California Court of Appeal Holds No “Advertising Injury” Coverage for Product That Is Neither Mentioned Nor Disparaged in Advertisement

more+
less-

[author: Jamison R. Narbaitz]

In Hartford Casualty Ins. Co. v. Swift Distribution, Inc., __ Cal.Rptr.3rd __, 2012 WL 5306248 (Cal. Ct. App. Oct. 29, 2012), the California Court of Appeal held that the “advertising injury” coverage in a CGL policy does not apply when the insured’s advertisement neither mentions nor disparages the claimant’s product.  The claimant, Dahl, manufactured and sold a product known as the “Multi-Cart.”  Dahl sued Ultimate for patent infringement, unfair competition, dilution of a famous mark, and misleading advertising arising from Ultimate’s sale of a similar product, the “Ulti-Cart.”  Ultimate’s advertisement did not expressly refer to Dahl’s Multi-Cart, nor did it disparage Dahl’s product or business.

Hartford Casualty Insurance Company insured Ultimate under a CGL policy that covered advertising injury, defined to include “injury … arising out of … [o]ral, written or electronic publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services… .”  Hartford denied coverage for the underlying action and sought a declaratory judgment that it had no obligation to defend or indemnify Ultimate.  On cross-motions for summary judgment, the Los Angeles Superior Court granted Hartford’s motion and denied Ultimate’s motion, finding that the Dahl action was not potentially covered under the policy.

The Court of Appeal affirmed.  The court observed that the underlying action alleged that Ultimate engaged in advertising with the intent to mislead the public:  (1) as to the origin and ownership of Dahl’s mark; and (2) into believing that Ultimate’s products were the same as Dahl’s or were authorized by or related to Dahl.  The court held that disparagement, or injurious falsehood, must specifically refer to the derogated product either expressly or by reasonable implication.  The court found that even though the advertisement could have caused the public to confuse Ultimate’s Ulti-Cart with Dahl’s Multi-Cart, the advertisement did not refer to or disparage the Multi-Cart.  The court criticized the recent decision in Travelers Property Casualty Co. of America v. Charlotte Russe Holding, Inc., 207 Cal.App.4th 969 (2012), for improperly expanding the scope of potential coverage for disparagement to include disparagement by implication and held that Dahl’s allegations could not show a potential for coverage under such a theory of disparagement.

 

Published In: Civil Remedies Updates, General Business Updates, Communications & Media Updates, Insurance Updates, Intellectual Property Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sedgwick LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »