A policy’s “personal and advertising” coverage for “disparagement” was not triggered where the insured’s advertisements only mentioned the insured’s own products and never mentioned the claimant’s products. ( Hartford Cas. Ins. Co. v. Swift Distribution, Inc. (2012) 148 Cal.Rptr.3d 679)
Facts
Gary-Michael Dahl (Dahl) manufactures and sells a collapsible cart called the “Multi-Cart,” which is used to move music, sound and video equipment. Dahl owns a patent for the collapsible cart design, as well as a trademark for the “Multi-Cart” name.
Swift Distribution, Inc. dba Ultimate Support Systems (Swift) manufactures and sells a competing product known as the “Ulti-Cart.”
Dahl filed a federal court lawsuit against Swift, alleging that Swift was impermissibly manufacturing, marketing and selling the “Ulti-Cart,” thus infringing patents and trademarks for Dahl’s “Multi-Cart.” Dahl’s complaint attached copies of Swift’s advertisements, which mentioned Swift’s Ulti-Cart but did not mention Dahl’s Multi-Cart.
Swift tendered the defense of the lawsuit to its general liability insurer, Hartford Casualty Insurance Company (Hartford). The Hartford policy covered Swift for various “personal and advertising” offenses, including “oral, written or electronic publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.” Hartford declined to defend Swift against Dahl’s lawsuit.
Hartford later filed a declaratory relief action seeking a determination that it had no duty to defend or indemnify Swift against Dahl’s lawsuit. The trial court granted summary judgment in favor of Hartford, finding that Hartford had no duty to defend Swift against Dahl’s lawsuit. Swift appealed.
Holding
The California Court of Appeal affirmed the judgment in favor of Hartford. The appellate court rejected Swift’s argument that Swift’s advertisements potentially “disparaged” Dahl’s Multi-Cart, thus triggering a potential for coverage under the “personal and advertising injury” provisions of the Hartford policy. The appellate court reasoned that the tort of “disparagement” involves “an injurious falsehood directed at the organization or products, goods, or services of another….” Here, Swift’s advertisements referred only to its own product, the Ulti–Cart, and did not refer to or disparage Dahl’s product, the Multi–Cart. As such, Swift had not potentially “disparaged” Dahl’s products, and thus Hartford had no duty to defend Swift against Dahl’s lawsuit.
Comment
The Swift court acknowledged and discussed the recent case of Travelers Property Casualty Co. of America v. Charlotte Russe Holding, Inc. (2012) 207 Cal.App.4th 969. In Charlotte Russe , another California appellate court held that the personal injury offense of “disparagement” required an insurer to defend an insured against a suit alleging that the insured had improperly advertised the claimant’s products at severely discounted prices, thus potentially “disparaging” the claimant’s products.
The Swift court declined to follow Charlotte Russe , for two reasons. First, the Swift court found Charlotte Russe factually distinguishable. Specifically, unlike the situation in Swift , in Charlotte Russe, the insured’s advertisements did in factrefer to the claimant’s products. Second, and perhaps more importantly, the Swift court disagreed with the theory of “disparagement” recognized in Charlotte Russe , i.e., that a price reduction could result in a disparagement of the claimant’s products.According to the Swift court,”[a] price reduction may allegedly be injurious to the brand or its high-end, high-quality reputation, but it is not false and is thus not disparagement.” The Swift court thus indicated that it would have decided Charlotte Russe differently.