The Third Circuit has ruled that aninsurer did not have to defend its insured against a competitor'slawsuit where the competitor's claims challenged statements theinsured made about its own products. (Photo: Shutterstock)

An insurer did not have to defend its insured against acompetitor's lawsuit where the competitor's claims challengedstatements the insured made about its own products, a courtruled.

The case

A competitor of Albion Engineering Company believed that Albionhad claimed that its products were made in theUnited States when they really were made in Taiwan. The competitorsued Albion in federal court in New Jersey for false advertisingand product marking in violation of the federal Lanham Act and fortortious unfair competition through false statements and materialomissions under New Jersey law.

Albion notified its insurer, Hartford FireInsurance Company, of its competitor's lawsuit.

Hartford disclaimed coverage and Albion sued. The the U.S.District Court for the District of New Jersey entered judgment forHartford, and Albion appealed.

The insurance policy

The Hartford business liability insurance policy provided thatHartford would:

pay on behalf of [Albion] those sumsthat [Albion] becomes legally obligated to pay as damages becauseof . . . “personal and advertising injury.”

The policy defined personal and advertising injury toinclude:

oral, written or electronicpublication of material that slanders or libels a person ororganization or disparages a person's or organization's goods,products or services.

The Third Circuit's decision

The U.S. Court of Appeals for the Third Circuit affirmed thedistrict court's decision, finding that neither of thecompetitor's claims in its lawsuit against Albion met therequirements of New Jersey law for trade libel or productdisparagement because the lawsuit did not allege that Albion hadlibeled or disparaged products made by the competitor.

In its decision, the circuit court explained that thecompetitor's Lanham Act claim alleged that Albion made“false statements of facts, misrepresentations, and materialomissions of facts of the geographic origin of [Albion's]merchandise and the commercial activity of Albion in violation of .. . the Lanham Act.” The circuit court added that the competitormade materially similar allegations for its claim of unfaircompetition.

In the Third Circuit's view, the gravamen of the competitor'ssuit was that “Albion lied about Albion's products,” not thecompetitor's products.

Rejecting Albion's contention that its statements about its ownproducts “implicitly” defamed its competitor, thus giving rise to aduty to defend, the circuit court concluded that the lawsuitagainst Albion did “not meet the requirements for coverage underthe Hartford policy.”

The case is Albion Engineering Co. v. Hartford Fire Ins.Co., No. 18-1756 (3d Cir. July 10, 2019).

This piece first published at law.com.

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