Opinion ID: 717171
Heading Depth: 3
Heading Rank: 1

Heading: Advertising Injury Provision

Text: 10 The advertising injury provision in Brown's insurance policy with City Insurance states: 11 Advertising injury means injury arising out of an offense committed during the policy period occurring in the course of the named insured's advertising activities, if such injury arises out of libel, slander, defamation, violation or right of privacy, unfair competition, or infringement of copyright, title, or slogan.... 12 (Emphases supplied.) The district court concluded that the advertising injury provision did not cover the type of unfair competition Westowne alleged in the underlying suit, nor did the allegedly unfair competition take place in the context of advertising activities. In its decision on Brown's reconsideration motion the district court determined that this court's interpretation of unfair competition in Curtis-Universal v. Sheboygan Emergency Memorial Services, Inc., 43 F.3d 1119 (7th Cir.1994), did not require reconsideration of its earlier decision. 13 The plain language of the advertising injury clause excludes a majority of Westowne's allegations in the underlying action against Brown, including breach of contract, promissory estoppel negligent misrepresentation, strict misrepresentation, and antitrust and statutory unfair trade practices. None of these claims is mentioned as a potential source of liability in the policy. But Westowne does allege in its complaint a count denominated common law unfair competition, which could potentially fall within the meaning of the advertising injury provision. What is important is not the legal label that the plaintiff attaches to the defendant's (that is, the insured's) conduct, but whether that conduct as alleged in the complaint is at least arguably within one or more of the categories of wrongdoing that the policy covers. Curtis-Universal, 43 F.3d at 1122 (citations omitted). Thus, the first question we face is whether the complaint's allegations fall within the definition of unfair competition in the advertising injury provision. 14 In Curtis-Universal we found that a complaint alleging (among other things) tortious interference with contractual relations fell within the realm of unfair competition as it appeared in an advertising injury insurance provision identical to the one before us. 43 F.3d at 1124-25. But we noted that a broad interpretation for unfair competition cannot be right, as [i]t would turn insurance against liability for 'advertising injury' into insurance against liability for antitrust violations. Id. at 1123. We stated that unfair competition must bear[ ] its normal legal meaning. Id. at 1123. That would include a variety of tortious misconduct by one competitor toward another, but it also was concerned mainly with harmful speech. Id. at 1123-24. This limitation was important in Curtis-Universal, as we wanted to more narrowly interpret the phrase in light of the word advertising, rather than broadly as the modern law of business torts might allow. Id. at 1124. Thus, we held in Curtis-Universal that an allegation the defendant disseminated false information about the insured stated a claim for unfair competition within the advertising injury provision. Id. at 1124. In the context of the case before us, a working definition of advertising injury after Curtis-Universal would be a false or injurious representation disseminated or published in promoting a product. 15 Brown argues certain of Westowne's allegations bring it within this definition, including that (1) Brown engaged in false and deceptive labeling and other false and deceptive marketing practices when it attached the Naturalizer name to poor quality shoes and offered them at deep discounts to the public, thereby cheapening the Naturalizer name, label and trademark; (2) Brown directly and unfairly competed with Westowne; and (3) the complaint contains three direct references to advertising. Brown claims these allegations come under improper solicitation and misrepresentation and therefore fall within the advertising injury insuring provision. 16 The complaint alleges that Brown did not supply Westowne with the shoes it promised and that Brown let its retail outlets sell shoes Westowne could not. But these claims describe modern business torts, not allegations concerning harmful speech which we recognized as advertising injury in Curtis-Universal. 43 F.3d at 1124. Further, Westowne's advertising claims allege Westowne spent money on advertising before and after Brown adopted the purity standard. Such claims do not relate to Brown's insuring of its own advertising activities. 17 The closest Westowne's allegations come to claiming unfair competition under the advertising injury provision is the allegation that Brown falsely and deceptively labelled and sold cheaper versions of Naturalizer shoes. The district court considered and rejected this possibility on the ground that marketing shoes was not the same as advertising them. 18 Coverage (and thus a duty to defend) under the advertising liability endorsement requires a showing that the alleged offense occurred in the course of the insured's advertising activities. B.R. Ostrager & T.R. Newman, Handbook on Insurance Coverage Disputes § 7.04[b], p. 284 (8th ed. 1995) (and citations therein). Brown's policy with City Insurance also requires that the offense occur in the course of the named insured's advertising activities. No allegations concerning Brown's advertising appear anywhere in Westowne's complaint. There is no mention of any published promotional material that Brown used. Westowne makes no claim that the cheaper Naturalizer shoes were ever part of an advertising campaign. The mere labelling of cheap shoes is not advertising. Brown's business decision to sell these shoes with the brand name Naturalizer is more properly seen as product identification than advertising. Although there is no easy and widespread definition for advertising activity, 3 we can safely conclude that it does not encompass mere product labelling. Without a basis to conclude that the alleged offense occurred in the course of advertising activities by Brown, a finding of potential insurance coverage triggering a duty to defend would not be proper. 19 If we accepted Brown's argument that Westowne's allegations arose from advertising activity, that phrase would have little meaning. See, e.g., Bank of the West v. Superior Court (Industrial Indem. Co.), 2 Cal.4th 1254, 1276-77, 833 P.2d 545, 560, 10 Cal.Rptr.2d 538, 553-54 (1992) (without causal connection between claims and insured's advertising activities, provision would encompass virtually every claim related to insured's business because virtually every business that sells a product or service advertises). Brown's construction of advertising activity would produce unreasonable results because it would transform any effort to sell a product into open-ended coverage. An insurance policy shall not be construed so as to produce an unreasonable or absurd result. Olguin v. Allstate Ins. Co., 71 Wis.2d 160, 165, 237 N.W.2d 694, 697 (1978). 20 In its complaint Westowne does not allege damages such as defamation or slander which could arguably be caused by some advertising publication or representation. This distinguishes this case from Curtis-Universal. Instead, Westowne claims purely economic damages. To interpret the advertising injury provision as Brown submits would be to take it out of its definition in Curtis-Universal. Brown may be arguing for insurance coverage for antitrust or business tort activity, something this court warned against in Curtis-Universal. 43 F.3d at 1123. This is not the type of conduct for which insurance can be purchased generally and it is certainly not the type for which the advertising injury provision contemplated coverage. See Bank of the West, 2 Cal.4th at 1277, 833 P.2d at 560, 10 Cal.Rptr. at 553 (insureds generally expect to obtain such broad coverage, if at all, only by purchasing several forms of insurance, including coverage for 'errors and omissions liability,' 'directors and officers liability,' 'completed operations and products liability,' and/or other coverages available as part of a CGL policy.) 21 Whether Westowne likes it or not cheap shoes labeled Naturalizer are nevertheless Naturalizers. Simply labeling them as such is an accomplished fact--it is not the result of advertising activity that results in an advertising injury. But even if merely labelling cheap shoes Naturalizer and offering them for sale could be construed as advertising activity, other courts interpreting this provision still require that the offense itself arise out of the advertising activity. See Handbook on Insurance Coverage Disputes at p. 286 (and citations therein). Here the actual sale of the shoes to consumers, not their labelling, allegedly caused Westowne's damages. Westowne filed suit claiming economic damages, such as lost profits, and an inferior competitive position because of Brown's actions. These damages resulted from the sale of the cheaper Naturalizer shoes, not their labelling. Accordingly, Brown has also failed to establish a causal connection between Westowne's claimed damages and what Brown characterizes as the advertising activity. 22 For the same reasons, we reject Brown's attempt to squeeze Westowne's allegations concerning trademark infringement into this court's interpretation of unfair competition in Curtis-Universal. 43 F.3d at 1123. Westowne's claim that it built up the Naturalizer trademark only to have it devalued by Brown's actions not only was ruled on in Brown's favor on summary judgment, but it does not fit into this court's interpretation of unfair competition in Curtis-Universal as dissemination of false information about the insured. 43 F.3d at 1124. 23 We agree with the district court's conclusions that no causal connection exists between Westowne's claimed damages and any advertising activity or even what Brown characterizes as advertising activity. Westowne's complaint thus does not allege any offense potentially covered by the advertising injury insuring provision, and City Insurance did not need to defend Brown based upon that provision.