribution of promotional material to the public

[Cumulative Supplement]

In the following cases, the courts held that in insurance policies that provide coverage for "advertising injury," the term "advertising activity" is construed as "widespread distribution of promotional material to the public." Cal

Zurich Ins. Co. v. Amcor Sunclipse North America, 241 F.3d 605, 57 U.S.P.Q.2d (BNA) 2012 (7th Cir. 2001) (applying California law) Murphy v. Federal Ins. Co., 2001 WL 902551 (N.D. Cal. 2001) (applying California law) ("advertising activity" expressly defined in the policy) Conn Qsp, Inc. v. Aetna Cas. and Sur. Co., 256 Conn. 343, 773 A.2d 906 (2001) (applying Connecticut law) Nationwide Mut. Ins. Co. v. Bartlett, 27 Conn. L. Rptr. 237, 2000 WL 767878 (Conn. Super. Ct. 2000) Ill Knoll Pharmaceutical Co. v. Automobile Ins. Co. of Hartford, 152 F. Supp. 2d 1026, R.I.C.O. Bus. Disp. Guide (CCH) ¶10171 (N.D. Ill. 2001) (applying Illinois law) Flodine v. State Farm Ins. Co., 2001 WL 204786 (N.D. Ill. 2001) (applying Illinois law) International Ins. Co. v. Florists' Mut. Ins. Co., 201 Ill. App. 3d 428, 147 Ill. Dec. 7, 559 N.E.2d 7 (1st Dist. 1990) Md State Farm Fire & Cas. Co. v. Housing Authority of Crisfield, 1995 WL 131295 (D. Md. 1995) (applying Maryland law) Monumental Life Ins. Co. v. U.S. Fidelity and Guar. Co., 94 Md. App. 505, 617 A.2d 1163 (1993) Mass Liberty Mutual Ins. Co. v. Metropolitan Life Ins. Co., 260 F.3d 54 (1st Cir. 2001) (applying Massachusetts law) Smartfoods, Inc. v. Northbrook Property and Cas. Co., 35 Mass. App. Ct. 239, 618 N.E.2d 1365 (1993) Mich GAF Sales & Service, Inc. v. Hastings Mut. Ins. Co., 224 Mich. App. 259, 568 N.W.2d 165 (1997) Tschimperle v. Aetna Cas. & Sur. Co., 529 N.W.2d 421 (Minn. Ct. App. 1995). Miss Delta Pride Catfish, Inc. v. Home Ins. Co., 697 So. 2d 400 (Miss. 1997). NH First Bank and Trust Co. v. New Hampshire Ins. Group, 124 N.H. 417, 469 A.2d 1367 (1983) ND Central Dakota Radiologists, P.C. v. Continental Cas. Co., 769 F. Supp. 323 (D.N.D. 1991) (apparently applying North Dakota law) Tex Bay Elec. Supply, Inc. v. Travelers Lloyds Ins. Co., 61 F. Supp. 2d 611 (S.D. Tex. 1999) (applying Texas law) ANR Production Co. v. American Guarantee & Liability Ins. Co., 981 S.W.2d 889 (Tex. App. Houston 1st Dist. 1998) Vt Select Designs, Ltd. v. Union Mut. Fire Ins. Co., 165 Vt. 69, 674 A.2d 798 (1996) Va Solers, Inc. v. Hartford Cas. Ins. Co., 146 F. Supp. 2d 785 (E.D. Va. 2001) (applying Virginia law) Wis Westowne Shoes, Inc. v. City Ins. Co., 82 F.3d 420 (7th Cir. 1996), reh'g and suggestion for reh'g en banc denied, (May 14, 1996) (applying Wisconsin law) The term "advertising activity," in an insurance policy providing "advertising injury" coverage, refers to the dissemination of prefabricated promotional material to the public, the court held in Zurich Ins. Co. v. Amcor Sunclipse North America, 241 F.3d 605, 57 U.S.P.Q.2d (BNA) 2012 (7th Cir. 2001) (applying California law). The court found that advertising is a subset of persuasion, and that when a company does not engage in any kind of promotion other than person–to–person persuasion, "advertising activity" does not occur. In addition, the court noted that although several federal cases applying California law had held to the contrary, until the Supreme Court of California should handle the subject, the court believed California would not depart from the normal understanding of "advertising" as "widespread distribution of promotional material to the public."

Comment

Although the circuit court in Zurich affirmed the district court's ruling that "advertising injury" did not occur, the court essentially reversed sub silentio the lower court's reasoning in Zurich Ins. Co. v. Sunclipse, Inc., 85 F. Supp. 2d 842 (N.D. Ill. 2000)

(applying California law), that in the context of "advertising injury" insurance coverage, one–on–one promotional contacts with customers was considered "advertising activity" since California appeared to have adopted a minority view that broadly defined the activity that constitutes "advertising." See § 5 for discussion of those cases.

In CGL insurance policies providing "advertising injury" coverage, the term "advertising activity" means "widespread distribution or announcements to the public," the court held in Monumental Life Ins. Co. v. U.S. Fidelity and Guar. Co., 94 Md. App. 505, 617 A.2d 1163 (1993). The court stated that advertising and solicitation are mutually exclusive, the difference being that advertising must be of a public nature. Consequently, individual, one–to–one solicitations, although they may be widespread, are clearly not "advertising" within the normal meaning of the word. In addition, where an excess insurance policy expressly defines "advertising activity" as activity done in any "advertisement, publicity article, broadcast or telecast," coverage is clearly provided only for "advertising activity" in its general "public" sense.

In Tschimperle v. Aetna Cas. & Sur. Co., 529 N.W.2d 421 (Minn. Ct. App. 1995), the court held that because it does not call the attention of the public to a product, an in–person sales talk is not "advertising activity" for purposes of a CGL "advertising offense" policy. The court noted that if "advertising activity" is not defined under an insurance policy, it must be given its plain, ordinary meaning of "to make public announcement of" or "to call the attention of the public to a product," and an in–person, one–on–one sales presentation does not fit that meaning.

Comment

The Minnesota Court of Appeal in Tschimperle essentially disagreed with an earlier federal district court case, John Deere Ins. Co. v. Shamrock Industries, Inc., 696 F. Supp. 434 (D. Minn. 1988), judgment aff'd on other grounds, 929 F.2d 413 (8th Cir. 1991) (applying Minnesota law), in which the court held that "advertising activity," in the context of insurance policies providing "advertising injury" coverage, constitutes the mailing of solicitation letters directly to one potential buyer. The court noted that if solicitation letters stating the beneficial features of a product are sent to 100 potential customers, instead of one, there would be no argument that they were not "advertising activity." Consequently, the court concluded that although activity directed at one customer seems to stretch the meaning of "advertising activity," Black's Law Dictionary's definition of "advertise" encompasses any form of solicitation, presumably including solicitation of one person.

The court in Solers, Inc. v. Hartford Cas. Ins. Co., 146 F. Supp. 2d 785 (E.D. Va. 2001) (applying Virginia law), held that the submission of proposals on a one–to–one basis does not rise to the level of "advertising activity" under "advertising injury" insurance coverage because advertising is the "widespread promotion of goods or services to the public" or to the company's customer base. The court ruled that the term "advertising" is not ambiguous and that generally a lay person would not read the term "advertising" as including an effort to sell, through a competitive bidding process, a product that is specifically tailored for a single customer to meet the needs of a specific project. The court further noted that although a proposal is promotional, it does not constitute "advertising activity," because a proposal to a particular company to do business together does not conform to ordinary notions of calling to the attention of the public the merits of a product. Consequently, proposals are more appropriately characterized as solicitations rather than advertisements.

CUMULATIVE SUPPLEMENT

Cases:

In order to be considered "advertising" within meaning of advertising injury coverage provision of commercial liability policy under Connecticut law, information must be publicly or widely disseminated. Nationwide Mut. Ins. Co. v. Mortensen, 222 F. Supp. 2d 173 (D. Conn. 2002).

Reference to "specific market segments" in definition of "advertisement" for purpose of advertising injury coverage of standard commercial general liability (CGL) was only a means of relieving insured of burden of showing that its advertising was directed to general public, as opposed to some defined market, and did not relieve insured of burden of demonstrating that it was engaged in relatively wide dissemination of its advertisements even if distribution was focused on recipients with particular

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 26 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) characteristics or interests. Rombe Corp. v. Allied Ins. Co., 128 Cal. App. 4th 482, 27 Cal. Rptr. 3d 99 (4th Dist. 2005), review denied, (July 20, 2005).

Under Maryland law, as predicted by federal district court, copyright- infringing manual that insured manufacturer posted on its website was not "advertising" within meaning of advertising injury clause in commercial general liability (CGL) insurance policy, just because it was widely distributed; manual was not prominently displayed on website, and its mere presence on website was not sufficient to convert it into advertising. Teletronics Intern., Inc. v. CNA Ins. Co., 302 F. Supp. 2d 442, 2004 WL 232745 (D. Md. 2004) (applying Maryland law).

Under Pennsylvania law, electronic-mail newsletter that employee of insured consulting firm distributed to clients, prospective clients and others fell short of "widespread public distribution" criterion of definition of covered "advertisement" in business liability insurance policy's advertising injury coverage; the e-mail newsletter went to approximately 300 persons in defense industry, intelligence community, and corporations who were known to employee or his colleagues or were associates of persons already on distribution list, so that distribution was not "widespread," and newsletter was not made available to public at large. Toffler Associates, Inc. v. Hartford Fire Ins. Co., 651 F. Supp. 2d 332 (E.D. Pa. 2009) (applying Pennsylvania law).

The court in Solers, Inc. v. Hartford Cas. Ins. Co., 36 Fed. Appx. 740 (4th Cir. 2002) (applying Virginia law), in affirming Solers, Inc. v. Hartford Cas. Ins. Co., 146 F. Supp. 2d 785 (E.D. Va. 2001), aff'd on other grounds, 36 Fed. Appx. 740 (4th Cir. 2002), this section, held that its inquiry into the plain meaning of "advertising" ends with the determination that "advertising" and the solicitation of bids that occurred in the case are mutually exclusive.

Caution

The court in Solers, Inc. v. Hartford Cas. Ins. Co., 36 Fed. Appx. 740 (4th Cir. 2002), in affirming Solers, Inc. v. Hartford Cas. Ins. Co., 146 F. Supp. 2d 785 (E.D. Va. 2001), aff'd on other grounds, 36 Fed. Appx. 740 (4th Cir. 2002), this section, did not necessarily agree with the district court's narrow definition of the term "advertising" to mean "the widespread promotion of goods or services to the public at large, or to the company's customer base." Indeed, the term "advertising" might not exclude activity, even directed towards one customer, which involves the unsolicited dissemination of information giving notice of the general nature of one's business and the services or products available for hire or sale. However, the court declined to reach that issue.

Under the broad definition of "advertising," for advertising injury coverage of a liability insurance policy, insured, which was in the business of selling to resellers, advertised its product by sending software samples to potential customers. Acuity v. Bagadia, 2007 WI App 133, 734 N.W.2d 464 (Wis. Ct. App. 2007).

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§ 5. One–on–one or targeted group solicitations

[Cumulative Supplement]

In the following cases, the courts held that in insurance policies that provide coverage for "advertising injury," the term "advertising activity" can constitute one–on–one or targeted group solicitations.

See OMI Holdings, Inc. v. Chubb Ins. Co. of Canada, 1997 WL 30861 (D. Kan. 1997) (applying Canadian law), in which the court held that under "advertising injury" insurance coverage, the plain, ordinary meaning of the term "advertising activity" is not narrowly confined to widespread dissemination through a public medium and is not inconsistent with the person–to–person or word–of–mouth communication, where the speaker's intent is to call attention to a given product. The court stated that if person–to–person contacts are the only effective form of "advertisement" available in a certain type of market, then the broader definition of "advertising activity" applies.

In Tri–State Ins. Co. v. B & L Products, Inc., 61 Ark. App. 78, 964 S.W.2d 402 (1998), the court construed the phrase "advertising activity," in the context of a CGL insurance policy providing "advertising injury" coverage, to include product promotion to a small, targeted market. The court concluded that because many courts view the undefined term "advertising activity" differently, it is ambiguous and should be construed against the policy drafter. In addition, the court noted that construing the term "advertising activity" to mean the "widespread distribution of promotional material" to the public would mean that an insured could never recover under the "advertising injury" provision of the insurance policy if its product market is a relatively small, target group, and not the public at large.

The term "advertising activity" as used in a CGL insurance policy providing "advertising injury" coverage is interpreted broadly to include one–on–one solicitations when the term is within the context of the insuring provisions and not within an exclusion, the court held in American States Ins. Co. v. Canyon Creek, 786 F. Supp. 821 (N.D. Cal. 1991) (applying California law). The court noted that the broader definition of "advertising activity," as adopted in Nichols and Black's Law Dictionary, is "to advise, announce, apprise, commend, give notice of, inform, make known, publish" or to "call to the public attention by any means whatsoever." Consequently, "advertising activity" does constitute placement of advertisements in targeted newspapers and periodicals as well as distribution of promotional materials to individual customers.

In New Hampshire Ins. Co. v. Foxfire, Inc., 820 F. Supp. 489 (N.D. Cal. 1993) (applying California law), the court construed that in a CGL insurance policy providing "advertising injury" coverage, the phrase "advertising activity" includes the mailing of a solicitation letter to a targeted audience. The court noted that where the solicitation is mailed to a small audience, but one that constitutes the entire customer base, a reasonable interpretation of an "advertising injury" policy compels the conclusion that such a mailing is a covered "advertising activity."

Where the advertising audience is small but nonetheless constitutes all or a significant portion of the insured's client base, the "advertising activity" element of "advertising injury" insurance coverage is satisfied, the court held in New Hampshire Ins. Co. v. R.L. Chaides Const. Co., Inc., 847 F. Supp. 1452, 30 U.S.P.Q.2d (BNA) 1474 (N.D. Cal. 1994) (applying California law). The court noted that when the solicitation of business is directed on a continuous basis to a targeted number of customers, not just one or a few, such conduct rises to the level of "advertising activity."

The court in Copart, Inc. v. Travelers Ins. Co., 11 Fed. Appx. 815 (9th Cir. 2001) (applying California law), held that the definition of "advertising activity" is susceptible to two or more reasonable constructions, including "widespread distribution" or one–on–one or targeted group solicitations. The court noted that both the California Supreme Court and the courts of appeal had acknowledged that there are two possible definitions of "advertising" but had refused to decide between them. Accordingly, construing the ambiguity in the term so as to protect the insured's reasonable expectation of coverage, "advertising activities" could mean one–on–one or targeted group solicitations.

Caution

This view of "advertising activity" was narrowed somewhat in a previous state decision, Peerless Lighting Corp. v. American Motorists Ins. Co., 82 Cal. App. 4th 995, 98 Cal. Rptr. 2d 753 (1st Dist. 2000), review denied, (Oct. 25, 2000), in which the California Court of Appeal held that in this specific situation the term "advertising activity," as used in a CGL policy providing coverage for "advertising injury," does not include an effort to sell, through a competitive bidding process, a product that is specifically manufactured for a single customer to meet the needs of a specific project. In coming to its decision, the court noted that a layperson would not read the term "advertising" as including solicitation of a single customer in a competitive bid, and that a definition that would stretch "advertising activity" to include solicitation of a single customer in such a manner is not within the insured's objectively reasonable expectations. The court however did not rule on whether California accepted the broad or narrow definition of the term "advertising activity." See § 4 for discussion of the narrow definition.

The court in Elan Pharmaceutical Research Corp. v. Employers Ins. of Wausau, 144 F.3d 1372 (11th Cir. 1998) (applying Georgia law), held that the dissemination of clinical studies to a targeted group of health professionals, in order to develop a product market, falls within the definition of "advertising activity" in the context of "advertising injury" insurance. The court

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 28 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) ruled that the commercialization of clinical studies amounts to "advertising activity" when the information is distributed outside the insured's own corporate structure in a number of fora with an eye toward developing product interest. In addition, it does not matter that the information is directed to a targeted group of doctors, hospitals, and other health professionals through the trade press rather than at actual consumers.

As construed in insurance policies providing "advertising injury" coverage, direct solicitation of business customers on an one– to–one basis is "advertising activity," the court held in Attorneys' Title Guar. Fund, Inc. v. Maryland Cas. Co., 1991 WL 171339 (N.D. Ill. 1991) (applying Illinois law). The court noted that if an insurer wants to limit "advertising activity" to widespread dissemination of materials, it should limit the term in the policy. If an insurer does not limit the term, then the definition of "advertising activity" is ambiguous and must be construed in favor of the insured.

In First State Ins. Co. v. Alpha Delta Phi Fraternity, 39 U.S.P.Q.2d (BNA) 1905, 1995 WL 901452 (Ill. App. Ct. 1st Dist. 1995), the court held that the term "advertising activity," as construed in a CGL insurance policy providing "advertising injury" coverage, does include the broad definition of direct solicitation to targeted groups and individuals. The court noted that because underlying complaints and insurance policies are to be liberally construed in favor of the insured, the narrow interpretation of the "advertising activity" to mean the "widespread distribution of promotional material" to the public improperly excludes many activities ordinarily considered advertising.

The court in American Safety & Risk Services, Inc. v. Legion Indem. Co., 153 F. Supp. 2d 869 (E.D. La. 2001) (applying Louisiana law), construed the term "advertising activity" in the context of a CGL insurance policy providing "advertising injury" coverage and held that the definition is broader than "the public dissemination of prefabricated promotional material." The court stated that the common–sense understanding of the term "advertising activity" certainly includes advertisements issued directly to members by direct mail and facsimile by use of a confidential renewal list. Moreover, if the phrase "advertising activity" is undefined within the policy, the phrase is ambiguous and should be strictly construed against the insurer in favor of coverage for the insured.

The direct distribution of a product to a targeted customer base is considered "advertising activity" as that term is construed in a CGL insurance policy providing "advertising injury" coverage, the court held in Farmington Cas. Co. v. Cyberlogic Technologies, Inc., 996 F. Supp. 695 (E.D. Mich. 1998) (applying Michigan law). The court noted that where "advertising activity" reaches virtually every potential customer through means of targeted distribution, the broad definition of "advertising activity" applies. To hold that such activities cannot constitute advertising because they are not directed at the "public at large" would be to hold that companies with small but well–defined markets cannot, as a matter of law, engage in "advertising activities." The court found that such a conclusion does not comport with the common understanding and usage of the term "advertising activity," nor with basic notions of fairness.

In Amway Distributors Benefits Ass'n v. Federal Ins. Co., 990 F. Supp. 936 (W.D. Mich. 1997) (applying Michigan law), the court held that in "advertising injury" insurance policies, the term "advertising activity" is ambiguous, so the definition can be reasonably interpreted to encompass direct solicitation of small groups or individuals. The court noted that a company's peculiar use of direct solicitation to distributors and not to the public at large in order to market, distribute, and sell products to the consumer is considered "advertising activity."

The court in Berman v. General Acc. Ins. Co. of America, 176 Misc. 2d 13, 671 N.Y.S.2d 619 (Sup 1998), held that when the undefined term "advertising activity" is used within the context of the insuring provisions and not within an exclusion of a policy providing "advertising injury" coverage, it should be broadly interpreted, with any doubts as to coverage resolved in favor of the insured. Consequently, interpreting the term broadly as including any written statement contained in a letter made by the seller in any manner in connection with the solicitation of business, sending a form letter soliciting the continuation of business directly to clients is "advertising activity."

CUMULATIVE SUPPLEMENT

Cases:

Under California law, "advertising injury," as used in commercial general liability (CGL) policy, requires widespread promotion to public; insured's allegedly wrongful one-on-one solicitation of a few customers does not give rise to insurer's duty to defend underlying lawsuit. Hayward v. Centennial Ins. Co., 430 F.3d 989 (9th Cir. 2005) (applying California law).

Assuming insured's taking trade secrets in form of competitor's beauty salon customer list was an offense that could inflict advertising injury, "advertising injury," as used in commercial general liability (CGL) insurance policy, required widespread promotion to the public, such that one- on-one solicitation of a few customers, in telephone calls and mailers advising competitor's customers of new location and of insured's lower prices, did not give rise to insurer's duty to defend competitor's underlying lawsuit. Hameid v. National Fire Ins. of Hartford, 1 Cal. Rptr. 3d 401, 71 P.3d 761 (Cal. 2003), time for grant or denial of reh'g extended to, 10-01-03 (July 21, 2003).

Meeting in which insured employment agency announced it was ending its franchise relationship with nationwide company and solicited attendees' business as independent agency was not "advertising" within meaning of advertising injury coverage under standard commercial general liability (CGL) policy, which required widespread broadcast; thus, meeting did not trigger insurer's duty to defend nationwide company's suit against insured for breach of contract, misappropriation of trade secrets and unfair competition. Rombe Corp. v. Allied Ins. Co., 128 Cal. App. 4th 482, 27 Cal. Rptr. 3d 99 (4th Dist. 2005), review denied, (July 20, 2005).

Advertising injury provisions of business liability insurance policy, which required insurer to defend insured in actions based on oral or written statements disparaging an organization's services, did not require the statements to be directed to the public at large; it was sufficient if the statements were directed to an organization's customers. Pekin Ins. Co. v. Phelan, 343 Ill. App. 3d 1216, 278 Ill. Dec. 805, 799 N.E.2d 523 (3d Dist. 2003).

Under Wisconsin law, furniture designer's allegations that insured, a furniture manufacturer, displayed and misappropriated the designer's furniture design did not fall within an enumerated advertising injury offense in a general commercial liability policy covering "[u]nauthorized taking or use of any advertising idea, material, slogan, style or title of others," so as to trigger insurer's duty to defend; the designed product itself did not constitute "advertising," and none of the claims in the underlying action related in any way to advertising of the product. Krueger Intern., Inc. v. Federal Ins. Co., 647 F. Supp. 2d 1024 (E.D. Wis. 2009) (applying Wisconsin law).

Insured, found liable to software company in federal copyright and trademark infringement suit, was engaged in "advertising" activity, within meaning of "advertising injury" provision of commercial general liability (CGL) insurance policy, with respect to software company's trademarks; insured placed in trade magazines advertisements showing software company's trademarked name. Acuity v. Bagadia, 2008 WI 62, 750 N.W.2d 817 (Wis. 2008).

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[END OF SUPPLEMENT]

III. WHAT CONSTITUTES "ADVERTISING INJURY"

§ 6[a] Libel, slander, or disparagement—"Advertising injury" found

[Cumulative Supplement]

The courts in the following cases held that coverage existed under an insurance policy, because the underlying action alleged the enumerated "advertising injury" offense of "libel, slander or disparagement."

Where the insured wrongfully asserted that a competitor's product infringed its patents, it clearly defamed the competitor and disparaged his product, so the underlying action fell within the "libel, slander or disparagement" "advertising injury" clause of the CGL insurance policies, the court held in Amerisure Ins. Co. v. Laserage Technology Corp., 2 F. Supp. 2d 296 (W.D. N.Y. 1998) (applying Illinois law). The underlying complaint alleged that the insured made misrepresentations to the competitor's customers that its patents were infringed and that the customers acted at their own risk in purchasing products from

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 30 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) the competitor. The court found that the underlying complaint did not need to allege the offense of commercial disparagement under Illinois law, and the mere factual allegation that the competitor was using stolen technology clearly fell within the policies' definition of "advertising injury." Thus, the court found that the insurance policies provided coverage for the injury and denied summary judgment on that basis.

The allegations in the underlying complaint that the insured falsely advertised that it had many years of experience in the emissions control field and that its competitor was a newcomer in the business constituted the "advertising injury" of "libel, slander or disparagement" under the CGL insurance policy, the court held in Sun Elec. Corp. v. St. Paul Fire and Marine Ins. Co., 1995 WL 270230 (N.D. Ill. 1995) (applying Illinois law). The court noted that even though the underlying complaint did not plead the tort of commercial disparagement, the alleged facts fit into the covered "advertising injury" of belittlement, which the court found was the equivalent of the tort of trade libel or commercial disparagement. In addition, the court noted that most Illinois courts were aware that an adversary may not artfully plead belittlement or be interested in triggering the insured's coverage, so the pleadings should be interpreted in a common–sense manner. Accordingly, because a portion of the allegations, construed liberally and read as a whole, fell within the covered "libel, slander or disparagement" provisions of the "advertising injury" policies, the insurance company had a duty to defend the insureds.

The court held in Winklevoss Consultants, Inc. v. Federal Ins. Co., 11 F. Supp. 2d 995 (N.D. Ill. 1998) (applying Illinois law), that the allegations that the insured made false advertised statements about a competitor's software in an attempt to steer customers away from the competitor fell within the insurance policies' coverage of "libel, slander or disparagement" "advertising injury." The court stated that the underlying claims, which stated that the insured falsely advertised in its promotional materials negative comparative statements about a competitor's goods, causing the competitor to lose sales, satisfied the laymen's definition of "disparage." It did not matter that the allegations might not have met the technical requisites for stating a commercial disparagement claim. Consequently, the court ruled that the second amended substituted complaint triggered defense obligations under both the CGL and umbrella policies' provisions for "advertising injury."

In Knoll Pharmaceutical Co. v. Automobile Ins. Co. of Hartford, 152 F. Supp. 2d 1026, R.I.C.O. Bus. Disp. Guide (CCH) ¶10171 (N.D. Ill. 2001) (applying Illinois law), the court held that in a CGL insurance policy expressly providing "advertising injury" coverage of "slander, libel or disparagement," such "advertising injury" had occurred even though the underlying allegations did not claim recovery for this offense, since the facts alleged that the insured disparaged other companies' products through its advertisements that its drug was superior to all other drugs that treated thyroid problems. The court noted that the advertisements were disparaging in that they criticized the quality of other companies' products as being inferior. Furthermore, allegations that the insured published articles discounting the research techniques of a scientist employed to determine whether its thyroid drug had bioequivalents constituted defamation, as such statements surely lowered the scientist's reputation in the eyes of the scientific community. Consequently, the court ruled that the allegations corresponded to the covered "advertising injury" offense of "libel, slander or disparagement," requiring a duty to defend under the insurance policy.

Under a CGL insurance policy providing "advertising injury" coverage, the "advertising injury" of "libel, slander or disparagement" was found when the insured made misrepresentations and disparagements about a competitor's products and services when contacting and soliciting the competitor's customers, the court held in Guardian Trust Co. v. American States Ins. Co., 1996 WL 509638 (D. Kan. 1996) (applying Kansas law). The court noted that the underlying complaint showed there was, at least, a potential that the insured's allegations gave rise to an "advertising injury" when it alleged publication of material that slandered or disparaged the competitor's products or services related to the servicing and handling of trust and agency accounts. Accordingly, the court ruled that the insurance company had a duty to defend the insured under the policy.

The court held in American Safety & Risk Services, Inc. v. Legion Indem. Co., 153 F. Supp. 2d 869 (E.D. La. 2001) (applying Louisiana law), that the underlying allegation by an insurance fund stating that the insured had falsely disseminated information that the fund was no longer in business and no longer writing certain policies appeared to fall within the CGL insurance policy enumeration of "libel, slander or disparagement" "advertising injury." The court disagreed with the insurance company's argument that the underlying allegation was a disparagement of the fund, rather than of its "goods, products or services," as defined in the policy. The court stated that because an insurance company's product was its policies, the suggestion that an insurance company no longer sells policies or certain types of policies was fairly viewed as disparaging its product.

Consequently, the court found that the insurance company had a duty to defend the insured under the "advertising injury" insurance provision.

In Home Ins. Co. v. Waycrosse, Inc., 990 F. Supp. 720 (D. Minn. 1996), aff'd without opinion, 131 F.3d 143 (8th Cir. 1997) (applying Minnesota law), the court held that there was coverage under the "advertising injury" insurance policies, because the offense of "libel, slander or disparagement" was found when the underlying allegation accused the insured of making defamatory statements about a competitor. The court also stated that the insured's fraudulent misrepresentations to customers about the competitor's security device arguably "disparaged a person's or organization's goods, products or services" even though the petition did not identify whether the subject device was among the competitor's "goods, products or services." Thus, because the allegations were within the insurance policies' definition of "advertising injury," the court declared that the insurance company had a duty to defend the insured in the underlying action.

In the underlying federal suit, the pleading alleged sufficient facts with respect to product disparagement to come within the libel insurance policy's coverage for the "advertising injury" of "libel, slander or disparagement," the court held in Ruder & Finn Inc. v. Seaboard Sur. Co., 52 N.Y.2d 663, 439 N.Y.S.2d 858, 422 N.E.2d 518, 7 Media L. Rep. (BNA) 1833 (1981), reargument denied, 54 N.Y.2d 753, 443 N.Y.S.2d 1031, 426 N.E.2d 756 (1981). The facts showed that although the complaint's first cause of action was couched in terms of restraint of trade, it went on to allege that the insured was engaged in "false disparagement" of the manufacturer's aerosol products in an effort to coerce the manufacturer into retaining the insured's firm to do public relations work. The manufacturer further claimed that as a result of the alleged scheme it had suffered grievous financial losses. The court found that these facts, although deficient to sustain the federal antitrust claim, painted a picture that, had it been established, conceivably could have subjected the insured and its codefendants to liability for commercial disparagement. Consequently, although the libel insurance policy defined "advertising injury" in terms of defamation rather than disparagement, the court affirmed the lower court's ruling that the underlying tort was within the scope of the insuring clause's protection.

Because the fourth counterclaim in the underlying action alleged that the insured's advertisement misrepresented the nature, characteristics, and qualities of a competitor's goods, it fit the expressly enumerated offense of "libel, slander or disparagement" in an insurance policy providing "advertising injury" coverage, the court held in PCB Piezotronics, Inc. v. Kistler Instrument Corp., 1997 WL 800874 (W.D. N.Y. 1997), order amended (W.D. N.Y. Apr. 22, 1998), related reference, 53 U.S.P.Q.2d (BNA) 1152, 1999 WL 1067569 (W.D. N.Y. 1999), (applying New York law). Contrary to the insurance company's argument, the court found that there was absolutely no evidence supporting the position that the word "disparage" in the policy was intended to be an exclusive reference to the common–law tort of product disparagement. Reading the policy as a whole, it was clear that the parties did not intend that "disparage" would have a specialized legal meaning and instead intended that "disparage" would have its ordinary dictionary meaning—"to speak of as unimportant or small," to "belittle," "to reduce in esteem or rank." Given its ordinary meaning, "disparage" therefore clearly encompassed the allegations made in support of the fourth counterclaim. Accordingly, the court found that the insurance company had a duty to defend the insured under the "advertising injury" provision of the policy.

The court held in DecisionOne Corp. v. ITT Hartford Ins. Group, 942 F. Supp. 1038 (E.D. Pa. 1996) (applying Pennsylvania law), that the underlying Lanham Act counterclaim, which stated that the insured misrepresented to customers that it made its own maintenance software, so that a competitor's customers switched service providers, stated a claim of "libel, slander or disparagement" "advertising injury" under the CGL insurance policy. The court discounted the insurance company's argument that the gravamen of the underlying counterclaim was copyright infringement and theft of trade secrets, which were not covered under the insurance policy. Instead, the court found that the Lanham Act counterclaim, which alleged that the insured falsely promoted or advertised its maintenance of a competitor's library equipment, was not limited to and did not even refer to copyright infringement or trade secrets. Because the underlying counterclaim arose out of an "advertising injury" enumerated in the CGL policy, specifically, the "libel, slander or disparagement" offense, the insurance company's motion for judgment on the pleadings was denied.

In Atlantic Lloyd's Ins. Co. of Texas v. Susman Godfrey, L.L.P., 982 S.W.2d 472 (Tex. App. Dallas 1998), review denied, (June 10, 1999), the court held that in the underlying action, the insured's letter to a former patient of a medical doctor informing the patient of a previous lawsuit filed against the doctor, and soliciting possible legal business, constituted the "advertising

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 32 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) injury" of "libel, slander or disparagement," under an insurance policy providing "advertising injury" coverage. The insurance policy defined the term "advertising injury" as an injury arising from a written publication that slandered a person, and the underlying action asserted a defamation cause of action. The court found that the crux of the doctor's lawsuit was that the insured attempted to influence a former patient to sue him because of his allegedly deficient medical work. The letter characterized the doctor's work as "sloppy, callous, unacceptable, impersonal, and indifferent" and stated that his conduct was "so outrageous" that previous litigants obtained a multimillion dollar settlement. Clearly, the purpose of the letter was to cast the doctor in an unfavorable light to encourage a lawsuit against him. Thus, the court concluded that, given the insurance policy's plain meaning, it was clear that the underlying action fell within the term "advertising injury" provided by the policy. Accordingly, the court affirmed the lower court's ruling that the insurance company had a duty to defend the insured in the underlying lawsuit.

CUMULATIVE SUPPLEMENT

Cases:

Insurer had duty under toothbrush manufacturer's commercial general liability policies to indemnify manufacturer for amount of settlement with competitor in false advertising dispute, where policies' definition of "advertising injury" encompassed product disparagement, and competitor's Lanham Act complaint against manufacturer alleged that manufacturer's advertisements made false and misleading representations concerning competitor's products. Lanham Trade-Mark Act, § 43, 15 U.S.C.A. § 1125. Philips Oral Healthcare Inc. v. Federal Insurance Co., 83 Fed. Appx. 963 (9th Cir. 2003).

Under Florida law, personal and advertising injury clause of liability insurance policy, providing coverage for damages arising out of the publication of material that disparaged goods, products, or services, would cover claims against insured for material false representations of fact in commercial advertisements which deceived or were likely to deceive purchasers, absent application of any exclusions; even though false advertising at issue did not involve mention of the name of the plaintiff that brought the false advertising lawsuit, the policy was ambiguous as to whether insured had to mention the name of the plaintiff to give rise to coverage, and ambiguity was required to be resolved in favor of insured. Vector Products, Inc. v. Hartford Fire Ins. Co., 397 F.3d 1316 (11th Cir. 2005) (applying Florida law).

Underlying lawsuit against insured hair salon, in which another hair salon alleged the insured made false statements to lure away the other salon's customers, involved allegations of disparagement, for purposes of advertising injury provisions of business liability insurance policy, which required insurer to defend insured in actions based on oral or written statements disparaging an organization's services; insured allegedly told other salon's customers that other salon was closing or moving, such statements were misleading, and they tended to influence the consuming public not to buy other salon's services. Pekin Ins. Co. v. Phelan, 343 Ill. App. 3d 1216, 278 Ill. Dec. 805, 799 N.E.2d 523 (3d Dist. 2003), appeal denied, 207 Ill. 2d 607, 283 Ill. Dec. 135, 807 N.E.2d 976 (2004).

Commercial insurer owed manufacturer of paper trimming products duty to defend false advertising suit brought by manufacturer's competitor under Wisconsin law, since underlying complaint clearly alleged "advertising injury offense"; complaint averred that manufacturer's advertisements drew comparison between its products and competitor's stainless steel products and asserted that manufacturer's products were superior because they contained titanium. Acme United Corp. v. St. Paul Fire & Marine Ins. Co., 214 Fed. Appx. 596 (7th Cir. 2007) (applying Wisconsin law).

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[END OF SUPPLEMENT]

§ 6[b] Libel, slander, or disparagement—"Advertising injury" not found

[Cumulative Supplement]

The courts in the following cases held that coverage did not exist under the insurance policy, because the underlying action did not allege the enumerated "advertising injury" offense of "libel, slander or disparagement."

In the underlying personal injury action relating to a hotel fire, the insureds' advertising acts of disclosing misleading and untrue information as to the ownership and control of their hotel in several business records and loan applications did not create a cause of action for "libel, slander or disparagement" under the "advertising injury" provisions of the CGL insurance policies, the court held in In re San Juan Dupont Plaza Hotel Fire Litigation, 802 F. Supp. 624 (D.P.R. 1992), aff'd on other grounds, 989 F.2d 36 (1st Cir. 1993) (applying California law). The court noted that in the context of the case, for there to be a "libel, slander or disparagement" "advertising injury," the communications had to have discredited a corporation's business reputation and caused loss to the corporation in the conduct of its business. Using this rationale, the insureds attempted to equate the statements they filed in credit applications and other financial transactions, in which they falsely represented their ownership of the hotel, as acts that impugned the basic integrity or creditworthiness of their business. The court, however, found that the alleged promotional material were aimed at bolstering the business of the hotel and its interrelated corporate entities, even though its contents might have been untrue or misleading. The court further stated that although the promotional materials might have been used by the underlying personal injury plaintiffs in their attempt to pierce the corporate veil of the insured, there was no evidence to indicate that the business reputations of the insureds were adversely affected therefrom. Because the offense of "libel, slander or disparagement" was not found, the court dismissed the "advertising injuries" claims raised by the insureds.

In Microtec Research, Inc. v. Nationwide Mut. Ins. Co., 40 F.3d 968, 32 U.S.P.Q.2d (BNA) 1823 (9th Cir. 1994) (applying California law), the court held that the underlying complaint, which alleged that the insured passed off computer code created by a competitor, did not constitute the "advertising injury" of "libel, slander or disparagement," as enumerated in the insurance policies. The court found that the facts of the case showed that the complaint did not allege an "advertising injury" of defamation, which could have been covered under the insured's two insurance policies. Instead, the complaint stated that the insured passed off the competitor's computer code as its own, not that the insured made disparaging statements about the competitor in its advertisements. The court also rejected the insured's argument that the complaint alleged "libel, slander or disparagement," when it stated that the insured's passing off of the compilers as original would mislead customers into thinking that the insured had as much or more technical skill than the competitor, since there was no claim that the insured falsely advertised that the competitor's code had bugs or was slower than the insured's code. The court did note that the insured advertised that its code was faster than the competitor's code, but in the underlying action the competitor carefully avoided suing the insured for damages arising out of those advertisements. Because the competitor elected not to make the claim of possible disparagement in the advertisements, there was no potential liability based on "advertising injury." Accordingly, the court affirmed the lower court's ruling that the insurance company did not owe the insured a duty to defend against the underlying suit.

In the underlying action, which stated that the insured sold its own product instead of the supplier's products, because the insured failed to point to evidence that raised the inference of false or misleading statements, there was no "advertising injury" offense of "libel, slander or disparagement" as enumerated in the insurance policy, the court held in Zurich Ins. Co. v. Sunclipse, Inc., 85 F. Supp. 2d 842 (N.D. Ill. 2000) (applying California law). In the underlying action, a surface coatings supplier sought damages from the insured resulting from the alleged misappropriation of proprietary information concerning the manufacture of conductive surface coating for corrugated boxes. The supplier claimed that the insured's manufacture and sale of its own coating violated the terms of an agreement by which the supplier licensed its coating process to the insured. The court found that although such allegations raised an inference of unfair treatment of a product under the terms of the license agreement, they did not raise an inference that the insured used false and misleading statements in its advertisements. Indeed, the evidence showed that rather than disparaging the supplier's product, the insured simply replaced customer orders for the supplier's products with its own products. Because the underlying action was not an offense of "libel, slander or disparagement," the court declared that the insurance company had no duty to defend or indemnify the insured under the "advertising injury" insurance policy.

The court held in Amerisure Ins. Co. v. Gold Coast Marine Distributors, Inc., 771 So. 2d 579 (Fla. Dist. Ct. App. 4th Dist. 2000), that there was no "advertising injury" of "libel, slander or disparagement" under the CGL insurance policy, because the underlying complaints' use of the word "defamation," and the allegation that the insureds communicated to a competitor's customers that the competitor's distributorship contract was being terminated, were not facts that related to slander or libel. The facts showed that the competitor's underlying complaints alleged the following: breach of contract and a breach of covenant of good faith and fair dealing; tortious interference with a contract not terminable at will; tortious interference with an advantageous

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 34 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) business relationship or with a contract terminable at will; and violation of the Florida restraint of trade laws. There were no allegations in any of the competitor's underlying complaints that the insureds made a false statement to a third party that libeled, slandered, or injured the competitor's business reputation. Thus, the court found that the buzz words of "defamation" and "damage to reputation" used by the competitor in its complaints were merely conclusory. Consequently, because the underlying complaints failed to allege any facts that created a duty to defend under the "advertising injury" provision of the CGL insurance policy, the court reversed the lower court's ruling in favor of the insureds.

In Heritage Mut. Ins. Co. v. Advanced Polymer Technology, Inc., 97 F. Supp. 2d 913 (S.D. Ind. 2000) (applying Indiana law), the court held that although the underlying action complained that the insured improperly made off with the competitor's product, it did not claim that the insured said anything negative about the competitor's product, so there was no coverage for the "libel, slander or disparagement" offense covered by the "advertising injury" provision of the insurance policy. First, the facts showed that the competitor never alleged an essential component of a disparagement claim, namely, that the insured made a false statement about the competitor's product in the course of advertising its allegedly infringing product. As the court noted, an insured's lack of any direct reference to a competitor's goods or products has repeatedly compelled courts to find that the underlying plaintiff has not alleged an "advertising injury" under the "libel, slander or disparagement" offense. Second, the court did not agree with the insured's argument that the underlying complaint stated a reasonable claim of implied disparagement. According to the court, the phrase "patent pending" in the insured's advertisements signified nothing about the quality or state of the competitor's product, as the phrase meant exactly what it said—a patent was pending. Accordingly, because the underlying complaint definitively failed to contain allegations that the insured committed an offense of "libel, slander or disparagement," the court declared that the insurance company did not have a duty to defend the insured under the "advertising injury" provision of the CGL insurance policy.

Where the insured sold its business and sent a going–out–of–business letter to former customers, the new business owner's underlying claim for tortious interference with prospective business relations did not fall within the "libel, slander or disparagement" category enumerated for "advertising injury" insurance, the court held in Virtual Home Care, Inc. v. St. Paul Fire & Marine Ins. Co., 2001 WL 1002639 (Minn. Ct. App. 2001), review denied, (Nov. 26, 2001). The court found that the going– out–of–business letter, which stated that the insured's company was going out of business and closing its Mankato office, did not fall within the "advertising injury" category of "making known to any person or organization written or spoken material that belittles the products, work or completed work of others." In fact, the letter did not refer to the new business owner at all, either positively or negatively. In addition, the new business owner was not belittled by the letter, which was substantially accurate. Thus, the court affirmed the lower court's summary judgment for the insurance company on the ground that the "advertising injury" offense of "libel, slander or disparagement" did not cover the claims made in the underlying action.

The court held in Mulberry Square Productions, Inc. v. State Farm Fire and Cas. Co., 101 F.3d 414 (5th Cir. 1996) (applying Mississippi law), that film companies' underlying counterclaims for breach of contract, tortious interference with contract, and tortious interference with prospective economic advantage, resulting from a movie deal that went bad, did not allege or even a hint that the insured authored some oral or written publication that amounted to trade libel or product disparagement and hence would not be covered under the "advertising injury" provision of the insured's CGL insurance policy. The court found that the film companies' alleged "advertising injury" was caused by the insured's alleged willful and malicious breach of the agreement between the parties when the insured halted production of the film. In addition, the court refused to accept evidence that demonstrated that the tort counterclaims were based on the factual premise that the insured had publicly disseminated disparaging remarks, which accused the film companies of acting unlawfully in their dealings with the insured, since this evidence did not appear in the counterclaims but in the film companies' declarations. Thus, the court affirmed the lower court's ruling that under the "advertising injury" offense of "libel, slander or disparagement" in the CGL insurance policy, the insurance company had no duty to defend the insured for counterclaims that arose from a breach of contractual duties.

In Reliance Ins. Co. v. Shenandoah South, Inc., 81 F.3d 789 (8th Cir. 1996) (applying Missouri law), the court held that the insured's negligent mismanagement of a popular singer's theater might have damaged the singer's reputation and good will, but it clearly did not libel or slander the singer or disparage his services, so the underlying action by the singer was not covered by the "libel, slander or disparagement" offense enumerated in the "advertising injury" insurance policy. The court rejected the

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 35 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) insured's argument that the singer's underlying allegations of damage to reputation, contained within the claim for negligent mismanagement, were sufficient to trigger a duty to defend under the insurance policy. The court found that allegations in the singer's complaint, that the insured turned away inquiries from tour operators by falsely claiming they had not yet received the singer's schedule, did not imply the singer's fraud, want of integrity, misconduct, or lack of fitness to perform the duties as an entertainer. Instead, the statement merely suggested that the singer's performance schedule was not yet available, and even if falsely given, the statement did not as a matter of law libel or slander the singer or disparage his services. Consequently, the court affirmed the lower court's declaration that the CGL insurance policy providing "advertising injury" coverage did not provide coverage for the underlying action under the "libel, slander or disparagement" offense.

The court held in Motorists Mut. Ins. Co. v. Natl. Dairy Herd Improvement Assn., Inc., 141 Ohio App. 3d 269, 750 N.E.2d 1169 (10th Dist. Franklin County 2001), that the competitors' underlying action against the insured, which claimed that the insured violated federal and state antitrust laws and interfered with their prospective business advantage, did not fall within the CGL insurance policy's definition of "advertising injury" because there was no allegation of "libel, slander or disparagement." The court stated that although the underlying complaint clearly stated causes of action for antitrust and monopoly, it did not potentially or arguably state a claim for defamation or disparagement. For example, the complaint, a detailed document containing more than 80 paragraphs of allegations, did not contain a single allegation that the insured published a false statement about the competitors to a third party. In addition, the competitors' affidavit never alleged that the insured made any false or disparaging statements, and although the competitors' deposition testimony made vague reference to comments by the insured, it did not identify specific false statements of fact published by the insured to a third party.

The underlying action against the insureds for malicious interference with a competitor's business relationship did not fall within the definition of "advertising injury" in the insurance policy, because the competitor did not plead a cause of action concerning "libel, slander, or disparagement," the court held in Westfield Companies v. Pins & Needles, Inc., 1996 WL 575977 (Ohio Ct. App. 5th Dist. Tuscarawas County 1996). The facts showed that not only did the competitor not plead a cause of action concerning "libel, slander, or disparagement," but she also stated in her deposition that the insureds did not make any statements disparaging her business goods, products, or services. In addition, the court noted that although in the admissions the competitor asserted that her claims against the insureds arose out of statements that allegedly disparaged her business goods, products, and services, she later withdrew this "admission" in her deposition testimony, in response to specific questioning. Consequently, because the malicious interference claim against the insureds was not based on "libel, slander, or disparagement," it was not an "advertising injury" as defined in the policy, and the court affirmed the lower court's summary judgment for the insurance company.

CUMULATIVE SUPPLEMENT

Cases:

Competitor's action against garage door opener manufacturer, alleging that manufacturer falsely advertised its openers as compatible with competitor's "rolling code" technology, was not suit for disparagement that triggered insurer's duty to defend manufacturer pursuant to the advertising injury coverage of manufacturer's commercial general liability and commercial umbrella insurance policies; statement of compatibility on manufacturer's packaging was not a false comparison that affected competitor's reputation. Skylink Technologies, Inc. v. Assurance Company of America, 400 F.3d 982, 74 U.S.P.Q.2d 1157 (7th Cir. 2005).

Alleged injury to insured's customer from competitor's allegedly slanderous statements about customer after insured routed customer's telephone calls to competitor was not "advertising injury" within the meaning of businessowners liability policy; that coverage applied only to offenses committed in the course of advertising insured's goods, products or services. North Metro Directories Pub., LLC v. Cotton States Mut. Ins. Co., 631 S.E.2d 726 (Ga. Ct. App. 2006).

Under Mississippi law, operator of golf course located within insured residential developer's subdivision stated only slander of title claim falling outside liability insurance policy's personal and advertising injury coverage, not claim for slander of "person or organization or … goods, products or services" within such coverage, by alleging that insured had represented to county

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 36 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) officials that operator lacked rights to develop subject property, and that insured had sought to prevent operator from exercising its development rights. Nationwide Mut. Ins. Co. v. Lake Caroline, Inc., 515 F.3d 414 (5th Cir. 2008) (applying Mississippi law).

Assuming insured's catalog listing allegedly infringing products constituted "advertising" within the meaning of insurance policies, insured failed to show that the alleged advertising injury that was subject of patent-infringement proceeding applied to enumerated offense of disparagement within the meaning of the policies, under New York law, where catalog did not contain specific assertions of unfavorable facts reflecting upon a rival product. Elite Brands, Inc. v. Pennsylvania Gen. Ins. Co., 164 Fed. Appx. 60 (2d Cir. 2006) (applying New York law).

Wholesalers' conduct, in allegedly selling brand-name clothing to discount stores in markets served by owners of franchises to sell the brand, which conduct allegedly disparaged the brand "by association" with stores that allegedly sold goods of inferior quality, did not constitute oral or written publication of material that disparaged an organization's goods, for purposes of definition, in wholesalers' liability insurance policies, of types of "personal injury" and "advertising injury" claims for which insurers were required to defend and indemnify wholesalers. JMZ USA, Inc. v. Lumbermens Mut. Cas. Co., 36 A.D.3d 555, 828 N.Y.S.2d 385 (1st Dep't 2007).

Under Ohio law, former employee's action against insured for tortious interference with economic advantage was not action for "advertising injury" or "personal injury" under commercial general liability policy that triggered insurer's duty to defend or indemnify, absent provision of underlying complaint which arguably recounted any defaming or disparaging statement that would amount to advertising injury or personal injury. Holloway Sportswear, Inc. v. Transportation Ins. Co., 58 Fed. Appx. 172 (6th Cir. 2003) (applying Ohio law).

Real property was not a person, organization, goods, products or services, for purposes of commercial general liability (CGL) policy providing coverage for advertising injury and personal injury to a person, organization, goods, products or services, and thus, the policy did not provide coverage for slander of title. Acme Const. Co., Inc. v. Continental Nat. Indem. Co., 2003- Ohio-434, 2003 WL 194879 (Ohio Ct. App. 8th Dist. Cuyahoga County 2003).

[Top of Section]

[END OF SUPPLEMENT]

§ 7[a] Unfair competition—"Advertising injury" found

The courts in the following cases held that coverage existed under the insurance policy, because the underlying action alleged the enumerated "advertising injury" offense of "unfair competition."

The underlying claim, which stated that the insured obtained information about a competitor's clients, and used the information to generate profits for itself, constituted an allegation of common–law "unfair competition," which brought it within coverage of the "advertising injury" insurance policy, the court held in New Hampshire Ins. Co. v. Foxfire, Inc., 820 F. Supp. 489 (N.D. Cal. 1993) (applying California law). The court found that the facts alleged by the competitor, that the insured misrepresented to clients that it was acting on behalf of the competitor, gave rise to a potential of liability for common–law "unfair competition," because the insured "passed off" its services as those of its competitor. Consequently, the court ruled that the insurance company had a duty to defend the insured under the "advertising injury" insurance policy.

In Tire Kingdom, Inc. v. First Southern Ins. Co., 573 So. 2d 885 (Fla. Dist. Ct. App. 3d Dist. 1990), the court held that, in the context of an insurance policy providing "advertising injury" coverage, the underlying action by a competing tire company fit into the enumerated "unfair competition" offense, because the complaint alleged various antitrust and unfair competition claims against the insured. The court noted that although there were some allegations in the underlying action that would, in and of themselves, be excluded from coverage under the policy, the "unfair competition" claim was not subject to the policy exclusions, so the insurer was bound to provide a defense on the entire suit. Accordingly, the court reversed the lower court's ruling that the insurance company was not obligated under its "advertising injury" insurance policy to secure the insured's defense against the underlying allegations.

The underlying complaint, which alleged common–law business torts against the insured, were potentially covered under the "unfair competition" offense in the "advertising injury" insurance policy, the court held in Tews Funeral Home, Inc. v. Ohio Cas. Ins. Co., 832 F.2d 1037 (7th Cir. 1987) (applying Illinois law). The court found that the underlying complaint essentially alleged that the insured made "false, misleading and defamatory" statements about a competing funeral home's business, products, and services, which interfered with the competitor's right to pursue a lawful business. The complaint further alleged that the insured willfully provided consumers with "false and misleading information" disparaging the plaintiffs' goods, services, and business in violation of the Uniform Deceptive Trade Practices Act, the Consumer Fraud Act, and the common law pertaining to interference with potential and existing contractual relationships. The court noted that under Illinois law, such allegations were sufficient to state a cause of action for libel per se, libel per quod, and tortious interference with contractual relationships, and that the insured's insurance policy explicitly insured for damages arising from claims for "libel, slander, defamation and unfair competition." Accordingly, because the underlying complaint fit the "advertising injury" offense of "unfair competition," the court affirmed the lower court and declared that the insurance company had a duty to defend the insured under the policy.

The court held in Attorneys' Title Guar. Fund, Inc. v. Maryland Cas. Co., 1991 WL 171339 (N.D. Ill. 1991) (applying Illinois law), that because the second amended underlying complaint by a competing title insurance company pled "unfair competition," whereby the insured allegedly solicited, induced, and influenced customers to cancel orders for title services with the competitor, it expressly fit into the insurance policy's "advertising injury" offense of "unfair competition." The court noted that it did not matter that the underlying complaint alleged several theories of recovery, because the duty to defend arose when the "unfair competition" claim was found within the potential coverage of the insurance policy. Thus, the court held that the insurance company had the duty to defend the insured in the underlying litigation.

In Polaris Industries, L.P. v. Continental Ins. Co., 539 N.W.2d 619 (Minn. Ct. App. 1995), the court held that the underlying allegations under the Colorado Consumer Protection Act, which stated that the insured violated the statute by misrepresenting, in its advertisements, that it invented the electronic fuel–injection system used in its snowmobiles, arguably fell within the coverage for "unfair competition" in the "advertising injury" umbrella insurance policy. The court noted that the insurance policy provided no definition of "unfair competition," and in its opinion a public misrepresentation about a product's invention was within the ordinary and usual meaning of "unfair competition." Consequently, because the Colorado Consumer Protection Act violation arguably fell within the scope of the umbrella insurance policy's "advertising injury" coverage for "unfair competition," the court reversed the lower court's ruling for the insured and remanded.

The court held in Curtis–Universal, Inc. v. Sheboygan Emergency Medical Services, Inc., 43 F.3d 1119 (7th Cir. 1994), reh'g and suggestion for reh'g en banc denied, (Jan. 12, 1995) (applying Wisconsin law), that the underlying suit, which alleged that the insured conspired to exclude a competing ambulance service from the Sheboygan market, in violation of federal antitrust law and state tort law, constituted the "advertising injury" offense of "unfair competition," within the context of the CGL insurance policy. The court noted that although the underlying complaint did not allege "unfair competition," if the offense of "unfair competition" within the meaning of the insurance contract was alleged (not necessarily by name), it was irrelevant that it was a subordinate aspect of the insured's case. The facts in the instant case showed that the underlying complaint elaborated on the claim of tortious interference with contractual relations in a way that preserved the informational connotations of the traditional legal concept of "unfair competition." For example, to tell people to call 911 and ask for the insured's ambulance service was in effect to represent to them that the insured was an authorized 911 ambulance service for Sheboygan, when in fact only the competing ambulance service was. This was very close to an attempt to pass the insured off as its competitor, which is the core trademark infringement in common–law "unfair competition." Thus, the court reversed the lower court's decision and held that the insurance company had a duty to defend the insured because there was "advertising injury" coverage.

§ 7[b] Unfair competition—"Advertising injury" not found

[Cumulative Supplement]

In Bank of the West v. Superior Court, 2 Cal. 4th 1254, 10 Cal. Rptr. 2d 538, 833 P.2d 545 (1992), the court held that the underlying consumer class action, which alleged that the insured violated the Unfair Business Practices Act in its auto loan financing program, was not an "advertising injury," because the insurance coverage for "advertising injury" due to "unfair competition" was limited to claims under the common law and excluded statutory claims. The court stated that because damages were available for common–law unfair competition (and for the other offenses listed in the "advertising injury" provision) but not for the Unfair Business Practices Act, the CGL insurance policy allowing for "advertising injury" due to "unfair competition" could not possibly refer to claims under the statute. Because the underlying action did not arise from the common–law "unfair competition" activity such as "passing off" one's goods as those of another or selling confusingly similar goods or services, leading to exploitation of a competitor's reputation in the market, the underlying complaint did not seek "damages" for "unfair competition" within the meaning of the CGL "advertising injury" insurance policy. Accordingly, the lower court's decision to the contrary was reversed.

Comment

Insofar as Bank of the West v. Superior Court, 2 Cal. 4th 1254, 10 Cal. Rptr. 2d 538, 833 P.2d 545 (1992), held that the enumerated "advertising injury" offense of "unfair competition" constituted common–law unfair competition, the court overruled the following cases, which found that underlying statutory business actions were offenses of "unfair competition" in insurance policies providing "advertising injury" coverage: Demonet Industries v. Transamerica Ins. Co., 278 Cal. Rptr. 178 (App. 1st Dist. 1991), opinion modified, (Feb. 28, 1991) and reh'g denied, (Mar. 14, 1991) and review granted and opinion superseded, 281 Cal. Rptr. 765, 810 P.2d 997 (Cal. 1991) and review transferred to Court of Appeals, 12 Cal. Rptr. 2d 681, 838 P.2d 203 (Cal. 1992); CNA Casualty of California v. Seaboard Surety Co., 176 Cal. App. 3d 598, 222 Cal. Rptr. 276 (1st Dist. 1986), reh'g denied, (Feb. 13, 1986); American States Ins. Co. v. Canyon Creek, 786 F. Supp. 821 (N.D. Cal. 1991) (applying California law).

Because the injury from the alleged "unfair competition" in the underlying Idaho litigation against the insured was to the consuming public, and not to the insured's competitors, there was no coverage available under that offense in the "advertising injury" insurance policy, the court held in A–Mark Financial Corp. v. CIGNA Property & Casualty Companies, 34 Cal. App. 4th 1179, 40 Cal. Rptr. 2d 808 (2d Dist. 1995). The court noted that although the underlying claims arose under Idaho's version of the Unfair Business Practices Act and the Commodity Exchange Act, both of which contained a damage remedy, under California law coverage was relegated to common–law "unfair competition" claims only. The court therefore rejected the insured's invitation to carve out an exception where the potential for recovery of damages existed under statutory law. Thus, the court affirmed the lower court's ruling that the insurance company did not have a duty to defend the insured under the "advertising injury" insurance policy.

The court held in Keating v. National Union Fire Ins. Co. of Pittsburgh, Pa., 995 F.2d 154 (9th Cir. 1993) (applying California law), that the underlying securities fraud claims asserted by investors against the insured did not involve "unfair competition" within meaning of the CGL insurance policies' definition of "advertising injury." The court noted that under California law the term "unfair competition," as used in "advertising injury" provisions, provided coverage for liability arising only from the common–law tort of "unfair competition," which gave a cause of action only for competitive injury. The court found that it was not possible to characterize the claims of the investors who were suing the insured as ones for common–law "unfair competition" because they were not claims for redress of competitive injury. In addition, even if the underlying claims alleged the "palming off" of uninsured bonds as federally insured deposits, the investors' complaints were not based on injury to the insured's competitors. Accordingly, because the lower court erred in ruling that the insurance company had a duty to defend the underlying claims as claims for "advertising injury" caused by "unfair competition," the court reversed and remanded.

The court held in Qsp, Inc. v. Aetna Cas. and Sur. Co., 256 Conn. 343, 773 A.2d 906 (2001) (applying Connecticut law), that because the underlying antitrust complaint, which alleged that the insureds monopolized the school and youth group magazine fund–raising market, was brought by a class of school–related entities, and not by the insureds' competitors, it did not state a claim for "unfair competition" as that term was enumerated in the insurance policies providing "advertising injury" coverage. The court noted that the underlying action alleged neither the misappropriation of a commercial advantage belonging to the

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 39 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) school–related entities nor that the entities suffered a competitive injury. Thus, the court affirmed the lower court's ruling that the insurance company was not under a duty to defend the insureds in the underlying action because there was no "advertising injury" of "unfair competition."

Because the insured was sued in the underlying business tort action by dissatisfied customers, there was no coverage for the enumerated offense of "unfair competition" in the "advertising injury" insurance policy, the court held in Practice Management Associates, Inc. v. Old Dominion Ins. Co., 601 So. 2d 587 (Fla. Dist. Ct. App. 1st Dist. 1992). The court stated that the phrase "unfair competition" in the policy referred unambiguously only to actions affecting competitors, because Florida case law required injury to a competitor as an essential element of any claim of "unfair competition." The court further noted that even giving the phrase "unfair competition" its broadest ordinary meaning, the offense must include at least two elements, "unfairness" and "competition," and the underlying action did not include the element of "competition." The court refused to accept the insured's definition of "unfair competition" as any act of a commercial enterprise that was unfair. Thus, the court affirmed the lower court's ruling that the insurance company did not have a duty to defend the insured under the "advertising injury" insurance policy.

In Graham Resources, Inc. v. Lexington Ins. Co., 625 So. 2d 716 (La. Ct. App. 1st Cir. 1993), writ denied, 631 So. 2d 1164 (La. 1994), reconsideration denied, 633 So. 2d 163 (La. 1994), the court held that because the underlying actions were brought by consumers instead of competitors, the allegations that the insured engaged in various federal and state law violations, including claims of unfair competition, false advertising, negligent misrepresentation, mismanagement, deceptive trade practices, and securities fraud, did not fit within the enumerated offense of "unfair competition" in the insured's CGL "advertising injury" insurance policies. The court found that, as used in the context of the "advertising injury" insurance policies, the offense of "unfair competition" was limited to misappropriation of a competitor's commercial advantage. In addition, the court noted that because the underlying complaint was for conduct prohibited by the unfair business practices statutes, it did not fit the common– law definition of "unfair competition." Finally, the court stressed that as a matter of public policy the insured should not be allowed to insure itself against acts prohibited by business practice statutes such as securities fraud. Accordingly, the court affirmed the lower court's decision that the insurance companies had no duty to defend the insured under the CGL insurance policies providing "advertising injury" coverage.

The court held in Smartfoods, Inc. v. Northbrook Property and Cas. Co., 35 Mass. App. Ct. 239, 618 N.E.2d 1365 (1993), that the underlying claims, brought by the insured's distributors, which alleged that the insured unfairly canceled distribution agreements, did not fall within the enumerated "advertising injury" offense of "unfair competition," in the context of the CGL insurance policy. The court found that the distributors' underlying claims of breach of contract, breach of implied covenant of good faith and fair dealing, unfair and deceptive trade practices, tortious interference with contractual and advantageous relations, and misappropriation of trade secrets were not an "unfair competition" suit, but a breach of contract suit at its core. The court noted that "unfair competition," in its common–law signification, implied palming off, and this was not the nature of the distributors' grievance, which was that their distribution agreements had been unlawfully terminated in light of inducements allegedly made by the insured when the agreements were entered into. The court further noted that although the underlying claims might fall within the wide enclosing arms of unfair business practices under statutory law, the insurance policy did not encompass such business statutes. Consequently, the court affirmed the lower court's ruling that the underlying allegations did not fall within the "unfair competition" offense of "advertising injury" coverage.

The underlying price–fixing, class action suits against the insured did not fall under the CGL insurance policy's coverage for an "advertising injury" of "unfair competition," because the actions were brought by customers, not competitors, the court held by way of dictum in Delta Pride Catfish, Inc. v. Home Ins. Co., 697 So. 2d 400 (Miss. 1997). Having made its decision on other grounds, and noting that the court did not need to interpret the meaning of "unfair competition" under the "advertising injury" clause, the court still stated that at a minimum "unfair competition" must involve some substantial component of competitive injury. In the instant case, the underlying actions were brought by customers and consumers, not competitors, so the actions did not fit the definition of "unfair competition," as viewed by the majority of courts that had dealt with the same issue. Accordingly, the court affirmed the lower court's ruling, which denied the insured coverage under the "advertising injury" provision of the insurance policy.

In John Markel Ford, Inc. v. Auto–Owners Ins. Co., 249 Neb. 286, 543 N.W.2d 173 (1996), the court held that because the term "unfair competition" did not refer to conduct prohibited by unfair business practices statutes, the underlying action brought by the state of Iowa against the insured, alleging violations of the Iowa Consumer Fraud Act and the Iowa Consumer Credit Code, were not covered under the "unfair competition" offense of the "advertising injury" insurance provision. The court noted that because most courts that had considered the definition of "unfair competition" in a context such as was at issue here had adhered to the common–law definition, the underlying action had to allege the "palming off" of one's goods as the goods of another before coverage would be available. In addition, because many courts had stated that the term "unfair competition" did not refer to conduct prohibited by unfair business practices statutes, the underlying suit brought by Iowa therefore was not one for "unfair competition" as the term was used in the "advertising injury" insurance contract. Thus, the court affirmed the lower court and ruled that the insurance company had no duty to indemnify or defend the insured.

The court held in Ruder & Finn Inc. v. Seaboard Sur. Co., 52 N.Y.2d 663, 439 N.Y.S.2d 858, 422 N.E.2d 518, 7 Media L. Rep. (BNA) 1833 (1981), reargument denied, 54 N.Y.2d 753, 443 N.Y.S.2d 1031, 426 N.E.2d 756 (1981), that because the insurance policy's phrase "unfair competition" was not equated with the far more amorphous term "commercial unfairness," the underlying state claims, which alleged that the insured conspired to disseminate anti–aerosol publicity, in effect to drive an aerosol products manufacturer out of business, did not fit the definition of "unfair competition." The court agreed with the insurance company's argument that the primary concern in "unfair competition" was the protection of a business from another's misappropriation of the business' organization, expenditure of labor, skill, and money. The principle of misappropriation of another's commercial advantage therefore was a cornerstone of the tort. The facts showed that no matter how adverse the aerosol campaign was, the insured's public relations firm was not a competitor of the aerosol products manufacturer, did not work for competitors of the manufacturer, and was not attempting to appropriate to itself any profit, property, or advantage belonging to the manufacturer. Consequently, the court affirmed the lower court's ruling and held that unlike the federal action, in which the defamation allegation triggered the duty to defend, in the state litigation the insurance company had no duty to defend the insured under the "unfair competition" offense in the libel insurance policy.

Where the underlying action alleged that the insured had engaged in bad faith and unfair trade practices when it sold a residence situated in a drainage area subject to severe flooding, coverage was not available under the "unfair competition" offense of the "advertising injury" insurance policies, because the buyers of the residence were the insured's customers, not its competitors, the court held in Henderson v. U.S. Fidelity & Guar. Co., 346 N.C. 741, 488 S.E.2d 234 (1997). The court found that because the insurance policies listed "unfair competition" with the offenses of "piracy" and "idea misappropriation," all referred to causes of action brought between business rivals for offenses pertaining to the disparagement or appropriation of another's name, style, identity, or other form of representation of products. In addition, because North Carolina's interpretation of the common–law tort of "unfair competition" meant an offense committed in the context of competition between business rivals and did not include statutory unfair and deceptive practices prohibited by chapter 75 of the North Carolina General Statutes, the underlying offense did not constitute "unfair competition" within the context of the CGL "advertising injury" insurance policies. Thus, the court affirmed the lower court's ruling denying the insured coverage under the policies.

In Granite State Ins. Co. v. Aamco Transmissions, Inc., 57 F.3d 316 (3d Cir. 1995), reh'g and reh'g in banc denied, (July 10, 1995) (applying Pennsylvania law), the court held that because the underlying suit was brought by customers, not competitors of the insured, there was no "advertising injury" insurance coverage for the underlying class action, which alleged that the insured used deceptive advertising that did not describe its services accurately and lured purchasers of transmission services into paying more than they should have paid, in violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law. The court found that regardless of the nature of the insured's conduct, the claim by a consumer of its products or services arising from that conduct could not be characterized as a claim for "unfair competition," because "competition" connoted an insured's relationship with other persons or entities supplying similar goods or services. The court further noted that the fact the legislature deemed it expedient to combine the remedies for "unfair competition" and consumer fraud into one statute did not magically transform acts of "consumer fraud" into acts of "unfair competition." Rather, the court concluded that the insured could not have expected to have "advertising injury" insurance coverage for the consumers' class action claims under the portion of the policy protecting it against claims of "unfair competition." Instead, the insured would expect that a claim arising from

"competition" would be forwarded by a competitor of the insured. Accordingly, because the underlying customers and the class they represented were not competitors of the insured, the court affirmed the lower court's ruling denying the insured coverage under the CGL insurance policy.

The court held in Boggs v. Whitaker, Lipp & Helea, Inc., P.S., 56 Wash. App. 583, 784 P.2d 1273 (Div. 2 1990), that because there were no allegations of harm or potential harm to a competitor, just allegations of unfair and deceptive practices by the insured's investors, the underlying action did not allege the enumerated "advertising injury" offense of "unfair competition." The court noted that although unfair and deceptive practices might constitute the offense of "unfair competition," there was no coverage under such language in an "advertising injury" insurance policy unless there were allegations and evidence of harm or potential harm to a competitor. In the instant case, there was nothing in the record that showed that the insured's deceptive advertising to investors, who had illegally purchased leases of master audio recordings from the insured, was intended to give the insured an advantage over competitors, or that the insured actually harmed any competitors. In fact, there was no evidence that the insured even had competitors in this venture, since the insured constituted the entire sales force for the master recordings in Washington. Consequently, the court reversed the lower court's ruling against the insured and held that there was no reasonable basis on which the average purchaser of a business policy containing the provisions here in question could have assumed that advertising practices that did not involve business rivalry constituted "unfair competition" in the context of the policy.

See the following additional cases, in which the courts held that under the particular circumstances involved coverage did not exist under the insurance policy, because the underlying action did not allege the expressly enumerated "advertising injury" offense of "unfair competition," where—

—investors in the insured's business brought a claim against the insured for deceptive business practices and not for the common–law tort of competitive rivalry, because they were investors in and not business competitors of the insured. Chatton v. National Union Fire Ins. Co., 10 Cal. App. 4th 846, 13 Cal. Rptr. 2d 318 (1st Dist. 1992), reh'g denied, (Nov. 25, 1992).

—investors in the insured's business brought a claim against the insured for deceptive business practices and not for the common–law tort of competitive rivalry, because they were investors in and not business competitors of the insured. McLaughlin v. National Union Fire Ins. Co., 23 Cal. App. 4th 1132, 29 Cal. Rptr. 2d 559 (1st Dist. 1994).

—a bankruptcy estate sued the insured for its alleged acts or omissions in preparing and recording title documents, which obscured the illusory underpinnings of a real estate option program and thereby aided the program's directors and officers in their scheme to loot and defraud the company, but there was no showing of competitive injury because the insured and the estate were not competitors. Ticor Title Ins. Co. v. Employers Ins. of Wausau, 40 Cal. App. 4th 1699, 48 Cal. Rptr. 2d 368 (1st Dist. 1995).

—a receiver for a failed savings and loan association claimed that the insured engaged in negligent supervision in its financial dealings with the savings and loan association, but the insured was not in competition with the receiver or the savings and loan association. Westfield Ins. Co. v. TWT, Inc., 723 F. Supp. 492 (N.D. Cal. 1989) (applying California law).

—shareholders, which alleged that the insured engaged in false advertising in the sale of securities, could not state a claim for relief under the common law because they were not competitors of the insured and therefore did not sustain a competitive injury. Liberty Mut. Ins. Co. v. Consolidated Capital Equities Corp., 878 F.2d 386 (9th Cir. 1989) (applying California law).

—investors' unfair business practices claims against the insured, alleging that the insured's employee engaged in a fraudulent tax shelter scheme, whereby he induced the investors to purchase insurance policies as tax shelters, did not seek damages, so any damages recovered by the investors would not constitute "unfair competition" damages under the policy. Aetna Cas. & Sur. Co. v. Trans World Assur. Co., 745 F. Supp. 1524 (N.D. Cal. 1990) (applying California law).

—a suit by a group of consumers, who purchased heating units from the insured and claimed that the insured engaged in deceptive and misleading practices with respect to those sales, was a consumer suit for unfair business practices and not a suit for common–law "unfair competition," of which injury to competition was an essential element. Nationwide Mut. Ins. Co. v. Dynasty Solar, Inc., 753 F. Supp. 853 (N.D. Cal. 1990) (applying California law).

—distributors of the insured, who alleged that the insured made misrepresentations to them in the course of negotiating certain "master dealer" or distributor contracts, were not competitors of the insured but rather its business partners, so the claims were within the "consumer protection aura" of unfair business practices. Tigera Group, Inc. v. Commerce and Industry Ins. Co., 753 F. Supp. 858 (N.D. Cal. 1991) (applying California law).

—the insureds' advertising acts of disclosing misleading and untrue information as to the ownership and control of their hotel in several business records and loan applications were the result of the insureds working in concert toward the common goal of promoting their related businesses, and not the misappropriation of another's business advantage or a competitive injury. In re San Juan Dupont Plaza Hotel Fire Litigation, 802 F. Supp. 624 (D.P.R. 1992), aff'd on other grounds, 989 F.2d 36 (1st Cir. 1993) (applying California law).

—bondholders of a project undertaken by a subsidiary of the insured brought claims of negligent misrepresentation and deceptive, untrue, and fraudulent advertising against the insured as customers and not competitors. Standard Fire Ins. Co. v. Peoples Church of Fresno, 985 F.2d 446 (9th Cir. 1993) (applying California law).

—investors in the insured's stock brought fraud and negligent misrepresentation claims against the insured, but such claims were not claims for common–law "unfair competition" because no substantial component of competitive injury was involved. Bergen Brunswig Corp. v. Safety Mut. Cas. Corp., 985 F.2d 571 (9th Cir. 1993) (applying California law).

—a competitor's allegation that the insured violated California's Unfair Business Practices Act when it engaged in appropriation of a business owned by another through illegal, fraudulent, or wrongful acts would be a too expansive reading of the term "unfair competition." Alliance Ins. Co. v. Colella, 995 F.2d 944 (9th Cir. 1993), as amended, (Sept. 3, 1993) and reh'g and suggestion for reh'g en banc denied, (Sept. 3, 1993) (applying California law).

—a competitor's unfair business practices claim, alleging that it had been injured in the award of contracts by the United States Air Force because of bribes paid by the insured to high officials in the Defense Department, was a totally different kind of act, and such an act of criminal bribery could not be read as included under the rubric of "unfair competition." Cubic Corp. v. Insurance Co. of North America, 33 F.3d 34, R.I.C.O. Bus. Disp. Guide (CCH) ¶8620 (9th Cir. 1994) (applying California law).

—a bank's unfair and deceptive trade practices claim, which alleged that the insured misrepresented the quality and quantity of the peanut inventory financed by the bank, was not one for competitive injury because the bank was not a competitor of the insured. Fireman's Fund Ins. Co. v. National Bank for Cooperatives, 849 F. Supp. 1347 (N.D. Cal. 1994) (applying California law).

—a minor injured at the insured's waterpark was an assignee of the insured's rights against an insurance company, and the minor's claim that the insurance company failed to place excess insurance coverage for the insured was not a competitive injury claim because the insured was a customer of the insurance company, not a competitor. American Services, Inc. v. Hartford Acc. & Indem. Co., 1993 WL 219291 (N.D. Cal. 1993) (applying California law).

—investors' false advertising claims, which alleged that they bought the insured's stock at artificially inflated prices after hearing false statements made in television commercials and other advertising media, did not seek recovery for the insured's having "passed off" its goods as those of another, within the common–law tort of "unfair competition," such that damages could be awarded. Sachs v. Industrial Indem. Ins. Co., 1993 WL 93562 (C.D. Cal. 1993) (applying California law).

—a record company's claim that the insured used its copyrighted songs without authorization constituted mere copyright infringement, especially because the record company was not in competition with the insured. Amway Distributors Benefits Ass'n v. Federal Ins. Co., 990 F. Supp. 936 (W.D. Mich. 1997) (applying Michigan law).

—a federal grand jury indictment against the insured, for criminal conspiracy in violation of the antitrust laws, was not an underlying action concerned with harmful speech as the other enumerated "advertising injury" offenses were. USX Corp. v. Adriatic Insurance Co., 99 F. Supp. 2d 593 (W.D. Pa. 2000) (applying Pennsylvania law).

—insurance companies' securities claim that the insured was responsible to bondholders for misrepresentations and omissions in various official statements or prospectuses was not an action for "passing off" one's goods for those of another. Pine Top Ins. Co. v. Public Utility Dist. No. 1 of Chelan County, 676 F. Supp. 212 (E.D. Wash. 1987) (applying Washington law).

—claimants' securities and RICO actions filed against the insured, alleging that the insured was involved in a scheme involving the purchase of precious metals, which defrauded investors through deceptive practices and misrepresentations, were within the "consumer protection aura" of unfair methods of competition, not the "passing off" of a competitor's goods. Globe Indem. Co. v. First American State Bank, 720 F. Supp. 853 (W.D. Wash. 1989), decision aff'd without opinion, 904 F.2d 710 (9th Cir. 1990) (applying Washington law).

—a manufacturer's claim that the insured supplied allegedly defective plywood panels used in its manufacturing process, in violation of the state's consumer protection act, was directed at its supplier, not a competitor. Aetna Cas. and Sur. Co. v. M & S Industries, Inc., 64 Wash. App. 916, 827 P.2d 321 (Div. 2 1992).

—an independent shoe retailer's business tort and antitrust claims, alleging that the insured breached its contract by not supplying the retailer with the shoes it promised, and allowing other retail outlets to sell shoes the retailer could not, described modern business torts, not allegations concerning harmful speech in the "unfair competition" context. Westowne Shoes, Inc. v. City Ins. Co., 82 F.3d 420 (7th Cir. 1996), reh'g and suggestion for reh'g en banc denied, (May 14, 1996)997), reh'g denied, (Apr. 7, 1997) (applying Wisconsin law).

CUMULATIVE SUPPLEMENT

Cases:

Under Massachusetts law, "unfair competition" clause of commercial general liability (CGL) insurance policy's advertising injury coverage provision did not cover insured computer manufacturer's alleged improper disassociation of itself from security software provider, which foreclosed software provider's participation in large segment of market and gave rise to provider's antitrust and interference with contract claims against insured; clause's application was limited to "palming off," i.e. inducing customers to believe that one's products are actually those of another. Open Software Foundation, Inc. v. U.S. Fidelity and Guar. Co., 307 F.3d 11 (1st Cir. 2002).

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§ 8[a] Copyright infringement—"Advertising injury" found

[Cumulative Supplement]

The courts in the following cases held that coverage existed under the insurance policy, because the underlying action alleged the enumerated "advertising injury" offense of "copyright infringement."

Because the underlying complaint stated that the insured infringed a competitor's copyright through the manufacture, shipment, sale, and distribution of products substantially similar to the competitor's toy products, it alleged the enumerated offense of "copyright infringement," and coverage was available under the CGL "advertising injury" insurance policy, the court held in Poof Toy Products, Inc. v. U.S. Fidelity and Guar. Co., 891 F. Supp. 1228, 36 U.S.P.Q.2d (BNA) 1343 (E.D. Mich. 1995) (applying Michigan law). First, the court stated that because the underlying complaint alleged "copyright infringement" in one of its counts, insofar as the instant insurance policy clearly stated that "advertising injury" included infringement of copyright, there was coverage available. Second, although the underlying complaint did not have a count entitled "infringement of title or slogan," the factual allegations that the insured used a competitor's copyrighted "names and titles," including "Dino Fuzzles," "Greta Gecko," and "Tubasaurs," arguably constituted an "infringement of title or slogan." Thus, the court held that the insurance company had a duty to defend the insured under the "advertising injury" provision.

The court held in Amway Distributors Benefits Ass'n v. Federal Ins. Co., 990 F. Supp. 936 (W.D. Mich. 1997) (applying Michigan law), that coverage existed under the insurance policy, because the underlying action, which claimed that the insured infringed a record company's copyrights by incorporating various songs into videotapes without permission or authorization, alleged the enumerated "advertising injury" offense of "infringement of copyright." The court noted that the offense of "infringement of copyright" was broadly defined, unlike the offense of "infringement of copyrighted advertising materials, titles or slogans" defined in a later "advertising injury" insurance policy. The latter offense would not cover the underlying action, because popular songs were not "advertising ideas or materials," but the prior offense would. Accordingly, the court granted summary judgment in part to the insureds regarding the insurance company's duty to defend under the insurance policy.

CUMULATIVE SUPPLEMENT

Cases:

Under Maryland law, activities of an insured sued for copyright infringement and related claims constituted "advertising," thus triggering insurer's duty to defend under an advertising injury provision of the policy; the insured referred potential customers to an installation manual posted on its website after receiving inquiries from them about its products, the insured employed the installation manual to promote the sale of its amplifiers, and by posting the installation manual on the Internet, the insured distributed the document to a large audience of potential customers. Teletronics Intern., Inc. v. CNA Ins. Co./Transportation Ins. Co., 120 Fed. Appx. 440 (4th Cir. 2005) (applying Maryland law).

Non-party's First Amended Complaint against insured, which used term "advertising" in broad terms that encompassed ongoing use of copyrighted materials in online and other advertising, alleged that insured's manufacturing, importation, advertising and sales of counterfeit products constituted copyright infringement, and sought recovery for profits received by insured in connection with products, potentially fell within liability insurance policies' coverage for "advertising injuries," thereby triggering insurer's duty to defend insured in lawsuit brought by non-party. Tradewind Products, Inc. v. Hartford Fire Ins. Co., 314 Fed. Appx. 2 (9th Cir. 2008).

Under Michigan's renewal rule, excess liability insurer was required to provide broader "advertising injury" coverage, as set forth in initial policies issued to insured, for underlying copyright infringement claims against insured, rather than the narrower "advertising injury" coverage provided in subsequent renewal excess policy in effect at the time when copyright claims were commenced, even though excess insurer followed the form of the primary general liability policy, where excess insurer failed to notify insured of primary insurer's narrowing of the "advertising injury" coverage, and the resulting reduction in coverage under the excess policy. Amway Distributors Benefits Ass'n v. Northfield Ins. Co., 323 F.3d 386, 2003 FED App. 0082P (6th Cir. 2003) (applying Michigan law).

Sign bearing the insured builder's name next to a construction site was "advertising," and, thus, the builder's copyright infringement by constructing house based on copyrighted plans was committed in the course of, i.e., as part of, the builder's advertising as required by the advertising injury coverage of commercial general liability (CGL) policy, even if the sign was on site for only part of the construction, even though the home construction was not by itself advertising, and even though the copyright owner did not allege advertisement of the plans or seek damages stemming from advertising of the home; the construction was part of the advertising. Kirk King, King Cons., Inc. v. Continental Western Ins. Co., 123 S.W.3d 259, 69 U.S.P.Q.2d 1517 (Mo. Ct. App. W.D. 2003).

Insured violated software company's copyright in the course of advertising by offering unauthorized software samples to potential customers, and this violation contributed materially to company's injury, as was required for advertising injury coverage under liability insurance policy. Acuity v. Bagadia, 2007 WI App 133, 734 N.W.2d 464 (Wis. Ct. App. 2007).

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§ 8[b] Copyright infringement—"Advertising injury" not found

[Cumulative Supplement]

In the following, it was held that coverage did not exist under the insurance policy, because the underlying action did not allege the enumerated "advertising injury" offense of "copyright infringement."

In Fallon McElligott, Inc. v. Seaboard Sur. Co., 607 N.W.2d 801, 54 U.S.P.Q.2d (BNA) 1340 (Minn. Ct. App. 2000), the court held that coverage did not exist under the insurance policy, because the underlying action, which alleged that the insured breached a contract when it prepared advertisements for a client that copyright holders believed violated their copyrights, did not allege the enumerated "advertising injury" offense of "copyright infringement." The court rejected the insured's argument that the "advertising injury" offense of "copyright infringement" covered the underlying claim, because its claim of contract breach and professional negligence should be viewed as "resulting from" the copyright violation. The court stated that because no third party pursued the insured or the client for copyright damages, and the client sought damages from the insured only for professional errors that produced unusable advertising, the underlying claim did not allege the offense of "copyright infringement." Consequently, the insurance company did not have a duty to defend or indemnify the insured in the underlying action because the risk was not covered by the "advertising injury" insurance policy.

CUMULATIVE SUPPLEMENT

Cases:

Competitor's copyright infringement action against garage door opener manufacturer, based on claim that manufacturer's openers circumvented competitor's copyrighted "rolling code" technology, was not claim for advertising injury that triggered insurer's duty to defend manufacturer pursuant to the advertising injury coverage of manufacturer's commercial general liability and commercial umbrella insurance policies; competitor did not object to manufacturer's marketing of its products except to extent that they claimed to use the rolling code technology. 17 U.S.C.A. § 1201(a)(2). Skylink Technologies, Inc. v. Assurance Company of America, 400 F.3d 982, 74 U.S.P.Q.2d 1157 (7th Cir. 2005).

Competitor's action against construction company, alleging that company's employee had taken confidential information about competitor's existing customers and had used the information to solicit such customers for the benefit of the company, did not involve "advertising" or an "advertising injury" within meaning of company's commercial general liability (CGL) insurance policy; policy defined terms to require the insured to have been "attracting the attention of others" with a purpose of "seeking customers or supporters" or "increasing sales or business," employee was already doing business with competitor's customers and sought merely to transfer customers' association from competitor to company, customer and project information was not subject to copyright law, and information was not made to attract attention in company's advertising. S.B.C.C., Inc. v. St. Paul Fire & Marine Ins. Co., 186 Cal. App. 4th 383, 2010 WL 2338698 (6th Dist. 2010).

Under Wisconsin law, furniture designer's allegations that insured, a furniture manufacturer, displayed and misappropriated the designer's furniture design did not fall within an enumerated advertising injury offense in a general commercial liability policy, so as to trigger insurer's duty to defend; even if the complaint in the underlying action could have been read to allege copyright or trademark infringement based on insured's alleged misappropriation of furniture designs, there was no allegation that the insured made infringing use of copyrighted advertising materials. Krueger Intern., Inc. v. Federal Ins. Co., 647 F. Supp. 2d 1024 (E.D. Wis. 2009) (applying Wisconsin law).

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§ 9. Invasion of privacy

[Cumulative Supplement]

In Nova Cas. Co. v. Able Const., Inc., 1999 UT 69, 983 P.2d 575 (Utah 1999), the court held that the CGL insurance policy providing "advertising injury" coverage did not cover the underlying action, which alleged that the insured misrepresented to purchasers of a home that the restrictive covenants would not bar running a business from it, because the complaint did not allege the enumerated offense of "invasion of privacy." The court rejected the insured's argument that the alleged misrepresentations caused an invasion of the homeowners' privacy, because the homeowners were not able to conduct themselves in a private manner in their home when the alleged misrepresentations led to a court order requiring the homeowners to alter their lifestyle within their home. The court stated that such an argument stretched the definition of the "invasion of privacy" offense beyond recognition. The court therefore affirmed the lower court's ruling that there was no "advertising injury," and no duty to defend under the CGL insurance policy.

CUMULATIVE SUPPLEMENT

Cases:

Under Georgia law, insured restaurant's actions of sending unsolicited advertisements via facsimiles to various businesses, in violation of the Telephone Consumer Protection Act (TCPA), was covered "advertising injury" within meaning of umbrella liability policy; violation constituted "advertising injury" as defined by policies, i.e., written publication of material that violated person's right of privacy, and injury was caused by insured's advertising activity. 47 U.S.C.A. § 227(b)(1). Hooters of Augusta, Inc. v. American Global Ins. Co., 272 F. Supp. 2d 1365 (S.D. Ga. 2003) (applying Georgia law).

"Publication" within the meaning of personal and advertising injury coverage of commercial general liability (CGL) insurance policy for publication of material that violated person's right of privacy is not limited to the publication of material that wrongfully discloses private facts to third parties. Valley Forge Ins. Co. v. Swiderski Electronics, Inc., 359 Ill. App. 3d 872, 296 Ill. Dec. 5, 834 N.E.2d 562 (2d Dist. 2005), appeal allowed, 217 Ill. 2d 626, 300 Ill. Dec. 529, 844 N.E.2d 972 (2006).

Under Missouri law, complaints by Federal Trade Commission (FTC) and state attorneys general against insured, a private research firm that conducted surveys of high school students for colleges and universities, alleging that insured shared information it gathered with commercial entities in addition to educational institutions, contrary to its representations to students, were potentially within "personal injury or advertising injury" coverage provision of business liability insurance policy; policy defined both terms to include oral or written publications violating "right of privacy," and insured's gathering and disseminating personal information beyond disclosed terms arguably violated students' privacy. State Farm Fire and Cas. Co. v. National Research Center for College and University Admissions, 445 F.3d 1100 (8th Cir. 2006) (applying Missouri law).

Under Texas law, insured real estate investment companies' act of faxing unsolicited advertisements, allegedly in violation of federal consumer protection statute and recipients' privacy rights, was potentially within commercial general liability (CGL) insurance policy's "advertising injury" coverage, defined in part as "oral or written publication of material that violates a person's right of privacy"; "publication" did not necessarily require communication to third persons as in defamation context, and offensive content was not required to implicate "privacy rights" protected by statute. Telephone Consumer Protection Act (TCPA), 47 U.S.C.A. §§ 227(b)(1)(C) and (b)(2)(B)(ii)(I). Western Rim Inv. Advisors, Inc. v. Gulf Ins. Co., 269 F. Supp. 2d 836 (N.D. Tex. 2003) (applying Texas law).

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§ 10[a] Misappropriation of advertising ideas or style of doing business—"Advertising injury" found

[Cumulative Supplement]

In the following cases, the courts held that coverage existed under the insurance policy, because the underlying action alleged the enumerated "advertising injury" offense of "misappropriation of advertising ideas or style of doing business."

The court in Hameid v. National Fire Ins. of Hartford, 94 Cal. App. 4th 1155, 114 Cal. Rptr. 2d 843 (4th Dist. 2001), opinion modified, 2002 WL 59444 (Cal. App. 4th Dist. 2002), held that the insured beauty salon's alleged misappropriation of its competitor's confidential customer lists to identify and solicit clients involved "misappropriation of advertising ideas" and was an advertising injury under a commercial general liability insurance policy; the alleged misappropriation of trade secrets related to marketing, not performance of services or manufacturing of a product.

In FRI Holdings, Inc. v. Hartford Casualty Ins. Co., 83 Cal. Rptr. 2d 29 (App. 4th Dist. 1999), ordered not to be officially published, (June 16, 1999), the court held that the underlying complaint, filed by airlines to shut down the insured's frequent flyer mile program, stated a cause of action under the enumerated "misappropriation of advertising ideas or style of doing business" offense in the insurance policy providing "advertising injury" coverage. In the instant case, the airlines' first amended complaints mentioned several different types of "advertising injury," including "misappropriation of advertising ideas" and "misappropriation of style of doing business." The court noted that "advertising ideas" and "style of doing business" had been defined as the "wrongful taking of the manner by which another advertises its goods or services." Therefore, because the frequent flyer mile program was an advertising gimmick and the insured's advertising used the very proprietary terms the airlines themselves devised to refer to their frequent flyer programs, the underlying claim stated an "advertising injury" of "misappropriation of advertising ideas." Accordingly, the court denied the insurance company's cross–claim that it had no duty to defend the insured in the underlying action.

CUMULATIVE SUPPLEMENT

Cases:

Under California law, patent infringement claim against insured automobile manufacturer alleged misappropriation of advertising ideas within "advertising injury" coverage of liability policy, even though patentee was not insured's competitor, where patentee alleged that insured violated patented method of displaying information to public at large for purpose of facilitating sales by using patented techniques as part of its own marketing method or marketing system on its website. Hyundai Motor America v. National Union Fire Ins. Co. of Pittsburgh, PA, 600 F.3d 1092 (9th Cir. 2010) (applying California law).

Licensee's allegations that insured used trademarks to which it had an exclusive license in the western hemisphere without authorization stated an advertising injury claim, either as a misappropriation of advertising ideas, or as an infringement of title, triggering insurer's duty to defend under California law. Peterson Tractor Co. v. Travelers Indem. Co. of Ill., 156 Fed. Appx. 21 (9th Cir. 2005) (applying California law).

Under Florida law, insured manufacturer's use of model numbers for its products that were confusingly similar to competitor's product numbers, and use of artwork from competitor's advertisements in manufacturer's own advertisements, which led to jury verdict that manufacturer had infringed competitor's trade dress in violation of the Lanham Act, amounted to misappropriation of advertising ideas or style of business, within meaning of advertising injury provision of manufacturer's commercial general liability (CGL) insurance policy. 15 U.S.C.A. § 1125(a). Hyman v. Nationwide Mut. Fire Ins. Co., 304 F.3d 1179, 64 U.S.P.Q.2d (BNA) 1411 (11th Cir. 2002) (applying Florida law).

Allegations of insureds' former employer that insureds misappropriated its proprietary pricing structures and methods when bidding on projects alleged claim for advertising injury not subject to liability policy's exclusion for oral or written publication of material before beginning of the policy period, giving rise to duty to defend under Georgia law; former employer arguably alleged claim for misappropriation of advertising ideas or style of doing business, a form of advertising injury covered under the policy, and allegation that the advertising injury occurred immediately after insureds' termination did not necessarily mean that it occurred before the policy period. Colony Ins. Co. v. Corrosion Control, Inc., 187 Fed. Appx. 918 (11th Cir. 2006) (applying Georgia law).

Under Illinois law, advertising injury coverage in liability insurance policy for "use of another's advertising idea" extended to harm suffered by manufacturer as result of insured's alleged use of manufacturer's trademark on its website, insured's making of promotional claims identical to those used by manufacturer in marketing its own product, and insured's statements in trade industry periodicals that it developed technology and maintained proprietary rights over technology that actually described characteristics of manufacturer's product. Central Mut. Ins. Co. v. StunFence, Inc., 292 F. Supp. 2d 1072 (N.D. Ill. 2003) (applying Illinois law).

Advertising injury coverage of umbrella liability policy for idea misappropriation under an implied contract, defamation, piracy, and unfair competition was broader than primary liability coverage in suit and dropped down to primary coverage in suit alleging that insured divulged trade secrets, competed unfairly, and infringed patents; thus, insurer was liable for defense costs associated with those claims on which its coverage was primary. Home Ins. Co. v. National Union Fire Ins. of Pittsburgh, 658 N.W.2d 522 (Minn. 2003), as modified on denial of reh'g, (Apr. 3, 2003).

Under Pennsylvania law, trademark infringement suit involving competing Internet domain sites sought recovery for misappropriation of advertising idea or style of doing business, within meaning of commercial liability policies' "advertising injury" coverage. Cat Internet Services, Inc. v. Providence Washington Ins. Co., 333 F.3d 138 (3d Cir. 2003) (applying Pennsylvania law).

Software manufacturer's suit alleging that insured website used manufacturer's patented method of downloading music to enable customer's to preview music available for purchase conceivably alleged misappropriation of idea concerning solicitation of business so as to support triggering of general insurer's duty to defend action for advertising injury. Amazon.com Intern., Inc. v. American Dynasty Surplus Lines Ins. Co., 120 Wash. App. 610, 85 P.3d 974 (Div. 1 2004).

The court in Kinko's, Inc. v. Shuler, 255 Wis. 2d 834, 2002 WI App 134, 646 N.W.2d 855 (Ct. App. 2002), review denied, 256 Wis. 2d 65, 2002 WI 111, 650 N.W.2d 841 (2002), where the insured appealed a summary judgment holding that its insurer did not have a duty to defend an action that the complaining party brought against the insured, concluded that, when all doubts and inferences are resolved in favor of the insured, the insured had coverage under the "Advertising Injury" provision of its policy and no exceptions applied. The complaining party filed a complaint against the insured, alleging a number of claims against the insured, including that the insured had "misappropriated" and "used" "sales and promotion strategies" and "marketing" plans, causing injury. The insured argued that the insurer had a duty to defend because the claim fell under coverage for "misappropriation of advertising ideas or style of doing business. The court agreed with the insured that the insurer has a duty to defend under the "Advertising Injury" provision of the policy. The insurer contended that the complaint does not allege that the insured advertised and that for there to be coverage, the complaint must allege that the insured used the complaining party's "advertising ideas" in its own advertising. However, the policy defines advertising injury to include "[m]isappropriation of advertising ideas," and the complaint alleged that the insured used the complaining party's trade secrets, including sales, promotion and marketing strategies. The court concluded that, under the applicable rule of law, the complaint alleged a claim for advertising injury. The court was satisfied that the ordinary meaning of "advertising" is broad enough to encompass "sales and promotion strategies" and "marketing." The insured conceded that the word "advertising" does not appear in the complaint, but even the insurer admitted that the complaint need not use the actual word "advertising." The court concluded that the allegations in the complaint were more than sufficient to create a claim that would arguably be covered under the "[m]isappropriation of advertising ideas" coverage.

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§ 10[b] Misappropriation of advertising ideas or style of doing business—"Advertising injury" not found

[Cumulative Supplement]

In the following cases, the courts held that coverage did not exist under the insurance policy, because the underlying action did not allege the enumerated "advertising injury" offense of "misappropriation of advertising ideas or style of doing business."

In Twin City Fire Ins. Co. v. Ennen, 2000 WL 558525 (E.D. Cal. 2000) (applying California law), the court held that there was no coverage under the CGL "advertising injury" insurance policy, because the underlying action, which claimed that the insured failed to pay the value of a marketing plan under an implied–in–fact agreement, did not allege the enumerated "advertising injury" offense of "misappropriation of advertising ideas or style of doing business." The court found that the insured's use or taking of the marketing plan was pursuant to an implied–in–fact agreement, which meant that the insured had the contractual right to use the marketing plan, coupled with a contractual obligation to pay for the use. The fact that the insured breached the implied–in–fact agreement by not paying for the use did not change the character of its earlier lawful taking, under the implied– in–fact agreement, into a "wrongful" taking. Because the insured lacked evidence to prove that the underlying judgment was based on the offense of "misappropriation of an advertising idea," the court ruled that the insurance company did not have a duty to indemnify the insured.

Where the underlying action, which alleged that the insured's subsequent development of a software program effectively appropriated and usurped a competing software developer's research, development, and marketing efforts, did not constitute the "advertising injury" offense of "misappropriation of style of doing business," there was no coverage available under the CGL insurance policy, the court held in Novell, Inc. v. Federal Ins. Co., 141 F.3d 983 (10th Cir. 1998) (applying Utah law). The court concluded that none of the definitions of "style of doing business" fit the allegations in the underlying complaint. First, there was no misappropriation of trade dress because the software developer never alleged that the insured attempted to mimic the outward appearance of his program when the insured created and sold its competing program. Second, although the developer alleged that the insured capitalized on his research, development, and marketing efforts for his program when the insured created and sold its competing program, there was no allegation that the insured misappropriated the developer's comprehensive manner of operating his business. Accordingly, the court affirmed the lower court's ruling and concluded that none of the underlying claims against the insured constituted a predicate offense under the "advertising injury" insurance policy.

In Atlantic Mut. Ins. Co. v. Badger Medical Supply Co., 191 Wis. 2d 229, 528 N.W.2d 486 (Ct. App. 1995), the court held that there was no coverage under the insurance policy, because the underlying action, which claimed that the insured intentionally induced a competitor's former employee to breach the restrictive covenant in order to obtain and control numerous customers served by the competitor, did not allege the "advertising injury" offense of "misappropriation of advertising ideas or style of doing business." First, the court found that the policy language of "misappropriation of advertising ideas or style of doing business" was not ambiguous because the meaning of the phrase was defined either by case law or common usage. Second, the court found that the underlying claim asserted against the insured was one for interference with contract and not either "misappropriation of advertising ideas" or "misappropriation of style of doing business." Although the insured argued that the hiring of the competitor's former employee, who provided the insured with stolen customer lists, essentially appropriated the competitor's "style of doing business," the court found otherwise. The facts showed that there was no allegation in the underlying complaint that the former employee gave the insured the competitor's customer lists. In addition, the court noted that simply because "misappropriation of advertising ideas" could involve confidential information, and "misappropriation of style of doing business" could involve customers, it did not follow that allegations relating to confidential information or customers transformed a claim for interference with contract into a claim covered by the policy. Otherwise, any claim for tortious interference with a restrictive covenant in an employment agreement would be considered a claim for "misappropriation of advertising ideas or style of doing business." Thus, the court affirmed the lower court's ruling and held that because the

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 50 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) nature of the underlying claim against the insured was not for "misappropriation of advertising ideas or style of doing business," it was not covered under the "advertising injury" insurance policy, and the insurance company had no duty to indemnify or defend the insured.

CUMULATIVE SUPPLEMENT

Cases:

Insurer had no duty to defend insured under insurance policy which provided advertising injury coverage in lawsuit against insured brought by third-party alleging insured had a scheme to steal third-party's product; evidence was clear that insured had stolen an idea from third-party and then advertised it, which did not amount to an advertising injury. Westport Reinsurance Management, LLC v. St. Paul Fire & Marine Ins. Co., 80 Fed. Appx. 277 (3d Cir. 2003).

Competitor's action against garage door opener manufacturer, alleging that manufacturer falsely advertised its openers as compatible with competitor's "rolling code" technology, was not suit for misappropriation that triggered insurer's duty to defend manufacturer pursuant to the advertising injury coverage of manufacturer's commercial general liability and commercial umbrella insurance policies; complaint was not result of manufacturer's use of competitor's name or phrases on its packaging, but was instead based on failure of manufacturer's product to live up to advertised promise. Skylink Technologies, Inc. v. Assurance Company of America, 400 F.3d 982, 74 U.S.P.Q.2d 1157 (7th Cir. 2005).

Insured's breach of an implied-in-fact contract was not "misappropriation" under commercial general liability (CGL) and umbrella insurance policies which provided coverage only to injury arising out of misappropriation of advertising ideas or style of doing business; even if insured never have intended to perform, insured was held liable, not for wrongfully taking another's advertising idea or for fraud in formation of contract, but for failing to perform its financial obligations. Twin City Fire Ins. Co. v. Ennen, 64 Fed. Appx. 47 (9th Cir. 2003).

Under Georgia law, former employer's complaint alleging that insureds misappropriated its shipping systems, re-manufacturing processes, accounting systems, quality control systems and inventory control system in setting up competing business did not involve covered "advertising injury" under general liability insurance policy, as there was no allegation that insureds traded on recognizable name, mark or product configuration of former employer. Transportation Ins. Co. v. Freedom Electronics, Inc., 264 F. Supp. 2d 1214 (N.D. Ga. 2003) (applying Georgia law).

Under Illinois law, allegations in underlying consumers' complaints that insured pineapple producer misled consumers by labeling its products as the only products worthy of description as unique or extra-sweet did not involve misappropriation of advertising idea within advertising injury coverage, as complaints did not allege that producer wrongfully took labels from competitor, but instead that producer knew it was not entitled to exclusive use of these descriptions. Del Monte Fresh Produce N.A., Inc. v. Transportation Ins. Co., 500 F.3d 640 (7th Cir. 2007) (applying Illinois law).

Insured's liability for allegedly misappropriating a computerized police reporting system and infringing copyright was outside advertising injury coverage of commercial general liability (CGL) insurance policy; even if the insured's competitor had complained of incidental marketing activities, it never alleged that the insured advertised the offending product or that the advertising engendered the injury. Information Spectrum, Inc. v. The Hartford, 182 N.J. 34, 860 A.2d 926 (2004).

Under Texas law, printing company's claim that insured competitor had misappropriated company's business history and pricing strategy in order "to solicit and misappropriate" company's customers was not within advertising injury coverage provisions of commercial general liability (CGL) insurance policies, which covered use or misappropriation of another's advertising idea in insured's advertisement, and which defined advertisement as "notice that is broadcast or published to the general public or specific market segments"; solicitation of customers did not imply wide dissemination. Continental Cas. Co. v. Consolidated Graphics, Inc., 656 F. Supp. 2d 650 (S.D. Tex. 2009) (applying Texas law).

Patent holder claiming that licensee sold patented holographic imaging machine to holder's potential customer, misappropriated trade secrets, and tortiously interfered with business relationships did not seek damages for injury arising out of misappropriation

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 51 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) of advertising ideas or style of doing business and, therefore, did not allege advertising injury covered by licensee's commercial general liability (CGL) insurance policy; the only damages arose from the alleged transfer and potential customer's use of the machine to manufacture holograms without a license. Pennsylvania Pulp & Paper Co., Inc. v. Nationwide Mut. Ins. Co., 100 S.W.3d 566 (Tex. App. Houston 14th Dist. 2003), review denied, (Aug. 28, 2003).

The term "misappropriation" as used in advertising injury context in general liability insurance policies ordinarily meant to take or acquire wrongfully, and, thus, insurers did not have duty to defend insured, which was a generic drug manufacturer, against claims for fraudulent manipulation of average wholesale price of its drugs, restraint of trade, conspiracy to monopolize, monopolization, and violation of state anti-trust laws; allegations were not reasonably susceptible of an interpretation that they could be covered by policies providing coverage for misappropriating another party's advertising idea or style of doing business. Mylan Laboratories Inc. v. American Motorists Ins. Co., 700 S.E.2d 518 (W. Va. 2010).

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§ 11[a] Patent infringement—Constitutes "advertising injury"

[Cumulative Supplement]

The courts in the following cases held that in an insurance policy providing "advertising injury" coverage, an underlying action of patent infringement is encompassed within the enumerated offenses of "advertising injury."

In Omnitel v. Chubb Group of Ins. Companies, 26 U.S.P.Q.2d (BNA) 1933, 1993 WL 438839 (Cal. Super. Ct. Trial Div. 1993), not certified for publication, the court held that the underlying action of patent infringement against the insured constituted an enumerated "piracy" offense under insurance policies providing "advertising injury" coverage. The court noted that there was a potential for "advertising injury" coverage in the insurance policies under the expressly defined offense of "piracy," because even though the word was without any clarification or reference to patent or copyright law, there was a reasonable expectation of the insured that an accusation of having pirated an invention under patent law might be an insured risk. In addition, the court stated that insurers have the ability to further define "piracy" to exclude patent infringement if they choose.

Caution

This unpublished lower court state decision is adverse to the majority of the federal cases applying California law, set out in § 11[b], which hold that patent infringement does not come within the enumerated offense of "piracy" in an insurance policy providing "advertising injury" coverage.

The allegations of patent infringement fit into the insurance policy's enumerated "advertising injury" offense of "infringement of title" because the term was ambiguous and should be construed against the insurer to protect the objectively reasonable expectations of the insured, the court held in Title Homedics, Inc. v. Valley Forge Ins. Co., 53 U.S.P.Q.2d (BNA) 1155, 1999 WL 33301457 (C.D. Cal. 1999), reconsideration dismissed, 2000 WL 33249823 (C.D. Cal. 2000) (applying California law). The court noted that an insured's expectation that patent infringement would be covered as an "advertising injury" was reasonable because, in 1996, the Patent Act was amended to include "offers to sell," or in other words advertising, as part of the definition of patent infringement.

Caution

This decision is adverse to the majority of California cases, set out in § 11[b], which hold that patent infringement does not constitute the enumerated "infringement of title" offense in insurance policies providing "advertising injury" coverage.

Comment

In a subsequent proceeding, the court in Homedics, Inc. v. Valley Forge Insurance Company, a Pennsylvania Coporation, 315 F.3d 1135, 65 U.S.P.Q.2d (BNA) 1365 (9th Cir. 2003), held that the terms "misappropriation of an advertising idea or style of doing business," in the commercial general liability insurance policy, could not be read in an objectively reasonable manner under California law to include the underlying patent infringement action, in the lawsuit brought by the insured seeking a declaration that the insured had a duty to defend.

In Rymal v. Woodcock, 896 F. Supp. 637 (W.D. La. 1995) (applying Louisiana law), the court held that the enumerated offenses of "piracy" and "unfair competition" in an "advertising injury" insurance endorsement were broad enough to include an underlying claim for patent infringement. The court found that the language of the "advertising injury" endorsement, combined with the words "unfair competition" and "piracy," had been interpreted in a number of different ways, which had resulted in a very cloudy insurance coverage question. Such ambiguous coverage language allowed an insurer to construe the policy in its best interests no matter what the parties originally intended, and to allow an insurer to deny its duty to defend based on this language would be to encourage the drafting of similar language. The court therefore concluded that there is a possibility that patent infringement is included under the headings of "piracy" or "unfair competition" in an "advertising injury" insurance endorsement.

Comment

A subsequent federal court decision in another district, U.S. Test, Inc. v. NDE Environmental Corp., 196 F.3d 1376, 52 U.S.P.Q.2d (BNA) 1845, 40 U.C.C. Rep. Serv. 2d 67 (Fed. Cir. 1999), reh'g denied, (Dec. 17, 1999) (applying Louisiana law), held that an underlying patent infringement claim does not constitute "advertising injury" under an insurance policy. That case is distinguished, however, because it construed the "advertising injury" offense of "infringement of title," rather than the offenses of "piracy" and "unfair competition," as were construed in Rymal v. Woodcock, 896 F. Supp. 637 (W.D. La. 1995). See § 11[b].

The court held in Foundation for Blood Research v. St. Paul Marine and Fire Ins. Co., 1999 ME 87, 730 A.2d 175 (Me. 1999) (certified question from the federal district court), that under a CGL insurance policy providing "advertising injury" coverage, an underlying claim of inducement of patent infringement constitutes the enumerated offense of "belittlement of a product." The court noted that when the underlying complaint alleges, in general but sufficient terms, a claim for inducing patent infringement, the claim includes a potential scenario of belittling to a third party the validity of a patent of another. Accordingly, when the "advertising injury" policy covers injury or damage resulting from making known to third parties material that belittles the work of others, inducement of patent infringement is a covered claim.

Because the enumerated offense of "piracy" is ambiguous in an insurance policy providing "advertising injury" coverage, the term encompasses an underlying claim of patent infringement, the court held in Union Ins. Co. v. Land and Sky, Inc., 247 Neb. 696, 529 N.W.2d 773 (1995). The court noted that when the enumerated offense of "piracy," as used in insurance policies providing "advertising injury" coverage, is not defined in the policies, and one policy specifically excludes patent infringement, that indicates that patent infringement is included in the other policy. The inconsistency in the two insurance policies creates an ambiguity regarding the meaning of the term piracy. Accordingly, because the term is susceptible of two reasonable interpretations, one encompassing patent infringement and one not, the enumerated offense of "piracy" is construed in favor of the insured as encompassing patent infringement.

The court held in U.S. Fidelity & Guar. Co. v. Star Technologies, Inc., 935 F. Supp. 1110 (D. Or. 1996) (applying Oregon law), that the enumerated "advertising injury" offense of "piracy" encompasses patent infringement or inducement to infringe in a CGL insurance policy, because the term "piracy" is susceptible of more than one reasonable interpretation. The court noted that in an "advertising injury" insurance policy, the construction of the term "piracy" as describing only misappropriation in the advertisement itself appears to be more reasonable than the construction of "piracy" as including patent infringement. Yet both constructions are not unreasonable, and so the term "piracy" is ambiguous, and as such, under Oregon law it must be construed in favor of the insured. Thus, the "advertising injury" offense of "piracy" encompasses patent infringement, which necessarily includes an inducement to infringe.

Comment

The circuit court in a different case, Precision Automation, Inc. v. West American Ins. Co., 203 F.3d 832 (9th Cir. 1999) (applying Oregon law), subsequently held that an underlying patent infringement claim does not constitute "advertising injury" under an insurance policy. That case is distinguished because it construed the "advertising injury" offense of "infringement of title," rather than the offenses of "piracy" and "unfair competition," as were construed in U.S. Fidelity & Guar. Co. v. Star Technologies, Inc., 935 F. Supp. 1110 (D. Or. 1996). See § 11[b].

CUMULATIVE SUPPLEMENT

Cases:

Patent infringement complaint against insured automobile manufacturer alleged advertising activities for purposes of determining whether infringement claim came within advertising injury coverage of insured's liability policy under California law where patentee asserted that allegedly infringing build-your-own-vehicle feature included by insured on its website constituted, at least in part, "marketing methods" or "marketing systems," and feature was widely distributed to public at large, despite its purpose of creating customized proposals via user input, unlike solicitations limited to discrete number of known potential customers. (applying California law) Hyundai Motor America v. National Union Fire Ins. Co. of Pittsburgh, PA, 600 F.3d 1092 (9th Cir. 2010).

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§ 11[b] Patent infringement—Does not constitute "advertising injury"

[Cumulative Supplement]

In the following cases, the courts held that in an insurance policy providing "advertising injury" coverage, an underlying action of patent infringement is not encompassed within the enumerated offenses of "advertising injury." Cal Aetna Casualty & Surety Co. v. Superior Court, 19 Cal. App. 4th 320, 23 Cal. Rptr. 2d 442, 28 U.S.P.Q.2d (BNA) 1424 (4th Dist. 1993) Maxconn Inc. v. Truck Ins. Exchange, 74 Cal. App. 4th 1267, 88 Cal. Rptr. 2d 750 (6th Dist. 1999), as modified on denial of reh'g, (Oct. 15, 1999) Mez Industries, Inc. v. Pacific Nat. Ins. Co., 76 Cal. App. 4th 856, 90 Cal. Rptr. 2d 721, 53 U.S.P.Q.2d (BNA) 1167 (2d Dist. 1999), as modified, (Dec. 21, 1999) and review denied, (Mar. 22, 2000) Iolab Corp. v. Seaboard Sur. Co., 15 F.3d 1500, 29 U.S.P.Q.2d (BNA) 1610 (9th Cir. 1994) (applying California law) St. Paul Fire & Marine Ins. Co. v. Advanced Interventional Systems, Inc., 21 F.3d 424, 30 U.S.P.Q.2d (BNA) 1494 (4th Cir. 1994) (applying California law) Everest and Jennings, Inc. v. American Motorists Ins. Co., 23 F.3d 226, 30 U.S.P.Q.2d (BNA) 1534 (9th Cir. 1994) (applying California law) Intex Plastics Sales Co. v. United Nat. Ins. Co., 23 F.3d 254, 30 U.S.P.Q.2d (BNA) 1652 (9th Cir. 1994) (applying California law) Proxima Corp. v. Federal Ins. Co., 26 F.3d 132 (9th Cir. 1994) (applying California law) Travelers Indem. Co. v. Levi Strauss & Co., 30 F.3d 140 (9th Cir. 1994) (applying California law) Big Sur Waterbeds, Inc. v. Maryland Cas. Co., 33 F.3d 58 (9th Cir. 1994) (applying California law) Clary Corp. v. Union Standard Ins. Co, 33 Cal. Rptr. 2d 486, 32 U.S.P.Q.2d (BNA) 1131 (App. 4th Dist. 1994), review denied and ordered not to be officially published, (Dec. 22, 1994) Continental Ins. Co. v. Del Astra Industries, Inc., 35 F.3d 570 (9th Cir. 1994) (applying California law) Classic Corp. v. Charter Oak Fire Ins. Co., 35 U.S.P.Q.2d (BNA) 1726, 1995 WL 295824 (C.D. Cal. 1995) (applying California law)

Aqua Queen Mfg. Co., Inc. v. Charter Oak Fire Ins. Co., 46 F.3d 1138, 33 U.S.P.Q.2d (BNA) 1681 (9th Cir. 1995) (applying California law) Ameron, Inc. v. Insurance Co. of North America, 51 F.3d 279 (9th Cir. 1995) (applying California law) Clark Mfg. Inc. v. Northfield Ins. Co., 187 F.3d 646 (9th Cir. 1999) (applying California law) Owens–Brockway Glass Container, Inc. v. International Ins. Co., 884 F. Supp. 363 (E.D. Cal. 1995), aff'd without opinion, 94 F.3d 652 (9th Cir. 1996) (applying California law) Surgin Surgical Instrumentation, Inc. v. Truck Ins. Exchange, 76 Cal. Rptr. 2d 303 (App. 4th Dist. 1998), review denied and ordered not to be officially published, (Sept. 16, 1998) Kemmer Agr. Mfg. Co. v. Finova Capital Corp., 221 F.3d 1348 (9th Cir. 2000) (applying California law) Franklin Miller, Inc. v. Commerce and Industry Insurance Co., 242 F.3d 381 (9th Cir. 2000) (applying California law) Everett Associates, Inc. v. Transcontinental Ins. Co., 159 F. Supp. 2d 1196 (N.D. Cal. 2001) (applying California law) Conn Lumbermens Mut. Cas. Co. v. Dillon Co., Inc., 9 Fed. Appx. 81 (2d Cir. 2001) (applying Connecticut law) Julian v. Liberty Mut. Ins. Co., 43 Conn. App. 281, 682 A.2d 611 (1996) Del ABB Flakt, Inc. v. National Union Fire Ins. Co. of Pittsburgh, P.A., 1998 WL 437137 (Del. Super. Ct. 1998), aff'd on other grounds, 731 A.2d 811 (Del. 1999) Fla Gencor Industries, Inc. v. Wausau Underwriters Ins. Co., 857 F. Supp. 1560, 32 U.S.P.Q.2d (BNA) 1296 (M.D. Fla. 1994) (apparently applying Florida law) Ill Home Ins. Co. v. American Nat. Can Co., 1997 WL 467180 (N.D. Ill. 1997) (applying Illinois law) Ind Heritage Mut. Ins. Co. v. Advanced Polymer Technology, Inc., 97 F. Supp. 2d 913 (S.D. Ind. 2000) (applying Indiana law) Iowa IMT Ins. Co. v. Paper Systems, Inc., 2001 WL 98545 (Iowa Ct. App. 2001) Ky National Union Fire Ins. Co. of Pittsburgh, PA v. United Catalysts, Inc., 182 F. Supp. 2d 608 (W.D. Ky. 2002) (applying Kentucky law) La U.S. Test, Inc. v. NDE Environmental Corp., 196 F.3d 1376, 52 U.S.P.Q.2d (BNA) 1845, 40 U.C.C. Rep. Serv. 2d 67 (Fed. Cir. 1999), reh'g denied, (Dec. 17, 1999) (applying Louisiana law) Mich Herman Miller, Inc. v. Travelers Indem. Co., 162 F.3d 454, 49 U.S.P.Q.2d (BNA) 1223, 1998 FED App. 373P (6th Cir. 1998) (applying Michigan law) Minn Fluoroware, Inc. v. Chubb Group of Ins. Companies, 545 N.W.2d 678 (Minn. Ct. App. 1996) NH Ekco Group, Inc. v. Travelers Indem. Co. of Illinois, 273 F.3d 409, 61 U.S.P.Q.2d (BNA) 1038 (1st Cir. 2001) (applying New Hampshire law) NJ Filenet Corp. v. Chubb Corp., 324 N.J. Super. 419, 735 A.2d 1170 (App. Div. 1999) Tradesoft Technologies, Inc. v. Franklin Mut. Ins. Co., Inc., 329 N.J. Super. 137, 746 A.2d 1078 (App. Div. 2000) NY A. Meyers & Sons Corp. v. Zurich American Ins. Group, 74 N.Y.2d 298, 546 N.Y.S.2d 818, 545 N.E.2d 1206 (1989) Energex Systems Corp. v. Fireman's Fund Ins. Co., 1997 WL 358007 (S.D. N.Y. 1997) (applying New York law) Ohio United Nat. Ins. Co. v. SST Fitness Corp., 182 F.3d 447, 51 U.S.P.Q.2d (BNA) 1310 (6th Cir. 1999) (applying Ohio law) Or

Precision Automation, Inc. v. West American Ins. Co., 203 F.3d 832 (9th Cir. 1999) (applying Oregon law) Pa Atlantic Mut. Ins. Co. v. Brotech Corp., 857 F. Supp. 423 (E.D. Pa. 1994), order aff'd without opinion, 60 F.3d 813 (3d Cir. 1995) (applying Pennsylvania law) I.C.D. Indus., Inc. v. Federal Ins. Co., 879 F. Supp. 480, 35 U.S.P.Q.2d (BNA) 1481 (E.D. Pa. 1995) (applying Pennsylvania law) Green Machine Corp. v. Zurich American Ins. Group, 2001 WL 1003217 (E.D. Pa. 2001) (applying Pennsylvania law) Tex Cigna Lloyds Ins. Co. v. Bradleys' Elec., Inc., 33 S.W.3d 102 (Tex. App. Corpus Christi 2000), reh'g overruled, (Dec. 14, 2000) and review denied, (May 24, 2001) and reh'g of petition for review overruled, (Sept. 20, 2001) Wash Epoch Pharmaceuticals, Inc. v. Federal Ins. Co., 201 F.3d 443 (9th Cir. 1999) (applying Washington law) Wis Heil Co. v. Hartford Acc. and Indem. Co., 937 F. Supp. 1355 (E.D. Wis. 1996) (applying Wisconsin law) In Aetna Casualty & Surety Co. v. Superior Court, 19 Cal. App. 4th 320, 23 Cal. Rptr. 2d 442, 28 U.S.P.Q.2d (BNA) 1424 (4th Dist. 1993), the court held that in a CGL insurance policy providing coverage for "advertising injury," the underlying action of patent infringement is not an offense of "unfair competition," because patent infringement is not the same as the "passing off" of one's goods as those of another. The court noted that because the "advertising injury" offense of "unfair competition" means common–law "unfair competition," statutory business torts, such as patent infringement, do not come within its meaning.

The court held in Maxconn Inc. v. Truck Ins. Exchange, 74 Cal. App. 4th 1267, 88 Cal. Rptr. 2d 750 (6th Dist. 1999), as modified on denial of reh'g, (Oct. 15, 1999), that the "advertising injury" offense of "infringement of title," as that term is defined in a CGL insurance policy, is a reference to infringement of a legally protected name, appellation, or designation, and not patent infringement. The court noted that the offenses contained in the CGL "advertising injury" policy consisted of common and distinct categories of actionable conduct, and yet there was no mention of patent infringement anywhere in the policy. The absence of any express reference to patent infringement in the policy would lead a reasonable layperson to the conclusion that patent infringement was not covered. The court could not believe that the drafters of the policy intended to expressly cover certain offenses, such as slander, libel, invasion of privacy, and copyright infringement, but chose to incorporate patent infringement by implication under some category that on its face did not include the words "patent infringement."

Neither direct patent infringement nor inducement of infringement falls within the enumerated offenses in an "advertising injury" insurance policy, the court held in Mez Industries, Inc. v. Pacific Nat. Ins. Co., 76 Cal. App. 4th 856, 90 Cal. Rptr. 2d 721, 53 U.S.P.Q.2d (BNA) 1167 (2d Dist. 1999), as modified, (Dec. 21, 1999) and review denied, (Mar. 22, 2000). First, the court stated that because patents do not involve any process or invention that could reasonably be considered an "advertising idea" or a "style of doing business," underlying actions of patent infringement and inducement of infringement do not constitute the "advertising injury" offense of "misappropriation of advertising ideas or style of doing business." Second, the court noted that the "advertising injury" offense of "infringement of copyright, title or slogan" read as a whole, compels the reasonable conclusion that coverage is at most provided for claims involving the following: (1) those matters that are protected by copyright statutes and decisions; and (2) those literary, musical, artistic, or commercial titles, marks, or slogans that are protected by common–law principles of unfair competition. Consequently, "infringement of copyright, title or slogan" cannot reasonably be interpreted to encompass claims involving patent infringement.

In Iolab Corp. v. Seaboard Sur. Co., 15 F.3d 1500, 29 U.S.P.Q.2d (BNA) 1610 (9th Cir. 1994) (applying California law), the court held that patent infringement cannot reasonably be considered an offense of "piracy" within the context of an insurance policy providing "advertising injury" coverage, because "piracy" means misappropriation or plagiarism found in the elements of the advertisement itself. The "advertising injury" of "piracy" therefore means the stealing of an advertisement's text form, logo, or pictures, rather than the product being advertised. Although patent infringement can be piracy of the advertised product, generally it is not piracy of the elements of the advertisement itself.

Comment

The Ninth Circuit essentially overruled the following district court cases, which held that the because the "advertising injury" offense of "piracy" is ambiguous, it encompasses an underlying claim of patent infringement: Aetna Cas. and Sur. Co. v. Watercloud Bed Co., Inc., 1988 WL 252578 (C.D. Cal. 1988) (applying California law); National Union Fire Ins. Co. of Pittsburgh, Pa. v. Siliconix Inc., 729 F. Supp. 77 (N.D. Cal. 1989) (applying California law); New Hampshire Ins. Co. v. R.L. Chaides Const. Co., Inc., 847 F. Supp. 1452, 30 U.S.P.Q.2d (BNA) 1474 (N.D. Cal. 1994) (applying California law).

Because "advertising injury" insurance is purchased to protect against those liabilities resulting from the advertisement itself, the "advertising injury" offenses in the insurance policies do not cover patent infringement, the court held in ABB Flakt, Inc. v. National Union Fire Ins. Co. of Pittsburgh, P.A., 1998 WL 437137 (Del. Super. Ct. 1998), aff'd on other grounds, 731 A.2d 811 (Del. 1999). First, the court found it incomprehensible that parties intent on including coverage for patent infringement would not specifically provide so in the policy. Second, the overwhelming majority of cases conclude that the enumerated "advertising injury" offenses do not provide coverage for patent infringement. Third, the language of the "advertising injury" insurance provision shows that patent infringement does not fall within the enumerated offenses. The court noted that the term "piracy" means piracy of an element of the advertisement and not the product in the advertisement; the term "unfair competition" refers only to the common–law tort and does not refer to conduct prohibited by statute; the term "infringement of title" does not include patent infringement because "title" does not refer to the legal ownership of property; and because the majority of courts agree, patent infringement is not included in the "misappropriation of advertising ideas or style of doing business" offense.

The court in National Union Fire Ins. Co. of Pittsburgh, PA v. United Catalysts, Inc., 182 F. Supp. 2d 608 (W.D. Ky. 2002) (applying Kentucky law), held that the competitor's complaint, in the underlying action against the insured manufacturer, alleged patent infringement, which was not an "advertising injury" covered by the commercial general liability (CGL) policies, under Kentucky law; advertising injury was defined in the policies as "misappropriation of advertising ideas or styles of doing business," and the complaint did not refer to the insured's advertising ideas or business styles, nor did it allege that the insured improperly misappropriated them from the competitor.

The court held in Fluoroware, Inc. v. Chubb Group of Ins. Companies, 545 N.W.2d 678 (Minn. Ct. App. 1996), that in the context of CGL insurance policies providing "advertising injury" coverage, the underlying action of patent infringement did not come within the enumerated offenses. The court stated that the "advertising injury" offense of "misappropriation of advertising ideas or style of doing business" is not ambiguous because it is defined by case law and common usage. The enumerated offense of "misappropriation of advertising ideas" had been defined as the wrongful taking of another's manner of advertising, and the phrase "style of doing business" had been used to refer to "a company's comprehensive manner of operating its business." In addition, the court noted that the enumerated offense of "piracy" meant misappropriation or plagiarism found in the elements of the advertisement itself and that it was absurd to suggest that the offense of "unfair competition" encompassed any form of patent infringement.

The court in Ekco Group, Inc. v. Travelers Indem. Co. of Illinois, 273 F.3d 409, 61 U.S.P.Q.2d (BNA) 1038 (1st Cir. 2001) (applying New Hampshire law), held that a general liability policy (CGL) policy covering "advertising injury" is not intended to provide coverage for ordinary patent violations.

The court in Weiss v. St. Paul Fire and Marine Ins. Co., 283 F.3d 790, 62 U.S.P.Q.2d (BNA) 1195 (6th Cir. 2002) (applying Ohio law), held that the plain meaning of an "advertising injury" defined in the policy as "piracy" and "unfair competition" did not arguably cover the losses due to patent litigation, and therefore the insurer had no duty to defend the insured in the patent infringement litigation.

In Atlantic Mut. Ins. Co. v. Brotech Corp., 857 F. Supp. 423 (E.D. Pa. 1994), order aff'd without opinion, 60 F.3d 813 (3d Cir. 1995) (applying Pennsylvania law), the court held that an underlying action of patent infringement did not constitute any of the enumerated "advertising injury" offenses in a CGL insurance policy providing "advertising injury" coverage. The court noted that the offense of "piracy," viewed in the context of the surrounding policy language, meant misappropriation or plagiarism found in the elements of the advertisement itself, such as its text form, logo, or pictures, rather than in the product being advertised. In addition, a similar contextual analysis compelled the conclusion that patent infringement, as a statutory offense, was not an intended or reasonably perceived meaning of the offense "unfair competition," since "unfair competition" was listed

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 57 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) in the policy provision among other specified common–law torts, including slander, libel, defamation, and violation of the right to privacy. Finally, the court stated that the offense "infringement of title" as used in "advertising injury" policies does not mean patent infringement, or else insurance companies would be liable under this provision for an insured's theft, misappropriation, or conversion of any personal property of another if the property were then advertised for sale.

CUMULATIVE SUPPLEMENT

Cases:

Under California law, commercial general liability policy's coverage for injuries arising out of a "misappropriation of style of doing business," did not include coverage for allegations of patent infringement. Everett Associates, Inc. v. Transcontinental Ins. Co., 35 Fed. Appx. 450 (9th Cir. 2002).

Insureds' alleged patent infringement did not constitute misappropriation of an advertising idea, and, thus, no advertising injury occurred within meaning of insureds' commercial general liability (CGL) insurance policies, and insurers had no duty to defend insureds in underlying patent infringement action, where ideas protected by the patents were not incorporated as elements of insureds' alleged advertising. Dish Network Corp. v. Arch Specialty Ins. Co., 734 F. Supp. 2d 1173 (D. Colo. 2010).

Terms "misappropriation of an advertising idea or style of doing business," in commercial general liability insurance policy, could not be read in objectively reasonable manner under California law to include underlying patent infringement action, in lawsuit brought by insured seeking declaration that insured had duty to defend. Homedics, Inc. v. Valley Forge Insurance Company, a Pennsylvania Coporation, 315 F.3d 1135, 65 U.S.P.Q.2d (BNA) 1365 (9th Cir. 2003) (applying California law).

Insured's advertising of products that allegedly infringed another company's patents, without more, was insufficient to fall within commercial general liability policy provision for advertising injury, where underlying complaint did not allege that insured provided any detailed instructions to its customers on how to infringe the patent. Greenwich Ins. Co. v. RPS Products, Inc., 882 N.E.2d 1202 (Ill. App. Ct. 1st Dist. 2008).

Under Pennsylvania law, patented method for cutting concrete was not patent holder's "style of doing business," or "trade dress," misappropriation of which would amount to "advertising injury" within alleged infringer's liability coverage. Green Mach. Corp. v. Zurich-American Ins. Group, 313 F.3d 837, 65 U.S.P.Q.2d (BNA) 1318 (3d Cir. 2002) (applying Pennsylvania law).

Advertising clause in commercial farmer's liability policy did not obligate insurer to defend and insure farmers against any liability in patent infringement and breach of contract action that seed company brought against farmers for planting seeds saved from crop grown from company's patented seeds; patent infringement was not an advertising injury. Ralph v. Pipkin, 183 S.W.3d 362 (Tenn. Ct. App. 2005), appeal denied, (Dec. 5, 2005).

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[END OF SUPPLEMENT]

§ 12[a] Trademark or trade dress infringement—Constitutes "advertising injury"

[Cumulative Supplement]

In the following cases, the courts held that in an insurance policy providing "advertising injury" coverage, an underlying action of trademark or trade dress infringement is encompassed within the enumerated offenses of "advertising injury." Ark Union Ins. Co. v. Knife Co., Inc., 897 F. Supp. 1213 (W.D. Ark. 1995) (applying Arkansas law) Cal Lebas Fashion Imports of USA, Inc. v. ITT Hartford Ins. Group, 50 Cal. App. 4th 548, 59 Cal. Rptr. 2d 36, 40 U.S.P.Q.2d (BNA) 1809 (2d Dist. 1996), as modified on denial of reh'g, (Nov. 27, 1996)

American Economy Ins. Co. v. Reboans, Inc., 900 F. Supp. 1246, 34 U.S.P.Q.2d (BNA) 1692 (N.D. Cal. 1994), reconsideration denied, (June 22, 1995) (applying California law) Dogloo, Inc. v. Northern Ins. Co. of New York, 907 F. Supp. 1383 (C.D. Cal. 1995) (applying California law) Letro Products, Inc. v. Liberty Mut. Ins. Co., 114 F.3d 1194 (9th Cir. 1997) (applying California law) Federated Mut. Ins. Co. v. Power Lift, 152 F.3d 925 (9th Cir. 1998) (applying California law) Rosco, Inc. v. TIG Ins. Co., 1996 WL 724896 (N.D. Cal. 1996), rev'd on other grounds, 139 F.3d 907 (9th Cir. 1998) (applying California law) Arnette Optic Illusions, Inc. v. ITT Hartford Group, Inc., 43 F. Supp. 2d 1088 (C.D. Cal. 1998) (applying California law) Del Swfte Intern., Ltd. v. Selective Ins. Co. of America, 1994 WL 827812 (D. Del. 1994) (applying Delaware law) Ill Platinum tech., inc. v. Federal Ins. Co., 2000 WL 875881 (N.D. Ill. 2000) (applying Illinois law) Flodine v. State Farm Ins. Co., 2001 WL 204786 (N.D. Ill. 2001) (apparently applying Illinois law) First State Ins. Co. v. Alpha Delta Phi Fraternity, 39 U.S.P.Q.2d (BNA) 1905, 1995 WL 901452 (Ill. App. Ct. 1st Dist. 1995) La Carnival Brands, Inc. v. American Guarantee and Liability Ins. Co., 726 So. 2d 496 (La. Ct. App. 5th Cir. 1999), writ denied, 740 So. 2d 636 (La. 1999) Me American Employers' Ins. Co. v. DeLorme Pub. Co., Inc., 39 F. Supp. 2d 64 (D. Me. 1999) (applying Maine law) Mich Poof Toy Products, Inc. v. U.S. Fidelity and Guar. Co., 891 F. Supp. 1228, 36 U.S.P.Q.2d (BNA) 1343 (E.D. Mich. 1995) (applying Michigan law) American States Ins. Co. v. Hayes Specialties, Inc., 1998 WL 1740968 (Mich. Cir. Ct. 1998) Minn Williamson v. North Star Companies, 1997 WL 53029 (Minn. Ct. App. 1997) NY B.H. Smith, Inc. v. Zurich Ins. Co., 285 Ill. App. 3d 536, 221 Ill. Dec. 700, 676 N.E.2d 221 (1st Dist. 1996) (applying New York law) Allou Health & Beauty Care, Inc. v. Aetna Cas. and Sur. Co., 269 A.D.2d 478, 703 N.Y.S.2d 253 (2d Dep't 2000) American Mfrs. Mut. Ins. Co. v. Quality King Distributors, Inc., 287 A.D.2d 527, 731 N.Y.S.2d 234 (2d Dep't 2001) J.A. Brundage Plumbing & Roto–Rooter, Inc. v. Massachusetts Bay Ins. Co., 818 F. Supp. 553 (W.D. N.Y. 1993), decision vacated pursuant to settlement, 153 F.R.D. 36 (W.D. N.Y. 1994) (applying New York law) Ben Berger & Son, Inc. v. American Motorist Ins. Co., 36 U.S.P.Q.2d (BNA) 1105, 1995 WL 386560 (S.D. N.Y. 1995) (applying New York law) A Touch of Class Imports, Ltd. v. Aetna Cas. and Sur. Co., 901 F. Supp. 175, 38 U.S.P.Q.2d (BNA) 1319 (S.D. N.Y. 1995), adhered to on reargument, (Jan. 12, 1996) (apparently applying New York law) Massachusetts Bay Ins. Co. v. Penny Preville, Inc., 1996 WL 389266 (S.D. N.Y. 1996) (applying New York law) Energex Systems Corp. v. Fireman's Fund Ins. Co., 1997 WL 358007 (S.D. N.Y. 1997) (applying New York law) Pa CAT Internet Systems, Inc. v. Providence Washington Ins. Co., 153 F. Supp. 2d 755 (E.D. Pa. 2001) (applying Pennsylvania law). RI Nortek, Inc. v. Liberty Mut. Ins. Co., 858 F. Supp. 1231 (D.R.I. 1994) (applying Rhode Island law) Tex Industrial Molding Corp. v. American Mfrs. Mut. Ins. Co., 17 F. Supp. 2d 633 (N.D. Tex. 1998), order vacated pursuant to settlement, 22 F. Supp. 2d 569 (N.D. Tex. 1998) (applying Texas law) Gemmy Industries Corp. v. Alliance General Ins. Co., 1998 WL 804698 (N.D. Tex. 1998), aff'd without opinion, 200 F.3d 816 (5th Cir. 1999) (applying Texas law) Bay Elec. Supply, Inc. v. Travelers Lloyds Ins. Co., 61 F. Supp. 2d 611 (S.D. Tex. 1999) (applying Texas law)

Wis Charter Oak Fire Ins. Co. v. Hedeen & Companies, 280 F.3d 730, 61 U.S.P.Q.2d (BNA) 1557, 98 A.L.R.5th 687 (7th Cir. 2002), reh'g and reh'g en banc denied, (Mar. 12, 2002) (applying Wisconsin law) In Union Ins. Co. v. Knife Co., Inc., 897 F. Supp. 1213 (W.D. Ark. 1995) (applying Arkansas law), the court held that within the context of an "advertising injury" insurance contract, the underlying actions of "passing off" and trademark infringement constituted the offense of "misappropriation of advertising ideas or style of doing business." The court noted that other courts that had addressed the same issue under the same form policy had concluded that a trademark is an "advertising idea" or "style of doing business" Moreover, these courts had concluded that an action for infringement of a trademark is properly called an action for "misappropriation," both of "advertising ideas" and one's "style of doing business." In addition, the court remarked that had the drafters of the "advertising injury" insurance policy wanted to limit their exposure to suits arising under the common–law tort of misappropriation, or to exclude exposure for actions involving trademarks, it would have been a simple matter to do so. In fact, previous "advertising injury" insurance policies (pre–1986 CGL form) did expressly exclude actions for trademarks. Finally, the court also held that an action for trademark infringement constituted the "advertising injury" offense of "infringement of a copyright, title or slogan," as those terms were used in the insurance policy.

The court held in Lebas Fashion Imports of USA, Inc. v. ITT Hartford Ins. Group, 50 Cal. App. 4th 548, 59 Cal. Rptr. 2d 36, 40 U.S.P.Q.2d (BNA) 1809 (2d Dist. 1996), as modified on denial of reh'g, (Nov. 27, 1996), that in a CGL insurance policy providing "advertising injury" coverage, an underlying trademark infringement action is covered under the "misappropriation of an advertising idea or style of doing business" offense. The court stated that although the misappropriation of an "advertising idea" certainly would include the theft of an advertising plan from its creator without payment, it is also reasonable to apply it to the wrongful taking of the manner or means by which another advertises its goods or services. Because one of the basic functions of a trademark is to advertise the product or services of the registrant, and a trademark could reasonably be considered an integral part of an entity's "style of doing business," it therefore is objectively reasonable to expect insurance coverage under the "advertising injury" provision. In addition, the court noted that the fact the trademark exclusion was dropped from 1986 standard CGL policy form along with the "unfair competition" offense and replaced with the offense of "misappropriation of an advertising idea or a style of doing business" contributed to the objectively reasonable expectation that trademark infringement is a covered act under the "advertising injury" provision.

Under a CGL insurance policy providing "advertising injury" coverage, an underlying action of trademark infringement is encompassed within the meaning of the expressly enumerated "infringement of title" offense, while an action of trade dress is encompassed within the offense of "misappropriation of style of business," the court held in American Economy Ins. Co. v. Reboans, Inc., 900 F. Supp. 1246, 34 U.S.P.Q.2d (BNA) 1692 (N.D. Cal. 1994), reconsideration denied, (June 22, 1995) (applying California law). The court stated that this construction agreed with decisions from numerous other jurisdictions, which defined the "advertising injury" offense of "infringement of title" as claims based on the confusion of names or designations, such as trademarks. In addition, numerous courts that had examined the "advertising injury" coverage for "misappropriation of style of doing business had concluded that the term refers to trade dress infringement, because "style of doing business" refers to a company's comprehensive manner of doing business, which is essentially the same as the more widely used term of "trade dress."

In First State Ins. Co. v. Alpha Delta Phi Fraternity, 39 U.S.P.Q.2d (BNA) 1905, 1995 WL 901452 (Ill. App. Ct. 1st Dist. 1995), the court held that the enumerated offense of "infringement of title or slogan" encompassed an underlying action for trademark infringement, in a CGL insurance policy providing "advertising injury" coverage. The court noted that the dictionary definition of title is "a mark, style, or designation; a distinctive appellation; the name by which anything is known," while the dictionary definition of slogan is "a rallying or battle cry; a brief striking phrase used in advertising or promotion; a word or phrase printed on a piece or mail." Thus, based on the definitions of "title" and "slogan," the court found that an underlying complaint alleging infringement of trademark was with the coverage of the "advertising injury" policy.

The court held in American Employers' Ins. Co. v. DeLorme Pub. Co., Inc., 39 F. Supp. 2d 64 (D. Me. 1999) (applying Maine law), that allegations set forth in an underlying trademark infringement action fell within the definition of the "misappropriation of style of doing business" offense under CGL and umbrella "advertising injury" insurance policies. The court noted because

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 60 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) one's mark and name is an integral part of an entity's "style of doing business," such misappropriation of "style of doing business" would include trademark, tradename, or service mark infringement. In addition, because a "title" may be a mark and thus be protected as a trademark, the court concluded, as other courts had done, that an action for trademark infringement can also be described as an offense for "infringement of a copyright, title, or slogan."

The enumerated offense of "misappropriation of advertising ideas or style of doing business" incorporated an underlying action of trade dress infringement in an insurance policy providing "advertising injury" coverage, the court held in American States Ins. Co. v. Hayes Specialties, Inc., 1998 WL 1740968 (Mich. Cir. Ct. 1998). The court noted that because a product's shape, appearance, or ornamental features are specifically designed so that its exhibition or display acts as advertising, any unauthorized copying of such unique and identifying features that causes or may cause confusion as to the source of the product is a dilution of the injured party's distinctive trade dress and constitutes the offense of "misappropriation of advertising ideas or style of doing business." Put differently, although there is generally no "advertising injury" coverage for the mere exhibition or display of a product whose features carry no communicative intent (functional trade dress), such coverage exists when the product's features are intended to communicate a secondary meaning (nonfunctional trade dress).

In J.A. Brundage Plumbing & Roto–Rooter, Inc. v. Massachusetts Bay Ins. Co., 818 F. Supp. 553 (W.D. N.Y. 1993), decision vacated pursuant to settlement, 153 F.R.D. 36 (W.D. N.Y. 1994) (applying New York law), the court held that there is "advertising injury" coverage under a CGL insurance policy for trademark or tradename infringement since that underlying claim falls within the enumerated offenses of "misappropriation of advertising ideas or style of doing business" and "infringement of title or slogan." The court stated that "misappropriation of an advertising idea" means the wrongful taking of the manner by which another advertises its goods or services, which includes the misuse of another's trademark or tradename. Similarly, because one's mark and name is an integral part of an entity's "style of doing business," such "misappropriation of style of doing business" includes trademark, tradename or servicemark infringement. In addition, because the term "title" is defined in the dictionary as "a mark, style or designation," and a "slogan" or plurality of words can function as a mark to identify and distinguish goods or services, the court concluded that clearly infringement of "title" or "slogan" can also include trademark or tradename infringement.

The court held in Bay Elec. Supply, Inc. v. Travelers Lloyds Ins. Co., 61 F. Supp. 2d 611 (S.D. Tex. 1999) (applying Texas law), that an underlying allegation of trademark or trade dress infringement is encompassed within the "advertising injury" offense of "misappropriation of advertising ideas or style of doing business" in a CGL insurance policy. The court noted that until 1986, the standard ISO CGL form included "unfair competition" as a covered class of "advertising injuries" and explicitly excluded injuries resulting from trademark, service mark, and tradename infringement. In 1986, the ISO revised the standard form, and "unfair competition" was eliminated in favor of "misappropriation of advertising ideas and style of doing business," while the trademark, service mark, and tradename exclusion was eliminated. Thus, a policyholder over time could reasonably infer that claims related to trademark and trade dress infringement are not excluded from a CGL policy providing "advertising injury" coverage, based on the 1986 revision of the standard form.

The court in Charter Oak Fire Ins. Co. v. Hedeen & Companies, 280 F.3d 730, 61 U.S.P.Q.2d (BNA) 1557, 98 A.L.R.5th 687 (7th Cir. 2002), reh'g and reh'g en banc denied, (Mar. 12, 2002) (applying Wisconsin law), held that under Wisconsin law the advertising injury provision of a commercial general liability (CGL) insurance policy, which extended to injuries arising out of infringement of copyright, title, or slogan, encompassed claims of trademark infringement asserted by a toy manufacturer against the insured companies that developed and marketed toy concepts, even though the policy did not expressly refer to trademark infringement. The insurer contended that trademark infringement was not a covered offense under the contract because the contract definition of "advertising injury" did not expressly refer to trademark infringement, one of "the oldest and best known intellectual property offenses." The insurer argued that the specific inclusion of "infringement of copyright" in the list of advertising injuries led to the conclusion that the absence of an express reference to "trademark infringement" meant that trademark infringement was not covered under the contract. The court noted, however, that the contract also referred to "infringement of … title or slogan," conduct that was not a distinct, recognized offense. The court noted that infringement of title "presumably" involved titles "of books, songs, products, services, and so forth" and was not clearly limited, as the insurer

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 61 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) asserted, to the infringement of a noncopyrightable title of a creative work. The court found that the term "infringement of … title" as used in the contract was broad enough to encompass claims of trademark infringement as alleged in the complaint.

CUMULATIVE SUPPLEMENT

Cases:

Under Indiana law as predicted by district court, trademark infringement claim in underlying action alleged injury caused by "misappropriation of advertising ideas or style of doing business" covered under general commercial liability policy as would trigger insurer's duty to defend, provided that infringement claim arose solely out of insured's advertising activities; not only were trademarks frequently used in advertising and often advertisements in themselves, but broad interpretation of "style of doing business" would likewise include a company's use of its trademarks. Aearo Corp. v. American Intern. Specialty Lines Ins. Co., 676 F. Supp. 2d 738 (S.D. Ind. 2009) (predicting Indiana law).

The court in American States Ins. Co. v. Dastar Corp., 2004 WL 2324688 (D. Or. 2004), order vacated on reconsideration on other grounds, 2005 WL 522115 (D. Or. 2005), held that Oregon's courts would follow the majority rule that trademark infringement falls within misappropriation coverage.

Under advertising injury liability policies defining "advertising injury" to include "misappropriation of advertising ideas or style of doing business" or "infringement of copyright, title or slogan," the advertising injury coverage provision extended to a trademark infringement claim. Kim Seng Co. v. Great American Ins. Co. of New York, 179 Cal. App. 4th 186, 2009 WL 3791874 (2d Dist. 2009).

Under Connecticut law, trade dress infringement claims asserted against insured tea manufacturer by its competitor, in which competitor alleged that insured had marketed herbal teas in new packaging with trade dress confusingly similar to that of competitor's boxes, involved claims for "advertising injury" caused by an offense committed in course of advertising products, that came within scope of insured's liability policy, to extent that insured had copied competitor's packaging and displayed its packaging in published advertisements. R.C. Bigelow, Inc. v. Liberty Mut. Ins. Co., 287 F.3d 242, 62 U.S.P.Q.2d (BNA) 1529 (2d Cir. 2002) (applying Connecticut law).

Under Illinois law, business owners liability insurance policy, that covered, among other possibilities, "[i]nfringement of copyright, title or slogan," covered claim for advertising injury, such as underlying federal and state law trademark infringement claims asserted against insured. Lanham Act, § 32(1), 15 U.S.C.A. § 1114(1). Capitol Indem. Corp. v. Elston Self Service Wholesale Groceries, Inc., 551 F. Supp. 2d 711 (N.D. Ill. 2008) (applying Illinois law).

Trade dress infringement and related claims in underlying suit constituted "misappropriation of advertising ideas or style of doing business," for purposes of coverage under commercial general liability (CGL) insurance policy, under Kentucky law; underlying complaint averred that franchisor's product and business model were virtually identical to those of allegedly infringed party. Pizza Magia Intern., LLC v. Assurance Co. of America, 447 F. Supp. 2d 766 (W.D. Ky. 2006) (applying Kentucky law).

Under Michigan law, competitor's trademark and trade dress infringement complaint against insured manufacturer arising in part from insured's advertisements and packaging utilizing competitor's "trademark" phrase, "The Wearable Light," to describe insured's brand of hand-held flashlights was potentially within "infringement of slogan" advertising injury coverage of business liability insurance policy, even though complaint referred to phrase as competitor's trademark and policy did not provide coverage for trademark and trade dress infringement; "slogan" was not defined in policy but under its plain meaning did not necessarily refer to trademarks, and competitor's own use of phrase in its advertising could be construed as catchword or catch phrase used to promote products rather than as trademark. Cincinnati Ins. Co. v. Zen Design Group, Ltd., 329 F.3d 546, 2003 FED App. 0158P (6th Cir. 2003) (applying Michigan law).

Complaint against insured for trademark infringement and counterfeiting stated claim of trade dress infringement within the advertising injury coverage of commercial general liability (CGL) insurance policy; the insured allegedly manufactured and sold inferior imitations of competitor's trademarked seals, used competitor's trademarks to identify its own seals, counterfeited

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 62 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) seal component products by representing them to be competitor's products, and sent a counterfeit seal to a customer in a crate marked with a competitor's label; the allegations were based on deception and unfair competition. Citizens Insurance Company v. Pro-Seal Service Group, Inc., 268 Mich. App. 542, 710 N.W.2d 547 (2005).

Trademark infringement fell within the scope of "misappropriation of advertising ideas or style of doing business" as set forth in commercial general liability (CGL) policy, thereby triggering insurer's duty to defend its insured in trademark infringement action. General Cas. Co. of Wisconsin v. Wozniak Travel, Inc., 762 N.W.2d 572 (Minn. 2009).

Injury caused by insured's infringement of intellectual property owner's trade dress is an "advertising injury" under New York law. Professional Product Research Inc. v. General Star Indem. Co., 623 F. Supp. 2d 438 (S.D. N.Y. 2008) (applying New York law).

Complaint alleging that insureds misused or infringed furniture manufacturer's trademark or "trade dress" alleged advertising injury covered by terms of commercial general liability (CGL) policies. Cosser v. One Beacon Ins. Group, 15 A.D.3d 871, 789 N.Y.S.2d 586 (4th Dep't 2005).

Under the law of North Carolina, injuries alleged by automobile company resulting from the alleged wrongful utilization by computer company of automobile company's trademark constituted "advertising injuries" within meaning of liability insurance policy issued to computer company. State Auto Property and Casualty Insurance Company v. Travelers Indemnity Company of America, 343 F.3d 249, 67 U.S.P.Q.2d (BNA) 1914 (4th Cir. 2003) (applying North Carolina law).

Trade-dress infringement claim in underlying action against insured potentially fell within "advertising injury" provision of insurance policy, triggering insurer's duty to defend; underlying complaint alleged that insured infringed its trade dress, alleged that insured engaged in advertisement, and claimed causal connection between injury and insured's advertisement, and exclusions in policy did not apply. Westfield Cos. v. O.K.L. Can Line, 155 Ohio App. 3d 747, 2003-Ohio-7151, 804 N.E.2d 45 (1st Dist. Hamilton County 2003), appeal not allowed, 102 Ohio St. 3d 1459, 2004-Ohio-2569, 809 N.E.2d 33 (2004).

An underlying suit premised upon trademark infringement by the insured qualifies as injury arising out of the offense of "misappropriation of advertising ideas or style of doing business," as necessary to constitute an "advertising injury," for purposes of determining whether insured is entitled to defense or indemnification in underlying suit under a commercial general liability (CGL) policy providing coverage for an "advertising injury." Super Duper Inc. v. Pennsylvania Nat. Mut. Cas. Ins. Co., 683 S.E.2d 792 (S.C. 2009).

Under Utah law, licensor's complaint against licensees alleging that licensees unlawfully used licensor's trade names in their advertisements stated claims for "advertising injury," and thus triggered licensees' insurers' duty under successive commercial general liability (CGL) policies to defend them in licensor's action, where licensor alleged that it suffered injury to its trade names as result of licensees' misconduct, and it expressly sought relief prohibiting licensees from using trade names and trademarks on their websites, in advertising, or in any other way. Ohio Cas. Ins. Co. v. Cloud Nine, LLC, 464 F. Supp. 2d 1161 (D. Utah 2006) (applying Utah law).

Allegations in underlying complaint against insured by its competitor claiming trade dress infringement alleged an "advertising injury," for purposes of determining whether insurer had duty to defend insured in underlying suit pursuant to terms of commercial general liability (CGL) umbrella policy, which included coverage for "advertising injury"; offense of trade dress infringement was contained within policy's coverage for "copying, in your advertisement, a person's or organization's advertising idea or style of advertisement," and competitor expressly identified insured's website as a source of infringing activities, and sought damages for insured's profits from its marketing of products bearing any copy or colorable imitation of competitor's trade dress. Lanham Act, § 43, 15 U.S.C.A. § 1125. Australia Unlimited, Inc. v. Hartford Cas. Ins. Co., 198 P.3d 514 (Wash. Ct. App. Div. 1 2008).

Coverage for "infringement of title" in "advertising injury" provision of commercial general liability (CGL) insurance policy extended to trademark infringement. Acuity v. Bagadia, 2008 WI 62, 750 N.W.2d 817 (Wis. 2008).

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[END OF SUPPLEMENT]

§ 12[b] Trademark or trade dress infringement—Does not constitute "advertising injury"

[Cumulative Supplement]

In the following cases, the courts held that in an insurance policy providing "advertising injury" coverage, an underlying action of trademark or trade dress infringement is not encompassed within the enumerated offenses of "advertising injury."

The court held in Advance Watch Co., Ltd. v. Kemper Nat. Ins. Co., 99 F.3d 795, 40 U.S.P.Q.2d (BNA) 1545, 1996 FED App. 350P (6th Cir. 1996), reh'g and suggestion for reh'g en banc denied, (Dec. 30, 1996), that in the context of an insurance policy providing "advertising injury" coverage, an underlying action of trademark or trade dress infringement is not encompassed within the enumerated offense of "misappropriation of advertising ideas or style of doing business." The court found that the term "misappropriation of advertising ideas or style of doing business" is unambiguous and refers to the unauthorized taking or use of interests other than those that are eligible for protection under statutory or common–law trademark law. In addition, the court noted that because all the "advertising injury" offenses in a CGL insurance policy are concerned mainly with harmful speech in various forms, and a claim for trademark or trade dress infringement need not depend on speech at all, to include trademark or trade dress infringement within the "misappropriation of advertising ideas or style of doing business" offense would expand the sense of "advertising injury" to include nonverbal conduct—a result difficult to rationalize in light of the ordinary meaning of "advertising." Finally, the absence from the "advertising injury" definition of any express reference to trademark infringement adds to the evidence that such an underlying action is not encompassed within the "misappropriation of advertising ideas or style of doing business" offense.

Caution

Although not officially overruled, this decision has been roundly criticized by a subsequent Michigan circuit court decision, American States Ins. Co. v. Hayes Specialties, Inc., 1998 WL 1740968 (Mich. Cir. Ct. 1998), and many other cases set out in § 12[a], in which the courts held that trademark and trade dress infringement is encompassed within the enumerated "advertising injury" offense of "misappropriation of advertising idea or style of doing business." Its precedential value therefore is questionable.

In Palmer v. Truck Ins. Exchange, 21 Cal. 4th 1109, 90 Cal. Rptr. 2d 647, 988 P.2d 568, 53 U.S.P.Q.2d (BNA) 1185 (1999), the court held that in an "advertising injury" umbrella insurance policy that expressly excludes coverage for trademark infringement, the enumerated offense of "infringement of title" does not encompass an underlying claim for trademark infringement, unless that "trademark, servicemark or tradename" is a literary or artistic title or slogan. The court stated that the definition of "title" cannot subsume the definitions of "trademark," "servicemark," or "tradename" as understood in the policy; otherwise, all or part of a trademark exclusion clause becomes meaningless.

Comment

Because a coverage exclusion clause existed for trademark infringement in the policy, this case is distinguished from the majority of California cases, set out in § 12[a], which hold that trademark and trade dress infringement is encompassed within the enumerated offenses of an "advertising injury" insurance policy.

The court held in Industrial Indem. Co. v. Apple Computer, Inc., 79 Cal. App. 4th 817, 95 Cal. Rptr. 2d 528 (1st Dist. 1999), that in an "advertising injury" insurance policy that expressly excludes coverage for trademark infringement, except for "titles or slogans," the enumerated offense of "infringement of title" does not encompass an underlying claim for trademark infringement of a business name. The court noted that to include business names as "titles" under such a policy ignores the express exclusion of coverage for claims of "trademark, servicemark, or tradename" infringement, since every tradename is also a "title" in the broad sense. The parties to such an insurance contract cannot reasonably contemplate both that tradename infringement is

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 64 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) excluded and that infringement of "title," including tradenames, is covered. The only reasonable construction of an "advertising injury" policy exclusion, therefore, is that infringement of registered trademarks, service marks, and tradenames is not covered unless the mark or name in question is either a slogan or a "title" in the narrower and more ordinary sense of the designation given to a work of art or other publishable matter.

Comment

In AC Circuit Breakers v. Hartford Fire Ins. Co., 28 F.3d 104 (9th Cir. 1994) (applying California law), the court held that the underlying action of trademark infringement was not encompassed within any of the enumerated offenses in an insurance policy providing "advertising injury" coverage. The court found that in policies that define "advertising injury" as including the offenses of "defamation," "infringement of copyright, title, or slogan," "piracy," "idea misappropriation under an implied contract," and "violation of the right of privacy," trademark infringement does not fall within the scope of these coverage areas.

Comment

California state courts have not discussed whether the "advertising injury" offense of "infringement of title" encompasses the underlying action of trademark infringement, but a subsequent federal district court decision, American Economy Ins. Co. v. Reboans, Inc., 900 F. Supp. 1246, 34 U.S.P.Q.2d (BNA) 1692 (N.D. Cal. 1994), reconsideration denied, (June 22, 1995) (applying California law), set out in § 12[a], did rule that trademark infringement is encompassed within that offense.

In an insurance policy providing "advertising injury" coverage, an underlying action of trade dress infringement does not come within the enumerated offenses of "advertising injury," where there is copying of only one product or device, the court held in Alpina USA Eyewear, L.L.C. v. Reliance Ins. Co., 122 F.3d 1069 (9th Cir. 1997) (applying California law). The court noted that the underlying trade dress infringement must be broad enough to amount to a "misappropriation of a style of doing business," which means the showing of pervasive similarity in the overall manner of doing business, not just the infringement of one product.

Comment

This unpublished federal court decision distinguishes itself from the leading California case, Lebas Fashion Imports of USA, Inc. v. ITT Hartford Ins. Group, 50 Cal. App. 4th 548, 59 Cal. Rptr. 2d 36, 40 U.S.P.Q.2d (BNA) 1809 (2d Dist. 1996), as modified on denial of reh'g, (Nov. 27, 1996), set out in § 12[a], in which the court held that trademark and trade dress infringement is encompassed within the enumerated offenses of an "advertising injury" insurance policy, by stating that the underlying action in Lebas involved allegations of much broader copying.

The court in Cables & Accessories, Inc. v. Hartford Ins. Co., 2002 WL 77114 (Cal. App. 6th Dist. 2002), nonpublished/ nonciteable, (Jan. 8, 2002) and review filed, (Feb. 14, 2002), held that the insurer had no duty to defend or indemnify the wholesale distributor of computer accessories under a commercial general liability policy provision covering advertising injury, in a suit brought by a buyer for nonconforming goods, where the trademark infringement, even if within the definition of "advertising injury," was not alleged by the buyer and was the legal right of the certification company, not the buyer, and there was no causal link between damages for delivery of nonconforming goods and any widespread promotional activities of the distributor.

In Callas Enterprises, Inc. v. Travelers Indem. Co. of America, 193 F.3d 952, 52 U.S.P.Q.2d (BNA) 1536 (8th Cir. 1999) (applying Minnesota law), the court, by way of dictum, held that an underlying action of trademark infringement was not encompassed within the enumerated offenses of an insurance policy providing "advertising injury" coverage. The court relied on two Sixth Circuit cases in concluding that the "misappropriation of advertising ideas or style of doing business" offense is not so broadly construed as to include trademark or trade dress infringement, and the offense of "infringement of copyright,

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 65 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) title, or slogan" also does not include trademark or trade dress infringement, because trademarks are not "copyrightable," they are not "slogans," and they cannot be considered "titles." The court further bolstered its decision by noting the absence of any express reference to trademark infringement in an "advertising injury" insurance policy.

Caution

A previous Minnesota Court of Appeals decision, Williamson v. North Star Companies, 1997 WL 53029 (Minn. Ct. App. 1997), held that an underlying action of trademark infringement does fall within the enumerated "advertising injury" offenses of "misappropriation of advertising ideas or style of doing business" and "infringement of copyright, title or slogan." In addition, in light of the fact that Callas relied on Advance Watch Co., Ltd. v. Kemper Nat. Ins. Co., 99 F.3d 795, 40 U.S.P.Q.2d (BNA) 1545, 1996 FED App. 350P (6th Cir. 1996), reh'g and suggestion for reh'g en banc denied, (Dec. 30, 1996), which has been roundly criticized by many other cases set out in § 12[a], its precedential value is questionable.

Because the underlying allegation of trademark infringement was not expressly enumerated as an offense, it did not constitute "advertising injury" as defined by a CGL insurance policy, the court held in Amer. Nat. Fire Ins. Co. v. Methods Research Corp., 2000 WL 1785519 (N.D. Ill. 2000) (applying New Jersey law). The court noted that it was nonsense to suppose that if parties had intended the insurance policy in question to cover trademark infringement claims, the policy would explicitly cover infringements of "copyright, title or slogan," but then included trademark infringement, sub silentio, in a different provision, by reference to "style of doing business."

Caution

In light of the fact that this case relied in part on the reasoning of Advance Watch Co., Ltd. v. Kemper Nat. Ins. Co., 99 F.3d 795, 40 U.S.P.Q.2d (BNA) 1545, 1996 FED App. 350P (6th Cir. 1996), reh'g and suggestion for reh'g en banc denied, (Dec. 30, 1996), which has been roundly criticized by many other cases set out in § 12[a], its precedential value is questionable.

In ShoLodge, Inc. v. Travelers Indem. Co. of Illinois, 168 F.3d 256, 49 U.S.P.Q.2d (BNA) 1694, 1999 FED App. 43P (6th Cir. 1999) (applying Tennessee law), the court held that the enumerated offenses of "misappropriation of advertising ideas or style of doing business" and "infringement of copyright, title, or slogan" did not encompass the underlying action of servicemark infringement, in the context of an "advertising injury" insurance provision. First, the court ruled that servicemark infringement does not fall within the offense of "misappropriation of advertising ideas or style of doing business" because that offense does not refer to a category or grouping of actionable conduct that includes trademark or trade dress infringement (of which there is no functional distinction between trade dress and servicemark infringement). Second, servicemark infringement does not fall within the offense of "infringement of copyright, title, or slogan," because trademarks or servicemarks are not copyrightable; they are not "slogans"; the term "title" does not include servicemarks, such as the name of a hotel or other establishment, because it generally refers to the noncopyrightable title of a book, film, or other literary or artistic work. Finally, the court noted that the absence of any express reference to trademark or servicemark infringement in a policy's definition of "advertising injury" further bolstered this interpretation.

Caution

CUMULATIVE SUPPLEMENT

Cases:

Initial complaint filed against insured by competitor, which alleged that insured misused competitor's trademarks and improperly sold items displaying competitor's trademark, did not allege conduct arising from insured's advertisement of its goods, products or services, and thus insurer did not have duty to defend insured under policy providing coverage for an "advertising injury,"

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 66 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) under Virginia law, even though competitor's complaint sought an injunction against advertising in its prayer for relief, where complaint failed to clearly allege that insured engaged in any past advertising-related conduct. Premier Pet Products, LLC v. Travelers Property Cas. Co. of America, 678 F. Supp. 2d 409 (E.D. Va. 2010).

Third party's underlying action against insured, which alleged that insured had misappropriated third party's furniture design, did not allege insured caused third party "advertising injury" so as to trigger general commercial liability insurers' duty to defend insured in underlying action; insurers' policies did not include trademark or copyright infringement as covered offense, third party's complaint stated claims for fraudulent concealment, breach of fiduciary duty, correction of patent inventorship, misappropriation, unjust enrichment, misrepresentation, fraud, and strict liability, but there was no allegation by third party that insured stole its advertising idea, material, slogan, style or title, there was no allegation that third party sustained any injury as a result of insured's advertising in underlying action, third party did not assert claim whose success or failure depended in some way on advertising, and third party complaint failed to allege single claim relating to advertising. Kreuger Intern., Inc. v. Federal Ins. Co., 637 F. Supp. 2d 604 (E.D. Wis. 2008).

Even if proposed third-party claims against insureds alleged "advertising" activity by insureds, in action stemming from alleged misappropriation of trade secrets and use of those secrets to gain advantage in competitive bidding, they did not allege "advertising injury" within meaning of insureds' liability policy, which required injury arising out of misappropriation of advertising ideas or style of doing business. Cooper Engineering, Inc. v. Westchester Fire Ins. Co., 126 Fed. Appx. 808 (9th Cir. 2005).

Under Connecticut law, even if commercial liability insurer's underlying action against insureds, former insurance agents of insurer and its affiliated company, asserted trademark or trade dress infringement claims against insureds, such claims were outside scope of "advertising injury" coverage provision of policy, where "advertising injury" was defined in policy as misappropriation of advertising ideas or style of doing business; tort of misappropriation protected distinct legal interests from those which were subject of trademark protection. Nationwide Mut. Ins. Co. v. Mortensen, 222 F. Supp. 2d 173 (D. Conn. 2002).

Under Illinois law, statements that insured made in industry periodicals and on its website pertaining to manufacturer's electrical fences, which included touting its own product using manufacturer's marketing claims, did not involve "trade dress" within advertising injury coverage of primary insurance policy, where they did not involve misuse of overall impression, or of some distinct feature, of manufacturer's product. Central Mut. Ins. Co. v. StunFence, Inc., 292 F. Supp. 2d 1072 (N.D. Ill. 2003) (applying Illinois law).

Injury for which insured was liable in trademark infringement action was not advertising injury within coverage of liability policy. American Mfrs. Mut. Ins. Co. v. Quality King Distributors, Inc., 16 A.D.3d 607, 792 N.Y.S.2d 555 (2d Dep't 2005).

Under Texas law, commercial general liability (CGL) insurer did not have duty to defend insured against retiree advocacy organization's Lanham Act suit arising from insured's alleged participation in mailing of unauthorized lead cards bearing organization's trademark; policy's "personal and advertising injury" coverage did not include trademark infringement claims, and organization's misrepresentation and false advertising claims were properly characterized as trademark infringement claims. America's Recommended Mailers Inc. v. Maryland Cas. Co., 339 Fed. Appx. 467 (5th Cir. 2009) (applying Texas law).

Under Virginia law, replica automobile manufacturer's alleged copying of competitor's licensed product's shape and design did not constitute conduct giving rise to "advertising injury" under manufacturer's commercial general liability (CGL) policy, even if policy coverage extended to trade dress infringement claims, where trade dress was not primarily nonfunctional. Superformance Intern., Inc. v. Hartford Cas. Ins. Co., 203 F. Supp. 2d 587 (E.D. Va. 2002).

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§ 13[a] Unfair competition or other unfair business practices violations—Constitutes "advertising injury"

[Cumulative Supplement]

In the following cases, the courts held that in an insurance policy providing "advertising injury" coverage, an underlying action of unfair competition or other unfair business practices violations is encompassed within the enumerated offense of "advertising injury."

In Atlapac Trading Co., Inc. v. American Motorists Ins. Co, 1997 WL 1941512 (C.D. Cal. 1997) (applying California law), the court held that in the context of a CGL insurance policy providing "advertising injury" coverage, an enumerated offense of "misappropriation of advertising ideas and style of doing business" encompasses underlying claims for unfair competition and false advertising, because it is objectively reasonable for an insured to expect coverage under this provision for such claims. The court stated that those who buy insurance coverage against lawsuits brought for various offenses committed in the course of "advertising activities" expect the policy to cover a variety of claims, including claims for false designation of origin under the Lanham Act and common–law unfair competition. In other words, the scope of coverage afforded to policyholders for the "unfair competition" offense in the pre–1986 standard CGL insurance policy remains the same for policyholders for the "misappropriation of advertising ideas and style of doing business" offense in the current standard CGL insurance policy.

The court held in Hoosier Ins. Co. v. Audiology Foundation of America, 745 N.E.2d 300 (Ind. Ct. App. 2001), reh'g denied, (June 6, 2001) and transfer denied (Ind. Dec. 13, 2001), that an underlying action for unfair competition between two competitors is encompassed within the "misappropriation of style of doing business" offense in an "advertising injury" insurance policy, because that offense is defined as "a company's comprehensive manner of operating its business." Furthermore, the court noted that the "misappropriation of style of doing business" offense is not restricted to nearly identical competitors for there to be coverage under a policy.

An underlying action for unfair competition is encompassed within a CGL insurance policy's enumerated "advertising injury" offenses of "unauthorized taking of advertising ideas or style of doing business" and "infringement of copyright, title or slogan," when false advertising of standards is involved, the court held in American Simmental Ass'n v. Coregis Ins. Co., 75 F. Supp. 2d 1023 (D. Neb. 1999) (applying Montana law). The court noted that where an underlying complaint alleges the improper designation of a product in violation of unfair business practices law, such false advertising fits within the two enumerated offenses, because the standard or designation is an "advertising idea," a "style of doing business," a "title," or a "slogan."

In Ben Berger & Son, Inc. v. American Motorist Ins. Co., 36 U.S.P.Q.2d (BNA) 1105, 1995 WL 386560 (S.D. N.Y. 1995) (applying New York law), the court held that in an insurance policy providing "advertising injury" coverage, underlying actions of unfair competition and false advertising come within the enumerated offenses of "misappropriation of advertising ideas or style of doing business" and "infringement of copyright," where trade dress infringement is involved. The court noted that unfair competition and false advertising claims are covered by the enumerated offenses when a distinctive trade dress or style of doing business in a design is misappropriated.

The court held in International Communication Material Inc. v. Employer's Ins. of Wausau, 1996 WL 1044552 (W.D. Pa. 1996) (applying Pennsylvania law), that a claim of common–law unfair competition is encompassed within the meaning of the enumerated "advertising injury" offense of "misappropriation of advertising ideas or style of doing business" in a CGL insurance policy providing "advertising injury" coverage. The court noted that although common–law unfair competition relates to the "passing off" of one's goods as those of a competitor, its scope has been extended to misappropriation as well as misrepresentation—to the selling of another's goods as one's own or the misappropriation of what equitably belongs to a competitor. Accordingly, it is reasonable to expect that a "misappropriation of advertising ideas or style of doing business" offense encompasses a claim of common–law unfair competition.

An underlying false advertising claim under the Lanham Act is incorporated within the enumerated "advertising injury" offense of "misappropriation of advertising ideas or style of doing business," where such advertising is an integral part of one's style of business, the court held in Elcom Technologies v. Hartford Ins. Co. of Midwest, 991 F. Supp. 1294 (D. Utah 1997) (applying

Pennsylvania law). The court stated that where an insured is accused of usurping a competitor's style of doing business through its false advertising, such an action is covered within a CGL insurance policy providing "advertising injury" coverage.

CUMULATIVE SUPPLEMENT

Cases:

Insured's alleged display of competitor's product, a cigar-shaped lighter, at a trade show, constituted a "widespread public distribution" within meaning of word "advertisement" in insured's commercial general liability (CGL) policy, so as to impose on insurer a duty to defend claim filed against insured that alleged advertising injury, even if the trade show was not open to general public; the display was presented at one of the cigar industry's largest trade shows, and counsel for insurer conceded that if the product had been advertised on a single billboard with very little exposure to the public because of its isolated location, it would have qualified under the policy as an advertisement. Bear Wolf, Inc. v. Hartford Ins. Co. of Southeast, 819 So. 2d 818 (Fla. Dist. Ct. App. 4th Dist. 2002), review denied, 839 So. 2d 698 (Fla. 2003).

Plaintiffs' false labeling claims in underlying product liability class actions brought against crayon manufacturer when trace amounts of asbestos were found in some crayons could have been considered a form of advertising sufficient to support a claim for coverage arising out of an advertising injury, for purposes of determining in declaratory judgment action after underlying actions were settled whether insurer which issued commercial general liability (CGL) policy covering advertising injuries breached its duty to indemnify manufacturer; plaintiffs' consumer fraud and deceptive trade practices claims against manufacturer stemmed from allegedly fraudulent and/or deceptive conduct arising from the form of advertising manufacturer engaged in, and plaintiffs' claims did not directly challenge the manufacture or production of the crayons themselves. Federal Ins. Co. v. Binney & Smith, Inc., 332 Ill. Dec. 448, 913 N.E.2d 43 (App. Ct. 1st Dist. 2009).

Under New York law, trademark holder's claim that insured "marketed" allegedly infringing goods was potentially covered by "advertising injury" provision of insured's commercial general liability insurance policy, triggering insurer's duty to defend in trademark infringement suit; "marketing" could include activities apart from selling and distribution that were within the embrace of "advertising" as that term was used in the policy. Century 21, Inc. v. Diamond State Ins. Co., 442 F.3d 79, 78 U.S.P.Q.2d 1316 (2d Cir. 2006) (applying New York law).

Under either Texas or Utah law, the antitrust exclusion from personal and advertising injury coverage under a liability policy applied to claims against the insured in an underlying action asserting that the insured had attempted to monopolize the billboard market in violation of state antitrust laws by abusing a regulatory regime, even though no antitrust violations were found in the underlying action; the policy excluded all claims "arising out of" an antitrust violation, the insurer was entitled to rely on the alleged antitrust violations, and even claimed malicious prosecution was for alleged sham lawsuits to maintain a monopoly. Reagan Nat. Advertising v. Hartford Cas. Ins. Co., 190 Fed. Appx. 608, 2006-2 Trade Cas. (CCH) P 75355 (10th Cir. 2006) (applying Texas and Utah law).

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§ 13[b] Unfair competition or other unfair business practices violations—Does not constitute "advertising injury"

[Cumulative Supplement]

In the following cases, the courts held that in an insurance policy providing "advertising injury" coverage, an underlying action of unfair competition or other unfair business practices violations is not encompassed within the enumerated offenses of "advertising injury."

In Proxima Corp. v. Federal Ins. Co., 26 F.3d 132 (9th Cir. 1994) (applying California law), the court held that where there is no allegation of misappropriation of ideas or plans for advertising or communicating information in an underlying complaint of unfair competition under the Lanham Act, such an action is not encompassed within the enumerated offense of "unauthorized

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 69 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) taking of advertising ideas or style of doing business" in an "advertising injury" insurance policy. The court stated that where an unfair competition claim under the Lanham Act alleges that a competitor's confidential ideas defining the functional characteristics of a product are misappropriated by the insured in order to make its own product, such an offense does not appropriate "advertising ideas" and does not deceive consumers into believing the product is manufactured by the competitor, thereby appropriating the competitor's "style of doing business."

In an insurance policy providing "advertising injury" coverage, an underlying action of restraint of trade does not come within the enumerated offenses of "advertising injury," the court held in National Union Fire Ins. Co. of Pittsburgh, Pa. v. Amway Corp., 1993–2 Trade Cas. (CCH) ¶70351, 1993 WL 398397 (W.D. Mich. 1993) (applying Michigan law). The court noted that the undefined offenses in the "advertising injury" definition section ("libel/slander/disparagement," "invasion of privacy," "misappropriation," "copyright infringement") were not obscure or ambiguous. On the contrary, the terms were commonly used in tort and intellectual property law for describing specific offenses. Therefore, drawing on their common usage, the enumerated offenses of "advertising injury" cannot reasonably be understood to apply to unfair trade practice allegations in a restraint of trade claim.

The court held in Amer. Nat. Fire Ins. Co. v. Methods Research Corp., 2000 WL 1785519 (N.D. Ill. 2000) (applying New Jersey law), that an underlying action of unfair competition is not encompassed within the enumerated offense of "misappropriation of advertising ideas or style of doing business" in the context of a CGL insurance policy providing "advertising injury" coverage, because unfair competition is not expressly stated in such coverage. The court noted that it is nonsense to suppose that if the parties intend the insurance policy in question to cover unfair competition claims, the policy would include unfair competition, sub silentio, in a provision, by reference to "misappropriation of advertising ideas or style of doing business."

The court in Danby of North America, Inc. v. Travelers Ins. Co., 25 Fed. Appx. 186 (4th Cir. 2002) (applying North Carolina law), held that under North Carolina law the licensee's breach of contract claim against the insured licensor, which arose out of the insured's alleged breach of the parties' licensing agreement, was not covered as an "advertising injury" under the insured's commercial general liability (CGL) policy, even though the insured allegedly had advised potential customers that the licensed product was inappropriate in some instances; the licensee did not allege injuries resulting from the insured's statements to potential customers, but instead sought to recover for the insured's termination of the licensing agreement.

In Heritage Mut. Ins. Co. v. Ricart Ford, Inc., 105 Ohio App. 3d 261, 663 N.E.2d 1009 (10th Dist. Franklin County 1995), the court held that in the context of an "advertising injury" insurance policy, the enumerated offense of "misappropriation of advertising ideas or style of doing business" does not encompass an underlying action claiming violations of consumer protection statutes, because such violations allege harm to consumers, not to competitors. The court found that the term "misappropriation" is intended to be read with "style of doing business," so that there must be a "misappropriation of the style of doing business," which necessarily involves a competitor.

The court held in Sorbee Intern. Ltd. v. Chubb Custom Ins. Co., 1999 PA Super 178, 735 A.2d 712 (Pa. Super. Ct. 1999), that an underlying action alleging violations of FDA policies and regulations is not encompassed within the enumerated "advertising injury" offense of "misappropriation of advertising ideas" because such statutory violations do not involve misappropriation of a competitor's "advertising idea." The court stated that where an underlying action states that an insured's product does not comply with FDA requirements for the use of certain advertising terms (such as "low calorie," "sugar free"), the offense of "misappropriation of advertising ideas" does not occur because such terms are not original, novel "advertising ideas" created by a competitor.

Where an underlying false advertising and unfair competition complaint merely alleges that an insured falsely advertises compliance with an industry testing standard, there is no coverage under the enumerated offenses in a CGL insurance policy providing "advertising injury" coverage, the court held in Applied Bolting Technology Products, Inc. v. U.S. Fidelity & Guar. Co., 942 F. Supp. 1029, 41 U.S.P.Q.2d (BNA) 1016 (E.D. Pa. 1996), order aff'd without opinion, 118 F.3d 1574 (3d Cir. 1997) (applying Vermont law). First, there is no coverage under the "misappropriation of advertising ideas or style of doing business" offense because a testing standard designation is not a competitor's "idea" for "advertising," "style of doing business," or "trade

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 70 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) dress." Second, the alleged misuse of a testing standard designation does not amount to the "infringement of slogan" offense because such a designation is not owned by a competitor.

In Microsoft Corporation v. Zurich American Insurance Co., 2001 WL 765871 (W.D. Wash. 2001) (applying Washington law), the court held that underlying claims for violations of antitrust law do not fall within the enumerated offenses of a CGL insurance policy, because an "advertising injury" provision is not adopted with the expectation that antitrust allegations are covered. The court noted that this is especially true when such underlying actions are brought by consumers and not competitors.

The court held in Bruner v. Heritage Companies, 225 Wis. 2d 728, 593 N.W.2d 814 (Ct. App. 1999), review denied, 228 Wis. 2d 172, 602 N.W.2d 759 (1999), that in an insurance policy providing "advertising injury" coverage, underlying RICO and other unfair business practices actions do not come within the enumerated offenses of "advertising injury." The court stated that such statutory claims do not involve the offense of "misappropriation of advertising ideas or style of doing business" or "infringement of copyright, title or slogan," because there is no allegation regarding competitive injury.

CUMULATIVE SUPPLEMENT

Cases:

Under California law, new employee's alleged agreement to solicit old employer's customers for new employer did not constitute "advertising injury," within meaning of new employer's commercial general liability (CGL) policy, and thus did not trigger insurer's duty to defend against old employer's lawsuit; covered injury required widespread promotion to public, not one-on- one solicitation of a few customers. Hayward v. Centennial Ins. Co., 430 F.3d 989 (9th Cir. 2005) (applying California law).

Settlement paid by insureds in underlying intellectual property infringement and deceptive trade practices suit arising from insureds' marketing of product to retailers was not covered loss under umbrella policy provision providing coverage for advertising injury; plain language of policy required injury to arise out of an advertisement, and underlying suit arose out of insureds' assembling of group of retailers to view product in insureds' private showroom. Santa's Best Craft, L.L.C. v. Zurich American Ins. Co., 346 Ill. Dec. 733, 941 N.E.2d 291 (App. Ct. 1st Dist. 2010), appeal pending, (Mar. 1, 2011).

Trade secrets action against insured was not suit for "unfair competition" under insurance policy's advertising injury coverage; plain meaning of "unfair competition" under policy did not include misuse of trade secrets. Mutual of Enumclaw Ins. Co. v. Jonas, 35 Fed. Appx. 556 (9th Cir. 2002) (applying Oregon law).

Under Texas law, leaseholder's claim against drilling company for negligent deviation from plotted well bore did not fall within company's commercial general liability policy's coverage for "personal and advertising injury," and thus insurer did not have duty to defend or indemnify company in leaseholder's suit against company, even though leaseholders alleged that they were evicted from their leasehold as result of company's negligence, where policy defined "personal and advertising injury" to include "wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor," and leaseholders' petition did not allege wrongful eviction, wrongful entry, or invasion of private occupancy. Mid-Continent Cas. Co. v. Camaley Energy Co., Inc., 364 F. Supp. 2d 600 (N.D. Tex. 2005) (applying Texas law).

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§ 14[a] Misappropriation of trade secrets—Constitutes "advertising injury"

In the following cases, the courts held that in an insurance policy providing "advertising injury" coverage, an underlying action of misappropriation of trade secrets is encompassed within the enumerated offenses of "advertising injury."

In CNA Casualty of California v. Seaboard Surety Co., 176 Cal. App. 3d 598, 222 Cal. Rptr. 276 (1st Dist. 1986), reh'g denied, (Feb. 13, 1986), the court held that in insurance policies providing "advertising injury" coverage, an underlying claim

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 71 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) of misappropriation of trade secrets is encompassed within the policies' enumerated offenses of "piracy," "unfair competition," and "idea misappropriation." The court found that when these enumerated "advertising injury" offenses are not defined in the policy, they must be construed against the insurance carrier.

The court held in Sentex Systems, Inc. v. Hartford Acc. & Indem. Co., 93 F.3d 578, 39 U.S.P.Q.2d (BNA) 1860 (9th Cir. 1996) (applying California law), that when an underlying claim for misappropriation of trade secrets relates to marketing and sales, the action is encompassed within the enumerated offense of "misappropriation of advertising ideas," in a CGL "advertising injury" insurance policy. The court found that where customer lists, marketing techniques, and other confidential sales information are misappropriated, and not trade secrets relating to the manufacture and production of a product, then coverage exists under a policy. In addition, the offense of "misappropriation of advertising ideas" is not limit to the misappropriation of an actual advertising text, but is concerned with "ideas," a broader term.

An underlying action that alleges the misappropriation of trade secrets is encompassed within the enumerated "advertising injury" offense of "misappropriation of advertising ideas or style of doing business," when the misappropriated secrets involve customer lists and other "advertising ideas," the court held in Aselco, Inc. v. Hartford Ins. Group, 28 Kan. App. 2d 839, 21 P.3d 1011 (2001), review denied, (Sept. 26, 2001). The court found that where the petition and evidence shows the misappropriation of customer and supply lists, catalogs, and other information used to inform potential purchasers of products, then coverage exists under a CGL "advertising injury" insurance policy.

In Merchants Co. v. American Motorists Ins. Co., 794 F. Supp. 611 (S.D. Miss. 1992) (applying Mississippi law), the court held that an underlying action alleging the misappropriation of a customer list trade secret is encompassed within the enumerated offenses of an insurance policy providing "advertising injury" coverage. First, such an underlying action is encompassed within the enumerated "advertising injury" offense of "infringement of copyright, title or slogan," because a misappropriated customer list can be infringement of the list's title. In coming to its conclusion, the court rejected the argument that infringement is limited solely to the context of copyrights, when an insurance policy does not explicitly state so. Moreover, when the word "infringement" is not defined, the court must give that term its plain, ordinary, or popular sense definition: "a breaking into; a trespass or encroachment upon; a violation of a law, regulation, contract or right." Second, because in the ordinary or popular sense a customer list may be fairly said to be an "advertising idea," an underlying action of misappropriation of a customer list trade secret is sufficiently similar to the "advertising injury" offense of "misappropriation of advertising ideas."

The court held in Tradesoft Technologies, Inc. v. Franklin Mut. Ins. Co., Inc., 329 N.J. Super. 137, 746 A.2d 1078 (App. Div. 2000), that the misappropriation of trade secrets related to marketing and sales is encompassed within a CGL insurance policy's enumerated "advertising injury" offense of "misappropriation of advertising ideas or style of doing business." The court stated that although the misappropriation of manufacturing and production trade secrets does not meet the required causal nexus because the injury is the misappropriation and not the advertising by which the misappropriation is revealed, the misappropriation of trade secrets related to marketing and sales does constitutes a misappropriation of advertising ideas within the evident intendment of an "advertising injury" insurance policy.

§ 14[b] Misappropriation of trade secrets—Does not constitute "advertising injury"

[Cumulative Supplement]

In the following cases, the courts held that in an insurance policy providing "advertising injury" coverage, an underlying action of misappropriation of trade secrets is not encompassed within the enumerated offenses of "advertising injury."

The court in Clark Mfg. Inc. v. Northfield Ins. Co., 187 F.3d 646 (9th Cir. 1999), held that under an insurance policy providing "advertising injury" coverage, an underlying complaint that alleges the disclosure of trade secrets through an insured's advertising does not trigger potential coverage under the enumerated offense of "misappropriation of advertising ideas." The court stated that unless the underlying action actually involves the misappropriation of advertising ideas, and not just secrets that are then advertised, no coverage is available under an "advertising injury" insurance provision.

In an insurance policy providing "advertising injury" coverage, an underlying action of misappropriation of trade secrets does not come within the enumerated offenses of "advertising injury," unless the secrets relate to advertising or marketing, the court held in Zurich Ins. Co. v. Amcor Sunclipse North America, 241 F.3d 605, 57 U.S.P.Q.2d (BNA) 2012 (7th Cir. 2001) (applying California law). First, the court found that any use of a rival's trade secrets is not encompassed within the "infringement of title" offense in a policy. Second, customer solicitation does not fit within the offense of "infringement of title," because vendors do not have "title" in their customers or their custom. In addition, when the "infringement of title" offense is read in relation to the accompanying words of "copyright" and "slogan," infringement means using someone else's words, not property.

In Monarch E & S Ins. Services, Inc. v. State Farm Fire and Cas. Co., 38 F. Supp. 2d 841 (C.D. Cal. 1999) (applying California law), the court held that in a CGL insurance policy providing "advertising injury" coverage, the enumerated offense of "misappropriation of advertising ideas or style of doing business" does not encompass an underlying claim for misappropriation of trade secrets, where there is no evidence that the misappropriated trade secrets relate to marketing and sales.

The court in Murphy v. Federal Ins. Co., 2001 WL 902551 (N.D. Cal. 2001) (applying California law), held, by way of dictum, that an underlying action alleging the misappropriation of trade secrets is not covered under an "advertising injury" insurance policy, where the "misappropriation of advertising ideas" offense is not explicitly listed. The court stated that the lack of such language in an insurance policy suggests that the parties deliberately excluded coverage for misappropriation of trade secrets.

In an insurance policy providing "advertising injury" coverage, an underlying action of misappropriation of trade secrets does not come within the enumerated offenses, unless the misappropriated trade secrets have to do with advertising, the court held in Winklevoss Consultants, Inc. v. Federal Ins. Co., 991 F. Supp. 1024 (N.D. Ill. 1998) (applying Illinois law). The court noted that unlike a trademark, which is concerned with the outward appearance, a trade secret is concerned with the inner workings, which is not advertisement. The court therefore concluded that taking a trade secret is not equivalent to the enumerated offense of "misappropriation of advertising ideas or style of doing business" unless the secret has do to with how something is advertised, such as an idea about getting more business, how to promote a product, or even how to approach customers. In addition, the court stated that not one case had ever held that trade secret misappropriation falls within the "advertising injury" offense of "oral or written publication of material that violates a person's right of privacy."

The court held in Nieman's, Ltd. v. Travelers Ins. Cos., 210 F.3d 379 (8th Cir. 2000) (apparently applying Iowa law), that in an insurance policy providing "advertising injury" coverage, an underlying action of misappropriation of trade secrets does not come within the enumerated offenses of "advertising injury," where no advertising ideas or style of business are misappropriated. The court noted that where a business idea is misappropriated, unless that idea has something to do with advertising, it does not fall under the offense of "misappropriation of advertising ideas or style of doing business." In addition, the court held that where a misappropriated trade secret destroys the chances of someone's obtaining a patent, this conduct does not amount to the offense of "infringement of title" as that term is used in an "advertising injury" policy.

In GAF Sales & Service, Inc. v. Hastings Mut. Ins. Co., 224 Mich. App. 259, 568 N.W.2d 165 (1997), the court held that an underlying complaint of misappropriation of trade secrets does not constitute the enumerated "advertising injury" offense of "misappropriation of advertising ideas or style of business" where no advertising ideas or style of business are misappropriated. For example, the court stated that activities such as the retention of copies of drawings and software for a machine, use of customer lists, or interference with contractual relations do not constitute a "misappropriation of advertising ideas or style of business."

The court held in American States Ins. Co. v. Vortherms, 5 S.W.3d 538 (Mo. Ct. App. E.D. 1999), reh'g and/or transfer denied, (Nov. 10, 1999) and transfer denied, (Dec. 21, 1999) (applying Missouri law), that an underlying complaint alleging the misappropriation of trade secrets does not fall under the enumerated offenses of an "advertising injury" insurance policy when no trade dress misappropriation is involved. The court noted that when an underlying complaint alleges the misappropriation of trade secrets of one's tangible personal property, and not trade secrets relating to one's outside appearance, there is no coverage under the enumerated offense of "misappropriation of advertising ideas or style of business," since trade dress is necessary for "advertising injury" coverage. This is so because in the misappropriation of trade secrets of tangible property, there is no

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 73 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) evidence that prospective customers or the public generally would ever know that the defendants were using the stolen trade secrets.

Where an underlying action of misappropriation of trade secrets does not allege the theft of sales or marketing secrets, it is not encompassed within the enumerated offense of "misappropriation of advertising ideas or style of doing business," in an insurance policy providing "advertising injury" coverage, the court held in Frog, Switch & Mfg. Co., Inc. v. Travelers Ins. Co., 193 F.3d 742, 52 U.S.P.Q.2d (BNA) 1288 (3d Cir. 1999) (applying Pennsylvania law). The court stated that a reasonable insured's understanding of the "misappropriation of advertising ideas or style of doing business" offense necessarily involves an advertising idea, not just a nonadvertising idea that is made the subject of advertising. The misappropriation of trade secrets relating to the manufacture of a product line therefore does not allege an offense of "misappropriation of advertising ideas or style of doing business" under an "advertising injury" insurance policy.

CUMULATIVE SUPPLEMENT

Cases:

For purposes of provision of business owner's policy that provided coverage for advertising injury, which included misappropriation of advertising ideas or style of doing business, competitor's allegation of insured's trade-secret misappropriation did not trigger coverage under "misappropriation of advertising ideas or style of doing business" provision; competitor alleged that trade secrets involved proprietary methods of analyzing market research, not secret ideas for advertising products and services. Westfield Ins. Co. v. Factfinder Marketing Research, Inc., 2006-Ohio-4380, 860 N.E.2d 145 (Ohio Ct. App. 1st Dist. Hamilton County 2006), appeal allowed, 2007-Ohio-152 (Ohio 2007).

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§ 15. Negligent misrepresentation

In the following cases, the courts adjudicated whether an underlying action of negligent misrepresentation is encompassed within the enumerated offenses of "advertising injury" in an insurance policy providing "advertising injury" coverage.

In Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336 (9th Cir. 1996) (applying California law), the court held that in an insurance policy providing "advertising injury" coverage, an underlying action of negligent misrepresentation did not come within the enumerated "advertising injury" offense of "any negligent act, error or omission in the use of advertising or merchandising ideas," because the clause did not create liability for general negligence. The court stated that the policy language itself did not extend to any negligent act, error, or omission in the advertisement, but rather created liability only for a negligent act, error, or omission in the use of advertising or merchandising ideas. In addition, an "advertising injury" policy is designed to cover dignitary injuries such as defamation, libel, and invasion of privacy, and other kinds of injury, such as misappropriation and passing off, that might occur in the text, words, or form of an advertisement. A claim for negligent misrepresentation does not fit into these categories, and an insured cannot reasonably expect that the additional offense of "any negligent act, error or omission in the use of advertising or merchandising ideas" expands the coverage to embrace such a claim.

The court held in Dugger v. Upledger Inst., 795 F. Supp. 184 (E.D. La. 1992), reconsideration and reh'g denied, 1992 WL 364976 (E.D. La. 1992) and aff'd without opinion, 8 F.3d 20 (5th Cir. 1993) (applying Louisiana law), that an underlying suit for negligent misrepresentation is not encompassed within the enumerated offenses of an "advertising injury" insurance policy. The court found it extremely difficult to read coverage of negligent misrepresentation into the clear language of the definition of "advertising injury," which covers themes of defamation, invasion of privacy, and misappropriation of intellectual property.

§ 15.5. Other acts

[Cumulative Supplement]

The following authority considered whether other acts constituted advertising injury for the purposes of advertising injury insurance.

CUMULATIVE SUPPLEMENT

Cases:

Complaint alleging that insured made and sold counterfeit National Football League (NFL) jerseys potentially stated cause of action for slogan infringement covered by insurance policy that covered advertising injury, thus giving rise under California law to insurer's duty to defend; although complaint did not contain claim for slogan infringement, facts alleged supported such claim by stating that insured sold jersey containing phrase "Steel Curtain," which was used to promote fan loyalty to NFL team Pittsburgh Steelers, and, rather than conceding standing or expressly disclaiming slogan infringement, underlying plaintiff supported its standing to bring slogan infringement claim by purportedly ambiguous statements that underlying plaintiff was "jointly owned in equal shares by the Member Clubs of the NFL" and that "[t]he Steelers [an NFL Member Club] [had] strong common law rights in the mark 'Steel Curtain.' " Hudson Ins. Co. v. Colony Ins. Co., 624 F.3d 1264 (9th Cir. 2010).

Purported connection between "offense" of slandering of services of insured condominium owners' association and alleged injuries sustained by one owner with regard to trespass allowed or perpetrated by association's management company was far too indirect under Utah law to come within coverage of provision covering "advertising injury" in business liability insurance policy, where advertising injury meant "injury arising out of one or more of the following offenses: a. oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's services." Chimera Inv. Co. v. State Farm Fire & Cas. Co., 268 Fed. Appx. 793 (10th Cir. 2008).

Investors' claims that investment company and its principal made false and misleading statements in advertising and promotional materials were not claims for "advertising injury" as defined by liability insurance policies issued to company and principal and, thus, were not covered by such policies; investors did not claim that company or principal appropriated their advertising ideas or style of doing business, or infringed their copyright, name, or style, and any advertising misconduct was only tangentially related to investors' injuries, which were actually caused by the misappropriation of their investments. McGregor v. Columbia Nat. Ins. Co., 298 Ga. App. 491, 680 S.E.2d 559 (2009).

Insured's act of shipping a repaired product in competitor's packaging with insured's name affixed to it was not "advertisement" and did not result in "advertising injury" covered by commercial general liability (CGL) insurance policy, even if members of public could see the package at distribution center; the policy defined "advertisement" as notice broadcast or published to the general public or specific market segments for the purpose of attracting customers or supporters, the insured sent product to a specific customer in competitor's container to complete a single transaction and used label to identify insured as source for that specific customer, and possibility that other customers would view the package and do business with insured was incidental and remote benefit. Citizens Ins. Co. v. Pro-Seal Service Group, Inc., 477 Mich. 75, 730 N.W.2d 682 (2007).

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IV. WHETHER "ADVERTISING INJURY" WAS CAUSED BY "ADVERTISING ACTIVITY"

§ 16[a] Libel, slander, or disparagement—Caused by "advertising activity"

The courts in the following cases held that coverage existed under the "advertising injury" insurance policy, because the "advertising injury" offense of "libel, slander or disparagement" was caused by the insured's "advertising activity."

In CNA Casualty of California v. Seaboard Surety Co., 176 Cal. App. 3d 598, 222 Cal. Rptr. 276 (1st Dist. 1986), reh'g denied, (Feb. 13, 1986), the court held that coverage existed under the "advertising injury" insurance policy, because the "advertising injury" offense of "libel, slander or disparagement" was caused by the insured's function as the advertising arm of its member banks. The court stated that even if the court accepted the insurance company's definition of "advertising" as "the action of

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 75 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) calling something to the attention of the public especially by means of printed or broadcast paid announcements," because the insured was a regional clearinghouse for the credit card system, and the entire question of the use or misuse of the credit card "servicemark" was central to the underlying lawsuit, it was clear that the factual allegations in the underlying complaint referred at least potentially to misrepresentations, defamations, and disparagements made to the public. Accordingly, the court affirmed the lower court's ruling that the insurance company had a duty to defend the insured in the underlying action.

The court held in Knoll Pharmaceutical Co. v. Automobile Ins. Co. of Hartford, 152 F. Supp. 2d 1026, R.I.C.O. Bus. Disp. Guide (CCH) ¶10171 (N.D. Ill. 2001) (applying Illinois law), that because there was a sufficient causal connection between the insured's marketing and advertising of its drug as more effective than competing drugs and the offense of "libel, slander or disparagement," coverage existed under the CGL "advertising injury" insurance policies. Although the underlying plaintiffs were not directly libeled or slandered by the insureds, the insureds' marketing plan of suppression and disparagement of competing drugs resulted in the plaintiffs' paying excessive costs for the insureds' drug. Because the court found a causal chain between the "disparagement" offense and the injury of higher prices, the insurance company had a duty to defend the insureds in the underlying action.

The court held in Home Ins. Co. v. Waycrosse, Inc., 990 F. Supp. 720 (D. Minn. 1996), aff'd without opinion, 131 F.3d 143 (8th Cir. 1997) (applying Minnesota law), that coverage existed under the "advertising injury" insurance policy, because the "advertising injury" offense of "libel, slander or disparagement" was caused by the insured's advertising and marketing of a radio device as its own. The court noted that because many of the factual allegations in the underlying complaint related to statements that the insured made in advertising and marketing the radio device as its own, when in fact the device was developed by a competitor and not the insured, it was arguable that the "defamatory statements" and "fraudulent misrepresentations" identified in the underlying complaint were statements made in connection with the insured's "advertising activities," and that these statements directly or proximately caused the injuries complained of in the complaint. Consequently, the court ruled that the insurance company had a duty to defend the insured in the underlying action.

§ 16[b] Libel, slander, or disparagement—Not caused by "advertising activity"

In the following, it was held that coverage did not exist under an "advertising injury" insurance policy, because the "advertising injury" offense of "libel, slander or disparagement" was not caused by the insured's "advertising activity."

In Weinstein Supply Corp. v. Home Ins. Companies, 1999 WL 310590 (E.D. Pa. 1999) (applying Pennsylvania law), the court held that coverage did not exist under an "advertising injury" insurance policy, because the "advertising injury" offense of "libel, slander or disparagement," whereby the insured was alleged to have defamed a former employee after that employee filed a charge of employment discrimination against the insured, was not caused by the insured's "advertising activity." The court noted that nothing in the underlying action suggested that the insured made any of the alleged defamatory statements in the course of advertising its goods, products, or services. The fact that the alleged defamatory statements were made to the insured's customers did not bring the statements within the "course of advertising goods, products or services," because the former employee did not allege that the insured was attempting to divert customers from him, or that he lost business or profits as a result of the alleged defamation. In addition, the former employee did not allege that he was a "competitor" or in "competition" with the insured, and nowhere in the underlying action did the words "advertise," "promote," or "market" appear with regard to the insured's conduct. The court concluded that because the alleged defamation did not constitute "advertising injury" as set forth in the insurance policy, the insurance company had no duty to defend or indemnify the insured.

§ 17[a] Copyright infringement—Caused by "advertising activity"

[Cumulative Supplement]

The courts in the following cases held that coverage existed under the "advertising injury" insurance policy, because the "advertising injury" offense of "copyright infringement" was caused by the insured's "advertising activity."

In Tri–State Ins. Co. v. B & L Products, Inc., 61 Ark. App. 78, 964 S.W.2d 402 (1998), the court held that coverage existed under the CGL insurance policy, because the "advertising injury" offense of "copyright infringement" was caused by the

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 76 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) insured's in–person sales talk in marketing its infringing paper products. The court noted that in its underlying complaint the competitor alleged that the insured infringed its copyrights in and relating to the paper products by using, reproducing, displaying, distributing, marketing, and offering for sale unauthorized copies of infringing products. Thus, the court found no error in the lower court's finding that the underlying complaint contained sufficient allegations that the insured's copyright infringement was caused by its "advertising activities."

Because the underlying "advertising injury" of "copyright infringement" arose out of the insured's distributing, displaying, and selling of the apparel with the copied artwork, there was coverage under the "advertising injury" insurance policy, the court held in J.I.P., Inc. v. Reliance Ins. Co., 165 F.3d 35 (9th Cir. 1998), opinion amended on denial of reh'g, 173 F.3d 860 (9th Cir. 1999) (applying California law). The court noted that the underlying complaint alleged that the insured infringed the underlying plaintiff's copyright by manufacturing, importing, distributing, displaying, selling, and placing on the market apparel items with artwork copied from the plaintiff's logo. Consequently, because distributing, displaying, and selling involved calling a product to the attention of the public and therefore fell within the commonly understood meaning of "advertising activities," the underlying complaint alleged just such a causal connection between the insured's infringement and its advertising. Moreover, the court noted that copyright infringement can and often does occur in the course of advertising, when the copying of constituent elements occurs in advertising, as the underlying complaint alleged here in the insured's copying of the logo for its apparel. Thus, because the causal connection was established, the court affirmed the lower court's ruling that the insurance company had a duty to defend the insured under the "advertising injury" policy.

The court held in Copart, Inc. v. Travelers Ins. Co., 11 Fed. Appx. 815 (9th Cir. 2001) (applying California law), that coverage existed under the "advertising injury" insurance policy because the "advertising injury" offense of "copyright infringement" occurred when the insured left copies of the allegedly infringing program interface with potential customers as a demonstration of its services. The court found that the insured's use of the competitor's copyrighted material to sell its services could have constituted copyright infringement in the course of "advertising activities," because the demonstration copy would itself have been an act of infringement, not an act exposing the fact of prior infringement. Consequently, the court affirmed the lower court in ruling that the insurance company had a duty to defend the insured under the "advertising injury" coverage clause.

In Interface, Inc. v. Standard Fire Ins. Co., 2000 Copr. L. Dec. ¶28164, 2000 WL 33194955 (N.D. Ga. 2000) (applying Georgia law), the court held that because the insured's advertisements of carpet bearing the infringing pattern infringed the competitor's copyright and did not merely expose it, the offense of "copyright infringement" was caused by the insured's advertising, leading to coverage under the "advertising injury" insurance policy. In the instant case, the underlying complaint stated that the insured infringed the competitor's copyrights every time it displayed, produced, distributed, or sold carpet bearing the infringing pattern. The court noted that because the underlying complaint alleged that the insured infringed its copyrights not only through the production and sale of carpets bearing the infringing patterns, but also through the promotional reproduction and display of these carpets (i.e., the marketing and advertising of the carpets), the suit arose from alleged "advertising injury." The court further stressed that the insured's advertising itself infringed on the copyrights because the ads bore images of the patterns, which was why the competitor sought production of the insured's promotional materials in the underlying action. Accordingly, because the causal connection between the "advertising activity" and the "advertising injury" was clear, the court held that the insurance company had a duty to defend the insured.

The court held in Amway Distributors Benefits Ass'n v. Federal Ins. Co., 990 F. Supp. 936 (W.D. Mich. 1997) (applying Michigan law), that coverage existed under the "advertising injury" insurance policy because the offense of "copyright infringement" was caused by the insured's activity of producing and publishing Amway videotapes, which incorporated infringing music. The court noted that the distinguishing feature of the case was that the alleged infringing activity was not limited to the production of the videotapes, but also included the display of the tapes to lower–level distributors and to potential distributors for the purpose of advertising. Since the videotapes were used by Amway distributors as motivational and sales tools, to recruit new distributors, and to promote upcoming Amway events, the copyright infringement was caused by the insured's "advertising activities." Because the allegations in the underlying complaint demonstrated the required causal connection, the court declared that the insurance company had a duty to defend the insured in the underlying action.

Where the insured infringed on a competitor's copyright in certain plush animal toys by manufacturing and selling toys that were substantially similar, the causal connection between the "copyright infringement" and the insured's "advertising activities" was established, so that "advertising injury" coverage was available under the insurance policy, the court held in GRE Ins. Group v. GMA Accessories, Inc., 180 Misc. 2d 927, 691 N.Y.S.2d 244 (Sup 1998). The court found that although the underlying complaint consisted primarily of claims of copyright infringement by means of manufacturing, distributing, and selling the copyright–infringing toys, the allegations that the insured was also engaged in the unauthorized "advertising" of the toys, coupled with the demands that the insured be permanently enjoined from "advertising" the copyright–infringing products and that all "advertisements and promotional literature" be impounded, was a sufficient causal link between the "advertising injury" and the insured's "advertising activities." Accordingly, because the underlying complaint clearly claimed that the insured committed copyright infringement specifically by means of its advertisements and in the course of its "advertising activities," the court ruled that the insurance company had a duty to defend the insured.

In Stratford Homes, Inc. v. Lorusso, 1995 WL 780977 (W.D. N.Y. 1995) (applying New York law), the court held that the underlying "advertising injury" of "copyright infringement" was caused by the insured's "advertising activities," when it was alleged that the insured infringed a competitor's copyrighted house design through acts related to and including the construction of an unauthorized copy of the house. In the instant case, the underlying complaint maintained that the insured wrongfully used, infringed on, sold, advertised, and otherwise profited from the competitor's house design copyright. The competitor also requested that the insured be enjoined from infringing its copyright in any way, including continuing to advertise. Consequently, the court concluded that not only did the complaint describe the infringing conduct that the competitor wished stopped, but also compelled the inference that the infringing conduct that previously occurred included advertising. Thus, because on its face the underlying complaint alleged "advertising injury" caused by the insured's "advertising conduct," the court ruled that the insurance company had a duty to defend the insured in the action.

There was coverage under the "advertising injury" insurance, because the "copyright infringement" injury, whereby the insured infringed a competitor's copyrighted jewelry designs, was caused by the insured's "advertising activities," the court held in Massachusetts Bay Ins. Co. v. Penny Preville, Inc., 1996 WL 389266 (S.D. N.Y. 1996) (applying New York law). The underlying complaint claimed that the insured's advertisement and display of allegedly imitation pieces of jewelry resulted in harm from the sales of these articles. The court stated that in view of such claims it would be artificial to deny coverage by constructing a distinction between the injuries arising from the manufacture and sale of infringing goods and injuries arising from the marketing of these same goods by means of display or advertisement of the goods. Consequently, the court ruled that the insurance company had a duty to defend the insured in the underlying action.

The court held in Western American Ins. Co. v. Moonlight Design, Inc., 95 F. Supp. 2d 838 (N.D. Ill. 2000) (applying New York law), that the "advertising injury" of "copyright infringement" was caused by the insured's advertising of the infringing bridal dresses. The court stated that unlike Illinois and many other jurisdictions, New York applied an expansive interpretation of whether an injury was caused by an "advertising activity" so as to bring the underlying action within the coverage of an insurance policy. In the instant case, although the sources of the underlying lawsuit were the insured's design and sale of infringing bridal dresses, the copyright claims of the underlying complaint also contained numerous allegations pertaining to the insured's "advertising activity." For example, the complaint alleged that the insured infringed on the competitor's copyright by publishing, displaying, selling, distributing, promoting, and advertising bridal dresses. According to the court, all that was needed under New York law were allegations that the insured advertised a "knock–off" product and thereby caused harm. Indeed, a duty to defend, under the "advertising injury" insurance policy, arose in New York even if the underlying copyright infringement claims stemmed mainly from the design or sale of "knock–off" goods, and the advertisements were merely incidental to that infringing activity. Accordingly, because the underlying allegations were sufficient to meet New York's broad causal requirement, the court declared that the insurance company had a duty to defend the insured in the underlying action.

In Federal Ins. Co. v. Microsoft Corp., 1993 WL 371416 (W.D. Wash. 1993), order vacated pursuant to settlement, 1994 WL 510102 (W.D. Wash. 1994) (applying Washington law), the court held that coverage existed under the "advertising injury" insurance policy, because the "advertising injury" offense of "copyright infringement" was caused by the insured's marketing, distributing, and licensing of software that infringed a competitor's program. The court found that the statement in the underlying

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 78 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) complaint that the insured's "distribution of the software exceeded the insured's rights" was broad enough to include claims that the advertising of the software could have exceeded the insured's rights. The court also held that the answer to the insured's counterclaims, in which the competitor stated that the insured had infringed its copyrights by marketing, distributing, and licensing the software, showed that advertising as part of marketing was alleged to have infringed the competitor's copyrights. Thus, because the underlying complaint could be construed to include claims that the insured's advertising infringed the competitor's copyrights, the court found that the insurance company had a duty to defend.

CUMULATIVE SUPPLEMENT

Cases:

Insured's advertising activity contributed materially to its infringement of software company's copyrights, thus supporting finding of coverage under "advertising injury" provision of commercial general liability (CGL) insurance policy after insured was found liable to software company in federal copyright and trademark infringement suit; in less than three years, insured made sales of over 117,000 disks containing software company's copyrights as a result of its advertising method of disseminating sample disks to customers. Acuity v. Bagadia, 2008 WI 62, 750 N.W.2d 817 (Wis. 2008).

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§ 17[b] Copyright infringement—Not caused by "advertising activity"

The courts in the following cases held that coverage did not exist under the "advertising injury" insurance policy, because the "advertising injury" offense of "copyright infringement" was not caused by the insured's "advertising activity."

In Rhein Bldg. Co. v. Gehrt, 21 F. Supp. 2d 896 (E.D. Wis. 1998), the court held that coverage did not exist under the "advertising injury" insurance policy, because the "advertising injury" offense of "copyright infringement" was not caused by the insureds' "advertising activity," where it was alleged that the insureds copied a competitor's architectural plans for an eight–family apartment building. The court did not find one scintilla of evidence in the record that the insureds advertised their infringing drawings to the public. While the advertising of the completed apartment buildings might have had some relevance to the amount of damages recoverable in the case, it did not materially contribute to the infringement of the plans. The court held that the insurance company did not have a duty to defend the insureds because the "advertising injury" provision did not provide coverage for the infringement of the architectural drawings not caused by the insureds' "advertising activities."

In Nationwide Mut. Ins. Co. v. Bartlett, 27 Conn. L. Rptr. 237, 2000 WL 767878 (Conn. Super. Ct. 2000), the court held that coverage did not exist under the "advertising injury" insurance policy, because the "advertising injury" offense of "copyright infringement," whereby it was alleged that the insured intentionally copied and used without authorization a competitor's copyrighted site and architectural plans for a senior housing project, was not caused by insured's "advertising activities." The complaint in the underlying action could not reasonably be read to allege a causal connection between the claim of copyright infringement and any advertising by the insured. The competitor did not assert that its architectural plans' copyright was infringed as a result of the insured's advertising of the housing project to the public. Instead, the court found that the claimed copyright infringement in the underlying complaint was the using and altering of the architectural plans in connection with their submission to the town, not the advertising of the housing units of the completed project. Consequently, because there was an absence in the underlying complaint of any causal relationship between the insured's "advertising activities" and the alleged copyright infringement, it precluded the insured's claim of an "advertising injury" as defined in its policies, and the insurance company had no duty to defend.

The court held in Robert Bowden, Inc. v. Aetna Cas. & Sur. Co., 977 F. Supp. 1475 (N.D. Ga. 1997) (applying Georgia law), that because there was no causal link between the injury of copyright infringement and the insured's "advertising activities," the underlying complaint, which alleged that the insured duplicated copyrighted software onto the hard disks of many of its personal computers, was not covered under the "advertising injury" insurance policy. The court rejected the insured's argument that two

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 79 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) of the three computer programs allegedly pirated were use extensively in the course of its so–called "Window to Paradise" advertising campaign, and thus its alleged copyright infringement was indeed committed in the course of its advertising. Instead, the court found that because the pirated software was not physically manifested in any advertising, but was merely used to create the advertising, the requisite causation was not alleged. In addition, the court noted that finding causation between advertising and injury from such a tangential relationship as that alleged by the insured would open up the insurance company to far– reaching obligations that neither it nor the insured could likely have countenanced at the time the policy was issued. Thus, because the insured's alleged pirating of software was not performed in the course of its advertising, the insurance company had no duty to defend or indemnify the insured in the underlying action.

In an underlying action, which alleged that the insured infringed a competitor's copyrighted architectural plans and technical drawings by constructing four homes based on the plans, the "copyright infringement" injury was not caused by the insured's "advertising activities," so coverage did not exist under the CGL "advertising injury" insurance policy, the court held in Construction Management Systems, Inc. v. Assurance Co. of America, 135 Idaho 680, 23 P.3d 142 (2001). The insured contended that its actions in building the homes, placing them on the market, and having real estate brokers promote them, were sufficient to give rise to the potential that the copyright infringement activities were related to or connected with its advertising. Yet, because the competitor's claim of infringement, even when read broadly, was based on the construction of the homes rather than their advertisement, and nothing in the record suggested that the insured advertised the infringing drawings to the public, the court held that a causal link did not exist. The court declared that because there was no causal connection between the copyright material and the insured's use of that material for the purpose of advertising, the insurance company did not have a duty to defend the insured under the CGL insurance policy.

In Delta Computer Corp. v. Frank, 196 F.3d 589, 53 U.S.P.Q.2d (BNA) 1061 (5th Cir. 1999) (applying Louisiana law), the court held that because there was no causal connection between the insured's misappropriation of a competitor's copyrighted computer software and the insured's "advertising activities," there was no coverage under the insured's "advertising injury" insurance policy. The court found that the underlying pleading stated nothing about an injury resulting from the insured's advertising, nor could a reference to advertising be fairly inferred from the language of the pleadings. Rather, the court found that the competitor's claim was essentially for infringement of its copyrighted software program, which was developed primarily for billing purposes, not for "advertising activity." Although the pirated software included a feature that allowed the generated bills to include advertisements, any advertising done through use of the software was incidental to the competitor's core complaint. In fact, the court stated that the underlying copyright infringement claim stood on its own, because even if customers had never discovered or used the software advertising feature in the course of their billing activity, the competitor could still have suffered the same injury and asserted the same software copyright infringement claim. Accordingly, because there was no connection between the copyright claims and the insured's advertising activity, the court affirmed the lower court's decision that the insurance company did not have a duty to defend the insured in the underlying action.

There was no coverage under the CGL insurance policy's "advertising injury" provision, where the insured allegedly infringed a competitor's software driver, but the insured's "advertising activities" did not cause the copyright infringement injury, the court held in Farmington Cas. Co. v. Cyberlogic Technologies, Inc., 996 F. Supp. 695 (E.D. Mich. 1998) (applying Michigan law). The insured's claim for a defense rested on the premise that the software driver was not merely a product but also an advertisement because it was given away as a free sample. The court rejected that premise by saying it proved too much, for it would similarly invoke "advertising injury" coverage whenever the producer of an allegedly infringing product simply distributed free samples or otherwise made demonstrations of the product. Such an approach would expand the coverage for "advertising injury" far beyond what was reasonably contemplated by the parties. In addition, even if the free samples constituted "advertising activities," they still did not give rise to the infringement claims, because the infringing acts could have occurred independent and irrespective of any advertising, and the samples of the driver did not cause the alleged copyright infringement, but merely exposed it. Consequently, because there was no causal connection, the court held that the insurance company did not have a duty to defend the insured in the underlying action.

The court held in GAF Sales & Service, Inc. v. Hastings Mut. Ins. Co., 224 Mich. App. 259, 568 N.W.2d 165 (1997), that where the insureds allegedly infringed a competitor's copyrighted software in the purchase and resale of inspection equipment, the

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 80 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) injury of copyright infringement did not result from their advertising, so there was no coverage afforded under the "advertising injury" insurance policy. The court found that the underlying complaint did not allege any injuries that resulted from the insureds' advertising. Instead, the complaint alleged injuries from the insureds' purchase and resale of copyrighted software. Thus, the cause of the injuries was not the insureds' advertising, but rather their buying and selling of the software. Because there was no causal connection between the alleged "advertising injury" and the insureds' "advertising activities," the court affirmed the lower court's decision and held that the insurance company had no duty to defend.

In GRE Ins. Group/Tower Ins. Co., Inc. v. Complete Music, Inc., 271 F.3d 711, 60 U.S.P.Q.2d (BNA) 1763 (8th Cir. 2001) (applying Nebraska law), the court held that because the insured failed to establish a causal connection between its advertising and the alleged copyright infringement by its franchisees in the playing of unauthorized songs, the "copyright infringement" injury was not covered under the "advertising injury" insurance policy. The facts showed that the insured solicited disk jockey franchisees by advertising services it supplied, such as the distribution of the allegedly infringing compilation music discs. The court noted that although this advertising might have indirectly contributed to copyright infringement, the primary objective of the insured's "advertising activities" was to induce the sale of franchises, and it was the playing of the copyrighted songs by the franchisees that allegedly infringed the copyright, especially because this could have occurred independent of the insured's advertising. The court further stated that there was no evidence that the insured advertised the compilation discs by name or that its advertising encouraged, instructed, or explained how its franchisees could engage in copyright infringement. Thus, because the copyright infringement was not committed in the course of the insured's advertising, the court affirmed the lower court's ruling and held that the insured was not entitled to indemnification under the "advertising injury" provision.

The court held in Quitman Mfg. Co., Inc. v. Northbrook Nat. Ins., Co., 266 A.D.2d 105, 698 N.Y.S.2d 469 (1st Dep't 1999), that coverage did not exist under the CGL "advertising injury" insurance policy, because the "advertising injury" offense of "copyright infringement" was not caused by the insured's "advertising activity." The court noted that the complaint in the underlying action, for which the insured sought to recover its defense and settlement costs, alleged copyright infringement only by reason of the insured's manufacture and sale of goods. Because the "copyright infringement" injury was not caused by the insured's "advertising activities," the court affirmed the lower court's opinion that the insurance company did not have a duty to defend.

Because the underlying copyright infringement action, which alleged that the insured infringed a competitor's copyrighted jewelry designs, was not caused by the insured's "advertising activities," coverage did not exist under the "advertising injury" insurance policy, the court held in Jerry Madison Enterprises, Inc. v. Grasant Mfg. Co., Inc., 1990 WL 13290 (S.D. N.Y. 1990) (applying New York law). The court noted that in the instant case it was irrelevant whether the insured's distribution of brochures displaying the infringing designs was actually "advertising activity," because the underlying complaint did not allege injury arising out of the brochures, but rather focused on the infringing manufacture and sale of the jewelry. The competitor directed its copyright infringement claim solely against the insured's sale and manufacture of the jewelry, and the competitor's use of the term "placing on the market" and request for an injunction against the marketing of the jewelry did not compel the inference that the competitor had alleged an "advertising injury." Furthermore, the court stated that the insured's sale of earrings through its advertising did not invoke the policies' coverage, because the competitor never alleged that the insured's advertising infringed the copyright. Finally, the court found that the language in the "advertising injury" provision was not so ambiguous as to allow for two reasonable interpretations when applied to the facts of the case. The ordinary meaning of the phrase "occurring in the course of the insured's advertising activities" did not encompass the sale and manufacture of copyrighted jewelry. Accordingly, because no causal connection existed, the court ruled that the insurance company did not have a duty to defend or indemnify the insured in the underlying action.

In Hosel & Anderson, Inc. v. ZV II, Inc., 2001 Copr. L. Dec. ¶28252, 2001 WL 392229 (S.D. N.Y. 2001) (applying New York law), the court held that there was no coverage under the "advertising injury" insurance policy, because the insured's infringement of a competitor's copyrighted designs by having them copied for it by another textile manufacturer was not caused by the insured's advertising. The complaint in the action charged that the insured infringed the competitor's copyrighted designs "by … reproducing, manufacturing, displaying, publishing, vending, distributing, selling, promoting, importing or advertising the designs." Seizing on the word "advertising," the insured sought a declaration that the insurance company was obliged to

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 81 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) defend and indemnify it in the action. The court however found that in the papers the competitor did not allege infringement of its copyrights in any "advertisement" in the ordinary sense of the word, because it specifically stated that the infringement consisted of the insured's manufacturing and selling of garments made from infringing fabric. In addition, the court rejected the insured's argument that the garments it made with the infringing fabric were their own advertisements, because the product itself is not an advertisement within the meaning of the policy. Accordingly, because the copyright infringement injury did not fall within the "advertising injury" clause of the policy, the court ruled that the insurance company was not obliged to defend and indemnify the insured.

The court in Idg, Inc. v. Continental Cas. Co., 275 F.3d 916, 61 U.S.P.Q.2d (BNA) 1265 (10th Cir. 2001) (applying Oklahoma law), held that the insurer did not have a duty to defend the insured under the advertising injury coverage provision in a commercial general liability policy against a third–party action based on copyright infringement. The court noted that although the insured alleged that it had advertised or distributed a copyrighted product and that the plaintiff in the third–party action sought to enjoin the distribution of the copyrighted product and might have been entitled to statutory damages if he had prevailed on his copyright claims, there was no causal connection between the copyright infringement injuries alleged in the third–party action and the insured's advertising activities.

Comment

The United States Supreme Court in IDG, Inc. v. Continental Cas. Co., 536 U.S. 940, 122 S. Ct. 2622, 153 L. Ed. 2d 805 (2002), has denied certiorari from Idg, Inc. v. Continental Cas. Co., 275 F.3d 916, 61 U.S.P.Q.2d (BNA) 1265 (10th Cir. 2001), cert. denied, 536 U.S. 940, 122 S. Ct. 2622, 153 L. Ed. 2d 805 (2002), in which the Tenth Circuit held that, under Oklahoma law, an insured was not entitled to recover from its commercial general liability (CGL) insurer the cost of defending an underlying copyright infringement claim under its advertising activities coverage in the absence of a showing of actual harm suffered by the underlying plaintiff directly connected to the insured's advertising activities. The insured argued that it was error to require some allegation or evidence of actual harm suffered by the underlying plaintiff directly connected to the insured's advertising activities when the underlying plaintiff would not have been required to show actual harm to recover statutory damages for copyright infringement. In the underlying suit, the alleged owner of certain software programs claimed that the insured had infringed his copyright by copying and selling some or all of the programs and preparing unauthorized derivative programs. The insured alleged that it had distributed the derivative programs as a promotional device to encourage potential customers to buy the program, and that this action was covered advertising activity. The Tenth Circuit held that, even assuming that a product can advertise itself and that the activity described by the insured was, in fact, "advertising" activity as broadly construed under the insurance policy, the record clearly revealed that the copyright holder sued the insured for copyright infringement arising out of its copying and sale of the computer programs, and not out of its promotional activity.

Where the insured's "advertising activities" did not cause the underlying "copyright infringement" offense, which alleged that the insured infringed the copyright holder's copyrights by copying, publishing, distributing and selling copies of its "Numerical Parts Record" and "Parts Book Library" without first obtaining permission, coverage was not available under the "advertising injury" insurance provision, the court held in Sentry Ins. v. R.J. Weber Co., Inc., 2 F.3d 554, 28 U.S.P.Q.2d (BNA) 1397 (5th Cir. 1993) (applying Texas law). The insured admitted that the underlying complaint stated nothing about advertising, and it could not identify any connection between the copyright infringement claims and its "advertising activity." Thus, the court affirmed the lower court's declaration that because the copyright infringement suit was not related to the insured's "advertising activity," the insurance company had no duty to defend the insured under the insurance policy.

§ 18[a] Patent infringement—Caused by "advertising activity"

[Cumulative Supplement]

The courts in the following cases held that coverage existed under the "advertising injury" insurance policy, because the "advertising injury" offense of "patent infringement" was caused by the insured's "advertising activity."

In Title Homedics, Inc. v. Valley Forge Ins. Co., 53 U.S.P.Q.2d (BNA) 1155, 1999 WL 33301457 (C.D. Cal. 1999), reconsideration dismissed, 2000 WL 33249823 (C.D. Cal. 2000) (applying California law), the court held that coverage existed under the "advertising injury" insurance policy, because the underlying "patent infringement" and "inducement of infringement" injuries were caused by the insured's action of publishing advertising materials that offered for sale products that infringed upon a competitor's magnetic device patent. The court found that there was a causal connection between the insured's "advertising activity" and the competitor's patent infringement claim, because of the adoption of the "offer to sell" language in the Patent Act, which may permit claims of patent infringement based on advertising alone. Because the insured might be held liable for damages for patent infringement in the underlying action solely by virtue of its "advertising activity," there was a casual connection between the insured's advertising and the underlying patent infringement claim, and the insurance company had a duty to defend the insured.

The court held in Elan Pharmaceutical Research Corp. v. Employers Ins. of Wausau, 144 F.3d 1372 (11th Cir. 1998) (applying Georgia law), that because the insured's action of advertising the clinical studies of an allegedly infringing hypertension drug was a necessary element of the competitor's underlying "patent infringement" claim, coverage was available under the CGL "advertising injury" insurance policies. The court noted that the underlying complaint alleged that the clinical studies themselves, standing apart from the insured's filing of the New Drug Application (NDA) with the FDA, were infringing uses that fell outside the patent law's exemption for making, using, and selling a product as long as the efforts were reasonably related to obtaining the required federal approvals under the NDA. Under the competitor's theory of liability, the dissemination of the infringing data in the insured's advertising gave rise to an action for patent infringement, because the dissemination retroactively deprived the protected use of the patented drug to collect the data of its exemption. Construed that way, the court found that the underlying lawsuit provided the necessary causal connection between the alleged patent infringement and the insured's "advertising activities," because without and until the insured advertised its clinical studies, the clinical studies were exempt. The court further noted that although the Federal Circuit subsequently held that the dissemination of data outside the FDA process and the data's use for fund raising and other business purposes were exempt uses or did not constitute infringing uses under the patent law, when the competitor filed its complaint this remained an open issue. As a result, because the allegations of the underlying complaint adequately set out a sufficient causal connection between the insured's "advertising activities" and the "advertising injury" of "patent infringement," the court affirmed the lower court's ruling and held that the insurer had a duty to defend the insured.

Where the insured's advertising of its flexible liquid storage containers being used as a waterbed might have induced or contributed to the underlying injury of a waterbed "patent infringement," there was coverage under the "advertising injury" insurance policy, the court held in Union Ins. Co. v. Land and Sky, Inc., 247 Neb. 696, 529 N.W.2d 773 (1995). It was uncontested that the insured did not directly infringe upon the waterbed patent, but the court found that it might potentially be liable for inducing or contributing to the patent infringement due to its "advertising activities." The insured advertised its products to wholesale and retail markets and distributed pamphlets that described the manner in which its products could be incorporated into a waterbed mattress frame. The insured provided an instruction sheet demonstrating the preferred method for incorporating its waterbed mattress into a waterbed frame and depicting the installation and placement of the temperature control and heating unit commonly known as the waterbed heater. This "advertising activity" could potentially allow someone to infringe the waterbed patent, which claimed a waterbed, including the waterbed mattress and a suitable frame and heater. Accordingly, because there was a causal connection, and the insurance company had a duty to defend the insured in the underlying action, the court reversed and remanded the lower court's contrary decision.

The court held in International Communication Material Inc. v. Employer's Ins. of Wausau, 1996 WL 1044552 (W.D. Pa. 1996) (applying Pennsylvania law), that coverage might have existed under the "advertising injury" insurance policies for the insured, accused of infringing a competitor's copier patent, because "patent infringement" was an enumerated "advertising injury" offense in the policy and therefore implied a causal connection with "advertising activities." The court stated that requiring a causal connection between the enumerated offense and the insured's "advertising activities" would annul the provision that already enumerated "patent infringement" as an offense giving rise to an "advertising injury." Moreover, the court found that the insured had a reasonable expectation that the policies would cover patent infringement claims, since they enumerated "patent

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 83 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) infringement" as an "advertising injury" offense. Consequently, the court ruled that a genuine issue of material fact existed as to whether the underlying patent infringement claims fell within the policies' "advertising injury" coverage.

CUMULATIVE SUPPLEMENT

Cases:

Use of build-your-own-vehicle feature included on insured automobile manufacturer's website was advertisement which allegedly caused patentee's injuries through purported infringement of patented method of displaying information to the public for purposes of facilitating sales, and therefore causal connection required under California law for advertising injury coverage under liability policy existed between insured's advertising activities and patentee's advertising injury. Hyundai Motor America v. National Union Fire Ins. Co. of Pittsburgh, PA, 600 F.3d 1092 (9th Cir. 2010) (applying California law).

[Top of Section]

[END OF SUPPLEMENT]

§ 18[b] Patent infringement—Not caused by "advertising activity"

[Cumulative Supplement]

The courts in the following cases held that coverage did not exist under the "advertising injury" insurance policy, because the "advertising injury" offense of "patent infringement" was not caused by the insured's "advertising activity."

In Aetna Casualty & Surety Co. v. Superior Court, 19 Cal. App. 4th 320, 23 Cal. Rptr. 2d 442, 28 U.S.P.Q.2d (BNA) 1424 (4th Dist. 1993), the court held that there was no coverage available under the CGL "advertising injury" insurance policies because the insured's "advertising activities" did not cause the underlying "patent infringement" injury, where it was alleged that the insured induced to infringe or contributorily infringed when it made and sold products that infringed the patented waterbed mattress. First, the court found that because the underlying claims for inducement and contributory infringement were merely a part of the direct infringement claim against the insured for manufacturing and selling the product, if the insured was liable at all, it was liable for direct infringement, and the direct infringement was not caused by "advertising activities." Second, the court rejected the insured's argument that its advertising induced infringement when it sold water mattresses without any bladder but included instructions and advertisements on how to insert any of the available bladders into the mattress for proper use, including the tube or cylinder bladders to which there was a claimed patent. The court found that there was no citation in the record that supported this assertion, because there were no facts or evidence adduced to substantiate the contention. Consequently, because the court held that there was no potential liability on the allegation of inducement of infringement or contributory infringement, and the direct infringement was not caused by the insured's advertising, the court reversed the lower court's ruling and held that under the insurance policies the insurance company did not have a duty to defend the insured.

The court held in Gitano Group, Inc. v. Kemper Group, 26 Cal. App. 4th 49, 31 Cal. Rptr. 2d 271 (2d Dist. 1994), as modified, (July 21, 1994) (applying California and New York law), that there was no coverage under the "advertising injury" insurance policies, because the underlying complaint, which alleged that the insureds had committed various forms of patent infringement when they marketed, sold, and used certain clothing produced by the competitors' patented acid–washed processes, did not allege an injury caused by the insureds' advertising of the infringing products. The court noted that the operative pleadings of the underlying suit generally pled "patent infringement" by the insureds through various means, with the ultimate harm suffered by the use of the infringing process/product in the production and sale of jeans. In addition, the statements made by the competitors and their counsel in responses to discovery did not specify or allege any harm suffered by them as the result of the insureds' "advertising activities," separate or apart from the harm suffered by sales of the infringing product. Instead, the statements bolstered the insurance company's position that the harm suffered by the competitors stemmed from the insureds' use, in a variety of ways, of the infringing process/product. Accordingly, as no separate harm from the advertising could be shown and the requisite causal connection was lacking, the court affirmed the lower court's ruling and held that the insurance company did not have a duty to defend or indemnify the insureds under the "advertising injury" provision in the CGL insurance policies.

In National Union Fire Ins. Co. of Pittsburgh, Pa. v. Siliconix Inc., 729 F. Supp. 77 (N.D. Cal. 1989) (applying California law), the court held that the insured's alleged patent infringement did not occur in course of its "advertising activities," within the meaning of the liability policy provision covering "advertising injury," because although there was evidence that the insured advertised the allegedly infringing product, that advertising did not cause the patent infringement. The court found that under the patent law it appeared that the infringing act was the making, using, or selling of a patented invention, not the mere advertising of it. The court then rejected the insured's argument that because advertising was part and parcel of selling, the underlying injury need not have been caused by advertising, but must have borne some relationship in time, place, or circumstance to the selling of the infringing product. The court held that taken to its extreme that argument would lead to the conclusion that any harmful act, if it was advertised in some way, would fall under the grant of coverage merely because it was advertised. Thus, a great many acts would fall within the ambit of advertising, extending the "advertising injury" coverage far beyond the reasonable expectations of the insured. Accordingly, because no causal link existed, the court ruled that the insurance company had no obligation to indemnify the insured in the underlying patent infringement action.

Coverage did not exist under the "advertising injury" insurance policies, because the underlying "patent infringement" injury was not caused by the insured's "advertising activities," but by the insured's manufacturing and selling of an intraocular lens patented by a doctor, the court held in Iolab Corp. v. Seaboard Sur. Co., 15 F.3d 1500, 29 U.S.P.Q.2d (BNA) 1610 (9th Cir. 1994) (applying California law). The court noted that under California law, because the doctor's claim was not that the insured infringed his patent in its advertising, in a manner independent of its sale of the intraocular lens, the underlying patent infringement was not a form of piracy arising out of or committed in advertising and was not covered under the policies. In addition, the fact that the doctor produced evidence of the insured's extensive "advertising activities" in response to the insured's attempt to raise an exemption defense under the patent law did not establish that the advertising caused the infringement. Instead, the advertising was merely evidence of the commercial nature of the insured's infringing activities and helped to establish that the insured's interest in the patent was for profit and not for research or to obtain FDA approval under the patent law exemption. Consequently, because the underlying injury was caused by the insured's "patent infringement," and not by its "advertising activities," the court affirmed the lower court's ruling and held that the insurance company did not have a duty to indemnify the insured in the underlying action.

In Simply Fresh Fruit, Inc. v. Continental Ins. Co., 94 F.3d 1219 (9th Cir. 1996), as amended, (Aug. 16, 1996) (applying California law), the court held that because the insureds' alleged infringement of a competitor's fruit–cutting device and process patents lacked a causal connection to their "advertising activities," even though the insureds exposed their alleged patent infringement through their product promotion, the underlying complaint was outside the "advertising injury" coverage of the liability insurance policies. The court first stated that as a matter of law patent infringement could not occur in the course of an insured's "advertising activities." Here, the underlying claims for direct, contributory, and inducing infringement all accrued when the insureds allegedly used the competitor's patented devices and processes. The court found that this injury had no causal connection to any "advertising activities" as a matter of law because it could have occurred independent and irrespective of any advertising by the insureds. In addition, the court stated that the insureds' exploitation of their alleged use of the patented processes in conjunction with their product promotional activities was immaterial, because the gravamen of the patent infringement claim was the use alone. Thus, because the underlying "patent infringement" injury was not caused by the insureds' advertising, but merely exposed it, the nexus requirement was not met, and the court affirmed the lower court's ruling that the insurance company did not have a duty to defend the insureds.

In Julian v. Liberty Mut. Ins. Co., 43 Conn. App. 281, 682 A.2d 611 (1996), the court held that the CGL insurance policy providing "advertising injury" coverage did not cover the underlying complaint for "patent infringement," because the insured's manufacture, sale, and use of an allegedly infringing decoiler machine was not caused by its advertising. The court found that the complaint in the "patent infringement" suit brought against the insured by the patent holder contained no reference to any "advertising activities" of the insureds. It alleged only that the insured had infringed, was infringing, and had induced others to infringe the patent in connection with the manufacture, sale, and use of the decoiler machines. The court further found that sales of the infringing product advertised by the insured did not establish a causal relationship between the advertisements and the infringement, because the creation of the infringing product had to have preceded its advertisement, so the latter could not

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 85 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) have caused the former. Accordingly, because the insured's advertising did not cause the direct "patent infringement" injury, the court affirmed the lower court's ruling that the insurance company had no duty to defend the insured in the underlying action.

Because there was no causal connection between the insured's "advertising activities" and the underlying "patent infringement" claim, which alleged that the insured infringed a patented process for flue gas desulferization in its demonstration plant, coverage was not available under the "advertising injury" insurance policy, the court held in ABB Flakt, Inc. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 731 A.2d 811 (Del. 1999). In the underlying action, the insured was alleged to have made, used, and sold, and continued to make, use, and sell, systems, facilities, and apparatus, the operation of which infringed the process patent. The court rejected the insured's argument that its customer demonstration plant, which used the infringing process, combined the infringing piracy and "advertising activities." Instead, the court noted that although the insured asserted that the demonstration plant was integral to securing customer interest in its technology, the insured did not allege that the specific customers identified in the underlying action were brought to the demonstration plant. In short, there was no claim that its demonstration plant activities, even if broadly viewed as "advertising," were either alleged or proven in the underlying patent infringement action as a basis for recovery. In addition, the Federal Circuit, when considering the permissible scope of an injunction against the insured in the underlying litigation, indicated that the trigger for the insured's patent liability was the actual use of the power plants by the insured's customers, and not the advertising, contract to build, or actual building of the plant. Accordingly, the court affirmed the lower court's ruling that the insurance company did not have a duty to defend, on the basis that the underlying "patent infringement" action neither "arose out of" nor "occurred in the course of" the insured's "advertising activities."

The court in Konami (America) Inc. v. Hartford Ins. Co. of Illinois, 260 Ill. Dec. 721, 761 N.E.2d 1277 (App. Ct. 2d Dist. 2002), held that a video game manufacturer's alleged infringement of patents relating to digital circuitry for television gaming apparatuses did not occur in the course of its advertising activities, so its comprehensive general liability (CGL) insurance policy provided no coverage, even if the infringement was piracy. The court found that the alleged direct and contributory infringement could not occur in the course of advertising, and the patent holder never alleged that the manufacturer provided any detailed instructions to its customers on how to infringe the patents or that the holder was injured in the course of the manufacturer's advertising. The court held that patent infringement occurring in the course of the insured's manufacture, use, and sale of a patented device is outside a comprehensive general liability (CGL) policy's coverage for advertising injury arising out of piracy; the court noted that although the insured correctly noted that some dictionaries define "piracy" to encompass patent infringement, such as Black's Law Dictionary 1148 (6th ed. 1990), the issue was not what "piracy" meant in isolation but what it meant in the context of the insurance policy at issue. The insurance policy at issue used the term "piracy" within the definition of advertising injury, and the court thus held that coverage under this provision was explicitly limited to occurrences in the course of the named insured's advertising activities.

In Fluoroware, Inc. v. Chubb Group of Ins. Companies, 545 N.W.2d 678 (Minn. Ct. App. 1996), the court held that the underlying action for "patent infringement," in which the insured was alleged to have manufactured, used, sold and distributed infringing plastic disk packages, did not arise out of the insured's "advertising activity," so coverage was not available under the CGL insurance policies' "advertising injury" provisions. The court held that there was no showing of direct causation between the insured's advertising and the "patent infringement" injury, and that the fact that the infringing products were advertised did not trigger liability coverage. Thus, because the "advertising injury" arising out of "advertising activity" did not extend to injury caused by "patent infringement" where the infringing product was coincidentally advertised, the insurance company did not have an obligation to defend the insured in the underlying action, and the court reversed the lower court's ruling to the contrary.

The court held in Filenet Corp. v. Chubb Corp., 324 N.J. Super. 419, 735 A.2d 1170 (App. Div. 1999), that, where it was alleged that the insured infringed a competitor's software, because the underlying injury of "patent infringement" did not occur from the insured's advertising, there was no coverage available under the insurance policies for "advertising injury." The insured argued that the competitor specifically identified the insured's press releases, brochures, catalogs, and manuals as evidence that supported its claims that the insured passed off its products as the competitor's patented inventions and induced third parties to infringe the patents. The court found that the advertising materials were collected by the competitor during discovery to prove its infringement claims, because the descriptions in the documents of the products and of their functioning were evidence that the insured's products had features that conflicted with the competitor's patent claims. The court further rejected the insured's

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 86 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) argument that the underlying complaint implied that the insured, by advertising its products, induced its customers to buy and use those products and thus the insured used advertising to induce others to infringe the competitor's patents. Instead, the court found that the underlying "patent infringement" complaint, which alleged that the insured manufactured, sold, and used products protected by the competitor's patents, was an action against the insured for direct "patent infringement." There was no indication in the record that the competitor asserted that the insured sold noninfringing products and induced its customers to use them in a manner or in a combination that infringed. Accordingly, because no causation existed, the court affirmed the lower court's ruling and held that the insurance company had no duty under the insurance policies to defend or indemnify the insured in the underlying action.

Where the underlying complaint filed with the International Trade Commission (ITC) alleged that the insured engaged in the unlawful manufacture, importation, and sale of patented plastic fasteners infringing on the complainant's patents, coverage was not available under the CGL "advertising injury" insurance policy because the infringement was not caused by the insured's advertising, the court held in A. Meyers & Sons Corp. v. Zurich American Ins. Group, 74 N.Y.2d 298, 546 N.Y.S.2d 818, 545 N.E.2d 1206 (1989). The court rejected the insured's argument that its price list listing the infringing fasteners was a cause of the patent infringement injury because the underlying complaint did not allege harm based on use of the price list, and it appeared to have been submitted solely as evidence that the insured was selling the infringing product, a necessary element of proof in a complaint filed with the ITC under the Tariff Act. Furthermore, the complaint before the ITC alleged harm arising out of the "importation" and "sale" of products that infringed on the complainant's patents, not injury arising out of the insured's "advertising activities," and sought an order enjoining the illegal manufacture and sale of infringing products without reference to preventing any type of false, misleading, or injurious advertising. Thus, because no causation existed between the injury and the advertising, the court affirmed the lower court's ruling that the insurance company did not have a duty to defend the insured under the "advertising injury" insurance coverage.

In Synergystex Intern., Inc. v. Motorists Mut. Ins. Co., 1994 WL 395626 (Ohio Ct. App. 9th Dist. Medina County 1994), appeal not allowed, 71 Ohio St. 3d 1429, 642 N.E.2d 637 (1994), the court held that because the underlying "patent infringement" injury was not caused by the insured's "advertising activities," coverage was not provided under the CGL "advertising injury" insurance provision. The court found that the underlying claim against the insured alleged "patent infringement" only, with no mention of the insured's advertising, let alone an established or alleged causal connection between advertising and the claimed "patent infringement." The court further noted that a patent holder generally was injured by losing sales, profits, or royalties to someone "making, using or selling a patented invention," as set forth in the patent laws, and not from advertising a product, unless that advertising resulted in sales, profits, or royalties to someone other than the patent holder. Consequently, because no causal connection existed, the court reversed the lower court's ruling and held that the insurance company did not have a duty to defend or indemnify the insured.

No coverage existed under the CGL "advertising injury" insurance policies, because the underlying action for "patent infringement," which alleged that the insured infringed certain patents by using or selling products defined by the claims or using or selling products made by the processes defined by the claims, was not caused by the insured's "advertising activities," the court held in Atlantic Mut. Ins. Co. v. Brotech Corp., 857 F. Supp. 423 (E.D. Pa. 1994), order aff'd without opinion, 60 F.3d 813 (3d Cir. 1995) (applying Pennsylvania law). The court noted that according to the underlying complaint, there was no causal nexus between the "patent infringement" injury and the "advertising activities" of the insured. The court further held that the mere advertising of the patented product in its sale did not support a claim of "patent infringement." Accordingly, because the causal link was lacking, the court held that the insurance company did not have a duty to defend or indemnify the insured in the underlying action.

See the following additional cases, in which the courts held that coverage did not exist under the "advertising injury" insurance policy, because the "advertising injury" offense of "patent infringement" was not caused by the insured's "advertising activity," where—

—a wheelchair manufacturer's underlying complaint, stating that the insured infringed its scooter patent, alleged infringement based on the manufacture and sale of the chair only and did not even mention the insured's advertising. Everest and Jennings, Inc. v. American Motorists Ins. Co., 23 F.3d 226, 30 U.S.P.Q.2d (BNA) 1534 (9th Cir. 1994) (applying California law).

—a patent holder's underlying claim, which alleged that the insured infringed his waterbed patent by making and selling, and inducing the making and selling of, waterbed mattresses and other waterbed products, involved direct infringement, which did not occur in the course of the insured's "advertising activities," and inducement of infringement, which was barred by the California Insurance Code as willful conduct. Intex Plastics Sales Co. v. United Nat. Ins. Co., 23 F.3d 254, 30 U.S.P.Q.2d (BNA) 1652 (9th Cir. 1994) (applying California law).

—a company's underlying complaint, which alleged that the insured infringed its patents for making concrete slip forms, clearly stated that the infringement occurred by the making, selling, or using of the slip forms, and nowhere in that complaint did the company claim it was injured by any advertising, solicitation, or even product demonstration by the insured. New Hampshire Ins. Co. v. R.L. Chaides Const. Co., Inc., 847 F. Supp. 1452, 30 U.S.P.Q.2d (BNA) 1474 (N.D. Cal. 1994) (applying California law).

—a patent owner of a prosthetic hip replacement device sued the insured for infringement, and the insured's method of advertising the infringing device on the order form was not the infringing act, because it was the manufacture and sale of the product itself that infringed the patent. Techmedica, Inc. v. Vanguard Underwriters Ins. Co., 59 F.3d 176 (9th Cir. 1995) (applying California law).

—an underlying complaint of "patent infringement" was not caused by the insured's advertisements of the infringing product, because the "patent infringement" injury occurred independent and irrespective of any advertising by the insured. Clark Mfg. Inc. v. Northfield Ins. Co., 187 F.3d 646 (9th Cir. 1999) (applying California law).

—a competitor's complaint stating that the insured contributory infringed, or induced others to infringe, one or more of the claims of its patent was tried, and there was no evidence presented at trial that the insured committed contributory infringement and inducement in the course of advertising or "advertising activities," nor did the insured attempt to controvert other defendants' contentions that no such evidence was presented at trial. Gencor Industries, Inc. v. Wausau Underwriters Ins. Co., 857 F. Supp. 1560, 32 U.S.P.Q.2d (BNA) 1296 (M.D. Fla. 1994) (apparently applying Florida law).

—an underlying complaint, which alleged that the "patent infringement" was caused by the insured's manufacture, use, and sale of an allegedly infringing product, failed to show how the "patent infringement" was caused by or arose out of the insured's "advertising activity," and advertising was mentioned very briefly, and only in the count alleging inducing infringement. Davila v. Arlasky, 857 F. Supp. 1258 (N.D. Ill. 1994), dismissed, 47 F.3d 1182 (Fed. Cir. 1995) (applying Illinois law).

—a competitor's complaint that the insured infringed its patent in a disposable liquid container by making, using, offering to sell, and selling the infringing container contained no evidence of a direct causal link between the asserted "patent infringement" and the insured's advertising. IMT Ins. Co. v. Paper Systems, Inc., 2001 WL 98545 (Iowa Ct. App. 2001) (held by way of dictum).

—a patent holder's underlying claim that the insured infringed his back projector patent when the insured used it in its high– performance computer did not allege that he was injured through advertising at all, let alone because the insured induced infringement when it provided detailed instructions to its customers on how to infringe. U.S. Fidelity & Guar. Co. v. Star Technologies, Inc., 935 F. Supp. 1110 (D. Or. 1996) (applying Oregon law).

—a patent holder's underlying complaint, which alleged that the insured sold "knock–offs" of his unique brand of pet food and water bowls, in violation of his design patent, did not mention "advertising activity" on the part of the insured whatsoever. Doskocil, Inc. v. Fireman's Fund Ins. Co., 1999 WL 430755 (N.D. Cal. 1999) (applying Texas law).

—a refuse container manufacturer's underlying complaint of "patent infringement" arose out of the insured's illegal manufacturing and selling of an alleged infringing container, not out of the insured's "advertising activities," and "advertising activity" was not even mentioned in the underlying complaint. Heil Co. v. Hartford Acc. and Indem. Co., 937 F. Supp. 1355 (E.D. Wis. 1996) (applying Wisconsin law).

CUMULATIVE SUPPLEMENT

Cases:

Patent holder's purported injury from insured's allegedly infringing automated telephone systems did not occur during course of insured's advertising, as required for patent holder's infringement claims against insured to fall within advertising injury coverage of insured's commercial umbrella policy, even though allegedly infringing systems had advertising and promotional capabilities, given that patent claims with which patent holder's complaint was concerned were not related to advertising or promotional capabilities of insured's systems, such that alleged infringement arising from insured's use or sale of its systems could have occurred without insured's advertising activities, making systems' advertising capabilities incidental to complaint. Discover Financial Services LLC v. National Union Fire Ins. Co. of Pittsburgh, PA, 527 F. Supp. 2d 806 (N.D. Ill. 2007).

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§ 19[a] Trademark or trade dress infringement—Caused by "advertising activity"

[Cumulative Supplement]

The courts in the following cases held that coverage existed under the "advertising injury" insurance policy, because the "advertising injury" offense of "trademark or trade dress infringement" was caused by the insured's "advertising activity."

In El–Com Hardware, Inc. v. Fireman's Fund Ins. Co., 92 Cal. App. 4th 205, 111 Cal. Rptr. 2d 670 (1st Dist. 2001), the court held that coverage existed under the CGL "advertising injury" insurance policy, because the underlying offense of "trade dress infringement" was caused by the insureds' advertising of their handles, which copied the unique design of a competitor's patented latch assembly and confused customers regarding the insureds' and the competitor's handles. The court noted that under "trade dress infringement" there must be customer confusion, and to cause customer confusion, the insureds would have had to call attention to the appearance of their own handles, and an obvious method for doing so was to depict the handles in their catalog. The catalog therefore potentially established that, as used in the underlying complaint, the allegations of "passing off," "palming off," and "offering to sell" the infringing handle connoted advertising the disputed handles. Thus, because the insureds' "trade dress infringement" was caused by the advertising of their handles using the infringing trade dress of the competitor's handles, the insurance company had a duty to defend the insured, and the court reversed and remanded the lower court's contrary decision.

There was coverage under the "advertising injury" insurance policies, because the underlying counterclaim of "trademark infringement" was caused by the insured's advertising of the infringing dome–shaped doghouse, the court held in Dogloo, Inc. v. Northern Ins. Co. of New York, 907 F. Supp. 1383 (C.D. Cal. 1995) (applying California law). The court found that because trademark or tradename infringement necessarily involved advertising, or use, of the mark or name to identify the merchant's goods or services, it was not possible to allege a claim for trademark, servicemark, or tradename infringement without the infringing mark being used to identify the goods or services to the public. In the instant case, the court found nothing in the underlying counterclaim to suggest that the alleged injury was not caused, at least in part, by the insured's advertising of the dome–shaped doghouse. Accordingly, because the causation link existed, the court found that the insurance company had a duty to defend the insured in the underlying action.

The court held in Letro Products, Inc. v. Liberty Mut. Ins. Co., 114 F.3d 1194 (9th Cir. 1997) (applying California law), that under the CGL "advertising injury" insurance policy, coverage existed for the underlying actions of "trademark and trade dress infringement," because the insured advertised its infringing pool cleaners with the competitor's pool cleaners. The court found that the underlying complaint clearly alleged injury arising out of the insured's "advertising activities," because among other claims, the complaint alleged that the insured marketed and advertised its allegedly infringing pool cleaners with photographs of the competitor's pool cleaners in promotional materials and trade pieces. The use of the competitor's distinctive product configuration and trade dress in the trade literature for purposes of advertising, marketing, and selling the insured's imitation pool cleaners satisfied the causal nexus test. Consequently, because the underlying "trademark and trade dress infringement"

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 89 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) was caused by the insured's "advertising activities," the court reversed the lower court's ruling and held that there was coverage under the "advertising injury" insurance policy, and hence a duty to defend.

Because the underlying injury of "trademark infringement" was caused by the insureds' unauthorized use of trademarks in its advertising, there was coverage under the CGL "advertising injury" insurance policy, the court held in First State Ins. Co. v. Alpha Delta Phi Fraternity, 39 U.S.P.Q.2d (BNA) 1905, 1995 WL 901452 (Ill. App. Ct. 1st Dist. 1995). The court found that the underlying complaint, which stated that by continuing to use the marks and name, the insureds intentionally confused, misled, and deceived others into believing that they were associated with or were a part of or approved by the organization, did unambiguously state that the insureds' use of the trademark in their advertising proximately caused the alleged injury. In addition, the court noted that unlike a false designation claim, which may be alleged without advertising as an element, the organization was not complaining about the making, selling, or use of some products by the insureds. Instead, the only activity complained of was the insureds' advertising with the infringing trademarks and name. Thus, because only "advertising activity" could have caused the underlying injury of "trademark infringement," the court affirmed the lower court's ruling and held that the insurance company had a duty to defend the insured under the insurance policy.

In Poof Toy Products, Inc. v. U.S. Fidelity and Guar. Co., 891 F. Supp. 1228, 36 U.S.P.Q.2d (BNA) 1343 (E.D. Mich. 1995) (applying Michigan law), the court held that coverage existed under the CGL "advertising injury" insurance policy, because the underlying claims for "trademark and trade dress infringement" were caused by the insured's marketing of the infringing bath stickers and toys. The court found that although the underlying complaint did not on its surface appear to allege any "advertising activities," the complaint was replete with the term "marketing." Even though not all "advertising activities" arguably fell within the term "marketing," the allegations of "trademark and trade dress infringement" inherently involved "advertising activity," because a required element in every trademark/trade dress case was that the mark or dress be likely to cause confusion to the consumer or deceive the consumer as to the origin or manufacturer of the goods. The court therefore ruled that the underlying claims for "trademark and trade dress infringement" fell within the course of advertising the insured's goods and thus within the coverage of the "advertising injury" insurance policy, creating a duty to defend.

The court held in P.J. Noyes Co. v. American Motorists Ins. Co., 855 F. Supp. 492, 31 U.S.P.Q.2d (BNA) 1790 (D.N.H. 1994), reconsideration denied, (July 12, 1994) (applying New Hampshire law), that the underlying action for "trademark infringement" was the result of the insured's use of the trademarked phrase "Dustfree Precision Pellets" in their advertisements for laboratory animal food, so the action fell under the insurance policy providing "advertising injury" coverage. The court found that the "trademark infringement" occurred as a result of the insured using the phrase "Dustfree Precision Pellets" in its advertisements, and that but for the use of the phrase in its packaging, literature, and advertisements, there would have been no "trademark infringement." Accordingly, because the underlying injury was caused by the insured's "advertising activities," the court found that the underlying suit came within the terms of the "advertising injury" provision, and the insurance company had a duty to defend the insured.

Where the competitor's underlying "trademark infringement" action alleged that the insured's selling of counterfeit products occurred during the course of the insured's advertising, there was coverage under the CGL "advertising injury" insurance policy, the court held in B.H. Smith, Inc. v. Zurich Ins. Co., 285 Ill. App. 3d 536, 221 Ill. Dec. 700, 676 N.E.2d 221 (1st Dist. 1996) (applying New York law). The facts showed that the insured's line sheet depicted the imitation products and listed the price of the products. Furthermore, the underlying complaint alleged sales based on the use of the line sheet that resulted in harm to the competitor. Because New York law broadly interpreted "advertising injury" to include the marketing, however incidental, and sale of knock–off goods, the bare allegation of marketing of handbags contained in the competitor's complaint and the attachment of a line sheet were sufficient to trigger coverage. Thus, because the underlying complaint alleged an offense committed during the course of advertising, the court affirmed the lower court's ruling and held that the insurance company had a duty to defend the insured in the underlying action.

In J.A. Brundage Plumbing & Roto–Rooter, Inc. v. Massachusetts Bay Ins. Co., 818 F. Supp. 553 (W.D. N.Y. 1993), decision vacated pursuant to settlement, 153 F.R.D. 36 (W.D. N.Y. 1994) (applying New York law), the court held that the insured's use of the trademark in its advertisements, which falsely designated the source of its services, was the cause of the underlying injury of "trademark infringement" and thus was covered under the "advertising injury" insurance provision. The court found

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 90 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) that the instant case alleged "advertising injury" arising out of the insured's "advertising activities," because it was not possible to allege a claim for trademark, servicemark, or tradename infringement without the infringing mark being used to identify the goods or services to the public. In addition, the first claim of the underlying complaint explicitly stated that the insured used the name and mark in connection with its advertising and sale of sewer, drain, and pipe cleaning services, which constituted an infringement of the federally registered mark. The second claim in the underlying complaint also alleged "advertising injury" arising out of "advertising activities," when it alleged that the insured's use of the designation in connection with the business of offering sewer and drain cleaning services falsely represented or designated that the insured was licensed, sponsored by, or otherwise affiliated with Roto–Rooter. Consequently, because the causal nexus existed, the court ruled that the insurance company had a duty to defend the insured under the "advertising injury" insurance policy.

The court held in Massachusetts Bay Ins. Co. v. Penny Preville, Inc., 1996 WL 389266 (S.D. N.Y. 1996) (applying New York law), that a jewelry designer's underlying complaint for "trade dress infringement" did fall under the insured's "advertising injury" insurance policies, because the infringement was caused by the insured's duplication of much of the designer's entire jewelry line, which caused confusion in the minds of the consumer as to the source of the imitation jewelry. The court found that the designer's underlying trade dress complaint explicitly noted that particular advertising and promotional activities of the insured caused her harm. Furthermore, the designer's requested relief included an injunction prohibiting the insured's advertising, and the evidence produced by the designer in support of her motion for an injunction included copies of the insured's advertisements. Read as a whole, the court concluded that the underlying allegations and averments provided ample indication of a connection between the trade dress injuries and the insured's "advertising activities." Accordingly, the court ruled that the insurance company had a duty to defend the insured in the underlying action under the CGL insurance policies providing "advertising injury" coverage.

In Energex Systems Corp. v. Fireman's Fund Ins. Co., 1997 WL 358007 (S.D. N.Y. 1997) (applying New York law), the court held that there was coverage under the CGL "advertising injury" insurance policy, because the underlying injury of "trade dress or trademark infringement" was caused by the insured's advertisement of its battery pack rebuilding services, which infringed a competitor's trademark/trade dress in its batteries. The court found that although the word "advertising" was not used in the underlying complaint, it was clear that the confusion, which was created through the insured's communications with its customers, took place through advertising. For example, the complaint alleged that the total visual effect of the insured's rebuilt battery pack would cause confusion, and that the insured had provided "false representations or descriptions" of its rebuilt batteries that diverted sales from the competitor's batteries. In addition, the court found that the claim for "trade dress or trademark infringement" included as an element of proof some communication between the seller and consumer. Accordingly, the court ruled that the insurance company had a duty to defend the insured under the insurance policy because the "trademark or trade dress infringement" was caused by the insured's "advertising activities."

There was coverage under the "advertising injury" insurance policy, because the underlying injury of "trademark infringement" was caused when the insured circulated advertising materials in a catalogue that contained photographs of a competitor's products, the court held in Nortek, Inc. v. Liberty Mut. Ins. Co., 858 F. Supp. 1231 (D.R.I. 1994) (applying Rhode Island law). The court found that it was clear that the competitor's underlying factual allegations could be considered "in the course of advertising," because the words alone suggested advertising—"circulating, advertising materials," and "marketing, bathroom faucets and fixtures bearing Harden's trademark." Accordingly, the court ruled that because there was a possibility of coverage under the "advertising injury" insurance policy, the insurance company had a duty to defend the insured in the underlying action.

The court held in Gemmy Industries Corp. v. Alliance General Ins. Co., 1998 WL 804698 (N.D. Tex. 1998), aff'd without opinion, 200 F.3d 816 (5th Cir. 1999) (applying Texas law), that because the underlying "trade dress infringement" claim was caused by the insured's selling of a knock–off novelty item, infringing a competitor's identical–looking product, the claim fell under the CGL insurance policies' "advertising injury" coverage. The court found that the competitor's underlying complaint specifically alleged numerous ways in which the design and appearance of the insured's product mimicked its own and caused customer confusion. According to the court, it was clear that the insured was sued for using this trade dress to "call public attention" to its product, and such a use constituted "advertising activity." Nevertheless, although the court ruled that the

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 91 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) underlying "trade dress infringement" claim fell under the CGL "advertising injury" insurance policies, there was no duty to defend because the insured breached the notice provisions of both policies.

The court in Charter Oak Fire Ins. Co. v. Hedeen & Companies, 280 F.3d 730, 61 U.S.P.Q.2d (BNA) 1557, 98 A.L.R.5th 687 (7th Cir. 2002), reh'g and reh'g en banc denied, (Mar. 12, 2002) (applying Wisconsin law), held that under Wisconsin law the alleged use of the manufacturer's trademark by companies that developed a toy concept by sending business letters on a letterhead that included the manufacturer's trademark, which allegedly created actual confusion among the commercial public and resulted in unlawful profits for the companies, was arguably a use in the course of the companies' advertising, and such use thus triggered the duty of the companies' commercial general liability insurer to defend the companies in the trademark infringement action brought by the manufacturer.

See the following additional cases, in which the courts held that coverage existed under the "advertising injury" insurance policy, because the "advertising injury" offense of "trademark or trade dress infringement" was caused by the insured's "advertising activity," where—

—an Indian arts and crafts organization's underlying trade dress injury was caused by the insured's affixation of tags to the products, which functioned as mini–ads and created the false impression that the products were authentic, Indian–made goods. Flodine v. State Farm Ins. Co., 2001 WL 204786 (N.D. Ill. 2001).

—a competitor's underlying counterclaim for "trademark infringement" of its mark, alleged that the insured's use of the similar mark in its marketing of similar goods as the competitor caused confusion among customers. American Employers' Ins. Co. v. DeLorme Pub. Co., Inc., 39 F. Supp. 2d 64 (D. Me. 1999) (applying Maine law).

—a company's complaint for "trademark infringement" of its name was caused by the insured's use of that same term in connection with the advertising and sale of its jewelry. A Touch of Class Imports, Ltd. v. Aetna Cas. and Sur. Co., 901 F. Supp. 175, 38 U.S.P.Q.2d (BNA) 1319 (S.D. N.Y. 1995), adhered to on reargument, (Jan. 12, 1996) (apparently applying New York law).

—an online retailer's complaint, which alleged that the insured infringed its trademark, when it used the similar, confusing trademark as its domain name, described an injury that was complete in the advertisement, requiring no further conduct. CAT Internet Systems, Inc. v. Providence Washington Ins. Co., 153 F. Supp. 2d 755 (E.D. Pa. 2001) (applying Pennsylvania law).

—an underlying complaint, which alleged that the insured infringed the trade dress in its Christmas tree stand, prayed that the insured be enjoined and restrained from "using in manufacturing, advertising, marketing or sales" the Christmas tree stand in question. Industrial Molding Corp. v. American Mfrs. Mut. Ins. Co., 17 F. Supp. 2d 633 (N.D. Tex. 1998), order vacated pursuant to settlement, 22 F. Supp. 2d 569 (N.D. Tex. 1998) (applying Texas law).

—a competitor's underlying complaint of "trademark and trade dress infringement" accused the insured of trading on the goodwill of the competitor by marketing and selling knock–off circuit breakers bearing trademarks and configurations allegedly identified with and owned by the competitor. Bay Elec. Supply, Inc. v. Travelers Lloyds Ins. Co., 61 F. Supp. 2d 611 (S.D. Tex. 1999) (applying Texas law).

CUMULATIVE SUPPLEMENT

Cases:

Under Florida law, advertising injury suffered by competitor, namely, trade dress infringement by insured manufacturer, was caused by manufacturer's own advertising activity, including publication of advertisements featuring artwork similar to artwork in competitor's ads and promoting products substantially similar to competitor's products designated by similar model numbers, and injury was thus covered under manufacturer's commercial general liability (CGL) insurance policy. Hyman v. Nationwide Mut. Fire Ins. Co., 304 F.3d 1179, 64 U.S.P.Q.2d (BNA) 1411 (11th Cir. 2002).

Under Illinois law, allegations in underlying complaint that insured used manufacturer's trademark and made false representations related to its own product provided sufficient link between advertising and manufacturer's injury to fall within advertising injury coverage of liability insurance policy absent limiting language expressly requiring that harm to third party arise solely out of insured's offense in course of advertising. Central Mut. Ins. Co. v. StunFence, Inc., 292 F. Supp. 2d 1072 (N.D. Ill. 2003) (applying Illinois law).

Causal connection existed between advertising injury stemming from trade dress infringement and pizza restaurant franchisor's advertising activity, for purposes of coverage under commercial general liability (CGL) insurance policy, under Kentucky law; advertisements at issue could have contributed to consumer confusion between franchisor and infringed competitor. Pizza Magia Intern., LLC v. Assurance Co. of America, 447 F. Supp. 2d 766 (W.D. Ky. 2006) (applying Kentucky law).

Alleged advertising injury to insured's competitor as result of insured's alleged use of the competitor's trademarks to identify insured's products and use of competitor's label to ship a box containing insured's seal was caused by an offense arising out of insured's business, and, thus, the requisite causal connection existed for advertising injury coverage under commercial general liability (CGL) policy. Citizens Insurance Company v. Pro-Seal Service Group, Inc., 268 Mich. App. 542, 710 N.W.2d 547 (2005).

For purposes of provision of business owner's policy that provided coverage for advertising injury and that required nexus between advertising activity and advertising injury, required nexus existed concerning competitor's Lanham Act claims for trade-dress and trademark infringement, as would support conclusion that insurer had duty to defend; trade-dress and trademark infringement necessarily involved advertising, and competitor alleged both that insured's use of competitor's trade dress and trademarks in reports and services provided to clients caused a "palming off" injury at least nine times and that palming off was ongoing and would irreparably damage competitor's business reputation and goodwill. Lanham Act, § 1, 15 U.S.C.A. § 1051. Westfield Ins. Co. v. Factfinder Marketing Research, Inc., 2006-Ohio-4380, 860 N.E.2d 145 (Ohio Ct. App. 1st Dist. Hamilton County 2006), appeal allowed, 2007-Ohio-152 (Ohio 2007).

Allegations in underlying complaint against insured by its competitor claiming trade dress infringement alleged a causal connection between its "advertising injury" and its damages, for purposes of determining whether insurer had duty to defend insured in underlying suit pursuant to terms of commercial general liability (CGL) umbrella policy, which included coverage for "advertising injury"; competitor sought damages originating from, growing out of, or flowing from insured's advertising activities, in that complaint alleged that insured marketed, imported, and/or sold footwear that infringed competitor's trade dress, and competitor sought damages from insured for offenses including marketing products or services that bore or used any copy or colorable imitation of competitor's trade dress. Australia Unlimited, Inc. v. Hartford Cas. Ins. Co., 198 P.3d 514 (Wash. Ct. App. Div. 1 2008).

Insured's advertising activity contributed materially to its infringement of software company's trademarks, thus supporting finding of coverage under "advertising injury" provision of commercial general liability (CGL) insurance policy after insured was found liable to software company in federal copyright and trademark infringement suit; insured used software company's trademarks in a manner that was likely to cause consumer confusion, and insurer's advertising resulted in the purchase of disks containing software bearing software company's trademarked titles. Acuity v. Bagadia, 2008 WI 62, 750 N.W.2d 817 (Wis. 2008).

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§ 19[b] Trademark or trade dress infringement—Not caused by "advertising activity"

[Cumulative Supplement]

The courts in the following cases held that coverage did not exist under the "advertising injury" insurance policy, because the "advertising injury" offense of "trademark or trade dress infringement" was not caused by the insured's "advertising activity."

The court held by way of dictum in Advance Watch Co., Ltd. v. Kemper Nat. Ins. Co., 99 F.3d 795, 40 U.S.P.Q.2d (BNA) 1545, 1996 FED App. 350P (6th Cir. 1996), reh'g and suggestion for reh'g en banc denied, (Dec. 30, 1996), that coverage was not available under the "advertising injury" insurance provision, because the insured's "advertising activities" did not cause the underlying injury of trade dress and trademark infringement, where it was alleged that the insured advertised and sold writing instruments that were reproductions, counterfeits, copies, and colorable imitations of the competitor's writing instruments. The court found that it was not the insured's advertising in itself that provoked the competitor's claim; it was the fact that in each advertisement that depicted the insured's writing instrument, there was a writing instrument deceptively similar in shape and appearance to the competitor's writing instruments. When it was the shape and appearance of the similar writing instruments themselves that the competitor claimed to have caused injury, such injury could not have been caused by the insured's advertising of the writing instruments. The court further rejected the insured's argument that the appearance of its writing instruments was in itself advertising, because that would invoke "advertising injury" coverage and the duty to defend whenever a product was merely exhibited or displayed. Accordingly, the court reversed the lower court's decision and held that the insurance company did not have a duty under the "advertising injury" insurance policy to defend the insured in the underlying action.

In Stenbock v. Hartford Fire Ins. Co., 217 F.3d 846 (9th Cir. 2000) (applying California law), the court held that the underlying offense of "trademark infringement" was not caused by the insured's "advertising activities," so no coverage was available under the "advertising injury" insurance provision. The court found that any injury alleged in the underlying complaint, caused by the insured's infringing use of the name "Credit Suisse," was caused by the advertising of Credit Suisse International Holding Corporation's, not the insured's, goods, products, or services. Consequently, because the causal link was lacking, the court affirmed the lower court's ruling that the insurance company had no duty to defend the insured in the underlying action.

The court held in 1–800 Lens–Now, Inc. v. Milbank Ins. Co., 1998 WL 556574 (N.D. Cal. 1998) (applying California law), that the underlying complaint of trademark infringement, whereby it was alleged that the insured falsely misled the public into believing that it had reached an 800 number affiliated with the mutual fund company, when in fact the number belonged to the insured, was not caused by the insured's "advertising activities," so no coverage was available under the "advertising injury" insurance provision. The court found that there was no nexus between the insured's advertising and the trademark infringement, because the underlying complaint did not allege that the insured was using the company's number or name to sell its product line of contact lenses or eyeware. To the contrary, the underlying complaint alleged that the insured injured the company by referring to the company's name in the outgoing message and asking callers to leave their number if they wanted to receive mutual fund information. The complaint did not allege that the insured advertised either its lenses or its 800 number in the outgoing message, and the lenses and the number were the only things mentioned in the complaint that possibly could be considered the insured's goods, products, or services. Finally, the court noted that the insured was not involved in the mutual fund business or financial services, and that the underlying complaint did not allege that the insured sold mutual funds. Thus, because on its face the underlying complaint did not allege a covered "advertising injury," the insurance company did not have a duty to defend the insured in the action.

Because the underlying trade dress injury, where the insured copied the overall appearance of a competitor's sunglasses, was not caused by the insured's "advertising activities," there was no coverage available under the "advertising injury" insurance provision, the court held in Alpina USA Eyewear, L.L.C. v. Reliance Ins. Co., 122 F.3d 1069 (9th Cir. 1997) (applying Colorado law). Here, the underlying complaint did not indicate that any advertising occurred, only that the insured copied the competitor's sunglasses and that the copying caused consumer confusion. Consumers could have been confused even if the insured never advertised its sunglasses at all, just from seeing them in the store or on the street. Consequently, the court affirmed the lower court's ruling and held that because the trade dress injury was not caused by the insured's "advertising activities," the underlying action was beyond the scope of the policy's coverage, and the insurance company had no obligation to defend the insured.

In Amer. Nat. Fire Ins. Co. v. Methods Research Corp., 2000 WL 1785519 (N.D. Ill. 2000) (applying New Jersey law), the court held by way of dictum that no coverage existed under the CGL "advertising injury" insurance policy because the competitor's underlying complaint for trademark or trade dress infringement was not due to the insured's "advertising activities." The court

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 94 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) found that the underlying allegation that the insured manufactured, marketed, and sold "display units" that were direct copies of the competitor's product alleged an offense that was committed long before any "advertising activity." It was the manufacturing of the copied item, not the advertising of it, that caused the alleged injury to the competitor. Because the required nexus between the insured's advertising and the underlying injury did not exist, coverage under the "advertising injury" insurance policy was precluded, and the insurance company had no duty to defend.

Coverage was not available under the "advertising injury" insurance policy, because the underlying complaints for trademark and trade dress infringement, which alleged that the insured copied the name and design of a competitor's bicycle, did not state acts that were caused by the insured's "advertising activities," the court held in Diversified Investments Corp. v. Regent Ins. Co., 226 Wis. 2d 563, 596 N.W.2d 502 (Ct. App. 1999), review denied, 228 Wis. 2d 175, 602 N.W.2d 761 (1999). The court found that it was not the insured's advertising itself that provoked the underlying action, but the fact that the advertisements depicted a bike, which was deceptively similar in design, color, and name to the competitor's bikes. Consequently, it was the sameness of the design, color, and name of the bicycle that caused injury to the competitor, not the advertisements. Furthermore, the court rejected the insured's argument that simply marketing the bicycle, which bore the competitor's trademarked design and names, satisfied the requirement that there be a causal connection between the injury alleged in the underlying action and the insured's "advertising activities." Because the insured's advertising did not cause the underlying trademark and trade dress injuries, the court affirmed the lower court's ruling and held that the insurance company did not have a duty to indemnify the insured under the "advertising injury" insurance policy.

CUMULATIVE SUPPLEMENT

Cases:

Under Connecticut law, allegations in underlying complaint by commercial liability insurer that insureds, former agents of insurer and its affiliated companies, misappropriated insurer's trade secrets, pricing structure information, policyholder information, marketing information, product information, and/or other proprietary information, did not constitute claims of "advertising injury" committed in course of advertising, as would fall within coverage provisions in applicable commercial liability policies; there was no allegation that "advertising" contributed to the alleged misappropriation. Nationwide Mut. Ins. Co. v. Mortensen, 222 F. Supp. 2d 173 (D. Conn. 2002).

Under Texas law, retiree advocacy organization's Lanham Act suit against insured commercial mailing service, alleging distribution of unauthorized lead cards that bore organization's trademark and solicited for financial and insurance services, was outside "misappropriation of advertising ideas or style of doing business" clause of commercial general liability (CGL) insurance policy's advertising injury coverage provision; organization's complaint sounded only in trademark infringement, not trade dress infringement, and organization's trademark was not "advertising." Lanham Act, §§ 32, 43, 15 U.S.C.A. §§ 1114, 1125. America's Recommended Mailers, Inc. v. Maryland Cas. Co., 579 F. Supp. 2d 791 (E.D. Tex. 2008).

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§ 20[a] Unfair competition or other unfair business practices violations—Caused by "advertising activity"

The courts in the following cases held that coverage existed under the "advertising injury" insurance policy, because the "advertising injury" offense of "unfair competition" or other unfair business practices violations were caused by the insured's "advertising activity."

The court in Hameid v. National Fire Ins. of Hartford, 94 Cal. App. 4th 1155, 114 Cal. Rptr. 2d 843 (4th Dist. 2001), opinion modified, 2002 WL 59444 (Cal. App. 4th Dist. 2002), held that allegations by the insured's competitor that 97% of two hairdresser's clients no longer booked new appointments after the hairdressers went to work in the insured's beauty salon and that most of the insured's customers on a particular Saturday were former clients showed a sufficient causal connection between

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 95 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) the alleged advertising activity and injury for purposes of the advertising injury coverage of a commercial general liability insurance policy.

In New Hampshire Ins. Co. v. Foxfire, Inc., 820 F. Supp. 489 (N.D. Cal. 1993) (applying California law), the court held that coverage existed under the CGL "advertising injury" insurance policy, because the underlying injury of "unfair competition" was caused by the insured's advertisements to clients, which misrepresented that the insured was acting on behalf of its former employer. The underlying complaint alleged more than a mere breach of an oral contract. In its claim for interference with economic relations, the former employer alleged that the insured misrepresented both its relationship with the former employer and the source of the revenue enhancement services that the insured offered. The court found that the basis for the underlying claim was the advertisement letter sent to customers by the insured. Accordingly, because the "unfair competition" injury alleged by the former employer arose from the insured's "advertising activity," the court declared that the insurance company had a duty to defend and indemnify the insured in the underlying action.

The court held in Polaris Industries, L.P. v. Continental Ins. Co., 539 N.W.2d 619 (Minn. Ct. App. 1995), that there was coverage under the "advertising injury" insurance policy, because the underlying complaint of consumer protection violations was due to the insured's public announcement, which misrepresented that it produced the industry's first electronic fuel–injected snowmobiles. The court found that the claimed violation of the Colorado Consumer Protection Act, which prohibited knowingly false representations about the source of goods or property, was the result of the insured's alleged misrepresentations and distortions in its advertisements and press releases. Consequently, because the consumer protection claim specifically alleged that the injury arose directly from the insured's "advertising activities," there was a possibility that the insurance company had a duty to defend the insured, and the court reversed and remanded to the lower court to consider the issue of whether any policy exclusions applied.

The court in American Simmental Ass'n v. Coregis Ins. Co., 282 F.3d 582 (8th Cir. 2002) (applying Montana law), held that the insured cattle breeders association's alleged liability to members and cattle breeders for misdesignating cattle as "fullblood" resulted from the "advertising of association's products or work," as required for advertising injury coverage under the commercial general liability (CGL) insurance policy. The court noted that although the bulls described as "fullblood" were owned by officer of the association, rather than directly by the association, the CGL policy provided coverage for the association's officers and the policy defined the association's products as goods that others using the association's name have sold.

§ 20[b] Unfair competition or other unfair business practices violations—Not caused by "advertising activity"

[Cumulative Supplement]

The courts in the following cases held that coverage did not exist under the "advertising injury" insurance policy, because the "advertising injury" offense of "unfair competition" or other unfair business practices violations were not caused by the insured's "advertising activity."

The court held in Pacific Group v. First State Ins. Co., 70 F.3d 524 (9th Cir. 1995) (applying California law), that coverage did not exist under the "advertising injury" insurance policy, because the underlying allegation that the insured engaged in "unfair competition" when it sabotaged the two companies' deal to buy a hotel from a third party did not arise from the insured's advertising. The underlying cross–claim stated that the insured fraudulently broke its promise and breached its fiduciary obligations to its partner, in order to squeeze the partner out of the hotel deal and buy the hotel for itself at a low price. The court rejected the insured's argument that this cross–claim involved advertising, as it distributed a brochure that misrepresented the size of its staff. Instead, the court found that the "unfair competition" injury was alleged to have been caused by the squeeze– out, not by the advertising, especially because the underlying cross–claim never mentioned the brochure. Accordingly, because the underlying complaint did not even mention advertising, the court reversed and remanded the lower court's ruling and held that the insurance company had no obligation to defend or indemnify the insured in the underlying action.

In Tynan's Nissan, Inc. v. American Hardware Mut. Ins. Co., 917 P.2d 321 (Colo. Ct. App. 1995), the court held that because the underlying complaint, which alleged that the insured's auto sales programs violated Colorado's consumer protection statutes, was not due to the insured's advertisement of the sales programs, there was no coverage available under the "advertising injury" provision in the insurance policy. The court found that although the insured might have advertised its offending sales programs, any injury occurred, if at all, in the process of selling the cars and services, and not in the course of advertising. Thus, because there was no causal connection between any alleged "advertising injury" and the insured's "advertising activities," the court affirmed the lower court's opinion concluding that the "advertising injury" provision did not provide coverage for the underlying action, so the insurance company had no duty to defend.

The court held in Qsp, Inc. v. Aetna Cas. and Sur. Co., 256 Conn. 343, 773 A.2d 906 (2001) (applying Connecticut law), that because the injuries alleged in the school entities' underlying antitrust complaint arose out of the existence of the insureds' monopoly in the school fund–raising market, and not out of the insureds' "advertising activities," there was no coverage under the "advertising injury" insurance policies. The court noted that the underlying complaint, phrased in terms of monopolistic and anticompetitive conduct, never mentioned the word "advertising," nor was there any evidence that the alleged anticompetitive conduct was facilitated by a widespread advertising campaign by the insureds against the school entities. In addition, there was little evidence in the record that even suggested that a derogatory advertising campaign was launched by the insureds against their competitors in the magazine fund–raising market. On the contrary, the damages claimed by the school entities were inextricably connected to the loss of profits they suffered as a result of the monopoly created by the insureds. Thus, because there was no causal connection between the insureds' advertising and the underlying antitrust injuries, the court affirmed the lower court's ruling and held that the insurance company did not have a duty to defend.

No coverage existed under the "advertising injury" provision of the insurance policy, because the underlying allegation of antitrust violations, which claimed that the insured engaged in a conspiracy to restrain trade in the business of providing services to subscribing florists, was not due to the insured's "advertising activities," the court held in International Ins. Co. v. Florists' Mut. Ins. Co., 201 Ill. App. 3d 428, 147 Ill. Dec. 7, 559 N.E.2d 7 (1st Dist. 1990). The court found that the basis of the underlying antitrust claim was the insured's in–house rule prescribing conditions for processing floral arrangements that had been advertised in a particular way. According to the court, this rule was not related to "advertising activity" such that an injury attributable to the rule could be considered an "advertising injury." The fact that the purpose of the rule was to protect the insured's advertising investment was of no consequence when the antitrust injury was alleged to have been caused, not by the advertising, but by the rule. Because the allegation of the underlying complaint did not support a causal connection between the insured's "advertising activity" and the antitrust injury, the court affirmed the lower court's ruling and held that the insurance company did not have a duty to defend the insured.

In Sentry Ins. A Mut. Co. v. Flom's Corp., 818 F. Supp. 187 (E.D. Mich. 1993) (applying Michigan law), the court held that because the insureds' "advertising activities" did not cause the underlying antitrust injury of "unfair competition," springing from the insured's participation in a conspiracy to fix prices on dry cleaning and laundry supplies, there was no coverage under the "advertising injury" insurance policy. The court rejected the insureds' argument that because they advertised the "fixed" prices, the "unfair competition" arose out of their "advertising activities." Instead, a thorough review of the underlying complaint showed that it contained no allegations that the injury from the insureds' price–fixing activities resulted from any advertising done by them. Rather, the complaint alleged that the injury suffered by the competitors resulted strictly from the insureds' unlawful price–fixing activities. In addition, the court noted that the underlying complaint did not even mention the fact that the insureds might have advertised the unlawfully fixed prices. Accordingly, because the "unfair competition" injury did not arise out of the insured's "advertising activities," the court ruled that the insurance company had no obligation to defend the insured in the underlying action.

In Tschimperle v. Aetna Cas. & Sur. Co., 529 N.W.2d 421 (Minn. Ct. App. 1995), the court held that "advertising injury" coverage did not exist under the CGL insurance policy, because the insured's marketing of its tax shelters was targeted at other banks and was unrelated to the underlying "negligent misrepresentation" and "unfair competition" injuries sustained by the investor in his purchase of a fraudulent lease. The court found that the investor's injuries giving rise to his claims for negligence, fraud, rescission, conversion, breach of contract, warranty, fiduciary duty, and unfair competition would have existed regardless

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 97 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) of the insured's "advertising activities" with the banks, because the investor might have been induced to purchase the lease anyway. In addition, the court concluded that there was no proximate cause or "but for" cause between the insured's "advertising activities" and the investor's injuries. Consequently, because the injuries to the investor were too far removed from the insured's "advertising activities" to the banks, the court affirmed the lower court's ruling and held that there was no duty on the part of the insurance company to defend or indemnify the insured.

The court held in Delta Pride Catfish, Inc. v. Home Ins. Co., 697 So. 2d 400 (Miss. 1997), that coverage did not exist under the CGL "advertising injury" insurance policy, because the insured's price–fixing activities, which caused the injuries in the underlying class actions, were separate from its "advertising activities." The underlying suits alleged that the insured met with its competitors to set minimum prices for catfish products and adhered to those minimum prices. As for its "advertising activities," the insured asserted that, in response to customer inquiries, it sent three letters to three different customers explaining the higher fish prices. The court found that it was obvious that because the letters were sent after the higher prices were in effect, they did not cause the underlying price–fixing injury. Thus, because there was no causal nexus, the court affirmed the lower court's opinion and held that the insurance company had no duty to defend or indemnify the insured in the underlying action.

Because the underlying complaint, which alleged that the insured engaged in "unfair competition" in marketing an electronic trading system that was similar to a competitor's system, was not due to the insured's "advertising activities," there was no coverage available under the "advertising injury" insurance policy, the court held in Tradesoft Technologies, Inc. v. Franklin Mut. Ins. Co., Inc., 329 N.J. Super. 137, 746 A.2d 1078 (App. Div. 2000). The court found that the competitor's "unfair competition" and tortious interference claims alleged an offense whose gravamen was distinctly different from, and one that was committed long before, any "advertising activity," and hence long before the policy term began. The court found that the eventual advertising of the allegedly infringing trading system exposed the injury sustained by the competitor as a result of the alleged tortious interference with contractual relationships. Accordingly, because the "advertising activity" itself did not cause the underlying injury, the court reversed and remanded the lower court's ruling for the insured.

In Structural Building Products Corp. v. Business Ins. Agency, Inc., 281 A.D.2d 617, 722 N.Y.S.2d 559 (2d Dep't 2001), the court held that the CGL insurance policy's "advertising injury" provision did not cover the customer's underlying action, which alleged that the insured engaged in false advertising and misleading trade practices when it made written statements that its adhesive was asbestos–free, when in fact it contained asbestos, because the insured's advertising did not cause the injury. The court found that the customer's underlying complaint did not allege any facts that showed that the insured's "advertising activities" led to the injury it sustained. Consequently, the court reversed the lower court's ruling and held that the insurance company had no duty to defend or indemnify the insured in the underlying action.

The court held in USX Corp. v. Adriatic Insurance Co., 99 F. Supp. 2d 593 (W.D. Pa. 2000) (applying Pennsylvania law), that coverage did not exist under the insured's "advertising injury" insurance policies, because the antitrust liability, arising from the insured's participation in a conspiracy to limit potential competition in the transportation of iron ore, was not caused by the insured's advertising or its tariffs. The court found that under Pennsylvania law an injury and any resulting liability did not become an "advertising activity" merely because the insured committed a business tort and then advertised the result. Here, even assuming that the insured's tariffs constituted a form of advertising, the underlying liability was not based on nor did it arise from the rates and charges established by those tariffs. The insured enjoyed Interstate Commerce Act immunity with regard to its rates and charges, and the tariffs reflecting those rates and charges had to be accepted as lawful and reasonable. On the contrary, the court found that it was the affirmative evidence of the railroads' refusal to handle self–loaders at their docks, restrictions on the sale and lease of dock property to unregulated entities, boycotts of unregulated docks, and intra–industry coercion claims that constituted the core underpinnings of the antitrust liability. Thus, the court ruled that no coverage was available under the "advertising injury" provisions because there was no connection between the insured's advertising and the underlying antitrust injury, and the insurance company had no duty to indemnify the insured.

No coverage was available under the CGL "advertising injury" insurance policy, because the insured's "advertising activities" did not cause the underlying "unfair competition" injury, whereby the insured misappropriated a developer's marketing of his software program, the court held in Novell, Inc. v. Federal Ins. Co., 141 F.3d 983 (10th Cir. 1998) (applying Utah law). The court reviewed the entire underlying complaint, which demonstrated that the developer alleged that he developed a market for

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 98 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) his software program, only to have the insured create an identical product and effectively close him out of the market. The court found that this simply did not demonstrate the necessary connection between the alleged offense and advertising of the insured's own products. Rather, the developer was injured when the insured created and sold a competing product in direct contravention of oral and written statements to him. The fact that the insured might have advertised the competing product to consumers simply did not cause the developer's injuries. Because the causation nexus did not exist, the court affirmed the lower court's ruling that the insurance company had no duty to defend the insured in the underlying action.

In Westowne Shoes, Inc. v. City Ins. Co., 82 F.3d 420 (7th Cir. 1996), reh'g and suggestion for reh'g en banc denied, (May 14, 1996) (applying Wisconsin law), the court held that there was no coverage available under the "advertising injury" insurance policies, because the insured's advertising did not cause the underlying "unfair competition" suit, brought by an independent dealer who charged that the insured falsely and deceptively labeled and sold cheaper versions of shoes to it. The dealer's underlying suit claimed economic damages, such as lost profits, and an inferior competitive position because of the insured's actions. The court found that the actual sale of the shoes to consumers, and not their labeling, allegedly caused the dealer's damages. In addition, no allegations concerning the insured's advertising appeared anywhere in the underlying complaint, and the dealer made no claim that the cheaper shoes were ever part of an advertising campaign. Accordingly, because there was no causal connection between the underlying injury and the insured's "advertising activity," the court affirmed the lower court's ruling and held that the insurance company had no duty to defend the insured in the underlying action.

See the following additional cases, in which the courts held that coverage did not exist under the "advertising injury" insurance policy, because the "advertising injury" offense of "unfair competition" or other unfair business practices violations was not caused by the insured's "advertising activity," where—

—an underlying action, which claimed that the insured engaged in "unfair competition" in the remanufacture of circuit breakers and the selling of them as new, was not caused by the insured's simultaneous advertising of the breakers. AC Circuit Breakers v. Hartford Fire Ins. Co., 28 F.3d 104 (9th Cir. 1994) (applying California law).

—an exhusband's complaint against his former wife, which alleged that she and her company engaged in "unfair competition" in her elaborate plan to reacquire business interests she gave up in the divorce, did not indicate or even suggested that the acts committed by her were undertaken to advertise her company's goods, products, or services. Katersky v. State Farm Fire and Cas. Co., 203 F.3d 831 (9th Cir. 1999) (applying California law).

—service station operators alleged in the underlying complaint that the insureds sought to fix retail gas prices, but there was no allegation that such an injury ever resulted from any advertising done by the insureds, and the advertising of the gas prices done by the operators, whether voluntary or impermissibly compelled, was of no consequence with regard to the insurance policies. Lazzara Oil Co. v. Columbia Cas. Co., 683 F. Supp. 777 (M.D. Fla. 1988), judgment aff'd without published opinion, 868 F.2d 1274 (11th Cir. 1989) (applying Florida law).

—a movie service's underlying complaint of "unfair competition" against the insured contained no allegations that the insured's secret business deals with a competing movie service and its attempt to monopolize the satellite dish market were related to its "advertising activities." National Union Fire Ins. Co. of Pittsburgh, Pa. v. Amway Corp., 1993–2 Trade Cas. (CCH) ¶70351, 1993 WL 398397 (W.D. Mich. 1993) (applying Michigan law).

—a competitor's underlying suit for "unfair competition" alleged that two of its former sales representatives stole copies of customer lists and used them to solicit business for the insured, but the suit did not seek recovery for anything the insured said in its advertising. Western States Ins. Co. v. Wisconsin Wholesale Tire, Inc., 184 F.3d 699, 51 U.S.P.Q.2d (BNA) 1527 (7th Cir. 1999), reh'g denied, (Aug. 27, 1999) (applying Wisconsin law).

CUMULATIVE SUPPLEMENT

Cases:

Complaint about packaging of allegedly infringing cameras, in patent-infringement proceeding before International Trade Commission (ITC) in which insured was respondent, was too broad for alleged injury to have arisen in the "course of advertising," as was required by advertising injury provisions of insurance policies. Elite Brands, Inc. v. Pennsylvania Gen. Ins. Co., 164 Fed. Appx. 60 (2d Cir. 2006) (applying New York law).

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§ 20.5. Emotional distress

[Cumulative Supplement]

The following authority adjudicated whether coverage existed under the "advertising injury" insurance policy, where the issue was whether the "advertising injury" offense of emotional distress was caused by the insured's "advertising activity."

CUMULATIVE SUPPLEMENT

Cases:

Under North Carolina law, smokers' alleged emotional distress from their injuries and cigarette manufacturer's misrepresentations about its tobacco products was not caused by the manufacturer's advertising activities and, therefore, was not covered by manufacturer's media special perils policy, whether or not the emotional distress was a natural and reasonable consequence of the manufacturer's advertising. Liggett Group, Inc. v. Ace Property and Cas. Ins. Co., 798 A.2d 1024 (Del. 2002).

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§ 21[a] Misappropriation of trade secrets—Caused by "advertising activity"

The courts in the following cases held that coverage existed under the "advertising injury" insurance policy, because the "advertising injury" offense of "misappropriation of trade secrets" was caused by the insured's "advertising activity."

In John Deere Ins. Co. v. Shamrock Industries, Inc., 696 F. Supp. 434 (D. Minn. 1988), judgment aff'd on other grounds, 929 F.2d 413 (8th Cir. 1991) (applying Minnesota law), the court held that coverage existed under the "advertising injury" insurance policies, because the competitor's "advertising injury" offense of "misappropriation of trade secrets" was caused by the insured's installation and demonstration of its proprietary pail–filling machine at a customer's place of business. The court agreed with the insured's argument and found that the disclosure of trade secret information allegedly would not have occurred if not for the insured's "advertising activity" in demonstrating the filling machine. In addition, neither the language of the insurance policies nor case law required there to be proximate cause between the "advertising activity" and the underlying injury for that injury to "arise out of the advertising activity." Accordingly, the court declared that the insurance company had a duty under the insurance policies providing "advertising injury" coverage to defend and indemnify the insured in the underlying action.

The court held in Merchants Co. v. American Motorists Ins. Co., 794 F. Supp. 611 (S.D. Miss. 1992) (applying Mississippi law), that there was coverage under the "advertising injury" insurance policies, because the insured's acquisition and use of the competitor's secret customer list in order to send direct mail solicitations for business to the competitor's customers caused the underlying injury of "misappropriation of trade secrets." Although the competitor's underlying complaint did not mention the word "advertising," deposition evidence submitted by the insured appeared to show that part of the conduct alleged

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 100 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) in the underlying action related to the use of the competitor's customer list by the insured to send a flyer to some of its customers. The court found that this conduct was committed "in the course of advertising." Consequently, because the insured's misappropriation of the trade secret customer list was conduct committed within the course of its advertising, the insurance company had a duty to defend the insured under the insurance policies.

§ 21[b] Misappropriation of trade secrets—Not caused by "advertising activity"

[Cumulative Supplement]

The courts in the following cases held that coverage did not exist under the "advertising injury" insurance policy, because the "advertising injury" offense of "misappropriation of trade secrets" was not caused by the insured's "advertising activity."

The court held in Simply Fresh Fruit, Inc. v. Continental Ins. Co., 94 F.3d 1219 (9th Cir. 1996), as amended, (Aug. 16, 1996) (applying California law), that no coverage existed under the "advertising injury" insurance policy, because the competitor's underlying action for "misappropriation of trade secrets" in its fruit–cutting device and processes, was caused by the insureds' use of the secrets in their manufacturing operations, and not their advertising. The insureds argued that the misappropriation occurred during their advertising because they would on occasion give prospective and current customers tours of their newly automated processing facilities, which disclosed the secret fruit–cutting device and processes. The court found that the insureds produced no evidence on summary judgment that the competitor had suffered damages because of this advertising in order to prove the elements of any such claim. Consequently, because the causation requirement of the "advertising injury" insurance provision was not met, the court ruled that the insurance company had no duty to defend the insureds in the underlying action.

In Ark Telecommunications, Inc. v. State Farm Fire and Cas. Co., 162 F.3d 1167 (9th Cir. 1998) (applying California law), the court held that because the competitor's underlying claim for "misappropriation of trade secrets" was not due to the insured's advertising, there was no "advertising injury" coverage available under the insurance policy. The court found that the mere fact that the insured advertised the infringing product could not bootstrap its underlying wrong into an "advertising injury," even if the advertising exposed the wrongdoing. In addition, there was no evidence that supported a causal link between any possible taking of advertising trade secrets and any injury suffered by the competitor. Accordingly, because the causal link was missing, the court affirmed the lower court's ruling and held that the insurance company had no duty to defend the insured under the "advertising injury" insurance policy.

The court held in Pierce Companies, Inc. v. Wausau Underwriters Ins. Co., 201 F.3d 444 (9th Cir. 1999) (applying California law), that no coverage existed under the "advertising injury" insurance provision, because the insured's advertising of the product made from the misappropriated trade secrets was not the cause of the competitor's injury. The court found that it was clear the gravamen of the underlying complaint was that the insured's employee had misappropriated the competitor's trade secrets and was using them to produce toner for the insured. The harm that the competitor allegedly suffered therefore was caused by the employee's misappropriation of its trade secrets, not by the insured's marketing brochure or any other advertising. Accordingly, the court affirmed the lower court's ruling that the insurance company did not have a duty to defend the insured in the underlying action, because the causal requirement was not met.

In Arnette Optic Illusions, Inc. v. ITT Hartford Group, Inc., 43 F. Supp. 2d 1088 (C.D. Cal. 1998) (applying California law), the court held that coverage did not exist under the CGL "advertising injury" insurance policy, because the offense of "misappropriation of trade secrets," whereby the insured stole secrets relating to the competitor's sunglasses designs, was not caused by the insured's "advertising activity." The court found that although the insured advertised and marketed the sunglasses, and although the underlying complaint mentioned this activity, the insured's "advertising activity" was incidental to the alleged misappropriation of trade secrets. The underlying complaint did not seek relief for the marketing and advertising of the alleged secrets but for their use in the design, development, and production of competing sunglasses. Indeed, the alleged secrets were not disclosed through advertising; rather, they were allegedly used to manufacture and produce sunglasses. Accordingly, because the nexus between any "advertising activity" related to the sunglasses and the alleged "misappropriation of trade secrets" was not sufficient to create a potential for coverage under the policy's "advertising injury" provision, the court ruled that the insurance company did not have a duty to defend.

Where the competitor's underlying complaint for "misappropriation of trade secrets" by a former employee then employed with the insured was not due to the insured's "advertising activities," there was no coverage under the CGL "advertising injury" insurance policy, the court held in Monarch E & S Ins. Services, Inc. v. State Farm Fire and Cas. Co., 38 F. Supp. 2d 841 (C.D. Cal. 1999) (applying California law). The court found that there was no evidence that the allegedly misappropriated trade secrets regarding the competitor's personal articles floater insurance program related to marketing and sales. In addition, there was no causal connection between the competitor's assertion of injury and the insured's advertising material, which announced that the competitor's former employee had joined the insured and that she would be concentrating on floater policies. Here, the "advertising activity" undertaken by the insured served only to announce that the employee would be offering a particular line of products and did not establish the causal connection required. Thus, the court affirmed the lower court's ruling and held that the insurance company did not have a duty to defend the insured in the underlying action.

In Zurich Ins. Co. v. Sunclipse, Inc., 85 F. Supp. 2d 842 (N.D. Ill. 2000) (applying California law), the court held that there was no coverage available under the "advertising injury" insurance policy, because the licensor's underlying injury of "misappropriation of trade secrets" concerning the manufacture of conductive surface coating for corrugated boxes did not arise from the insured's "advertising activities," but from the insured's manufacture and sale of its own coating in violation of the license agreement. The court found that the licensor sued the insured for selling a misappropriated product in violation of their contractual licensing agreement, and not for advertising the product. The injury for which the insured sought coverage was not caused by its advertising of the misappropriated product, but by its wrongful taking of the licensor's trade secrets, and subsequent selling of a competing product in violation of the terms of the license agreement. Consequently, because the insured could not show a sufficiently close causal connection between the harm alleged by the licensor and the insured's "advertising activity," the court ruled that the insurance company did not have a duty to defend or indemnify the insured in the underlying action.

The court held in Winklevoss Consultants, Inc. v. Federal Ins. Co., 991 F. Supp. 1024 (N.D. Ill. 1998) (applying Illinois law), that because the "misappropriation of trade secrets" offense, which led to the development of a competing software product, did not occur in the course of the insured's advertising, although the competing product was subsequently advertised, the underlying injury did not come within the insurance policy's "advertising injury" coverage. The court found that all the allegations of trade secret misappropriation were limited to the insured's development of a competing product, and such conduct took place long before the insured began its promotional efforts. In addition, the original underlying complaint never alleged that the insured wrongfully disclosed trade secret information to third parties in its promotional dealings. Accordingly, because there was no causal link in the original underlying complaint, the court declared that the insurance company did not have a duty to defend the insured.

There was no coverage under the "advertising injury" insurance policies, because the underlying action for "misappropriation of trade secrets" in the development of a competing oven was not caused by the insured's promotion of the competing oven, which exposed the trade secrets to the market place, the court held in McDonald's Corp. v. American Motorists Ins. Co., 321 Ill. App. 3d 972, 255 Ill. Dec. 67, 748 N.E.2d 771 (2d Dist. 2001), reh'g denied, (May 31, 2001) and appeal denied, 196 Ill. 2d 545 (2001). First, the court stated that the insurance policies did not afford "advertising injury" coverage if the only causal connection was between the insured's promotional activities and the measure of damages asserted by the underlying plaintiff. Otherwise, "advertising injury" coverage would extend to virtually every "misappropriation of trade secrets" case, because the product or equipment that is developed from wrongfully acquired trade secrets is typically advertised after the fact. Second, the court found that the insured was unable to demonstrate that the "misappropriation of trade secrets" was caused by its promotional activities in showing off the competing oven to owner–operators of its restaurants as well as to various equipment and food suppliers. Instead, the theft of the trade secrets occurred when the competing oven was manufactured and installed in the restaurant, well before any promotion began. Because the causal nexus was lacking, the court affirmed the lower court's ruling that the insurance company had no duty to indemnify the insured.

Where the insured's "advertising activities" did not cause the competitor's underlying injury of "misappropriation of trade secrets" relating to electronic fuel injectors used to manufacture the insured's snowmobile engines, there was no coverage available under the "advertising injury" provision in the insurance policy, the court held in Polaris Industries, L.P. v. Continental Ins. Co., 539 N.W.2d 619 (Minn. Ct. App. 1995). The court found that the alleged misappropriation of information from the

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 102 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) competitor was the underlying cause of all but one of the competitor's injuries. In addition, seven of the eight claims brought by the competitor in the underlying complaint made no allegation of injuries causally related to the insured's "advertising activities." The court noted that although the prefatory factual section of the underlying complaint mentioned the insured's news releases about the snowmobile engines, the complaint did not address the news releases as an element in any of the seven claims. Because there was no direct causal link between the misappropriated trade secrets and the insured's advertising, the court ruled that there was no coverage under the insurance policy on that point. The court however reversed the lower court's ruling and held that the underlying claim for "unfair competition" did fall within the "advertising injury" insurance coverage, and the court remanded for further consideration. See § 7[a] for the related setout on this issue.

In Associated Aviation Underwriters, Inc. v. Vegas Jet, L.L.C., 106 F. Supp. 2d 1051 (D. Nev. 2000) (applying Nevada law), the court held that because the competing airline's underlying complaint for misappropriation of its marketing and business plan trade secrets by the insureds for economic gain in the Grand Canyon tour business was not caused by the insureds' advertising, there was no "advertising injury," and hence no coverage available under the insurance policy. The court found that the insureds failed to point out any allegations within the underlying complaints that they conducted any "advertising activities" that caused the competing airline's alleged injuries The insureds stipulated that their activities were concentrated in the purchase, sale, refurbishment, and lease of commercial aircraft. They also stipulated that they had never been in the business of providing air tours of the Grand Canyon area. Because none of the alleged acts of misuse or misappropriation of air tour–related property could have been committed in the course of advertising the insureds' goods, products, or services, the court ruled that the insurance company had no duty to defend or indemnify the insureds in the underlying state court action.

CUMULATIVE SUPPLEMENT

Cases:

Insured poultry processor's advertising, that allegedly disclosed inventor's process for roasting chicken, was not factual basis for jury's award under Florida Uniform Trade Secrets Act (FUTSA), and therefore, advertising liability provision of commercial liability insurance policy did not cover insured's liability to inventor, with whom insured had signed nondisclosure agreement; inventor's complaint did not mention advertisement in which insured allegedly disclosed process, but instead focused on insured's use of process to produce competing line of roasted chicken. West's F.S.A. § 688.002. Perdue Farms Inc. v. National Union Fire Ins. Co. of Pittsburgh, P.A., 197 F. Supp. 2d 370 (D. Md. 2002) (applying Maryland law).

Comment

The court in Perdue Farms Inc. v. National Union Fire Ins. Co. of Pittsburgh, P.A., 197 F. Supp. 2d 370 (D. Md. 2002) (applying Maryland law), noted that under Maryland law, coverage for advertising liability does not extend when an insured does nothing more than advertise a product developed from wrongfully acquired trade secrets.

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V. WHETHER COVERAGE EXCLUSIONS APPLY

§ 22[a] Prior publication or acts—Exclusion applied

[Cumulative Supplement]

The courts in the following cases held that coverage did not exist under the "advertising injury" insurance policy because the policy's "prior publication or acts" exclusion applied.

In Delta Airlines v. State Farm Fire and Cas. Co., 96 F.3d 1451 (9th Cir. 1996) (applying Alaska law), the court held that coverage did not exist under the "advertising injury" insurance policy for the underlying "unfair competition" claim, because the policy's "prior publication or acts" exclusion applied. The insurance policy omitted coverage for "advertising injury" arising

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 103 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) out of oral or written publication of material whose first publication took place before the beginning of the policy period. The court found that any "advertising injury" committed by the insured began with publication before the policy took effect. In addition, the court rejected the insured's argument that the exclusion could not have relieved the insurance company of its duty to defend because facts necessary to establish the exclusion's application (i.e., the date of first publication) were not alleged in the underlying complaint. Instead, the court found that an insurer could rely on extrinsic facts to prove that coverage was unavailable when the complaint was silent as to the existence of those facts, and when the facts would not be determined in the underlying action. Accordingly, because the facts demonstrated that the underlying complaint fell within the "prior publication or acts" exclusion, the insurance company did not breach its duty to defend or indemnify, and the court affirmed the lower court's grant of summary judgment for the insurance company.

No coverage was available under the "advertising injury" insurance policy, because the "prior publication or acts" exclusion applied, where the first publication of the offending name in the underlying action occurred before the policy's coverage began, the court held in Federal Ins. Co. v. Learning Group Intern., Inc., 56 F.3d 71 (9th Cir. 1995) (applying California law). The record revealed that the first publication of the offending name giving rise to the alleged "advertising injury" occurred before June 1, 1990, the beginning of the policy period. In addition, the court rejected the insured's argument that the exclusion language was ambiguous, because the language of the exclusion logically applied to any and all "advertising injuries," regardless of how those injuries were specifically described under the policy. Accordingly, because the "prior publication or acts" exclusion applied, the court affirmed the lower court's ruling that the insurance company had no duty to defend or indemnify the insured.

The court held in Envirotech Industries, Inc. v. United Capitol Ins. Co., 141 F.3d 1175 (9th Cir. 1998) (applying California law), that coverage did not exist under the "advertising injury" insurance policy, because the policy's "prior publication or acts" exclusion applied. Here, the facts alleged in the underlying complaint indicated that any "advertising injury" offense was committed from on or about November 1, 1991, until on or about February 5, 1992, and during the employment of the employee, which ceased before February 15, 1992, the start date of the insurance policy. The facts alleged in the complaint did not reveal any possibility of coverage because the relevant conduct allegedly first occurred before the policy's inception. Thus, the court affirmed the lower court's ruling and held that the insurance company had no duty to defend the insured in the underlying action because the insurance policy's "prior publication or acts" exclusion negated the possibility of "advertising injury" coverage.

In Heidarinia v. Chubb Group of Ins. Companies, 163 F.3d 606 (9th Cir. 1998) (applying California law), the court held that there was no coverage for "advertising injury" under the insurance policy because the "prior publication or acts" exclusion applied in the competitor's underlying action for "unfair competition" and commercial disparagement. The facts showed that most of the conduct complained of, whereby the insureds sought to destroy and discredit a competing medical courier company by spreading false information regarding the competitor's inability to serve customers in the Orange County area, was alleged to have occurred before July 12, 1994, the inception of the policy. The facts showed only one specific incident in the underlying complaint that occurred within the policy period. That incident was a statement allegedly made in August 1994 by the insured's employee, which claimed that the competitor had left the Orange County area. Other evidence adduced in the underlying action established that the insured's employee had made nearly identical statements before July 1994. Contrary to the insured's contention, a disparaging statement that the competitor would be leaving Orange County was substantively the same as the statement that the competitor had already left Orange County, for purposes of the harm alleged. Thus, the employee's August 1994 statement was "first published" before the inception of the policy, since only the tense and the syntax changed afterward. Consequently, the court affirmed the lower court's ruling that the exclusion applied and the insurance company had no duty to defend the insured.

The court held in Maxtech Holding, Inc. v. Federal Ins. Co., 202 F.3d 278 (9th Cir. 1999) (applying California law), that the underlying complaint for "trademark infringement" was not covered by the insurance policy's "advertising injury" provision because the "prior publication or acts" exclusion applied. By its terms, the "prior publication or acts" exclusion abrogated the insurer's duty to defend where it could prove that the insured's first publication of the material that caused the injury alleged in the underlying complaint occurred prior to the beginning of the policy. The court found that it was undisputed that the first injurious publication of the offending name occurred before October 31, 1996, the date the "advertising injury" insurance policy went into effect. The trademark owner's underlying complaint alleged that it had been using the trademark on a continuous basis

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 104 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) throughout the United States since 1991, and that in 1994 the insured began using and obtained federal trademark registration for the mark. The court also rejected the insured's argument that the exclusion did not apply because an "advertising injury" caused by "trademark infringement" was not triggered by the "publication" of material, as was required for an injury based on libel or slander. The court found that there was nothing to support that construction of the insurance policy, and that the language of the exclusion logically applied to any and all "advertising injury" offenses, regardless of how those specific offenses were described under the policy. Consequently, the court affirmed the lower court's ruling that the exclusion applied, and that no coverage was available under the "advertising injury" insurance policy, and hence no duty to defend.

In John Deere Ins. Co. v. Shamrock Industries, Inc., 696 F. Supp. 434 (D. Minn. 1988), judgment summarily aff'd, 929 F.2d 413 (8th Cir. 1991) (applying Minnesota law), the court held that the underlying claim for "misappropriation of trade secrets" was not covered under the "advertising injury" insurance policies because the "prior publication or acts" exclusion applied, where the letters and demonstrations of the trade secrets occurred well before the policies' effective dates. The court found that because the letters describing the misappropriated product established specific dates on which the first activity arguably constituting "advertising activity" occurred, and these dates were before the coverage of two of the "advertising injury" insurance policies, the "prior publication or acts" exclusions applied to remove the insured from any responsibility to defend or indemnify the insured under the two policies.

Coverage did not exist under the "advertising injury" insurance policy, because the policy's "prior publication or acts" exclusion applied when the underlying trademark violations occurred before the policy's coverage began, the court held in Essex Ins. Co. v. Redtail Products, Inc., 1998 WL 812394 (N.D. Tex. 1998) (applying Texas law). The court concluded that the trademark owner's September 27, 1996, letter to the insured complaining about the insured's alleged infringement of its trademarks showed that the alleged trademark violations occurred before the policy period, and the first publication of material containing the trademark violations took place before the beginning of the policy period. It was clear from the trademark owner's underlying complaint that the allegations did not arise from the later publication of the insured's 1997 catalog or any other specific materials, but instead arose out of the insured's use of the owner's trademarks to sell its oil products, as described in the September 27, 1996, letter. Based on this letter, the court held that the trademark violations were first published before the insured obtained the policy, and any later publication of the infringing material was merely a subsequent iteration of the original trademark violations. Accordingly, the court ruled that the insurance company had no duty to defend or indemnify the insured in the underlying action.

Because the pet feeder designs in the underlying design patent infringement action were published by the insured before the policy period, the "prior publication or acts" exclusion applied, and there was no coverage available under the CGL "advertising injury" insurance policy, the court held in Doskocil, Inc. v. Fireman's Fund Ins. Co., 1999 WL 430755 (N.D. Cal. 1999) (applying Texas law). The court found that the designer admitted that the allegedly infringing product line of pet feeders was published in advertisements by the insured beginning in April 1997, well before the policy period. In addition, the insured provided no argument or precedent for the claim that the result should be different merely because its corporate predecessor, Dogloo, was responsible for the publications that antedated the policy. Thus, the court ruled that the insurance company had no duty to defend the insured in the underlying action because the "prior publication or acts" exclusion applied.

The court held in Applied Bolting Technology Products, Inc. v. U.S. Fidelity & Guar. Co., 942 F. Supp. 1029, 41 U.S.P.Q.2d (BNA) 1016 (E.D. Pa. 1996), order aff'd without opinion, 118 F.3d 1574 (3d Cir. 1997) (applying Vermont law), that because the "advertising injury" insurance policy's coverage began on January 18, 1995, and the insured first published the allegedly false advertisement before that date, the "prior publication or acts" exclusion applied, and there was no coverage for the underlying "unfair competition" and false advertising claims. The exclusion precluded coverage for "advertising injury" arising out of oral or written publication of material whose first publication took place before the beginning of the policy period. The court found that under the exclusion's plain terms the "first publication" date was a landmark, and that if the injurious advertisement was "first published" before the policy coverage began, then coverage for the "advertising injury" was excluded. It was irrelevant that later publications under a "continuous tort" theory, made after the policy became effective, also caused "advertising injury" or increased the damages. In addition, the court rejected the insured's argument that the exclusion applied only to the "advertising injury" offenses of "libel, slander and disparagement," and "invasion of privacy," because the exclusion applied to the entire definition of "advertising injury," which included the offenses of "misappropriation of advertising ideas or style of doing

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 105 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) business" and "infringement of copyright, title, or slogan." The court stated that because "advertising injury" was defined by four, not two, offenses expressly set forth in the policy, the term "advertising injury" had the same four–part meaning in the exclusion. Because the "prior publication or acts" exclusion applied, the court ruled that the insurance company was not required to defend or indemnify the insured.

CUMULATIVE SUPPLEMENT

Cases:

Under Virginia law, "first publication exclusion" in replica automobile manufacturer's commercial general liability (CGL) policy, which barred coverage for advertising injury when first publication took place before policy period began, relieved insurer of duty to defend manufacturer in trademark infringement actions filed by competitor and licensor, even though competitor filed amended complaint and licensor filed complaint after beginning of policy period, where competitor filed original complaint three months before beginning of policy period, amended complaint alleged almost all of exact same factual language as original complaint, restated first six counts verbatim, and merely added related count and few supporting factual allegations, and licensor's complaint relied on same facts as competitor's original complaint. Superformance Intern., Inc. v. Hartford Cas. Ins. Co., 203 F. Supp. 2d 587 (E.D. Va. 2002).

Under advertising injury liability policies excluding coverage for advertising injury that arose out of "oral or written publication of material whose first publication took place before the beginning of the policy period," coverage for trademark infringement based on materials first published before the beginning of the policy period was excluded, even though the words "oral or written publication" did not appear in the subparts of the policies' definition of "advertising injury" applicable to trademark infringement. Kim Seng Co. v. Great American Ins. Co. of New York, 2009 WL 3791874 (Cal. App. 2d Dist. 2009).

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§ 22[b] Prior publication or acts—Exclusion did not apply

[Cumulative Supplement]

The courts in the following cases held that coverage existed under the "advertising injury" insurance policy, because the policy's "prior publication or acts" exclusion did not apply.

The "prior publication or acts" exclusion did not preclude coverage under the "advertising injury" insurance policy for the underlying "trademark infringement" action, because the insured's infringing acts occurred during the policy period, the court held in Platinum tech., inc. v. Federal Ins. Co., 2000 WL 875881 (N.D. Ill. 2000). The underlying complaint alleged that the insured first used and registered a number of allegedly infringing trademarks between February 1, 1995, and February 1, 1996, during the policy period. There were no allegations in the complaint that the allegedly infringing trademarks were first published prior to the policy period. Because the court could not say that the application of the "prior publication or acts" exclusion was free and clear from doubt in the case, the court declared that the insurance company had a duty to defend the insured in the underlying action.

Where no specific date of infringement was alleged in the underlying pleadings, the "prior publication or acts" exclusion did not apply, so "advertising injury" insurance coverage existed for the underlying "trademark infringement" action, the court held in Federal Ins. Co. v. National Union Fire Ins. Co. of Pittsburg, 928 F.2d 408 (9th Cir. 1991) (applying California law). The insurance company argued that because the pleadings in the underlying infringement claim alleged that the insured's first use of the infringing trademark occurred "subsequent to January, 1983," the trademark infringement began at least in 1983, well before the policy date. The court, however, found that the language indicated that, to the contrary, the first use could have occurred anytime after January 1983 and before the complaint was filed in February 1985. Thus, the first use could feasibly have occurred after January 1, 1985, when the insured's policy would have been in effect. Consequently, because at the time the

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 106 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) underlying complaint was filed it was impossible to know when the insured's first act of "trademark infringement" occurred, the "prior publication or acts" exclusion did not apply, and the court affirmed the lower court's ruling that the insurance company had a duty to defend the insured in the underlying action.

The court held in Dogloo, Inc. v. Northern Ins. Co. of New York, 907 F. Supp. 1383 (C.D. Cal. 1995) (applying California law), that because the "prior publication or acts" exclusion did not apply where it was unclear whether the insured's advertising led to the underlying injury, there was "advertising injury" coverage under the CGL insurance policy for the underlying "unfair competition" counterclaim. The court noted that its finding that the insured had spent over three million dollars on advertising in the past five years did not conclusively establish that the "prior publication or acts" exclusion precluded coverage because, based on the record before the court, the court could not say that any advertising published before the policy period caused the type of injury alleged in underlying counterclaim. Consequently, because the application of the "prior publication or acts" exclusion was only a possibility, the court held that the insurance company's duty to defend continued.

In Arnette Optic Illusions, Inc. v. ITT Hartford Group, Inc., 43 F. Supp. 2d 1088 (C.D. Cal. 1998) (applying California law), the court held that coverage existed under the "advertising injury" insurance policy, because the policy's "prior publication or acts" exclusion did not apply, where the language was ambiguous as to whether it applied to all four enumerated "advertising injury" offenses. The insurance company argued that the "prior publication or acts" exclusion applied to all four "advertising injury" offenses, including the offense of "misappropriation of advertising ideas or style of doing business," and so, because the insured's publication of the misappropriated trademarks occurred before the policy's coverage began, the exclusion applied. The insured argued that the exclusion language was ambiguous because there was no controlling in–circuit authority that ruled that the "prior publication or acts" exclusion applied to all four "advertising injury" offenses. The court agreed with the insured and concluded that the exclusion language in question was ambiguous because the case law supported both interpretations, and the insurance company therefore had a duty to defend and indemnify the insured.

In Irons Home Builders, Inc. v. Auto–Owners Ins. Co., 839 F. Supp. 1260, 30 U.S.P.Q.2d (BNA) 1059 (E.D. Mich. 1993) (applying Florida law), the court held that coverage existed under the "advertising injury" insurance policy, because the policy's "prior publication or acts" exclusion did not apply to the underlying offense of "copyright infringement." The court found that because the provision excluded coverage for "advertising injury arising out of oral or written publication of material whose first publication took place before the beginning of the policy period," its reference to the "oral or written publication of material" mimicked the "advertising injury" offenses involving "libel, slander, and disparagement," and "invasion of privacy." In each case, the "advertising injury" was defined as the "oral or written publication of material" that was slanderous or libelous or invaded privacy. The clear implication was that the "prior publication or acts" exclusion merely limited the coverage for "advertising injury" that arose from those two particular offenses, and not the offense of "copyright infringement." In addition, the court noted that there was no exclusionary provision that limited coverage where one of several instances of "copyright infringement" occurred before the effective date of the policy. Each instance of the insured's copying of the competitor's plans, and each instance in which the copied plans were used to construct a home, constituted an infringement of copyright. Consequently, because the exclusionary provision of the "advertising injury" insurance policy did not apply to the underlying "copyright infringement" allegation, and at least two of the instances of copyright infringement occurred during the coverage period of the "advertising injury" policy, the court held that the insurance company had a duty to defend the insured.

The court held in Guardian Trust Co. v. American States Ins. Co., 1996 WL 509638 (D. Kan. 1996) (applying Kansas law), that the "prior publication or acts" exclusion did not apply and coverage was available under the CGL "advertising injury" insurance policy because it was unclear from the underlying complaint whether all of the insured's disparaging comments were published before the insurance policy's coverage. The insurance company argued that because portions of the underlying complaint alleged that the insured and its officers made the disparaging comments "from and including at least March, 1991," the first publication of the disparaging comments occurred before the insurance policy start date of May 8. 1991. The court, however, found that it was unclear from the underlying complaint whether it could be proved that all of the disparaging comments were first published before the policy period, nor was it clear that all the injuries alleged in the underlying complaint were caused by publications first made before the policy period. The court therefore ruled that the insurer had a continuing duty to defend, because the application of the "prior publication or acts" exclusion remained simply a possibility.

Because the "prior publication or acts" exclusion did not apply, where the underlying complaint of "trademark infringement" was unclear as to when the insured's infringing acts first began, coverage was available under the "advertising injury" insurance policy, the court held in Carnival Brands, Inc. v. American Guarantee and Liability Ins. Co., 726 So. 2d 496 (La. Ct. App. 5th Cir. 1999), writ denied, 740 So. 2d 636 (La. 1999). The court found that the underlying petition, filed in April 1997, only alleged that the insured misappropriated the trademark for use in national commerce "recently," so it could have been construed that the petition alleged a claim for first injurious publication or misappropriation that occurred during the terms of the policy, from January 1996 to January 1997. Consequently, because the "prior publication or acts" exclusion did not apply, the court reversed and remanded the lower court's ruling and held that, pursuant to the insurance policy providing "advertising injury" coverage, the insurance company had a duty to defend the insured.

In International Communication Material Inc. v. Employer's Ins. of Wausau, 1996 WL 1044552 (W.D. Pa. 1996) (applying Pennsylvania law), the court held that coverage existed under the "advertising injury" insurance policy, because the "prior publication or acts" exclusion did not preclude coverage for material published within the policy period, even if similar to previously published material, or if part of an "advertising campaign." The insurance company argued that the exclusion applied because the insured admitted in its answer that it had been committing the "trademark and trade dress infringement" acts since at least July 1987, before the policy began. It further argued that although the insured's infringement might have continued over a period of time, and in different forms, it was all part of the insured's "American Challenge" campaign, which fell within the "prior publication or acts" exclusion, because the first publication of material that contained this theme occurred in July 1987. The court, however, found that the clear language of the exclusion did not support the insurance company's argument, and if the insurer had intended that the "prior publication or acts" exclusion apply to advertising campaigns or material that was "similar to" material published before the inception of the policy, it could have provided such language in the policy. Accordingly, because some of the insured's "trademark infringement" acts occurred during the policy period, the "prior publication or acts" exclusion did not apply, and the court ruled that the insurance company had a duty to defend and indemnify the insured.

The court held in Bay Elec. Supply, Inc. v. Travelers Lloyds Ins. Co., 61 F. Supp. 2d 611 (S.D. Tex. 1999) (applying Texas law), that there was coverage available under the CGL "advertising injury" insurance policy for the competitor's underlying "trademark and trade dress infringement" claims because the "prior publication or acts" exclusion did not apply. The court found that because the trademark law specifically required that a suit be brought by the "registrant," no cause of action against the insured arose until the competitor registered its trademarks in 1997, well after the August 1995 inception of the "advertising injury" insurance policy. Thus, because the "prior publication or acts" exclusion did not apply, the court ruled that the insurance company had a duty to defend the insured in the underlying action.

CUMULATIVE SUPPLEMENT

Cases:

Under Florida law, testimony that insured manufacturer may have run advertisements that facilitated manufacturer's infringement of competitor's trade dress before beginning of manufacturer's commercial general liability (CGL) insurance policy was insufficient to establish that competitor's resulting advertising injury was excluded from coverage under policy provision barring claims for advertising injury arising out of oral or written publication of material whose first-publication took place before the beginning of the policy period. Hyman v. Nationwide Mut. Fire Ins. Co., 304 F.3d 1179, 64 U.S.P.Q.2d (BNA) 1411 (11th Cir. 2002).

Allegations of insureds' former employer that insureds misappropriated its proprietary pricing structures and methods when bidding on projects alleged claim for advertising injury not subject to liability policy's exclusion for oral or written publication of material before beginning of the policy period, giving rise to duty to defend under Georgia law; former employer arguably alleged advertising injury under policy provision defining advertising injury to include misappropriation of advertising ideas or style of doing business, and there was no allegation of any publication occurring before policy period. Colony Ins. Co. v. Corrosion Control, Inc., 390 F. Supp. 2d 1337 (M.D. Ga. 2005), aff'd, 187 Fed. Appx. 918 (11th Cir. 2006) (applying Georgia law).

Exclusion from advertising injury coverage in commercial insurance policy for injury arising out of publication of material before beginning of policy period did not apply to relieve insurer of duty to defend insured in underlying trade- dress infringement suit; underlying complaint did not specify when insured began marketing allegedly infringing product, and exclusion only applied to advertising injuries based on libel, slander, disparagement, and invasion of privacy. Westfield Cos. v. O.K.L. Can Line, 155 Ohio App. 3d 747, 2003-Ohio-7151, 804 N.E.2d 45 (1st Dist. Hamilton County 2003), appeal not allowed, 102 Ohio St. 3d 1459, 2004-Ohio-2569, 809 N.E.2d 33 (2004).

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§ 23[a] Knowledge of falsity—Exclusion applied

[Cumulative Supplement]

The courts in the following cases held that coverage did not exist under the "advertising injury" insurance policy, because the policy's "knowledge of falsity" exclusion applied.

In Callas Enterprises, Inc. v. Travelers Indem. Co. of America, 193 F.3d 952, 52 U.S.P.Q.2d (BNA) 1536 (8th Cir. 1999) (applying Minnesota law), the court held, by way of dictum, that coverage did not exist under the "advertising injury" insurance policy for the underlying defamation claim brought by the insured's business partner, because the policy's "knowledge of falsity" exclusion applied. The court noted that the insurance policy specifically provided that it did not apply to "advertising injuries" arising out of oral or written publication of material, if done by or at the direction of the insured with knowledge of its falsity. Here, the underlying complaint adequately alleged that the insured had acted with knowledge in making defamatory statements against its former business partner. Because the "knowledge of falsity" exclusion precluded coverage for any defamatory remarks attributable to the insured, the court affirmed the lower court's ruling and held that the insurance company had no obligation to defend or indemnify the insured.

The court held in Mulberry Square Productions, Inc. v. State Farm Fire and Cas. Co., 101 F.3d 414 (5th Cir. 1996) (applying Mississippi law), that coverage did not exist under the CGL insurance policy's "advertising injury" provision, because the film companies' underlying counterclaims, which alleged trade libel and product disparagement, triggered the "knowledge of falsity" exclusion. The court found that the libel and disparagement counterclaims spoke for themselves, when they stated that the insured's actions were taken with knowledge and intent. Thus, the court affirmed the lower court's ruling that because the "knowledge of falsity" exclusion applied, the insurance company had no duty to defend the insured in the underlying action.

Because the allegations of the underlying "trademark infringement" complaint were based on conduct both knowing and intentional, the "knowledge of falsity" exclusion applied, and no coverage was available under the "advertising injury" insurance policy, the court held in A.J. Sheepskin and Leather Co., Inc. v. Colonia Ins. Co., 273 A.D.2d 107, 709 N.Y.S.2d 82 (1st Dep't 2000). The court stated that the insurer, in determining whether to disclaim coverage, was entitled to rely on and, indeed, was bound by the four corners of the complaint, which alleged knowing conduct on the part of the insured. In addition, the court found that outside the complaint, the insurance company had no reason to suppose there was a reasonable possibility that liability in the action might be premised on unintentional or unknowing conduct not embraced by the exclusion. To the contrary, before the underlying action's settlement, there was an express finding, after a full evidentiary hearing held in connection with the trademark owner's successful application for a preliminary injunction, that, in accordance with the allegations of the complaint, the insured was a "serial infringer" that had "deliberately sought to confuse the public" by selling goods nearly identical to the trademark owner's. Accordingly, because the "knowledge of falsity" exclusion applied, the court affirmed the lower court's ruling and held that the insurance company had no obligation under the "advertising injury" insurance provision to defend or indemnify the insured in the underlying action.

In American Guarantee and Liability Ins. Co. v. Shel–Ray Underwriters, Inc., 844 F. Supp. 325 (S.D. Tex. 1993) (applying Texas law), the court held that coverage did not exist under the "advertising injury" insurance policy, because the policy's

"knowledge of falsity" exclusion applied to the underlying allegations of breach of fiduciary duty and common–law fraud stemming from the insured's knowingly false statements. First, the exclusion contained language that unambiguously stated that the insurance company would not insure for injury if done by or at the direction of the insured with knowledge of its falsity. Second, the underlying complaint alleged causes of actions based on the insured's knowingly fraudulent statements. Accordingly, the court declared that under the "advertising injury" insurance policy's exclusion the insurance company did not have a duty to defend or indemnify the insured in the underlying action.

The court held in Regent Ins. Co. v. Tanner, 232 Wis. 2d 555, 2000 WI App 32, 608 N.W.2d 436 (Ct. App. 1999), that the "knowledge of falsity" exclusion precluded coverage under the "advertising injury" insurance policy, because the underlying complaint alleged that the insured's "misappropriation of trade secrets" violation was willful, knowing, and intentional. The underlying complaint stated that the insured knowingly misappropriated trade secrets, and that her actions were willful, malicious, and deliberate. In fact, the court noted that the complaint was replete with allegations of knowing and willful conduct. Consequently, because the alleged conduct was done by or at the direction of the insured with knowledge of its falsity, the "knowledge of falsity" exclusion applied, and the court affirmed the lower court's ruling that the insurance company was not obligated under the "advertising injury" insurance provision to defend the insured.

CUMULATIVE SUPPLEMENT

Cases:

Under Illinois law, exclusion from liability policy for personal or advertising injury if injury arose out of statement made by insured with knowledge of falsity precluded coverage for underlying consumer class action suits that alleged insured pineapple producer made false claims about extra sweetness and uniqueness of its patented pineapple, which allegedly injured consumers by misleading them before patent was withdrawn, where factual allegations in consumer complaints were coupled with allegations of fraud and intentional conduct, such that consumers would be required to prove producer's knowledge of falsity to prevail. Del Monte Fresh Produce N.A., Inc. v. Transportation Ins. Co., 500 F.3d 640 (7th Cir. 2007) (applying Illinois law).

Letter sent by insured, a real estate educator, to real estate institute, threatening to start competing school using same surname and stating that competing school would "profit greatly" by using surname, established that insured acted intentionally with knowledge that his act would infringe institute's trademark, such that coverage was barred in institute's trademark infringement lawsuit by liability policy's exclusion for personal and advertising injuries caused by or at the direction of insured with knowledge that the act would violate another's rights and would inflict injury, though insured claimed he believed he had unfettered right to use his own surname. Educational Training Systems, Inc. v. Monroe Guar. Ins. Co., 129 S.W.3d 850 (Ky. Ct. App. 2003), review denied, (Apr. 15, 2004).

Liability coverage for counselor's alleged defamation and malicious prosecution of patient by lying about their sexual relationship and falsely accusing her of theft of records from his office was barred by exclusion of coverage for personal or advertising injury arising out of publication of material, if done by or at the direction of the insured with knowledge of its falsity; the counselor instituted his lawsuit against patient and made various comments which he knew were false. Finnie v. LeBlanc, 856 So. 2d 208 (La. Ct. App. 3d Cir. 2003), writ denied, 869 So. 2d 849 (La. 2004).

Insurer under comprehensive general liability policy had no duty to indemnify insured for federal court judgment finding it liable for trademark infringement, false designation of origin, and false advertising in violation of the Lanham Act; insured's conduct in which it intentionally, willfully, knowingly, surreptitiously and fraudulently passed off counterfeit goods of inferior quality as those of trademark holder fell squarely within policy's exclusion for advertising injury which arose out of insured's publication of material "with knowledge of its falsity." Lanham Trade-Mark Act, §§ 1 et seq. 15 U.S.C.A. §§ 1051 et seq.. Atlantic Mut. Ins. Co. v. Terk Technologies Corp., 309 A.D.2d 22, 763 N.Y.S.2d 56 (1st Dep't 2003).

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§ 23[b] Knowledge of falsity—Exclusion did not apply

[Cumulative Supplement]

The courts in the following cases held that coverage existed under the "advertising injury" insurance policy, because the policy's "knowledge of falsity" exclusion did not apply.

The court in American Simmental Ass'n v. Coregis Ins. Co., 282 F.3d 582 (8th Cir. 2002), held that the commercial general liability (CGL) insurer was precluded from raising an affirmative defense to coverage based on the "knowledge of falsity" exclusion from advertising injury coverage, where the insurer raised the defense for the first time in a renewed motion for summary judgment, the insurer failed to raise the defense during the six years that it denied coverage, and the renewed motion was brought on the eve of trial after the deadline for filing summary judgment motions expired, and after the pretrial order was entered.

Because the underlying complaint for disparagement could be proved by a state of mind less than intent, the "knowledge of falsity" exclusion did not preclude coverage under the CGL "advertising injury" insurance policy, the court held in Sun Elec. Corp. v. St. Paul Fire and Marine Ins. Co., 1995 WL 270230 (N.D. Ill. 1995) (applying Illinois law). The insurance policy contained an exclusion clause that eliminated coverage when the insured knowingly made false and disparaging statements. The court noted that where the complaint alleged intentional misconduct, the "knowledge of falsity" exclusion did not apply if there could be recovery without proving intent. In the instant case, of the four claims asserted against the insured, three did not require proof of intent for recovery, so at least some of the disparagement allegations contained in the underlying complaint were safe from the reach of the "knowledge of falsity" exclusion. The court therefore held that the insurance company had a duty to defend the insured in the underlying action.

In Hoosier Ins. Co. v. Audiology Foundation of America, 745 N.E.2d 300 (Ind. Ct. App. 2001), reh'g denied, (June 6, 2001) and transfer denied (Ind. Dec. 13, 2001), the court held that coverage existed under the insurance policy's "advertising injury" provision, because the "knowledge of falsity" exclusion did not apply to the underlying false advertising claims, where the insured did not publish anything false. The court disagreed with the insurer's argument that the insured, in promoting its "Doctor of Audiology" credential, did so knowing that the meaning people would attach to the title was one of a false degree. Instead, the court noted that for the "knowledge of falsity" exclusion to have applied, it required that the "advertising injury" arose out of materials published by the insured, and that the insured had knowledge of the material's falsity. Here, the insured was engaged in a recredentialing program, which conferred the "doctor of audiology" credential. The insured was not conferring academic degrees, but credentials, and its materials never claimed otherwise. As such, there was nothing false published by the insured, and no way for the insured to have knowledge of any such falsity. The court therefore upheld the lower court's ruling that the "knowledge of falsity" exclusion did not apply, and the insurance company had a duty to defend and indemnify the insured.

The court held in Guardian Trust Co. v. American States Ins. Co., 1996 WL 509638 (D. Kan. 1996) (applying Kansas law), that coverage existed under the CGL "advertising injury" insurance policy because the "knowledge of falsity" exclusion did not apply, where the underlying disparagement claim could be proved by showing the insureds' reckless disregard of the publication's falsity. The court noted that other than noting generally that the underlying complaint alleged that its insureds had acted "willfully, maliciously and intentionally," the insurance company did not cite any part of the complaint where it specifically alleged that the insureds knew the statements they were making were false. In addition, although the insurance company alleged in count two that the insureds made the disparaging statements with actual malice, recovery under actual malice could be proved by showing that the publication was made with knowledge of its falsity or with reckless disregard of whether it was false. Thus, because the insureds' liability on this claim did not require proof of the insureds' actual knowledge of falsity, the court held that the insurer was unable to avoid its duty to defend by the terms of the exclusion.

The underlying action for "misappropriation of trade secrets" was covered under the "advertising injury" insurance policy, because the "knowledge of falsity" exclusion did not apply where the insureds did not disseminate false information, the court

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 111 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) held in American Safety & Risk Services, Inc. v. Legion Indem. Co., 153 F. Supp. 2d 869 (E.D. La. 2001) (applying Louisiana law). The court noted that close scrutiny of the underlying complaint revealed that the allegations were that the insureds knowingly used information illegally obtained to lure away a competitor's customers. Nowhere was it alleged that the insureds disseminated information that they knew to be false. Thus, because the "knowledge of falsity" exclusion did not apply, coverage was not precluded under the "advertising injury" insurance provision, and the insurance company had a duty to defend.

The court held in Simply Lite Food Corp. v. Aetna Cas. & Sur. Co. of America, 245 A.D.2d 500, 666 N.Y.S.2d 714 (2d Dep't 1997), that the underlying disparagement action was covered by the "advertising injury" insurance provisions, because the "knowledge of falsity" exclusions did not apply. The underlying action arose from the insureds' publication of a letter that allegedly disparaged the products of another company. The court found that although the complaint in the underlying action alleged fraudulent intent, it also alleged violations of the New York General Business Law, which did not require proof of intentional or even reckless conduct. Furthermore, the court found that there was sworn testimony in the record indicating that the insureds published the letter without knowledge of its falsity. Consequently, because the "knowledge of falsity" exclusion did not apply, the court affirmed the lower court's ruling and held that the insurance company had a duty to defend the insureds in the underlying action.

There was coverage available under the "advertising injury" insurance policy, because the "knowledge of falsity" exclusion did not apply where the false advertising and deceptive business practices allegations of the underlying complaint did not allege only intentional and knowing misconduct on the part of the insured, the court held in PG Ins. Co. of New York v. S.A. Day Mfg. Co., Inc., 251 A.D.2d 1065, 674 N.Y.S.2d 199 (4th Dep't 1998). The court found that the insured might be found liable in the underlying complaint, pursuant to the Lanham Act and the New York General Business Law allegations, without a showing of intentional or knowing conduct on its part. Under those allegations, whether the insured engaged in intentional or knowing conduct was relevant on the issue of damages only, not liability. Because the "knowledge of falsity" exclusion did not apply, the court reversed the lower court's ruling to the contrary and declared that the insurance company had a duty to defend and indemnify, pursuant to the "advertising injury" insurance provision.

In Berman v. General Acc. Ins. Co. of America, 176 Misc. 2d 13, 671 N.Y.S.2d 619 (Sup 1998), the court held that there was coverage available under the "advertising injury" insurance policy because the "knowledge of falsity" exclusion did not apply to the underlying claim for disparagement. The court noted that the jury in the underlying suit was not required to find, and did not specifically find, that the statement that the insured made about a former employee in the form letter was made with knowledge of its falsity. Indeed, the letter merely stated that the insured could not continue employing the former employee because they had had "an increasing number of differences of opinion." The court found that such a statement was hardly susceptible to a serious allegation that it was made with knowledge of its falsity. Accordingly, the court held that the "knowledge of falsity" exclusion did not preclude coverage under the "advertising injury" insurance provision, and the insurance company had a duty to indemnify the insured.

"Advertising injury" coverage was available under the CGL insurance policy, because the "knowledge of falsity" exclusion did not apply to the underlying copyright and trade dress actions, which did not require a finding of intent, the court held in Massachusetts Bay Ins. Co. v. Penny Preville, Inc., 1996 WL 389266 (S.D. N.Y. 1996) (applying New York law). First, the court found that intent was not a required element, because "copyright infringement" was a strict liability tort. Accordingly, it was possible that under that claim the insured could have been found liable without being found to have acted knowingly, willfully, and intentionally. Second, the court found that intent was not required under the Lanham Act to prove the underlying allegations that the insured knowingly, willfully, and intentionally engaged in "unfair competition" and "trade dress infringement." Although the presence of intent was relevant to the imposition of punitive damages under the act, wrongful intent was not essential for recovery of actual damages. Because the underlying claims did not fall "solely and entirely" within the "knowledge of falsity" exclusion, coverage was available under the insurance policy, and the insurer had a duty to defend.

There was coverage for the competitor's underlying "patent infringement" and false advertising claims, under the "advertising injury" insurance policy, because the "knowledge of falsity" exclusion did not apply, the court held in Elcom Technologies v. Hartford Ins. Co. of Midwest, 991 F. Supp. 1294 (D. Utah 1997) (applying Pennsylvania law). The court noted that the policy did not apply to any "advertising injury" that arose out of a written publication if done by the injured with knowledge of its

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 112 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) falsity. In the instant case, the court found that the false advertising claim did not require an intent to deceive or knowledge of falsity. Instead, that claim could be proved by establishing that the insured acted with reckless indifference in falsely advertising that its technology was the only patented wireless telephone jack on the market. Accordingly, because the "knowledge of falsity" exclusion did not apply, the court ruled that there was a duty, under the insurance policy's "advertising injury" provision, to defend the insured in the underlying action.

The court held in Bay Elec. Supply, Inc. v. Travelers Lloyds Ins. Co., 61 F. Supp. 2d 611 (S.D. Tex. 1999) (applying Texas law), that coverage was available under the CGL "advertising injury" insurance policy for the competitor's underlying "trademark and trade dress infringement" claims because the "knowledge of falsity" exclusion did not apply. The court noted that intent was not a required element of "trademark infringement," so liability in the underlying action could be found even where the infringement was innocent rather than willful. Accordingly, because the insurance company failed to demonstrate that the "knowledge of falsity" exclusion barred coverage under the "advertising injury" insurance policy, the court ruled that the insurance company had a duty to defend the insured in the underlying action.

In Curtis–Universal, Inc. v. Sheboygan Emergency Medical Services, Inc., 43 F.3d 1119 (7th Cir. 1994), reh'g and suggestion for reh'g en banc denied, (Jan. 12, 1995) (applying Wisconsin law), the court held that coverage existed under the CGL "advertising injury" insurance policy, because the policy's "knowledge of falsity" exclusion did not apply to the competitor's underlying antitrust and tort suit. The court found that the underlying complaint did not allege, nor was it clear that the competitor would have to prove in its "unfair competition" claim, that the insureds' alleged campaign of disseminating false information about it was made with knowledge that the information was false. The insureds might have disseminated negative information that they believed was true. In such a case, the insureds might still be guilty of tortious interference with contractual relations, at least if they failed to exercise due care to make sure they were telling the truth about the competitor. Because the underlying complaint alleged an "advertising injury" within the scope of the insurance policy, and none of the exclusions applied, the court reversed the lower court's opinion and held that the insurance company had a duty to defend the insureds in the underlying action.

See the following additional cases, in which the courts held that coverage existed under the "advertising injury" insurance policy, because the policy's "knowledge of falsity" exclusion did not apply, where—

—a competitor's underlying complaint was for "trademark infringement," and because intent was not a required element of that offense, there could be a finding of liability against the insured even if the infringement were innocent. Union Ins. Co. v. Knife Co., Inc., 897 F. Supp. 1213 (W.D. Ark. 1995) (applying Arkansas law).

—a competitor's underlying complaint was for "copyright infringement," and "knowledge of falsity," as a layman would read it, had nothing to do with "copyright infringement," nor was it an element of a claim for that offense, because whether the insured knowingly manufactured infringing carpets or publications displaying those carpets did not make the carpets or publications "false." Interface, Inc. v. Standard Fire Ins. Co., 2000 Copr. L. Dec. ¶28164, 2000 WL 33194955 (N.D. Ga. 2000) (applying Georgia law).

—a copyright owner's underlying "copyright infringement" suit against the insured did not fall "solely and entirely" within the exclusion, because it was possible that the insured might have been found liable for the offense without being found to have acted willfully and knowingly. GRE Ins. Group v. GMA Accessories, Inc., 180 Misc. 2d 927, 691 N.Y.S.2d 244 (Sup 1998).

—an underlying counterclaim, which alleged that the insured's "copyright infringement" was intentional, willful, wanton, and malicious, also alleged that the insured's acts were reckless, and "knowledge of falsity" was not a definitive element of recklessness. DecisionOne Corp. v. ITT Hartford Ins. Group, 942 F. Supp. 1038 (E.D. Pa. 1996) (applying Pennsylvania law).

CUMULATIVE SUPPLEMENT

Cases:

Under Florida law, exclusion to advertising injury coverage, under commercial general liability (CGL) insurance policy, for injury done with knowledge of its falsity was ambiguous, as it did not clearly extend to insured manufacturer's conduct of

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 113 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) infringing competitor's trade dress by creating likelihood of confusion between its own products and those of competitor, and, because ambiguity had to be construed narrowly, exclusion did not bar coverage for advertising injury suffered by competitor. Hyman v. Nationwide Mut. Fire Ins. Co., 304 F.3d 1179, 64 U.S.P.Q.2d (BNA) 1411 (11th Cir. 2002).

Even if some allegations of trademark infringement in underlying action complained of intentional and willful conduct, exclusions from advertising injury coverage in liability policy for acts committed with knowledge that they would violate rights of another did not apply, as Lanham Act permitted recovery for unintentional conduct such that third party's assertions of intentional conduct did not need to be proved to recover. Lanham Trade-Mark Act, § 32(1)(a), 15 U.S.C.A. § 1114(1)(a). Central Mut. Ins. Co. v. StunFence, Inc., 292 F. Supp. 2d 1072 (N.D. Ill. 2003) (applying Illinois law).

Coverage for insured's alleged liability for infringing competitor's trademark and trade dress was not barred by commercial general liability (CGL) policy exclusion applicable to advertising injury caused by or at the direction of the insured with the knowledge that that act would violate the rights of another and would inflict personal and advertising injury; the insured could be liable even if infringement was inadvertent, negligent, or reckless. Citizens Insurance Company v. Pro-Seal Service Group, Inc., 268 Mich. App. 542, 710 N.W.2d 547 (2005).

Under North Carolina law, exclusion from advertising injury coverage, under liability insurance policy issued to computer company, for injury done with knowledge of its falsity did not encompass allegedly misleading conduct, and thus, such exclusion did not bar coverage for advertising injury suffered by automobile company alleging computer company's website gave a false impression or misled visitors to believe that its contents were sponsored by the automobile company. State Auto Property and Casualty Insurance Company v. Travelers Indemnity Company of America, 343 F.3d 249, 67 U.S.P.Q.2d (BNA) 1914 (4th Cir. 2003) (applying North Carolina law).

Business owner's policy's knowledge-of-falsity exclusion, which barred coverage for advertising injury arising out of oral or written publication of material by or at direction of insured with knowledge of its falsity, did not apply to competitor's Lanham Act claims for trade-dress and trademark infringement; exclusion's "oral or written publication of material" language was absent from policy's provision defining advertising injury as including injuries arising from misappropriation of advertising ideas or style of doing business, and competitor alleged that insured acted intentionally or negligently. Lanham Act, § 1, 15 U.S.C.A. § 1051. Westfield Ins. Co. v. Factfinder Marketing Research, Inc., 2006-Ohio-4380, 860 N.E.2d 145 (Ohio Ct. App. 1st Dist. Hamilton County 2006), appeal allowed, 2007-Ohio-152 (Ohio 2007).

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§ 24[a] Breach of contract—Exclusion applied

[Cumulative Supplement]

The courts in the following cases held that coverage did not exist under the "advertising injury" insurance policy, because the policy's "breach of contract" exclusion applied.

In American Services, Inc. v. Hartford Acc. & Indem. Co., 1993 WL 219291 (N.D. Cal. 1993) (applying California law), the court held that coverage did not exist under the CGL "advertising injury" insurance policy for the underlying "unfair competition" and false advertising claims, because the policy's "breach of contract" exclusion applied. The court found that the "breach of contract" exclusion applied because the insureds' "advertising injury" claims against the insurance company revolved around the breach of the promise to provide excess insurance coverage. Consequently, the court held that the insurance company had no duty to defend the insureds in the underlying action.

The court held in Constitution State Ins. Co. v. Dibidale of Louisiana, Inc., 1991 WL 110393 (E.D. La. 1991) (applying Louisiana law), that there was no "advertising injury" insurance coverage available for the underlying counterclaim because the "breach of contract" exclusion applied where the underlying defamation claim was really one for breach of contract. The

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 114 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) court found that the gist of the counterclaim was that the insured failed to comply with its contractual obligation to pay for services rendered by the complainants. In their counterclaim, the complainants alleged that their business reputation was ruined because of the filing of liens and suits by the unpaid subcontractors and suppliers. They alleged that those liens and suits were filed because the insured used loan funds to pay expenses unrelated to the completion of the construction project. The court concluded that the underlying allegations centered on a breach of contract—that is, the complainants' losses flowed from the insured's failure to pay them. Accordingly, because the insurance policy excluded coverage for "advertising injury" that was caused by the insured's breach of contract, the court held that the insurance company was not obligated to defend or indemnify the insureds.

The court held in Callas Enterprises, Inc. v. Travelers Indem. Co. of America, 193 F.3d 952, 52 U.S.P.Q.2d (BNA) 1536 (8th Cir. 1999) (applying Minnesota law), that coverage did not exist under the "advertising injury" insurance policy for the underlying defamation claim brought by the insured's business partner, because the policy's "breach of contract" exclusion applied. The insured sold the business partner's products through an exclusive right–to–sell agreement. Pursuant to this agreement, the insured agreed that it would not sell floor matting manufactured by anyone but the business partner. In 1996, the business partner filed suit against the insured, alleging that the insured had breached their contract by selling other floor matting products to its customers. According to the court, the court could not read any of the counts alleged in the business partner's underlying complaint that flowed from or had their origins in anything other than the alleged breach of the exclusive agency contract, including those counts that alleged "advertising injury" violations of the Lanham Act and defamation. Because the "breach of contract" exclusion precluded coverage for any defamatory remarks attributable to the insured, the court affirmed the lower court's ruling and held that the insurance company had no obligation to defend or indemnify the insured.

In Ross v. Briggs and Morgan, 540 N.W.2d 843 (Minn. 1995), the court held that coverage was not available under the CGL "advertising injury" insurance provision, because the "breach of contract" exclusion applied where the underlying "misappropriation of trade secrets" and "unfair competition" complaints alleged an injury that resulted from the insured's violation of his employment and termination agreements. After the insured left his medical practice group, he violated certain provisions of both his employment agreement and his termination agreement by distributing misleading advertisements for his new practice. The court held that the underlying practice group claims were essentially for breach of the employment and termination contracts and thus were excluded from coverage. Because the "breach of contract" exclusion applied, the court reversed the lower court's ruling and held that the insurance company had no duty to defend or indemnify the insured under the CGL insurance policy.

Where the underlying "copyright infringement" claim resulted from the insured's failure to perform its contractual duties, the "breach of contract" exclusion applied, and there was no coverage available under the "advertising injury" insurance policy, the court held in Fallon McElligott, Inc. v. Seaboard Sur. Co., 607 N.W.2d 801, 54 U.S.P.Q.2d (BNA) 1340 (Minn. Ct. App. 2000). The client's underlying complaint stated that the insured failed to perform its contractual obligations when it prepared advertisements for the client that had to be withdrawn because they allegedly violated copyrights. The court found that because the client's underlying claim was grounded on the insured's failure to fulfill a contract obligation, it fell both outside the "advertising injury" clause and within the "breach of contract" exclusion. Consequently, because the "breach of contract" exclusion applied, the court reversed and remanded the lower court's opinion and held that the insurer had no duty to defend or indemnify the insured in the underlying action.

Because the underlying complaint's allegation that the insured used an unauthorized corporate logo arose from the breach of a dissolution agreement, which assigned all rights to the corporate name and logo to the complainant, the "breach of contract" exclusion applied to preclude any coverage under the CGL "advertising injury" insurance policy, the court held in Southstar Corp. v. St. Paul Surplus Lines Ins. Co., 42 S.W.3d 187 (Tex. App. Corpus Christi 2001), reh'g overruled, (Apr. 5, 2001). The dissolution agreements granted the complainant all rights to the corporate name and logo. Nonetheless, according to the complainant's underlying petition, the insureds engaged in the unauthorized use and misuse of the corporate name. Thus, the court found that the alleged "advertising injury," if any, resulted from the alleged breach of the dissolution agreement by the insureds. Consequently, because the "breach of contract" exclusion applied, there was no duty on the part of the insurance company to defend the insureds, and the court reversed and remanded the lower court's ruling to the contrary.

In Custom Machinery Design, Inc. v. West Bend Mut. Ins. Co., 182 Wis. 2d 511, 514 N.W.2d 879 (Ct. App. 1994), the court held that the licensee's underlying counterclaim and complaint, alleging that the insured infringed the patents it had granted, were not covered under the "advertising injury" insurance policy, because the claims had their genesis in the parties' contractual relationship, so the "breach of contract" exclusion applied. The court found that in both suits the licensee sought to vindicate its rights under the parties' patent licensing agreement. Accordingly, because the "breach of contract" exclusion applied, the court affirmed the lower court's ruling and held that the insurance company had no obligation to defend under the "advertising injury" provision of the insurance policy.

CUMULATIVE SUPPLEMENT

Cases:

Insurance policy's exclusion of coverage for advertising injuries "arising out of breach of contract" applied, precluding insurer from having a duty to defend insured in underlying action regarding insurer's alleged breach of contract to destroy computer software for computer software company; insured was contractually obliged to destroy company's software and company alleged that instead, insured allowed software to be distributed to stores instead of destroying it. Paper Recovery of Northern California v. Travelers Cas. and Sur. Co. of Illinois, 92 Fed. Appx. 478 (9th Cir. 2004).

Under Texas law, exclusion in liability insurance policy for an advertising injury arising out of a breach of contract, other than the misappropriation of advertising ideas under an implied contract, precluded coverage for a trademark infringement claim asserted against the insured; trademark infringement claim alleged that the insured breached licensing agreement by advertising and selling products using a licensor's trademark on the internet, so that claim arose from a breach of contract, and it was not a misappropriation of advertising ideas. V.T.C.A., Bus. & C. § 16.01(a)(5, 6). Sport Supply Group, Inc. v. Columbia Cas. Co., 335 F.3d 453, 67 U.S.P.Q.2d (BNA) 1225 (5th Cir. 2003) (applying Texas law).

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§ 24[b] Breach of contract—Exclusion did not apply

The courts in the following cases held that coverage existed under the "advertising injury" insurance policy, because the policy's "breach of contract" exclusion did not apply.

The insurance policy's "breach of contract" exclusion did not preclude "advertising injury" coverage in the underlying "trademark infringement" action, because other claims were also involved, the court held in Platinum tech., inc. v. Federal Ins. Co., 2000 WL 875881 (N.D. Ill. 2000). The insured allegedly breached a written agreement with the trademark owner when it began using the trademark in contravention of the agreement. The court noted that a review of the trademark owner's underlying complaint showed that it had a number of other claims unrelated to the breach of contract claim—namely, the "trademark infringement" claim. The insurance company also had acknowledged this fact in its coverage denial letter. Because the court could not say that the application of the "breach of contract" exclusion was free and clear from doubt in the case, the court declared that the insurance company had a duty to defend the insured in the underlying action.

In Zurich Ins. Co. (U.S. Branch) v. Killer Music, Inc., 998 F.2d 674 (9th Cir. 1993) (applying California law), the court held that coverage existed under the CGL "advertising injury" insurance policy for the underlying "copyright infringement" suit, because the policy's "breach of contract" exclusion did not apply. The court found that the underlying infringement action, which claimed that the insured sold songs without compensating the producer, under the terms of their license agreement, could have been a claim characterized as sounding in tort, creating at least a potential of liability. Accordingly, because the exclusion did not apply, the insurance company had a duty to defend the insured, and the court reversed and remanded the lower court's ruling to the contrary.

The court in Phoenix American, Inc. v. Atlantic Mut. Ins. Co., 2001 WL 1649243 (Cal. App. 1st Dist. 2001), nonpublished/ nonciteable, rejected the insurer's contention that there was no duty to defend the tendered action because the policy precludes coverage for an advertising injury arising out of "[b]reach of contract, other than misappropriation of advertising ideas under an implied contract …" The insurer argued that this policy exclusion applied because the third–party complaint stated a cause of action alleging that the insured breached the terms of the parties' contract "by virtue of its misappropriation of proprietary information and trade secrets …" The court, however, noted that under California law the presence of claims for which there was no coverage did not necessarily negate the possibility that there could be some potential duty to defend, as a duty to defend the action arose if at least one cause of action in the complaint could possibly fall within the coverage provided by the policy. The court noted that the duty to defend in the instant case was not extinguished merely because of the presence of a single cause of action alleging breach of contract. The court noted that in order to avoid its duty to defend, the insurer had to show that the allegations in the complaint were solely and entirely within the policy's exclusions, and no such showing was made, as the complaint alleged other wrongful conduct, such as copyright infringement and misleading and unfair business practices.

The court held in Interface, Inc. v. Standard Fire Ins. Co., 2000 Copr. L. Dec. ¶28164, 2000 WL 33194955 (N.D. Ga. 2000) (applying Georgia law), that because the insured and the competitor who brought the underlying "copyright infringement" action had no contractual relationship, the insurance policies' "breach of contract" exclusions did not apply, and "advertising injury" coverage was available. The facts in the instant case showed that the competitor's breach of contract claims in the underlying litigation were against its former consultant, who had access to the competitor's patterns while he was contractually obligated to the competitor under a consulting agreement. When the consultant left, the competitor contended that he brought the patterns to the insured, which then produced carpets bearing the infringing patterns. According to the court, the connection between the competitor's alleged breach of contract and the "copyright infringement" claims in the underlying litigation was too attenuated for the "breach of contract" exclusion to apply. The exclusion was intended to preclude claims for coverage of ordinary breach of contract suits against an insured, not claims like this one, where the insured was not even a party to the contract. Consequently, because no exclusions applied, the court declared that the insurance company had a duty to defend the insured in the underlying action.

In Flodine v. State Farm Ins. Co., 2001 WL 204786 (N.D. Ill. 2001) (apparently applying Illinois law), the court held that coverage existed under the "advertising injury" insurance policy for an Indian arts and crafts organization's underlying trade dress injury, because the "breach of contract" exclusion did not apply. The court found that no alleged breach of contract led to the alleged "advertising injury" in this case, which was the misappropriation of the style of selling goods as Indian– made. Instead, the court found that the insurer's argument on this point was backwards. Although the department store asserted a claim against the insured for breach of contract, the alleged breach arose out of the insured's alleged false labeling and misrepresentation of the nature and origin of her goods (the "advertising injury"), and not the other way around. Consequently, the court ruled that the insurance company had a duty to defend the insured under the "advertising injury" provision of the insurance policy because no exclusions applied.

The court held in Assurance Co. of America v. J.P. Structures, Inc., 132 F.3d 32 (6th Cir. 1997) (applying Michigan law), that the underlying "trademark infringement" suit was covered under the "advertising injury" provision in the CGL insurance policy, because the "breach of contract" did not apply when two legal theories of damages were alleged. The underlying injury resulted from the insured's use of the licensor's trademark, following termination of the franchise contract between the licensor and the insured. Along with the underlying breach of contract allegation, the underlying Lanham Act allegation essentially prohibited the same conduct—unauthorized use of the trademark. The licensor therefore had damages under two theories, breach of contract and trademark infringement. To the extent the licensor suffered damages as a result of the use of its trademark in advertising, it suffered two kinds of advertising injuries: those arising from the breach of the contract provisions pertaining to unauthorized use of the mark, and those arising from the infringement of its trademark. The court concluded that the insured's intentional unauthorized use of the mark caused the "trademark infringement," and the breach of the contract merely withdrew the authorization to use it. Thus, because the "advertising injury" did not arise from the breach of contract, which was the failure to pay royalties, the exclusion did not apply, and the court reversed the lower court's opinion, holding that the insurance company had a duty to defend.

Because the "breach of contract" exclusion did not apply to the competitor's underlying allegations of defamation and fraudulent misrepresentation in breach of a confidentiality agreement, there was coverage available under the "advertising injury" insurance policies, the court held in Home Ins. Co. v. Waycrosse, Inc., 990 F. Supp. 720 (D. Minn. 1996), aff'd without opinion, 131 F.3d 143 (8th Cir. 1997) (applying Minnesota law). The insurance company argued that the "breach of contract" exclusions in the policies applied and precluded coverage because the insured's claims arose out of the breach of the confidentiality agreement between the competitor and the insured. The court found that this argument did not apply to all of the competitor's claims. Significantly, the defamation and fraudulent misrepresentation allegations in the competitor's underlying complaint did not refer to the confidentiality agreement and were not necessarily connected with the alleged wrongful disclosure of information conveyed in breach of that agreement. As a result, the court concluded that the insurance company had a duty to defend the insured in the underlying action, because the injuries claimed in those allegations were outside the scope of the "breach of contract" exclusion.

The court held in Hugo Boss Fashions, Inc. v. Federal Ins. Co., 252 F.3d 608, 59 U.S.P.Q.2d (BNA) 1161 (2d Cir. 2001) (applying New York law), that defense coverage did exist under the "advertising injury" insurance policy for the competitor's underlying "trademark infringement" and breach of contract suit, because the policy's "breach of contract" exclusion did not apply. The "breach of contract" exclusion disclaimed coverage for "advertising injury arising out of breach of contract." The court noted that, under New York law, a "but for" test governed exclusion clauses such as the "breach of contract" exclusion at issue here. Thus, the injury would "arise out of" a breach of contract only if the "advertising injury" suffered by the competitor would not exist but for the breach of contract. The court agreed with the lower court's ruling that the underlying trademark claims against the insured existed independent of the contract because the competitor's trademark rights arose long before it entered into the agreement with the insured and would have existed even if the competitor had never entered into that agreement or if that agreement had not been breached. Accordingly, because the "breach of contract" exclusion in the insurance contract did not apply, the court affirmed the lower court's opinion on this point and held that the insurance company had a duty to defend the insured in the underlying action.

§ 25. Intellectual property

[Cumulative Supplement]

The courts in the following cases adjudicated whether coverage existed under the "advertising injury" insurance policy under an "intellectual property" exclusion.

The court held in Industrial Indem. Co. v. Apple Computer, Inc., 79 Cal. App. 4th 817, 95 Cal. Rptr. 2d 528 (1st Dist. 1999), that coverage did not exist under the "advertising injury" insurance policies, because the policies' "intellectual property" exclusions applied in the underlying trademark infringement action. The "advertising injury" insurance policies clearly excluded coverage for claims of "trademark infringement" and "unfair competition" based on infringement of trademark, servicemark, or tradename. The court rejected the insured's claim that this exclusion was reasonably read to exclude statutory and common–law trademark claims, but not "passing off," another form of "unfair competition" that was distinct from trademark or tradename infringement. Instead, the court concluded that when a "passing off" claim was based solely on conduct constituting "trademark or tradename infringement," as was the underlying action, the insurance policies' exclusions for claims of "unfair competition" based on "trademark or tradename infringement" plainly and unambiguously barred coverage. The court also noted that the policies' exclusions did not drastically reduce the scope of coverage for acts of "unfair competition" committed in the course of advertising, because "unfair competition" included many misleading practices distinct from "trademark infringement," and claims based on such conduct were not subject to the exclusion. Accordingly, because the "intellectual property" exclusion applied, the court reversed the lower court's ruling and held that the insurance company did not have a duty to defend the insured in the underlying action.

In Aloha Pacific, Inc. v. California Ins. Guarantee Ass'n, 79 Cal. App. 4th 297, 93 Cal. Rptr. 2d 148 (2d Dist. 2000), as modified on denial of reh'g, (Mar. 28, 2000) and review denied, (June 2, 2000), the court held that the "intellectual property" exclusion for trademarks applied in the underlying trademark action, so no coverage was available under the CGL "advertising injury"

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 118 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) insurance policy. The exclusion in the instant case precluded coverage for "advertising injury" arising out of infringement of trademark, service mark, or tradename, other than titles or slogans. The court noted that the trademarks found to have been infringed were not the names of literary or artistic works, nor could the use of the marks be said to have constituted infringement of a slogan, so the trademarks did not fit into the "title" or "slogan" exception to the "intellectual property" exclusion. The court concluded that because of the "intellectual property" exclusion, the underlying claims, based on infringement of the registered trademark and on false designation of origin resulting from infringement of the unregistered trademark, were not within the insurance policy's coverage. Consequently, the court affirmed the lower court's ruling that there was no "advertising injury" coverage under the insurance policy, and hence no duty to defend.

In Parameter Driven Software, Inc. v. Massachusetts Bay Ins. Co., 25 F.3d 332, 31 U.S.P.Q.2d (BNA) 1202, 1994 FED App. 181P (6th Cir. 1994) (applying Michigan law), the court held that coverage did not exist under the "advertising injury" insurance policy, because the policy's "intellectual property" exclusion for trademark infringement applied. The court noted that the insured's insurance policy excluded coverage for advertising offenses that arose out of "trademark infringement." In the instant case, the competing software company's underlying action was for false designation of origin under the federal Trademark Act, common–law "trademark and tradename infringement," and "unfair competition," arising from the use by the insured of the company's trademark and tradename. As all four counts of the underlying complaint were based on the insured's use of the trademark, the insurance policy exclusion for "infringement of trademark" applied, and the court affirmed the lower court's ruling that the insurance company had no duty to defend the insured.

The court held in Hugo Boss Fashions, Inc. v. Federal Ins. Co., 252 F.3d 608, 59 U.S.P.Q.2d (BNA) 1161 (2d Cir. 2001) (applying New York law), that indemnification coverage did not exist under the "advertising injury" insurance policy for the competitor's underlying "trademark infringement" and breach of contract suit, because the policy's "intellectual property" exclusion applied. In the instant case, the "intellectual property" exclusion stated that coverage did not apply to "advertising injury" arising out of conduct that was claimed as an infringement of trademark or service mark or certification mark or collective mark or tradename, other than trademarked or service marked titles or slogans. Although the lower court ruled that the infringed trademark was a slogan and therefore fit into the exception within the exclusion, the court found that the term BOSS could not be deemed a "trademarked slogan." The court interpreted the carve–out for "trademarked slogans" as applying only to words or phrases used to promote particular products or product lines, and the house name itself did not qualify as such a word or phrase.

CUMULATIVE SUPPLEMENT

Cases:

Exclusion from advertising injury coverage was applicable, in policy held by parent company of Native American art company, and thus insurer did not have duty under Illinois law to defend parent in underlying suit alleging that parent manufactured and sold inauthentic Native American crafts and jewelry; unambiguous policy language excluded coverage for advertising injuries arising out of infringement of trademarks, trade names, service marks or other designations of origin or authenticity. Native American Arts, Inc. v. Hartford Cas. Ins. Co., 435 F.3d 729 (7th Cir. 2006), as amended, (Feb. 14, 2006) (applying Illinois law).

Under Virginia law, provision of commercial general liability (CGL) insurance policy, excluding from coverage of personal and advertising injury any injury arising out of "infringement of trademark, trade name, service mark or other designation of origin or authenticity," applied to preclude coverage for underlying claims against insured replica automobile manufacturer, as underlying claims, including trademark dilution and trade dress infringement, and related unfair competition, were all varieties of trademark claims protected by the Lanham Act and state analogues. Lanham Trade-Mark Act, §§ 1 et seq. 15 U.S.C.A. §§ 1051 et seq.. Superformance Intern. Inc. v. Hartford Casualty Ins. Co., 332 F.3d 215, 67 U.S.P.Q.2d (BNA) 1040 (4th Cir. 2003) (applying Virginia law).

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§ 26[a] Quality of goods—Exclusion applied

[Cumulative Supplement]

In the following, it was held that coverage did not exist under the "advertising injury" insurance policy, because the policy's "quality of goods" exclusion applied.

In New Hampshire Ins. Co. v. Power–O–Peat, Inc., 907 F.2d 58 (8th Cir. 1990) (applying Minnesota law), the court held that coverage did not exist under the CGL "advertising injury" insurance policy, because the policy's "quality of goods" exclusion applied to the competitor's underlying "unfair competition" claim that the insured mislabeled its soil additive products. In the instant case, the policy exclusion applied to "advertising injury" arising out of an incorrect description or mistake in the advertised price of goods, products, or services sold, offered for sale, or advertised. The court agreed with the insurance company's argument that the exclusion covered both the incorrect description of goods and a mistake in the advertised price of goods; otherwise, the use of either "incorrect description" or "mistake" would be redundant if both referred to "advertised prices." Because the competitor's underlying complaint essentially stated that the insured falsely described the contents of its soil additive product, the actions fell within the scope of the exclusion. Accordingly, the court affirmed the lower court's ruling and held that there was no coverage under the "advertising injury" insurance policy, and no duty for the insurance company to indemnify its insured, because the exclusion applied.

CUMULATIVE SUPPLEMENT

Cases:

Insurers were not required to provide defense to topical insect repellent manufacturer's false advertising action against insured due to failure to conform exclusion to commercial general liability (CGL) policies, although manufacturer alleged that insured's advertisements falsely stated that insured's products were superior to its repellent, and insured's repellent was naturally derived, and used adjectives such as messy, nasty, and greasy to describe manufacturer's repellents and characterized their application as hassle and nuisance; allegedly false portrayal of manufacturer's products laid solely in alleged failure of insured's products to be of quality and as effective as claimed. Harleysville Mut. Ins. Co. v. Buzz Off Insect Shield, L.L.C., 364 N.C. 1, 692 S.E.2d 605 (2010).

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§ 26[b] Quality of goods—Exclusion did not apply

The courts in the following cases held that coverage existed under the "advertising injury" insurance policy, because the policy's "quality of goods" exclusion did not apply.

In Flodine v. State Farm Ins. Co., 2001 WL 204786 (N.D. Ill. 2001) (apparently applying Illinois law), the court held that there was coverage under the "advertising injury" insurance policy, because the "quality of goods" exclusion did not apply to an Indian arts and crafts organization's underlying trade dress complaint, which alleged that the insured's labels created the false impression that her products were authentic, Indian–made goods. The court found that the "quality of goods" exclusion barred coverage for claims arising from the failure of the insured's products to perform as well as advertised. In the instant case, although the Indian–made trademarks or designations of authenticity could be indicators of quality (in the sense of excellence) to consumers, they were primarily concerned with identifying the source or origin of goods, not how well the goods would perform. Accordingly, because the "quality of goods" exclusion did not apply, the court ruled that the insurance company had a duty to defend the insured in the underlying action.

The court held in PCB Piezotronics, Inc. v. Kistler Instrument Corp., 1997 WL 800874 (W.D. N.Y. 1997), order amended (W.D. N.Y. Apr. 22, 1998) (applying New York law), that because the insurance policy's "quality of goods" exclusion did

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 120 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) not apply, there was coverage under the "advertising injury" provision for the underlying counterclaim, which alleged that the insured disparaged the competitor's products in an advertisement it placed. The court rejected the insurer's argument that the insurance policy's exclusion for "advertising injury" arising out of the "failure of goods, products or services to conform with advertised quality of performance." applied, because that exclusion would only apply if the advertisement misrepresented the nature, characteristics, and qualities of the insured's own goods. Here, however, the underlying counterclaim alleged that the advertisement was misleading with respect to the competitor's goods. Because the exclusion did not apply, the court held that there was a duty on the part of the insurance company to defend or indemnify the insured.

Coverage existed under the CGL "advertising injury" insurance policy for the underlying false misrepresentation lawsuit, because the policy's "quality of goods" exclusion did not apply, the court held in DecisionOne Corp. v. ITT Hartford Ins. Group, 942 F. Supp. 1038 (E.D. Pa. 1996) (applying Pennsylvania law). A computer company counterclaimed that the insured made false or misleading factual representations concerning its maintenance of the computer company's library equipment and made false or misleading comparisons between itself and the computer company. The insurance company argued that the policy did not cover this "advertising injury" because it arose out of "the failure of goods, products or services to conform with advertised quality of performance," but the court found that the computer company was not claiming that the insured's quality did not rise to the level advertised, but that the insured made misleading and false comparisons with the company's products and services. Consequently, the court ruled that the insurance company had a duty to defend the insured in the underlying action under the "advertising injury" provision of the insurance policy, because no policy exclusions applied.

In Elcom Technologies v. Hartford Ins. Co. of Midwest, 991 F. Supp. 1294 (D. Utah 1997) (applying Pennsylvania law), the court held that coverage existed under the "advertising injury" insurance policy for the competitor's underlying "patent infringement" action, because the policy's "quality of goods" exclusion did not apply. The court noted that under the insured's insurance policy coverage did not apply to any "advertising injury" that arose out of the failure of the product to conform with advertised quality or performance. The court further noted that the competitor's underlying claim alleged that the insured wrongfully advertised that its product was patented. Nowhere did the underlying complaint claim that the quality of the insured's product failed to rise to the level advertised. Accordingly, because the "quality of goods" exclusion did not apply, the court ruled that there was a duty, under the insurance policy's "advertising injury" provision, to defend the insured in the underlying action.

§ 27. Publishing business

The courts in the following cases adjudicated whether coverage existed under the "advertising injury" insurance policy's "publishing business" exclusion.

In Travelers Ins. Co. v. Lesher, 187 Cal. App. 3d 169, 231 Cal. Rptr. 791 (1st Dist. 1986), reh'g denied, (Dec. 24, 1986), the court held that coverage for the underlying antitrust actions was excluded by the "publishing business" exclusion in the "advertising injury" insurance policy, because the insured was engaged in the newspaper publishing business. Contrary to the insured's argument, the court found that the "publishing business" exclusion clause was not ambiguous. The dictionary defined "publishing" as "the business or profession of the commercial production and issuance of literature, information, musical scores or sometimes recording, or art–newspaper–microfilm." The court therefore found that the exclusion clause plainly conveyed the insurer's intent not to provide coverage for "advertising injuries" if the insured was in any type of publishing business, including newspaper publishing. Accordingly, the court affirmed the lower court's ruling that the insurance company had no duty to defend or indemnify the insured under the terms of the "advertising injury" insurance policy on account of the "publishing business" exclusion.

The court held in American Employers' Ins. Co. v. DeLorme Pub. Co., Inc., 39 F. Supp. 2d 64 (D. Me. 1999) (applying Maine law), that coverage did not exist under the CGL "advertising injury" insurance policy for the underlying "trademark infringement" claim, because the policy's "publishing business" exclusion applied, where it was uncontested that the insured's principal business was publishing. The insurance policy explicitly stated that coverage did not apply to an "advertising injury" arising out of an offense committed by an insured whose business was advertising, broadcasting, publishing, or telecasting. The court rejected the argument that the phrase "insured whose business was … publishing" was ambiguous, because it could not apply to companies that engaged in the business of publishing only in part, or else almost all companies would be excluded.

On the contrary, the court found that to be "in the business" of one of the four listed areas clearly meant to be at least primarily engaged in that activity. The court then found that the phrase clearly applied to the insured, whose primary, essential, chief, or principal business was the design and printing of atlases and maps and the development of computer mapping software and databases. This conclusion was further bolstered by the insured's own admission that it was a company "principally engaged" in the business of publishing, and that the company was incorporated as DeLorme Publishing Company, Inc. Because the "publishing business" exclusion applied, the court held that no coverage was available for "advertising injuries," and the insurance company had no duty to defend the insured in the underlying action.

§ 28. Professional services

The courts in the following cases adjudicated whether coverage existed under the "advertising injury" insurance policy's "professional services" exclusion.

In Attorneys' Title Guar. Fund, Inc. v. Maryland Cas. Co., 1991 WL 171339 (N.D. Ill. 1991) (applying Illinois law), the court held that coverage existed under the "advertising injury" insurance policy, because the policy's "professional services" exclusion did not apply in the underlying "copyright infringement" action, where no error, mistake, or omission occurred. The "professional services" exclusion negated coverage for an "advertising injury" caused by any error, omission, malpractice, or mistake of a professional nature committed or alleged to have been committed on behalf of the insured in the conduct of the insured's business activities. The court found that the complaint in the underlying litigation alleged acts committed by the insured during the course of rendering professional services. In particular, the complaint alleged that the insured's employee copied land title data, rather than doing his own research, when he issued title insurance policies. The court found that although copying another's work product was unethical or deceitful, it did not necessarily result in an error, omission, mistake, or malpractice, especially as there were no allegations that the insured's title opinions contained errors, omissions, or mistakes, nor that they constituted malpractice. Consequently, the court declared that the insurance company had a duty to defend the insured in the underlying action because no exclusion provisions applied.

The court held in Atlantic Lloyd's Ins. Co. of Texas v. Susman Godfrey, L.L.P., 982 S.W.2d 472 (Tex. App. Dallas 1998), review denied, (June 10, 1999), that the "advertising injury" insurance provision provided coverage for the underlying defamation injury, because the insured's solicitation letter sent to a prospective client did not provide a professional service, thereby falling under the "professional services" exclusion. The court found that the insured's firm did not render professional services in the letter sent to a former patient of a doctor, soliciting its services for a possible malpractice action against the doctor. The letter did not advise the former patient, but rather invited him to contact the insured's firm. The letter offered no legal opinion with respect to the patient's particular case, but simply acknowledged that the doctor previously had been the subject of litigation. The letter then concluded by offering the possibility of representation. Consequently, the court concluded that by mailing the letter to the former patient, the insured had merely engaged in a practice designed to acquire new business, which was incidental to the profession. Accordingly, because the defamation "advertising injury" was not due to the rendering or failure to render any professional service, the exclusion did not apply, and the court affirmed the lower court's ruling that the insurance company had a duty to defend the insured under the "advertising injury" insurance policy.

§ 29[a] Willful violation of penal statute—Exclusion applied

The courts in the following cases held that coverage did not exist under the "advertising injury" insurance policy, because the policy's "willful violation of a penal statute" exclusion applied.

In Cubic Corp. v. Insurance Co. of North America, 33 F.3d 34, R.I.C.O. Bus. Disp. Guide (CCH) ¶8620 (9th Cir. 1994) (applying California law), the court held that coverage did not exist under the "advertising injury" insurance policies, because the underlying allegations of bribery and other antitrust violations by the insured were excluded by the "willful violation of a penal statute" exclusions in the policies. The court found that the insured could not insure criminal conduct or expect its insurance to cover the defense of claims based on criminal conduct, because the explicit language of the insurance policies covering the insured excluded coverage for actions taken in violation of a penal statute. In addition, the strong policy of California was to deny the possibility of a criminal wrongdoer's insuring the liability arising from its crimes. No more pernicious insurance practice

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 122 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) could be imagined than permitting defense contractors, such as the insured, to carry insurance protecting them if they committed bribery of the government and were discovered. Consequently, because the policy exclusion applied, the court affirmed the lower court's declaration that the insurance company had no duty to defend the insured.

The court held in American Guarantee and Liability Ins. Co. v. Shel–Ray Underwriters, Inc., 844 F. Supp. 325 (S.D. Tex. 1993) (applying Texas law), that coverage did not exist under the "advertising injury" insurance policy, because the policy's "willful violation of a penal statute" exclusion applied to the underlying allegation of antitrust violations. The court found that the exclusion applied, because the antitrust laws were penal statutes, and the underlying complaint by the insured's former business partner alleged that the insured made knowingly false statements to the partner's prospective clients in violation of antitrust laws. Accordingly, the court ruled that the insurance company did not have a duty under the "advertising injury" insurance policy to defend or indemnify the insured in the underlying action.

§ 29[b] Willful violation of penal statute—Exclusion did not apply

[Cumulative Supplement]

The courts in the following cases held that coverage existed under the "advertising injury" insurance policy, because the policy's "willful violation of a penal statute" exclusion did not apply.

In Flodine v. State Farm Ins. Co., 2001 WL 204786 (N.D. Ill. 2001) (apparently applying Illinois law), the court held that coverage existed under the "advertising injury" insurance policy for an Indian arts and crafts organization's underlying trade dress injury, because the "willful violation of a penal statute" exclusion did not apply. The underlying complaint alleged that the insured willfully violated the Indian Arts and Crafts Act (IACA) in misrepresenting her goods as Indian–made. The insurance company contended that the IACA was a penal statute, but the court found that since the IACA had been held to be a strict liability statute, no proof of intent was required. In addition, the court stated that even if the exclusion applied to the underlying claim for contribution from the insured for its liability under the IACA, the exclusion would not affect the insurance company's duty to defend the insured in the underlying suit because other, non–IACA based claims also triggered coverage. Consequently, the court ruled that the insurance company had a duty to defend the insured under the "advertising injury" provision of the insurance policy, because no exclusions applied.

The court held in Curtis–Universal, Inc. v. Sheboygan Emergency Medical Services, Inc., 43 F.3d 1119 (7th Cir. 1994), reh'g and suggestion for reh'g en banc denied, (Jan. 12, 1995) (applying Wisconsin law), that coverage existed under the CGL "advertising injury" insurance policy, because the policy's "willful violation of a penal statute" exclusion did not apply to the underlying wide–ranging antitrust and tort suit. The court stated that although price–fixing was among the many offenses charged in the underlying complaint, it would be a stretch to suppose that the complaint alleged criminal activity. The court noted that even though the antitrust laws contained penal provisions, so did many other statutes not normally considered penal or criminal, such as the copyright laws, which contained criminal penalties although they were rarely imposed. In addition, the court noted that the exclusion argument by the insurance company was made on the assumption that the "advertising injury" alleged in the tortious–interference count of the underlying complaint should be classified as arising out of a willful violation of a penal statute rather than arising out of the tort of "unfair competition." Because the underlying complaint alleged an "advertising injury"

© 2011 Thomson Reuters. No claim to original U.S. Government Works. 123 Advertising Injury Insurance, 98 A.L.R.5th 1 (Originally published in 2002) within the scope of the insurance policy, and none of the exclusions applied, the court reversed the lower court's opinion and held that the insurance company had a duty to defend the insureds in the underlying action.

CUMULATIVE SUPPLEMENT

Cases:

Under Florida law, advertising injury caused by insured manufacturer's infringement of competitor's trade dress, in violation of the Lanham Act, even if willful, was not injury arising out of willful violation of a penal statute or ordinance committed by or with the consent of the insured, as would exclude injury from coverage under manufacturer's commercial general liability (CGL) insurance policy, since Lanham Act was not a penal statute. 15 U.S.C.A. § 1125(a). Hyman v. Nationwide Mut. Fire Ins. Co., 304 F.3d 1179, 64 U.S.P.Q.2d (BNA) 1411 (11th Cir. 2002).

Under Georgia law, exclusion in umbrella liability policy, stating that no coverage was provided for advertising injury arising out of willful violation of penal statute or ordinance committed by or with consent of insured, did not apply to preclude coverage for advertising injury sustained by businesses when insured restaurant willfully sent unsolicited advertisements to them via facsimile, in violation of the Telephone Consumer Protection Act (TCPA); TCPA was a remedial, rather than a penal, statute. 47 U.S.C.A. § 227. Hooters of Augusta, Inc. v. American Global Ins. Co., 272 F Supp. 2d 13655 (S.D. Ga. 2003) (applying Georgia law).

Exclusion of coverage in commercial general liability policy for advertising injury arising from intentional, knowing and illegal conduct of insured did not apply to relieve insurer of duty to defend insured in underlying trade-dress infringement action, even though complaint in underlying action alleged intentional action; complaint also contained claim for non-intentional infringement, plaintiff could have prevailed on Lanham Act and common-law claims without showing intentional conduct, and intent was required only to justify request for enhanced damages and attorney fees. Lanham Trade-Mark Act, § 43(a), 15 U.S.C.A. § 1125(a). Westfield Cos. v. O.K.L. Can Line, 155 Ohio App. 3d 747, 2003-Ohio-7151, 804 N.E.2d 45 (1st Dist. Hamilton County 2003), appeal not allowed, 102 Ohio St. 3d 1459, 2004-Ohio-2569, 809 N.E.2d 33 (2004).

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§ 30. Failure of performance

[Cumulative Supplement]

The following authority adjudicated whether a "failure of performance" exclusion precluded advertising liability coverage.

CUMULATIVE SUPPLEMENT

Cases:

Failure to perform contract exclusion in commercial general liability policy barred coverage of Florida Uniform Trade Secrets Act (FUTSA) claim brought against insured by inventor who claimed that insured misappropriated his process for roasting chicken; insured's liability could be traced back ultimately to its confidentiality agreements with inventor, under which inventor disclosed his process to insured. West's F.S.A. § 688.002. Perdue Farms Inc. v. National Union Fire Ins. Co. of Pittsburgh, P.A., 197 F. Supp. 2d 370 (D. Md. 2002) (applying Maryland law).

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§ 31. "Arises out of contract" exclusion

[Cumulative Supplement]

The following authority adjudicated whether the "arises out of contract" exclusion barred coverage for advertising injury insurance.

CUMULATIVE SUPPLEMENT

Cases:

Under Florida insurance law, exclusion in commercial liability policy for advertising injuries arising out of breach of contract did not bar coverage for claims arising out of insured's unsolicited facsimile advertisements, on ground that insured's transmissions violated its contract with its telecommunications provider; exclusion applied only to contract between insured and party claiming injury. Telephone Consumer Protection Act of 1991, 3(a), 47 U.S.C.A. § 227. Penzer v. Transportation Ins. Co., 545 F.3d 1303 (11th Cir. 2008) (applying Florida law).

The court in Kinko's, Inc. v. Shuler, 255 Wis. 2d 834, 2002 WI App 134, 646 N.W.2d 855 (Ct. App. 2002), review denied, 256 Wis. 2d 65, 2002 WI 111, 650 N.W.2d 841 (2002), where the insured appealed a summary judgment holding that its insurer did not have a duty to defend an action that the complaining party brought against the insured, concluded that, when all doubts and inferences are resolved in favor of the insured, the insured had coverage under the "Advertising Injury" provision of its policy and no exceptions applied. The court rejected the insurer's argument that the "arises out of contract" exclusion applied. The trial court found that exclusionary language in the policy precluded a duty to defend the defendants. The court held that the insurer distorted the applicable legal standard when it asserted that the "arises out of contract" exclusion should be interpreted broadly. To the contrary, exclusions are to be narrowly construed against the insurer. The court concluded that the "arises out of contract" exclusion does not apply because the insured had no contracts with the complaining party. The exclusionary language referenced by the trial court stated that: This insurance does not apply to: "advertising injury" for which the insured has assumed liability in a contract or agreement. The court noted that the exclusion exempts the insurer from its duty to defend claims based on contractual liability, and the contract excluding coverage must be made with the insured. Here, the insured never had any type of contract with the complaining party.

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§ 32. Arising out of offense committed by insured whose business is advertising exclusion

[Cumulative Supplement]

The following authority adjudicated whether the "arising out of offense committed by insured whose business is advertising" exclusion barred coverage for advertising injury insurance.

CUMULATIVE SUPPLEMENT

Cases:

Under North Carolina law, exclusion from advertising injury coverage, under liability insurance policy issued to computer company, for advertising injuries arising out of an offense committed by an insured whose business is advertising did not bar coverage for advertising injury suffered by automobile company alleging computer company's web site gave a false impression or misled visitors to believe that its contents were sponsored by the automobile company; although computer company sold advertising space on its web sites, its principal business was computer sales and services. State Auto Property and Casualty Insurance Company v. Travelers Indemnity Company of America, 343 F.3d 249, 67 U.S.P.Q.2d (BNA) 1914 (4th Cir. 2003) (applying North Carolina law).

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§ 33. Arising out of termination of employment or employment-related practices exclusion

[Cumulative Supplement]

The following authority adjudicated whether the arising out of termination of employment or employment-related practices exclusion barred coverage for advertising injury insurance.

CUMULATIVE SUPPLEMENT

Cases:

Under Alabama law, employment-related practices exclusion from bodily injury and personal and advertising injury coverage in commercial general liability (CGL) insurance policy applied to former employee's claims against insureds for defamation, malicious prosecution, intentional infliction of emotional distress, and other torts arising out of insureds' allegedly wrongful actions in accusing employee of embezzlement and securing his prosecution for possession of forged instrument, as many claims were explicitly enumerated in exclusionary language and all claims were germane to his employment. State Nat. Ins. Co. v. Affordable Homes of Troy, LLC, 368 F. Supp. 2d 1281 (M.D. Ala. 2005) (applying Alabama law).

Under Missouri law, exclusion in commercial general liability policy for personal and advertising injury "arising out of" termination of employment or employment-related practices barred coverage for former employee's suit alleging false arrest, false imprisonment, and slander; incidents of which employee complained all flowed directly from her employment with insured. Capitol Indem. Corp. v. 1405 Associates, Inc., 340 F.3d 547 (8th Cir. 2003) (applying Missouri law).

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§ 33.5. Interactive conversation between or among persons through a computer network

[Cumulative Supplement]

The following authority considered whether an interactive conversation between or among persons through a computer network exclusion from a business liability insurance policy was applicable to advertising injury coverage.

CUMULATIVE SUPPLEMENT

Cases:

Under Pennsylvania law, electronic-mail newsletter that employee of insured consulting firm distributed to clients and prospective clients was outside "interactive conversation between or among persons through a computer network" exclusion from business liability insurance policy's advertising injury coverage; although the e-mail newsletter included insured's Internet address and employee instructed recipients to contact him at that address with comments or questions, newsletter did not constitute conversation in normal sense of that word. Toffler Associates, Inc. v. Hartford Fire Ins. Co., 651 F. Supp. 2d 332 (E.D. Pa. 2009) (applying Pennsylvania law).

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VI. ENFORCEABILITY OF ADVERTISING INJURY COVERAGE IN LIGHT OF PUBLIC POLICY AGAINST INSURANCE COVERAGE FOR INTENTIONAL ACTS

§ 34. Advertising injury coverage enforceable

[Cumulative Supplement]

The following authority held that the advertising injury coverage of a commercial general liability (CGL) insurance policy was enforceable despite the public policy against insurance coverage for intentional acts.

CUMULATIVE SUPPLEMENT

Cases:

Advertising injury coverage of commercial general liability (CGL) insurance policy was enforceable despite public policy against insurance coverage for intentional acts; the insurer authored and sold the policy. Liberty Mut. Ins. Co. v. OSI Industries, Inc., 831 N.E.2d 192 (Ind. Ct. App. 2005), transfer denied, 841 N.E.2d 190 (Ind. 2005).

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RESEARCH REFERENCES

West's Key Number Digest

West's Key Number Digest, Insurance 2298–2305

Westlaw Databases

Westlaw® Search Query: "advertising injur!"

A.L.R. Library

A.L.R. Index, Advertising and Advertisements A.L.R. Index, Insurance and Insurance Companies Insurance Coverage for Claims of Violations of the Telephone Consumer Protection Act (47 U.S.C.A § 227), 3 A.L.R.6th 625 Construction and application of "business pursuits" exclusion provision in general liability policy, 35 A.L.R.5th 375 Liability insurer's postloss conduct as waiver of, or estoppel to assert, "no–action" clause, 68 A.L.R.4th 389 Libel or slander: defamation by gestures or acts, 46 A.L.R.4th 403 Actionable nature of advertising impugning quality or worth of merchandise or products, 42 A.L.R.4th 318 Division of opinion among judges on same court or among other courts or jurisdictions considering same question, as evidence that particular clause of insurance policy is ambiguous, 4 A.L.R.4th 1253 Invasion of privacy by sale or rental of list of customers, subscribers, or the like, to one who will use it for advertising purposes, 82 A.L.R.3d 772 Rights and remedies with respect to another's use of deceptively similar advertising slogan, 2 A.L.R.3d 748 Commercial competitor's truthful denomination of his goods as copies of designs of another, using designer's name, as trademark infringement, unfair competition, or the like, 1 A.L.R.3d 760 Failure of liability insurer, after notification, to defend suit against insured, as warranting opening default against insured on ground of inadvertence or excusable neglect, 87 A.L.R.2d 870 Allegations in third person's action against insured as determining liability insurer's duty to defend, 50 A.L.R.2d 458

Consequences of liability insurer's refusal to assume defense of action against insured upon ground that claim upon which action is based is not within coverage of policy, 49 A.L.R.2d 694 Refusal of liability insurer to defend action against insured involving both claims within coverage of policy and claims not covered, 41 A.L.R.2d 434

Legal Encyclopedias

Am. Jur. 2d, Insurance §§ 703–728 Am. Jur. 2d, Insurance §§ 703–728 C.J.S., Insurance §§ 948–950

Treatises and Practice Aids

Couch on Insurance 3d §§ 129:25- 129:28 4 West Federal Forms, District Courts §§ 4319, 4786 Ostrager & Newman, Handbook on Insurance Coverage Disputes (9th ed.) § 7.04

Trial Strategy

Insured's "Reasonable Expectations" as to Coverage of Insurance Policy, 20 Am. Jur. Proof of Facts 2d 59

Forms

14A Am. Jur. Pleading and Practice Forms, Insurance, Forms 623, 731 et seq.

Law Reviews and Other Periodicals

Antognini, Why Neither Side Has Won Yet: Recent Trends in Advertising Injury Coverage, 65 Def. Couns. J. 18 (1998) Kelly, Scope of Advertising Injury Under Iowa Law in Commercial General Liabiliuty Policies, 48 Drake L. Rev. 625 (2000) Rossi, Insurance Coverage for Advertising Injury Liability and Multimedia Liability Risks in the United States, 5 Int'l Ins. L. Rev. 244 (1997) Winder, Insurance Coverage for Intellectual Property Claims: Understanding "Advertising Injury" Provisions in Liability Policies, 12 Intell. Prop. J. 127 (1998)

1 Accordingly, cases discussing whether claims arising out of "advertising activities" are covered under more general provisions of a liability policy are excluded, as are cases discussing whether particular acts constitute advertising for purposes of determining the applicability of a provision excluding coverage for injuries arising out of an insured's "advertising activities."

2 See Heritage Mut. Ins. Co. v. Advanced Polymer Technology, Inc., 97 F. Supp. 2d 913 (S.D. Ind. 2000).

3 See Heritage Mut. Ins. Co. v. Advanced Polymer Technology, Inc., 97 F. Supp. 2d 913 (S.D. Ind. 2000).

4 See Mez Industries, Inc. v. Pacific Nat. Ins. Co., 76 Cal. App. 4th 856, 90 Cal. Rptr. 2d 721, 53 U.S.P.Q.2d (BNA) 1167 (2d Dist. 1999), as modified, (Dec. 21, 1999) and review denied, (Mar. 22, 2000). The 1976 CGL form included the following "advertising injury" offenses: libel; slander; defamation; violation of right of privacy; piracy; unfair competition; and infringement of a copyright, title, or slogan.

5 See Industrial Molding Corp. v. American Mfrs. Mut. Ins. Co., 17 F. Supp. 2d 633 (N.D. Tex. 1998), order vacated, 22 F. Supp. 2d 569 (N.D. Tex. 1998) (pursuant to settlement). The 1986 CGL form included the following "advertising injury" offenses: oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products, or services; oral or written publication of material that violates a person's right of privacy; misappropriation of advertising ideas or style of doing business; and infringement of a copyright, title, or slogan.

6 See Bank of the West v. Superior Court, 2 Cal. 4th 1254, 10 Cal. Rptr. 2d 538, 833 P.2d 545 (1992).

7 See Hameid v. National Fire Ins. of Hartford, 94 Cal. App. 4th 1155, 114 Cal. Rptr. 2d 843 (4th Dist. 2001), opinion modified, 2002 WL 59444 (Cal. App. 4th Dist. 2002).