646 F.3d 210
5th Cir.2011Background
- Consolidated Graphics defendants seek defense costs and indemnity from Sentry (primary) and Continental (excess) for a California misappropriation suit by Rudamac.
- Underlying suit alleged misappropriation of trade secrets, unfair practices, and related claims; jury awarded substantial compensatory and punitive damages against the defendants.
- Policies provided advertising injury coverage; Sentry sought declaratory relief that it had no duty to defend or indemnify in Rudamac.
- Continental also sought declaratory relief that it had no duty to defend or indemnify; both insurers moved for summary judgment in federal court.
- District court granted summary judgment for insurers, ruling no advertising injury within policy terms and no duty to defend.
- On appeal, issues focus on whether Sentry had a duty to defend and whether, if any duty existed, Continental had a duty to defend or indemnify; district court’s harmless-error ruling on amendment of pleadings was challenged.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to defend under Sentry policy | Consolidated Graphics argues misappropriation and pricing data constitute advertising injury. | Sentry contends underlying claims do not allege advertising injury in course of advertising goods or public dissemination. | No duty to defend |
| Advertising injury in course of advertising | Broad interpretation of advertising includes misappropriation of advertising ideas. | Allegations show direct, non-public contacts, not advertising to the public. | Not within advertising injury tent; no duty to defend |
| Continental's potential duty to defend after Sentry | If Sentry exhausted its limits, Continental might defend under excess policy. | No need to decide because Sentry had no duty to defend. | Declined; no duty to defend by Sentry means no obligation established for Continental |
| Indemnification liability notwithstanding no defense duty | Griffin allows indemnity consideration even if defense duty exists or not depending on underlying facts. | If there is no defense duty, indemnity may still be possible only upon proven coverage in underlying adjudication. | Summary judgment affirmed; no indemnity because no defense duty established |
| Harmlessness of district court amendment ruling | Amendment of pleadings on same day as judgment could prejudice response. | Error was harmless since motions and evidence remained unchanged. | Harmless error |
Key Cases Cited
- Smith v. Baldwin, 611 S.W.2d 611 (Tex. 1980) (advertising meaning tied to public notice; not broad to encompass all representations)
- Sport Supply Group, Inc. v. Columbia Casualty Co., 335 F.3d 453 (5th Cir. 2003) (advertising in policy sense refers to public advertisement to induce patronage)
- ANR Production Co. v. American Guarantee & Liability Insurance Co., 981 S.W.2d 889 (Tex.App.—Houston [1st Dist.] 1998) (advertising injury requires public dissemination)
- Hameid v. National Fire Insurance of Hartford, 31 Cal.4th 16 (Cal. 2003) (advertising injury implies widespread promotional activity; one-to-one solicitation not advertising)
- General Casualty Co. of Wisconsin v. Wozniak Travel, Inc., 762 N.W.2d 572 (Minn. 2009) (broad advertising interpretations rejected in favor of public dissemination view)