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Hartford Casualty Ins. Co. v. Swift Distribution, Inc.

Supreme Court of California

June 12, 2014

HARTFORD CASUALTY INSURANCE COMPANY, Plaintiff and Respondent,
v.
SWIFT DISTRIBUTION, INC., et al., Defendants and Appellants

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Superior Court of Los Angeles County, No. BC442537, Debre Katz Weintraub, Judge. Court of Appeal, Second Appellate District, Division Three, No. B234234.

Little Reid & Karzai, Eric R. Little, M. Catherine Reid and Najwa Tarzi Karzai for Defendants and Appellants.

Amy Bach; Dickstein Shapiro, Kirk A. Pasich and Kimberly A. Umanoff for United Policyholders as Amicus Curiae on behalf of Defendants and Appellants.

Nossaman, Kurt W. Melchior and S. Ashar Ahmed for Bullpen Distribution, Inc., and Jon Brill as Amici Curiae on behalf of Defendants and Appellants.

Caldwell Leslie & Proctor, Christopher G. Caldwell, Andrew Esbenshade and Kelly L. Perigoe for Charlotte Russe Holding, Inc., as Amicus Curiae on behalf of Defendants and Appellants.

Gauntlett & Associates and David A. Gauntlett as Amici Curiae on behalf of Defendants and Appellants.

Steven W. Murray as Amicus Curiae on behalf of Defendants and Appellants.

Dentons US, Michael Barnes; Tressler, David Simantob, Elizabeth L. Musser; Akin Gump Strauss Hauer & Feld and Rex S. Heinke for Plaintiff and Respondent.

McCurdy & Fuller, Laura J. Ruettgers and David C. Hungerford for Ironshore Specialty Insurance Company as Amicus Curiae on behalf of Plaintiff and Respondent.

Wiley Rein, Laura A. Foggan, Edward R. Brown; Sinnott, Puebla, Campagne & Curet and Randolph P. Sinnott for Complex Insurance Claims Litigation Association as Amicus Curiae on behalf of Plaintiff and Respondent.

Kutak Rock, Christopher D. Glos, Bradley J. Baumgart and Jean-Paul Assouad for American Guarantee & Liability Insurance Company as Amicus Curiae on behalf of Plaintiff and Respondent.

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Horvitz & Levy, Peter Abrahams and Mitchell C. Tilner for American Insurance Association as Amicus Curiae on behalf of Plaintiff and Respondent.

OPINION

[326 P.3d 256] [172 Cal.Rptr.3d 657] LIU, J.

Hartford Casualty Insurance Company (Hartford) issued a commercial general liability policy to Swift Distribution, Inc., doing business as Ultimate Support Systems (Ultimate), that covered " personal and advertising injury." This term included claims arising from " [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." Ultimate, which sells the " Ulti-Cart," was sued in federal district court by Gary-Michael Dahl (Dahl), the manufacturer of the " Multi-Cart." The suit included allegations of patent and trademark infringement, false designation of origin, and damage to business, reputation, and goodwill.

When Ultimate tendered defense of the suit to Hartford, Hartford denied coverage on the ground that the suit did not allege that Ultimate had disparaged Dahl or the Multi-Cart. The Court of Appeal agreed with Hartford that it had no duty to defend and expressly disagreed with the reasoning in Travelers Property Casualty Co. of America v. Charlotte Russe Holding, Inc . (2012) 207 Cal.App.4th 969 [144 Cal.Rptr.3d 12] ( Charlotte Russe ). We granted review to clarify the principles governing the scope of a commercial general liability insurer's duty to defend an insured against a claim alleging disparagement.

We hold that a claim of disparagement requires a plaintiff to show a false or misleading statement that (1) specifically refers to the plaintiff's product or business and (2) clearly derogates that product or business. Each requirement must be satisfied by express mention or by clear implication. Because Dahl's suit contains no allegation that Ultimate clearly derogated the Multi-Cart, we find no claim of disparagement triggering Hartford's duty to defend, and we affirm the judgment of the Court of Appeal.

I.

Ultimate sells a product called the Ulti-Cart, a multiuse cart marketed to help musicians load and transport their equipment. On January 26, 2010, Dahl filed an action in federal district court against Ultimate (the Dahl action). The complaint alleged that Dahl held multiple patents on a similar convertible transport cart called the Multi-Cart, which he had sold commercially since 1997. The Multi-Cart was described as a collapsible cart capable

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of being manipulated into multiple configurations and typically used to transport music, sound, and video equipment.

According to the complaint, Ultimate impermissibly manufactured, marketed, and sold the Ulti-Cart, and thereby infringed on Dahl's patents and trademarks and diluted the Multi-Cart trademark. Dahl asserted that Ultimate's false and misleading advertisements and use of a " nearly identical mark" were likely to cause consumer confusion or mistake, or to deceive the public " as to the affiliation, connection, or association" [326 P.3d 257] of the two parties. He also alleged unfair competition, misleading advertising, breach of contract, and claims based on the violation of two ...


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