A commercial general liability policy’s “personal and advertising injury” coverage did not require an insurer to defend an insured against a lawsuit alleging that the insured had copied another’s product. ( Oglio Entertainment Group, Inc. v. Hartford Cas. Ins. Co. (2011) 200 Cal.App.4th 573)
Facts
Oglio Entertainment Group, Inc. (“Oglio”) is an independent music label. Mark Jonathan Davis (“Davis”) is a musician / comedian who uses the professional name “Richard Cheese” to perform and record lounge-style versions of popular rock, hip-hop and pop songs. Oglio and Davis entered into a three-year recording contract pursuant to which Davis agreed to record an album of lounge-style arrangements of popular songs for distribution by Oglio. The contract provided that Oglio would own the copyrights to the recordings, and that Oglio would have the right to use Davis’ professional name to promote the album. The contract also provided that within two years after execution of the contract and upon payment of a minimum advance of $15,000, Oglio could require Davis to record a second album.
According to Davis, the first album was a financial success. However, when Oglio attempted to exercise its option to have Davis record a second album, Oglio allegedly sought to reduce Davis’ advance from $15,000 down to $7,000. After Davis refused to agree to the modification, and while the parties’ contract was still in effect, Oglio allegedly hired other recording artists to record competing lounge-style versions of popular songs, in order to trade on Davis’ public recognition.
Davis sued Oglio for breach of contract, violation of right of publicity, intentional interference with prospective economic advantage, and breach of the covenant of good faith and fair dealing. In his complaint, Davis alleged that Oglio had recorded and released the competing albums with the intent to injure Davis’ professional reputation and to divert sales from Davis’ future albums.
Oglio tendered defense of the lawsuit to its general liability insurer, Hartford Casualty Insurance Company (“Hartford”), under a policy covering specified “personal and advertising injury” offenses. Hartford declined to defend Oglio. Following Hartford’s declination of coverage, Oglio paid $80,000 to settle Davis’ lawsuit.
Oglio then sued Hartford for breach of contract and bad faith, alleging that Hartford had wrongfully refused to defend and indemnify Oglio against Davis’ lawsuit. The trial court entered judgment in favor of Hartford, finding that Davis’ claims against Oglio were not potentially covered under the “personal and advertising injury” section of the Hartford policy. Oglio appealed.
Holding
The Court of Appeal affirmed, concluding that Davis’ underlying complaint against Oglio did not allege “personal and advertising injury” as defined in the Hartford policy. The policy defined “personal and advertising injury” so as to include injury arising out of “copying, in your ‘advertisement,’ a person’s or organization’s ‘advertising idea’ or style of ‘advertisement .’” The policy then defined “advertisement” so as to include “the widespread public dissemination of information or images that has the purpose of inducing the sale of goods, products or services,” and defined “advertising idea” as “any idea for an ‘advertisement.’”
Here Davis had alleged that while the Oglio / Davis recording contract was in effect, Oglio had sought out, in bad faith and with the intention of injuring Davis’ recording career, other potential recording artists to record competing lounge-style versions of popular songs. According to the appellate court, these were not allegations that Oglio copied, in an advertisement, Davis’ advertising idea or style of advertisement. Rather, these were allegations that Oglio sought out artists to copy Davis’ product and that Oglio then sold a competing product which injured Davis’ sales and the value of his professional name. There was no allegation that Oglio used an advertisement that copied an advertisement or advertising idea belonging to Davis. Because Davis had not sought damages from Oglio for “personal and advertising injury” as defined in the policy, Hartford had no duty to defend.
Comment
The policy also contained various exclusions, including a “breach of contract” exclusion and an “intellectual property” exclusion. However, because the appellate court concluded that Davis’ claims against Oglio did not fall within the scope of the insuring agreement , the court was not required to determine whether Davis’ claims against Oglio were subject to some exclusion .