CGL Insurance Coverage for Advertising Injuries: Upping the Ante for IP Litigation

by Jones Day
Contact

Jones Day

In Short

The Situation: Reversing a pair of federal district court rulings, the Fifth and Ninth Circuits have held that insurers must defend commercial general liability policyholders in advertising injuries related to IP litigation.

The Result: Policyholders facing IP claims welcome these rulings, hoping that the decisions are signs that the courts are trending toward interpreting CGL policies to cover the defense and indemnification of these types of claims.

Looking Ahead: It's unclear whether the recent trend indicated by the two decisions will continue. Policyholders should carefully examine the advertising injury provisions of their general liability insurance policies regarding IP disputes.


In a pair of recent decisions, the Fifth and Ninth Circuits issued separate policyholder-friendly opinions broadly construing the language of commercial general liability ("CGL") insurance policies in connection with intellectual property litigation. Reversing federal district court rulings granting summary judgment for the insurers, both opinions found that the insurers had a duty to defend their policyholders, because the complaints alleged potentially covered advertising injuries within the terms of the CGL policies.

These rulings are welcome news for commercial policyholders facing intellectual property claims, as they indicate courts' growing trend of interpreting CGL policies to cover the defense and indemnification of advertising injury claims related to IP litigation.

Uretek (USA) Inc. v. Continental Casualty Co. (5th Cir.)

The Fifth Circuit's Uretek ruling on July 28, 2017, involved an insurance coverage dispute between Uretek, a roadway maintenance and repair company, and Continental Casualty Company ("Continental"), which had sold a CGL policy to Uretek. In the underlying litigation, Uretek sued its competitor, Applied Polymetrics Inc. ("Applied") for patent infringement, and Applied asserted a counterclaim against Uretek for misrepresenting to Applied's customers and potential customers that Applied could not work on various projects without infringing on Uretek's patent. Continental refused to defend Uretek against Applied's counterclaim.

In the ensuing insurance coverage litigation, the district court granted summary judgment in favor of Continental, holding that Continental's duty to defend was not triggered because Applied had not alleged that Uretek told customers that Applied had infringed the patent. On appeal, the Fifth Circuit reversed the district court's entry of summary judgment for Continental.

The Fifth Circuit's reasoning turned on its interpretation of the word "disparage." The policy required Continental to defend Uretek against suits seeking damages for "personal and advertising injury … arising out of" several offenses, one of which was the publication of material that "disparages a person's or organization's goods, products or services." The court used a dictionary definition for "disparage" because it "is not a technical or industry-specific term" and ruled that "[a] statement to a competitor's customer that the competitor is undertaking work that it has no legal right to undertake disparages that competitor and the services it offers by clear implication." The court concluded that, when resolving all disputes about the term "disparage" in favor of the policyholder and interpreting the complaint liberally, the term was sufficiently broad to include Applied's allegations.

Crum & Forster Specialty Ins. Co. v. Willowood USA, LLC et al. (9th Cir.)

Echoing the Fifth Circuit's decision in Uretek, the Ninth Circuit handed down its Willowood decision only four days later on August 1, 2017. In Willowood, the underlying litigation concerned Repar, a distributor of agricultural pesticides containing an active ingredient trademarked as Tebucon, and Willowood, a joint venture with Repar's primary stockholders. Repar sued Willowood for trademark infringement and breach of contract stemming from Willowood's alleged unauthorized use of Repar's trademark.

The parties settled these claims, and Willowood sought coverage for its defense and settlement costs under three general liability insurance policies that covered advertising injury "arising out of … [t]he use of another's advertising idea in your 'advertisement.'" The district court found that the insurance policies did not cover Repar's claims, and it twice granted summary judgment for Willowood's insurers, holding that they had neither a duty to defend the suit nor a duty to indemnify the settlement costs.

On appeal, the Ninth Circuit disagreed with the district court's finding that the complaint alleged no potentially covered claims. Adopting an unduly narrow construction of the phrase "arising out of," the district court had concluded that any harm to Repar was caused by Willowood's alleged misuse of the trademarked name, rather than by actual advertising. In contrast, the Ninth Circuit explained that courts "broadly interpret" the term "arising out of" when used within a policy's insuring clauses, holding that the "complaint specifically alleged injury from Willowood's use of Repar's advertising idea—the TEBUCON name—in Willowood's advertising."

The court concluded that the allegations of the complaint had sufficiently put the insurers on notice of the possibility of covered liability for advertising injury, which triggered their duty to defend. The court reversed the grant of summary judgment as to the duty to defend and remanded for trial the question of the insurers' indemnity obligations for the settlement, finding that there was an issue of triable fact as to whether the settlement was for a covered claim.

Policyholder Implications

The Fifth and Ninth Circuit's well-reasoned Uretek and Willowood decisions indicate courts' growing trend of construing the broadly worded advertising injury provisions of CGL policies to afford coverage for IP-related litigation, including defense costs. Whether this trend will continue remains to be seen. Commercial policyholders should carefully examine the advertising injury provisions of their general liability insurance policies in connection with their IP disputes. In addition, policyholders should also review their umbrella liability insurance policies, as many such policies may provide even broader coverage for advertising injuries.


Two Key Takeaways

Circuit court rulings in Uretek (USA) Inc. v. Continental Casualty Co. and Crum & Forster Specialty Ins. Co. v. Willowood USA, LLC et al. could indicate a trend of construing the broadly worded advertising injury provisions of CGL policies to afford coverage for IP-related litigation.

Policyholders should still verify the pertinent provisions of their CGL policies, and also examine their umbrella liability coverage, as it may provide even broader coverage.

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.

© Jones Day | Attorney Advertising

Written by:

Jones Day
Contact
more
less

Jones Day on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.