Advertising Injury Claim and Intellectual Property Exclusion
August 19, 2013
The insurer made a motion to dismiss the complaint brought by the insured pertaining to a denial of coverage for an advertising injury claim. This case is Purplus, Inc. v. Hartford Casualty Insurance, 2013 WL 1149768.
Adobe filed a complaint against Purplus alleging causes of action for copyright and trademark infringement. Purplus had a liability policy issued by Hartford Casualty and tendered the complaint to Hartford. Hartford denied coverage. The insured retained legal counsel to defend itself and settled the case with Adobe. Purplus then filed a complaint against Hartford for declaratory relief claiming that the Adobe complaint triggered coverage under the Hartford policy. The insurer moved to dismiss the complaint.
Hartford moved to dismiss the complaint on the grounds that Purplus cannot meet its burden to establish that allegations in the Adobe complaint triggered the duty to defend. The court said that in order to fall within policy coverage, Purplus had to demonstrate that allegations in the underlying complaint revealed a potential liability for an advertising injury. Under the policy terms, an advertising injury is an infringement in the insured's advertisement of another's copyrighted advertising idea or style. The Adobe complaint contained claims for copyright infringement of Adobe software and trademarks. The court pointed out that Purplus conceded that these claims are not covered by the policy.
However, the court then stated that factual allegations in the underlying complaint may trigger a duty to defend even if the underlying technical legal causes of action do not reveal a potential for coverage. The court noted that it had not found any facts alleged in the Adobe complaint that reveal a potential liability for an advertising injury. The insured argued that certain words or phrases in the complaint, like “advertising, sale, and offer for sale” triggered the duty to defend. The court responded that references to the term “advertisement” do not transform trademark infringement allegations into advertising injuries. Thus, the court could find no factual allegations in the Adobe complaint that could have triggered the duty to defend.
The court also pointed out that, notwithstanding the fact that Purplus had not alleged sufficient facts to demonstrate coverage under the policy, specific exclusions also barred coverage. The intellectual property exclusion barred coverage of any intellectual property infringement unless the infringement is a copyright violation of another's advertising idea or style, or an infringement of a non-trademarked slogan. The Adobe complaint alleged causes of action for copyright infringement of software and trademarks. Neither of these causes of action constituted a copyright infringement of an advertising idea or style or an infringement of a non-trademarked slogan. As a result, the intellectual property exclusion barred coverage of the claims alleged by Adobe.
The court found that the insured failed to state a claim upon which relief could be granted. The insurer's motion to dismiss without leave to amend was granted.
Editor's Note: The United States District Court for the Northern District of California could find no facts or legal causes of action that created any potential liability for an advertising injury covered by the Hartford policy. The insured failed to meet his burden to demonstrate coverage and so, the court ruled in favor of the insurer.
Another point made by the court was that a party cannot excise particular words or phrases from their context so as to manufacture coverage. The insured tried this tactic by seizing on the words “advertising and sale” that were contained in the underlying complaint so as to create a basis for an advertising injury claim. The court did not accept this move.