Basic Research wanted Admiral to defend it against consumer
protection claims; the state supreme court agreed that a policy exclusion
applied.
Basic Research sells a
weight-loss product Akävar, using the slogans “Eat All You Want And Still Lose
Weight” and “And we couldn't say it in print if it wasn't true!” (These were allegedly licensed
trademarks.) Customers filed multiple
lawsuits alleging false advertising, product defects, etc.
Basic Research had personal and advertising injury coverage,
which Admiral contended didn’t cover these underlying claims. Basic Research claimed coverage because the
policy covered “The use of another’s advertising idea in your ‘advertisement.’” It argued that the underlying claims were
causally linked to its “use of another’s advertising idea.” However, in order to trigger a duty to
defend, the injury must have occurred as
a result of the use of another’s advertising idea, and that connection wasn’t
present. The underlying causes of action
didn’t depend on the source or ownership of the slogans, but rather on their
content. As the court pointed out, if
the underlying claims went to trial, plaintiffs would never be required to
prove the source of the slogans. The
insurance contract couldn’t reasonably be interpreted to cover that type of
mere but-for causation, “no matter how legally irrelevant the link.”
The insured cited cases suggesting that “use” should be
interpreted broadly in this phrase, including “misuse” via deceptive
advertising. That might be appropriate
where the underlying injury is directly caused by the deceptive advertising
regardless of the product’s failure to perform, but here the use isn’t the
problem: the problem is the underlying alleged failure to perform, making the
use false. Plus, Basic Research’s
argument would allow insureds to indemnify themselves from all defective
product liability by using slogans etc. from other sources. The policy might well require Admiral to
indemnify Basic Research against a claim by the licensor related to Basic
Research’s use, but that wasn’t the case here.
In any event, even if the underlying claims triggered
advertising injury coverage, there was an explicit exclusion for advertising
injury arising out of the failure of goods to conform with any statement of
quality or performance made in an insured’s ad.
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