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Hartford Casualty Insurance Company v. Swift Distribution

October 29, 2012

HARTFORD CASUALTY INSURANCE COMPANY, PLAINTIFF AND RESPONDENT,
v.
SWIFT DISTRIBUTION, INC. ET AL., DEFENDANTS AND APPELLANTS.



(Los Angeles County Super. Ct. No. BC442537) APPEAL from a judgment of the Superior Court of Los Angeles County, Debre K. Weintraub, Judge.

The opinion of the court was delivered by: Kitching, J.

CERTIFIED FOR PUBLICATION

Affirmed.

INTRODUCTION

The issue in this appeal is whether the "advertising injury" provision of an insurance policy required the insurer to provide a defense for its insured against a claim that the insured company's advertisements disparaged another company's products. In this case, Company A advertised its product, which resembled and had a name similar to the product sold by Company B. Company A's advertisement, however, did not identify Company B's product expressly and did not disparage Company B's product. When Company B sued, Company A made a demand on its insurer to defend against that suit under an insurance policy provision that provided coverage for "advertising injury," defined as injury arising out of publication of material that disparaged a person's or organization's goods, products, or services. Because the advertisement did not identify Company B's product, and contained no matter derogatory to Company B's title to its property, its quality, or its business, no disparagement occurred. Therefore the insurance policy did not provide a potential for coverage of this claim for damages because of advertising injury and the insurer did not owe the insured a duty to defend.

Specifically, in an underlying action, Gary-Michael Dahl (Dahl), who manufactured and sold the "Multi-Cart," sued Swift Distribution, Inc., dba Ultimate Support Systems, Inc., Michael Belitz, and Robin Slaton (Ultimate), for patent and trademark infringement, unfair competition, dilution of a famous mark, and misleading advertising arising from Ultimate's sale of its product, the "Ulti-Cart." Ultimate tendered defense of Dahl's action to its insurer, Hartford Casualty Insurance Company (Hartford), which refused to defend it in the Dahl action. In a subsequent action for declaratory relief against Ultimate, Hartford sought a declaration that it had no duty to defend or indemnify Ultimate in the Dahl action. The trial court granted Hartford's motion for summary judgment and Ultimate appeals.

We find that Ultimate's advertisements did not expressly refer to Dahl's Multi-Cart and did not "disparage" Dahl's Multi-Cart product or business, and there was no coverage or potential for coverage for "advertising injury" under the Hartford insurance policy. Thus Hartford had no duty to defend Ultimate in the Dahl action, and the trial court correctly granted summary judgment for Hartford. We affirm the judgment.

FACTUAL AND PROCEDURAL HISTORY

Hartford issued a liability insurance policy to Swift Distribution, Inc. dba Ultimate Support Systems for the period January 29, 2009, to January 29, 2010. The Hartford policy's insuring agreement stated: "We will pay those sums that the insured becomes legally obligated to pay as damages because of . . . 'personal and advertising injury' to which this insurance applies. We will have the right and duty to defend the insured against any 'suit' seeking those damages. However, we will have no duty to defend the insured against any 'suit' seeking damages for . . . 'personal and advertising injury' to which this insurance does not apply."

The policy defined "personal and advertising injury" in several ways. One definition of "personal and advertising injury" was "injury . . . arising out of . . . [o]ral, 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[.]"

On January 26, 2010, Dahl filed an action against Ultimate, Dahl v. Swift Distribution, Inc. in U. S. District Court, Central District of California. The Dahl complaint alleged that Dahl owned a U.S. patent to a "convertible transport cart," which he had sold as the "Multi-Cart" collapsible cart since 1997. The Multi-Cart can be manipulated into eight configurations, and is used to move music, sound, and video equipment quickly and easily. The U.S. Patent and Trademark Office issued a patent to Dahl for the "Multi-Cart" mark. The Dahl complaint alleged that Ultimate impermissibly manufactured, marketed, and sold the "Ulti-Cart," which infringed patents and trademarks for Dahl's Multi-Cart and diluted Dahl's trademark. The complaint attached advertisements for the Ulti-Cart, which do not name the Multi-Cart, Dahl, or any other products other than the Ulti-Cart.

Ultimate made three demands upon Hartford to defend it the Dahl action under the Hartford insurance policy. Hartford denied coverage to Ultimate for the Dahl action and stated that Hartford had no duty to defend or indemnify Ultimate. Hartford filed a complaint for declaratory relief against Ultimate seeking a declaration that it had no duty to defend or indemnify Ultimate in the Dahl action.

While the Hartford complaint was pending, counsel for Ultimate notified counsel for Hartford that the court in the Dahl action granted Ultimate's motion for summary adjudication as to Dahl's two patent infringement claims. Subsequently counsel for Ultimate notified counsel for Hartford that the Dahl action had settled.

Hartford and Ultimate filed motions for summary judgment or in the alternative summary adjudication. The trial court entered an order granting summary judgment in favor of Hartford and denying Ultimate's motion. The judgment entered in favor of Hartford determined that Hartford had no duty to defend or indemnify Ultimate in the Dahl action. Ultimate filed a timely notice of appeal.

ISSUE

Ultimate claims on appeal that the Dahl action alleged facts that constituted the potentially covered offense of disparagement.

DISCUSSION

1. Standard of Review

Any party to an action may move for summary judgment on a cause of action or defense--a plaintiff contending that there is no defense to the action, a defendant contending that the action has no merit. (Code Civ. Proc., ยง 437c, subd. (a); Aguilar ...


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