Court Opinion

ID: 3054605
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:55:11.477016+00
Date Added: 2024-06-11T07:38:14.156591
License: Public Domain

FILED
                            NOT FOR PUBLICATION                             DEC 21 2011

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS

                            FOR THE NINTH CIRCUIT

TOM KELLEY STUDIOS, INC.,                        No. 10-55931

              Plaintiff - Appellant,             D.C. No. 2:09-cv-04018-RSWL-
                                                 VBK
    v.

STATE FARM GENERAL INSURANCE                     MEMORANDUM *
COMPANY,

              Defendant - Appellee.

                  Appeal from the United States District Court
                      for the Central District of California
                Ronald S.W. Lew, Senior District Judge, Presiding

                     Argued and Submitted December 8, 2011
                              Pasadena, California

Before: NOONAN, GOULD, and IKUTA, Circuit Judges.

      Because the Nova complaint alleged that conduct constituting “advertising

injury” was “committed in the course of advertising [Tom Kelley Studios’s] goods,

         *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Cir. R. 36-3.

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products or services,” the complaint stated claims potentially covered by Tom

Kelley Studios’s (Kelley) policy. Consequently, State Farm had a duty to defend

Kelley against Nova’s suit. See Montrose Chem. Corp. v. Superior Court, 861

P.2d 1153, 1157 (Cal. 1993).

      The Nova complaint alleged trademark and trade dress infringement, which

under California law constitute the advertising injury of “misappropriation of

advertising ideas or style of doing business” under Kelley’s policy. See Dogloo,

Inc. v. N. Ins. Co. of N.Y., 907 F. Supp. 1383, 1390 (C.D. Cal. 1995); Lebas

Fashion Imps. of USA, Inc. v. ITT Hartford Ins. Grp., 59 Cal. Rptr. 2d 36, 46 (Cal.

Ct. App. 1996). Further, the advertising injuries alleged in the Nova complaint

were “committed in the course of advertising [Kelley’s] goods, products or

services.” Adler Fels’s (Adler) advertisements, such as its website featuring the

allegedly infringing wine label, constituted a course of advertising for Kelley’s

goods, products or services because the advertisements highlighted the unique

collectible value of Kelley’s photos on Adler’s wine bottles. Nothing in the

relevant provision or Kelley’s policy as a whole required that the allegedly

injurious “course of advertising” be undertaken by Kelley itself. State Farm argues

that this requirement is inherent in the policy because Kelley does not have an

objectively reasonable expectation that the policy would cover a third party’s

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course of advertising Kelley’s products. We reject this argument because State

Farm has adduced no evidence to support it. At most, the policy language on this

point is ambiguous because it is “susceptible to two or more reasonable

constructions.” Palmer v. Truck Ins. Exch., 988 P.2d 568, 573 (Cal. 1999). While

State Farm’s argument that the provision covers only Kelley’s “course of

advertising” is a reasonable construction of the policy, courts must resolve this

contractual “uncertaint[y] in favor of the insured.” Gray v. Zurich Ins. Co., 419

P.2d 168, 174–75 (Cal. 1966).

      Finally, Kelley has shown the requisite causal connection between the

“course of advertising” its products and the alleged advertising injury: Adler’s

wine advertisements highlighting Kelley’s photos caused Nova’s trademark and

trade dress injuries. See Hyundai Motor Am. v. Nat’l Union Fire Ins. Co. of

Pittsburgh, Pa., 600 F.3d 1092, 1103 (9th Cir. 2010).

      We affirm the district court’s ruling that State Farm did not breach its

implied covenant of good faith and fair dealing. State Farm’s interpretation of the

policy was reasonable, see Karen Kane Inc. v. Reliance Ins. Co., 202 F.3d 1180,

1190 (9th Cir. 2000), and the evidence shows it “relied on the advice of competent

counsel” to arrive at its interpretation, State Farm Mut. Auto. Ins. Co. v. Superior

Court, 279 Cal. Rptr. 116, 117 (Cal. Ct. App. 1991).

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The parties shall bear their own costs on appeal.

REVERSED in part and AFFIRMED in part.

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