Ninth Circuit Finds Duty to Defend Manufacturer of Counterfeit NFL Jerseys

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In an important decision for both policyholders and insurers, the Ninth Circuit recently reiterated the breadth of an insurer’s duty to defend its insured under California law even where no potentially covered causes of action are alleged in the underlying complaint.

In Hudson Insurance Company v. Colony Insurance Company, the Ninth Circuit held that an insurer must defend its insured even where the plaintiff had not actually alleged the single, potentially covered claim for slogan infringement in the first instance. Case No. 09-55275, 10 C.D.O.S. 14054 (9th Cir. Nov. 5, 2010). Because the complaint had alleged facts arguably sufficient to support a claim for slogan infringement, however, the carrier’s duty to defend was triggered.

NFL Properties, LLC sued All Authentic Corporation for making and selling counterfeit NFL jerseys. All Authentic, the policyholder, was defended by one of its insurers, but another insurer declined coverage altogether. Thus, when the underlying action concluded, the defending insurer (Hudson) sued the non-defending insurer, Colony, arguing that Colony had a duty to defend All Authentic and should have paid some of the legal fees and costs.

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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.

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