Covered or Not: Has Hartford v. Swift Opened a Faster Lane for Intellectual Property and Insurance Mediation?

By Barbara A. Reeves Neal, Esq.

The California Supreme Court recently issued its long-awaited coverage decision in Hartford Casualty Ins. Co. v. Swift Distribution, Inc., 59 Cal. 4th 277 (2014).  The Court, applying California state law, upheld the trial court’s granting of Hartford Casualty Insurance Company’s (Hartford) motion for summary judgment, ruling it had no duty to defend or indemnify a claim tendered by its insured under the advertising injury provision of a general liability policy.  In so doing, the California Supreme Court resolved a split of authority in the California appellate courts regarding the specificity of allegations required to trigger an insurer’s duty to defend or indemnify claims for advertising injuries.  The commercial general liability policy at issue included a provision for coverage of advertising injury.

The California Supreme Court took the case “to clarify the principles governing the scope of a commercial general liability insurer‘s duty to defend [emphasis added] an insured against a claim alleging disparagement.”  Its holding “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” by “express mention or by clear implication” clarifies the law on what is necessary to establish a claim of implied disparagement but fails to provide other than a passing mention of the duty to defend.  Rather, having defined what allegations had to be stated to state a covered claim for implied disparagement under “advertising injury,” and having found those allegations missing, the Court jumped to the conclusion that there was no duty to defend.

How is this holding likely to impact the settlement of the underlying cases, especially those that usually arise as infringement of intellectual property rights?  The answer is that if we take the Court’s language at face value, parties will be more willing to address the real meat of the case, the infringement issues.  This is because unless the plaintiff has clearly pled an advertisement that disparages the defendant’s product, the implied disparagement claim will fall by the wayside inasmuch as it is no longer a basis for insurance coverage.

To continue reading about Hartford v. Swift and its impact on Intellectual Property and Insurance mediation, please read the full article from Law.com by clicking here.