Supreme Court Affirms Ruling on Insurer’s Duty to Defend “Disparagement” Claim

Publish Date:Jun 16, 2014
Summary:
On June 12, 2014, the California Supreme Court issued a decision in Hartford Casualty Insurance Company v. Swift Distribution, Inc. which affirmed an October 29, 2012, Court of Appeal ruling that a commercial general liability policy which promised to pay for damages resulting from an advertising injury did not require the insurer to defend the insured in a lawsuit that did not allege disparagement to the plaintiff’s product.
On June 12, 2014, the California Supreme Court issued a decision in Hartford Casualty Insurance Company v. Swift Distribution, Inc. which affirmed an October 29, 2012, Court of Appeal ruling that a commercial general liability policy which promised to pay for damages resulting from an advertising injury did not require the insurer to defend the insured in a lawsuit that did not allege disparagement to the plaintiff’s product. The Court of Appeal’s ruling was summarized in the October 30, 2012.

Hartford issued a commercial general liability policy to Swift Distribution that covered “personal and advertising injury” which the policy stated 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.” Swift was sued by a company that produced a product similar to a product produced by Swift. The suit included allegations of patent and trademark infringement, false designation of origin, and damage to business, reputation, and goodwill. Swift sought defense from Hartford. Hartford refused to defend Swift in the lawsuit because the suit did not allege a claim covered by its policy. Swift filed a lawsuit against Hartford.

The Court of Appeal ruled in favor of Hartford, concluding that the insurer had no duty to defend Swift because the lawsuit against Swift did not allege disparagement.

The Supreme Court affirmed the Court of Appeal’s ruling and set forth this clarification of 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.”

In this case, there was no claim of disparagement triggering Hartford’s duty to defend Swift because the plaintiff’s lawsuit against Swift contained no allegation that Swift clearly derogated the plaintiff.

The Supreme Court’s opinion is available at www.courts.ca.gov     

 

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