Court rules that coverage for advertising injury can't be used for trademark infringement

Light-emitting diode (LED) flameless candles are popular alternatives to wax candles, and they’re safer too. As a result, many manufacturers are making the candles, including one company named Smart Candle LLC. Excell Consumer Products sued Smart Candle on Oct. 31, 2011, in federal district court in Minnesota, alleging that, among other things, Smart Candle’s use of the trade name and trademark “Smart Candle” infringed on rights that Excell had over the use of that name and trademark. Excell asked for a permanent injunction against Smart Candle’s use of the name, trademark and domain name “smartcandle.com.”

Selective Insurance Co. insured Smart Candle at the time Excell filed its suit. Smart Candle requested that Selective defend it, but the insurance company disclaimed coverage under the policy. Selective pointed to relevant portions of the policy that covered “personal and advertising injury,” which the policy defined as injury resulting from, among other things, “Infringing upon another’s copyright, trade dress or slogan in your ‘advertisement.’” Excluded from that coverage of personal and advertising injury, however, was any injury “arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights.” The exclusion clarified that it didn’t apply to “infringement in your ‘advertisement’ of copyright, trade dress or slogan.” Because the policy required the insurer to defend only suits claiming infringement of “copyright, trade dress or slogan,” Selective insisted that it had no duty to defend Smart Candle against Excell’s suit for infringement of the “Smart Candle” trademark.