318 F. Supp. 3d 1147
C.D. Cal.2017Background
- Secard Pools and its officers were sued by Solar Sun Rings (SSR) for trademark/trade dress infringement, false designation of origin, false advertising, dilution, common-law trademark claims, and California UCL violations (the "SSR Action").
- Kinsale issued a Commercial General Liability policy (Coverage B: Personal and advertising injury) effective Aug 28, 2014–Aug 28, 2015; Secard tendered defense on Dec 1, 2014.
- The policy originally had a limited IP exclusion, but Kinsale replaced it with a broader endorsement titled "Exclusion - Intellectual Property" (the IP Exclusion). That endorsement (three prongs) excludes: (1) infringement of trademarks/trade dress/other IP; (2) false advertising/false designation of origin/product disparagement/trade libel or other unfair competition claims; and (3) claims arising from products or work in violation of any law, including the Lanham Act.
- Kinsale denied coverage (Dec 4, 2014) relying on the IP Exclusion, concluding all SSR claims fell within it; Secard sued Kinsale for breach of contract and breach of the covenant of good faith and fair dealing.
- The court found the IP Exclusion unambiguous, concluded it eliminated even potential coverage for the SSR Action, held Kinsale had no duty to defend, and granted Kinsale summary judgment; Secard’s summary judgment was denied as moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the IP Exclusion applies to SSR's Lanham Act and related claims | Exclusion is ambiguous or does not cover "misleading" advertising; therefore coverage exists | Exclusion expressly and unambiguously removes trademark/trade dress, false advertising and Lanham Act claims | IP Exclusion unambiguously covers all SSR claims; exclusion applies and bars coverage |
| Whether the term "false advertising" excludes "misleading" advertising | "Misleading" omitted from exclusion, so ambiguity favors insured | "False advertising" under Lanham Act and California law includes misleading claims; exclusion covers both | Court: "false advertising" reasonably includes misleading advertising; exclusion not ambiguous |
| Whether the endorsement renders policy coverage illusory | If exclusion eliminates meaningful Coverage B protection, policy is illusory | Policy still provides coverage for other advertising injuries (e.g., defamation in an ad); exclusion does not eliminate all coverage | Exclusion does not make the policy illusory because other Coverage B offenses remain |
| Whether insurer breached duty to defend or implied covenant by denying defense | Insurer wrongfully refused defense | Because exclusion eliminates even potential for coverage, insurer had no duty to defend and no breach occurred | No duty to defend; no breach of contract or implied covenant; insurer entitled to summary judgment |
Key Cases Cited
- Montrose Chem. Corp. v. Admiral Ins. Co., 10 Cal.4th 645 (interpret policy terms by their ordinary meaning)
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standards and burden-shifting)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (genuine issue for trial standard)
- Davis v. Farmers Ins. Group, 134 Cal.App.4th 100 ("arising out of" in exclusions construed broadly)
- Waller v. Truck Ins. Exchange, 11 Cal.4th 1 (no bad-faith claim where insurer owes no policy benefits)
- Acceptance Ins. Co. v. Syufy Enters., 69 Cal.App.4th 321 ("arising out of" clause links factual situation broadly to excluded event)