Tuesday, October 25, 2011

1st Circuit: Insurance Policy "Antitrust Exclusion" Also Excludes False Advertising/Labeling Claim

The First Circuit recently held that an insurer was not required to defend and indemnify its insured against claims for misleading product labeling.

Accused of deceptive trade practices, false and misleading advertising, and deceptive labeling (the court did not specify whether these were federal and/or state claims), Welch Foods sought defense and indemnity from its insurer.

The policy at issue in Welch Foods v. National Union Fire Ins. Co., No. 10-2261 (1st Cir. Oct. 24, 2011) (per curiam), which otherwise covered the claims, contained the italicized exclusion below:

Antitrust Exclusion

The Insurer shall not be liable to make any payment for Loss in connection with a Claim made against the Insured . . . alleging, arising out of, based upon or attributable to, or in any way involving, either directly or indirectly, antitrust violations, price fixing, price discriminations, unfair competition, deceptive trade practices and/or monopolies, including any actions, proceedings, claims or investigations related thereto . . . . (emphasis added)

The terms “unfair competition” and “deceptive trade practices” were undefined.

The Court rejected Welch’s argument that, because the heading (“Antitrust Exclusion”) and several of the listed violations focused on anticompetitive antitrust-type behavior, the terms “unfair competition” and “deceptive trade practices” must also refer to antitrust-type behavior—not false advertising or false labeling.

Tuesday, October 18, 2011

10th Circuit: infringement of patent(!) covering "promotion" or "advertising" may trigger insurance policy covering "advertising injury"

The 10th Circuit recently reinstated a company’s lawsuit to force its insurers to defend and indemnify it in a patent infringement against the company. The case serves as a reminder to insureds to read through their insurance policies carefully each time they are sued and not to reflexively assume that a patent infringement claim (or any other type of case) may not be covered.

Dish Network Corp. v. Arch Specialty Ins. Co. et al., No. 10-1445 (10th Cir. Oct. 17, 2011), involved patent infringement claims by the well-known patent plaintiff Ronald A. Katz Technology Licensing, L.P. The complaint did not mention advertising. Nor did it specify which patent claims were infringed and how. But some of the claims of the asserted patents mentioned systems and processes for advertising or promoting products.

The policies at issue provided for coverage of claims asserting “misappropriation of advertising ideas or style of doing business.” Under Colorado law, the 10th Circuit held:

(1) “when the underlying complaint alleges any facts or claims that might fall within the ambit of the policy, the insurer must tender a defense”;

(2) to avoid the duty to defend, insurers “must prove [the claim] cannot” fall within the policy;

(3) while such cases may be rare, “patent infringement can qualify as an advertising injury if the patent involves any process or invention which could reasonably be considered an “advertising idea’”;

(4) given the patent complaint’s general allegations, the insurers could not disprove that the claim did not encompass the allegation that Dish Network’s advertising infringed the patent claims that disclosed processes and systems for promoting or advertising products (i.e. “advertising ideas”);

(5) the required “causation” for the advertising injury was satisfied by the patent complaint’s typical “irreparable harm” allegation that the infringer “continues” to infringe and won’t stop “unless enjoined by this Court”; and

(6) the duty to defend an entire suit arises when “the complaint even potentially alleges conduct within the policy”—it’s not restricted to the “core complaint” or “primary grievance,” and advertising need not be the “sole cause of the alleged injury.”