Hartford Cas. Ins. Co. v. Swift Distribution, Inc.

• Decision Date: 12 June 2014
• Docket Number: No. S207172.,S207172.
• Parties: HARTFORD CASUALTY INSURANCE COMPANY, Plaintiff and Respondent, v. SWIFT DISTRIBUTION, INC. et al., Defendants and Appellants.
• Court: California Supreme Court

59 Cal.4th 277

326 P.3d 253

172 Cal.Rptr.3d 653

HARTFORD CASUALTY INSURANCE COMPANY, Plaintiff and Respondent,

v.SWIFT DISTRIBUTION, INC. et al., Defendants and Appellants.

No. S207172.

Supreme Court of California

June 12, 2014.

Little Reid & Karzai, Irvine, Eric R. Little, M. Catherine Reid and Najwa Tarzi Karzai for Defendants and Appellants.

Amy Bach, Mill Valley; Dickstein Shapiro, Kirk A. Pasich, Los Angeles, and Kimberly A. Umanoff for United Policyholders as Amicus Curiae on behalf of Defendants and Appellants.

Nossaman, San Francisco, Kurt W. Melchior and S. Ashar Ahmed for Bullpen Distribution, Inc., and Jon Brill as Amici Curiae on behalf of Defendants and Appellants.

Caldwell Leslie & Proctor, Los Angeles, Christopher G. Caldwell, Andrew Esbenshade and Kelly L. Perigoe for Charlotte Russe Holding, Inc., as Amicus Curiae on behalf of Defendants and Appellants.

Gauntlett & Associates and David A. Gauntlett, Irvine, as Amici Curiae on behalf of Defendants and Appellants.

Steven W. Murray, Sherman Oaks, as Amicus Curiae on behalf of Defendants and Appellants.

Dentons US, Michael Barnes, San Francisco; Tressler, David Simantob, Elizabeth L. Musser, Los Angeles; Akin Gump Strauss Hauer & Feld and Rex S. Heinke, Los Angeles, for Plaintiff and Respondent.

McCurdy & Fuller, Laura J. Ruettgers and David C. Hungerford, Menlo Park, for Ironshore Specialty Insurance Company as Amicus Curiae on behalf of Plaintiff and Respondent.

Wiley Rein, Laura A. Foggan, Edward R. Brown ; Sinnott, Puebla, Campagne & Curet and Randolph P. Sinnott, Los Angeles, for Complex Insurance Claims Litigation Association as Amicus Curiae on behalf of Plaintiff and Respondent.

Kutak Rock, Christopher D. Glos, Irvine, Bradley J. Baumgart and Jean–Paul Assouad for American Guarantee & Liability Insurance Company as Amicus Curiae on behalf of Plaintiff and Respondent.

Horvitz & Levy, Peter Abrahams and Mitchell C. Tilner, Encino, for American

Insurance Association as Amicus Curiae on behalf of Plaintiff and Respondent.

LIU, J.

Hartford Casualty Insurance Company (Hartford) issued a commercial general liability policy to Swift Distribution, Inc., doing business as Ultimate Support Systems (Ultimate), that covered "personal and advertising injury." This term 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." Ultimate, which sells the "Ulti–Cart," was sued in federal district court by Gary–Michael Dahl (Dahl), the manufacturer of the "Multi–Cart." The suit included allegations of patent and trademark infringement, false designation of origin, and damage to business, reputation, and goodwill.

When Ultimate tendered defense of the suit to Hartford, Hartford denied coverage on the ground that the suit did not allege that Ultimate had disparaged Dahl or the Multi–Cart. The Court of Appeal agreed with Hartford that it had no duty to defend and expressly disagreed with the reasoning in Travelers Property Casualty Company of America v. Charlotte Russe Holding, Inc. (2012) 207 Cal.App.4th 969, 144 Cal.Rptr.3d 12 (Charlotte Russe ). We granted review to clarify the principles governing 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. Because Dahl's suit contains no allegation that Ultimate clearly derogated the Multi–Cart, we find no claim of disparagement triggering Hartford's duty to defend, and we affirm the judgment of the Court of Appeal.

I.

Ultimate sells a product called the Ulti–Cart, a multiuse cart marketed to help musicians load and transport their equipment. On January 26, 2010, Dahl filed an action in federal district court against Ultimate (the Dahl action). The complaint alleged that Dahl held multiple patents on a similar convertible transport cart called the Multi–Cart, which he had sold commercially since 1997. The Multi–Cart was described as a collapsible cart capable of being manipulated into multiple configurations and typically used to transport music, sound, and video equipment.

According to the complaint, Ultimate impermissibly manufactured, marketed, and sold the Ulti–Cart, and thereby infringed on Dahl's patents and trademarks and diluted the Multi–Cart trademark. Dahl asserted that Ultimate's false and misleading advertisements and use of a "nearly identical mark" were likely to cause consumer confusion or mistake, or to deceive the public "as to the affiliation, connection, or association" of the two parties. He also alleged unfair competition, misleading advertising, breach of contract, and claims based on the violation of two nondisclosure agreements. The complaint attached Ultimate's advertisements, which did not name the Multi–Cart or any other product.

Ultimate delivered the suit to Hartford for defense under the commercial liability policy issued by Hartford for the period of January 29, 2009 to January 29, 2010 (the Hartford policy). The Hartford policy's insuring agreement provided: "We will pay those sums that the insured becomes legally obligated to pay as damages because of ... ‘personal and advertising injury’ to which this insurance applies. We will have the right and duty to defend the insured against any ‘suit’ seeking those damages. However, we will have no duty to defend the insured against any ‘suit’ seeking damages for ... ‘personal and advertising injury’ to which this insurance does not apply." It defined "personal and advertising injury," in pertinent part, as "injury ... arising out of ... [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." The insuring agreement did not provide a definition for the term "disparages."

Ultimate argued that the Dahl action involved a claim of disparagement covered by the Hartford policy's definition of "personal and advertising injury." But Hartford found no potential claim of disparagement and denied any duty to defend or indemnify Ultimate in the underlying litigation. Citing Total Call Internat., Inc. v. Peerless Ins. Co. (2010) 181 Cal.App.4th 161, 104 Cal.Rptr.3d 319 (Total Call ), Hartford's counsel explained in a letter to Ultimate that there could be no disparagement in the absence of a specific statement about a competitor's goods. It further found that any possibility of coverage would have been precluded by the policy's exclusion provisions, one of which denied coverage for personal or advertising injuries arising out of violations of intellectual property rights.

On July 27, 2010, Hartford filed a complaint seeking a declaratory judgment that it had no duty to defend or indemnify Ultimate in the Dahl action. The complaint argued that the allegations in the underlying action did not satisfy the elements of a disparagement offense. While the action was pending, the court in the Dahl action granted Ultimate's motion for summary adjudication on the claims of patent infringement, and the Dahl action settled. Hartford and Ultimate each filed motions for summary judgment or, in the alternative, summary adjudication. The superior court granted Hartford's motion for summary judgment.

Ultimate appealed, and the Court of Appeal affirmed. The Court of Appeal observed that the Dahl action did "not allege that Ultimate's advertisements specifically referred to Dahl by express mention" and that "Dahl did not allege that Ultimate's publication disparaged Dahl's organization, products, goods, or services" by reasonable implication. Because "Dahl was precluded from recovery on a disparagement theory," the court reasoned, "Dahl alleged no claim for injurious false statement or disparagement that was potentially within the scope of the Hartford policy coverage for advertising injury," and Hartford had no duty to defend Ultimate in the underlying action. Further, the Court of Appeal "disagree[d] with the theory of disparagement apparently recognized" in Charlotte Russe, supra, 207 Cal.App.4th 969, 144 Cal.Rptr.3d 12, although it acknowledged that Charlotte Russe was distinguishable on its facts.

We granted review.

II.

A trial court properly grants a motion for summary judgment where "all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." ( Code Civ. Proc., § 437c, subd. (c).) "Because this case comes before us after the trial court granted a motion for summary judgment, we take the facts from the record that was before the trial court when it ruled on that motion. [Citation.] ‘ "We review the trial court's decision de novo, considering all the evidence set forth in the moving and opposing papers except that to which objections were made and sustained." ’ [Citation.] We liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party." ( Yanowitz v. L'Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1037, 32 Cal.Rptr.3d 436, 116 P.3d 1123.)

As discussed below, we conclude that the Court of Appeal correctly decided the issue before us.

A.

An insurer's duty to indemnify and its duty to defend an insured "lie at the core of the standard policy." Certain Underwriters at Lloyd's of

London v. Superior Court

(2001) 24 Cal.4th 945, 958, 103 Cal.Rptr.2d 672, 16 P.3d 94.) The duty to defend is broader than the duty to indemnify. ( Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076, 1081, 17 Cal.Rptr.2d 210, 846 P.2d 792 (Horace Mann ).) "Unlike the obligation to indemnify, which is only...