158 F. Supp. 3d 1110
W.D. Wash.2016Background
- Evanston insured Clartre, Inc. and Scott Clarke and is defending them under a reservation of rights while seeking a declaratory judgment that it has no duty to defend or indemnify in underlying litigation brought by Global Building Products.
- Global sued numerous Clarke-controlled entities alleging misappropriation of a proprietary wood‑treatment chemical (the “Chemco Chemical”), misuse of test data and third‑party approvals (CSFM, ICC‑ES), unfair competition, Lanham Act violations, and related claims.
- Global alleges a scheme where Chemco and Clarke provided Global’s chemical (renamed CPX) and approvals/data to Clarke’s companies to market treated roofing products as having Global’s approvals.
- Defendants claim the underlying complaint triggers policy coverage for “advertising injury” under Evanston’s 2010–2012 CGL policies; Evanston contends the claims fall outside that coverage and are barred by policy exclusions.
- The district court applied Washington insurance law and the eight‑corners rule, reviewing the underlying complaint and policies as a matter of law on summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether underlying allegations trigger duty to defend as "advertising injury" | Evanston: Global’s claims do not assert misappropriation of advertising ideas, trade dress, or slogans in an advertisement, so no advertising‑injury coverage is triggered. | Defendants: Global’s allegations of false representations, use of approvals, and intermingling products amount to advertising‑type misappropriation and could trigger coverage. | Court: No. Complaint alleges theft of product/formula, approvals, and unfair competition, not appropriation of advertisement elements; no advertising injury within policy definitions. |
| Whether misappropriation of product, approvals, or data equals misappropriation of an "advertising idea" | Evanston: Washington law limits "advertising idea" to elements of advertisement (text, logo, form); product or data theft is not covered. | Defendants: Using false approvals/representations to sell product constitutes misappropriation of advertising idea or style of doing business. | Court: Held for Evanston — taking product/approvals/data is not taking an advertising idea or manner of advertising; Washington precedent distinguishes product misappropriation from advertising‑idea claims. |
| Whether trade dress/style of doing business coverage applies | Evanston: No allegations that defendants copied Global’s product packaging, look, logo, or advertisement content; intermingling product is not trade dress in an advertisement. | Defendants: Intermingling and representations could be viewed as imitating product image or business style. | Court: Held for Evanston — allegations do not plead trade dress or style‑of‑doing‑business infringement in advertisements; therefore no coverage. |
| Whether policy exclusions bar coverage even if advertising injury alleged | Evanston: Several exclusions apply — intellectual property/misappropriation, knowing violation of another's rights, and knowingly false publication — based on complaint allegations of intentional, knowing scheme. | Defendants: (Implicit) Even if some exclusions apply, factual disputes may preclude summary disposition. | Court: Held for Evanston — exclusions apply unambiguously (IP/misappropriation, knowing violation, knowingly false publication), so no duty to defend. |
Key Cases Cited
- Overton v. Consol. Ins. Co., 145 Wash.2d 417, 38 P.3d 322 (interpretation of insurance policies is a question of law)
- Weyerhaeuser Co. v. Commercial Union Ins. Co., 142 Wash.2d 654, 15 P.3d 115 (policies construed as contracts; ambiguities resolved against insurer)
- Pub. Util. Dist. No. 1 v. Int’l Ins. Co., 124 Wash.2d 789, 881 P.2d 1020 (clear policy language enforced as written)
- Expedia, Inc. v. Steadfast Ins. Co., 180 Wash.2d 793, 329 P.3d 59 (use of eight‑corners rule for duty to defend)
- Hayden v. Mut. of Enumclaw Ins. Co., 141 Wash.2d 55, 1 P.3d 1167 (exclusions must clearly and unambiguously apply to bar coverage)
- Amazon.com Int’l, Inc. v. Am. Dynasty Surplus Lines Ins. Co., 120 Wash.App. 610, 85 P.3d 974 (‘‘advertising idea’’ protects elements of advertisement, not the product)
- Auto Sox USA Inc. v. Zurich N. Am., 121 Wash.App. 422, 88 P.3d 1008 (taking a product to sell is not an advertising‑idea injury)
- Unigard Ins. Co. v. Leven, 97 Wash.App. 417, 983 P.2d 1155 (duty to defend arises when complaint could, if proven, impose liability within coverage)