The Ninth Circuit Court of Appeals has held that an insured’s alleged solicitation of a competitor’s customers is not “advertising” and does not trigger a duty to defend under a CGL policy’s “advertising injury” coverage. (Hayward v. Centennial Insurance Company (9th Cir. 2005) 430 F.3d 989)
Facts
Andresen hired an employee from a competitor company. The competitor sued Andresen and the employee, alleging that the employee had misappropriated the competitor’s confidential customer lists and marketing plans and had then solicited the competitor’s existing and potential customers. Centennial, Andresen’s CGL insurer, refused to defend, contending that there was no potential for “advertising injury” coverage.
Holding
Liability coverage for “advertising injury” requires advertising by the insured. The ordinary meaning of “advertising” includes widespread distribution of promotional materials to the public at large, and does not include one-on-one solicitation of customers.
The terms “advertising” and “solicitation” are mutually exclusive. Absent allegations of “advertising,” the insured’s solicitation of his former employer’s customers did not trigger a duty to defend under the “advertising injury” coverage of the Centennial policy.
Comment
The Ninth Circuit Court of Appeals is consistent with California state courts on the issue of what kind of “advertising” may trigger “advertising injury” liability coverage. Unless otherwise stated in the policy, “advertising” requires a widespread distribution of promotional material to the public. Thus, insurers who offer “advertising injury” coverage generally should not be obligated to defend where the complaint merely contains allegations of one-on-one communications and employs words like “solicit” or “solicitation.”