A Trademark Exclusion May Not Relieve An Insurer Of Its Duty To Defend
By: LAURA L. MYERS
April 2007
An insurer may have a duty to defend its insured despite a trademark exclusion, even where most of the claims involve trademark issues, if “factual allegations go beyond the elements of a trademark claim and exceed the scope of the trademark exclusion.”
In Western International Syndication Corporation v. Gulf Insurance Company, 2007 WL 625264 (9th Cir. Feb. 26, 2007), the Apollo Theater Foundation (“Apollo”) sued Western International Syndication Corporation (“Western”), claiming, among other things, that Western made misrepresentations about Apollo’s television program and that Western used Apollo’s trademarks in connection with a competing program. When Western’s insurance company, Gulf Insurance Company (“Gulf”), refused to provide a defense, it also filed a declaratory judgment action to determine its liability under the insurance policy.
The district court found that Gulf had a duty to defend Western against Apollo’s claims involving Western’s alleged misstatements, and the Ninth Circuit Court of Appeals agreed.
The Court of Appeals found that, under the terms of the policy, Gulf had a duty to defend Western against allegations of “personal injury,” which included acts that “disparage[d] a person’s or organization’s goods, products, or services” through oral or written publication. Under state law, “the intentional utterance of an injurious falsehood that causes the plaintiff to suffer actual damage” constitutes disparagement. The Court found that Western’s alleged statements constitute disparagement because Western intended those statements “to be understood or reasonably understood to cast doubt upon the existence or extent of [Apollo’s] property in . . . intangible things, or upon their quality.” Thus, Apollo’s allegations regarding Western’s misstatements constituted personal injury for which Gulf was obligated to provide a defense.
Agreeing with the lower court, the Court of Appeals also found that the trademark exclusion contained in the insurance policy did not relieve Gulf of liability, even though the policy excluded coverage for “personal injuries regarding infringement of copyright or trademark.” The “[i]nsurance policy exclusions are narrowly construed, especially where the coverage portion of a policy would lead an insured to reasonably expect coverage.” The Court noted that Apollo alleged that Western’s statements to banking institutions created a false impression that Apollo’s trademark ownership was in doubt and that Western provided false information to advertisers regarding limited distribution of the Apollo Show. The Court then said that such allegations went beyond the elements of a trademark claim and, therefore, exceeded the scope of the trademark exclusion. Thus, although Apollo’s claims involved trademark issues, the Court found that Apollo’s allegations that Western made disparaging statements were distinct from a trademark infringement claim, and Gulf was required to provide a defense under the insurance policy.
Even if you think your insurance excludes coverage for trademark infringement, you should have your attorney review your policy in light of the allegations. It may be that you have coverage even if the infringement allegations constitute the majority of the claims.