Court: Insurer has no duty to defend 'advertising injury' case

The insurer has no obligation to defend trademark infringement claims against a swimming pool manufacturer, the U.S. Court of Appeals for the Ninth Circuit recently ruled.

The case

Premier Pools Management Corp. (PPMC) filed a suit against Colony Insurance in 2013 for bad faith and breach of contract as well as damages stemming from two separate denials of coverage in a trademark and unfair competition action, which has since been settled.

Texas-based Premier Pools, Inc. (PPI) sued PPMC for trade name infringement, service mark infringement, unfair competition, Texas service mark infringement, and trade name and service mark dilution. After Colony’s insurance adjuster received tender of the state court case, she notified the PPMC’s founder by email that Colony had received the notice and would investigate the matter. The adjuster notified PPMC’s founder that based on the initial review, PPI was alleging trade name claims that the policy did not cover. The adjuster also spoke to the plaintiff’s counsel in the initial Texas suit and went through each offense with him. The claim was formally denied by letter because the damages did not fit within the “personal and advertising injury” definition under the policy.

The Appellate Court determined that the U.S. District Court in Sacramento, California, correctly rejected PPMC’s argument that the underlying trademark infringement suit triggered a duty to defend for Colony due to “ personal and advertising injury” caused by PPMC’s alleged disparagement, use of another’s slogan, and use of another’s advertising idea. The three-judge appeals court panel decided that PPMC did not tender an amended complaint that contained relevant new disparagement allegations, so Colony owed no duty to investigate those allegations or to defend PPMC against them as a matter of law.

The panel also held that since Colony did not owe a duty to defend, the claims of bad faith and indemnity both fail as a matter of law.

The case is Premier Pools Management Corp. v. Colony Ins. Co., No. 18-16551 (9th Cir. July 20, 2020).

Editor’s Note: This unpublished decision by the appeals court panel ends a coverage battle that began in 2012. Because the opinion was not published, it may not have a widespread impact on intellectual property claims.

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