Palmer v. Truck Ins. Exchange

Decision Date06 December 1999
Docket NumberNo. S074326.,S074326.
Citation90 Cal.Rptr.2d 647,988 P.2d 568,21 Cal.4th 1109
CourtCalifornia Supreme Court
PartiesGeoffrey H. PALMER et al., Plaintiffs and Appellants, v. TRUCK INSURANCE EXCHANGE et al., Defendants and Respondents.

The Ford Law Firm, William H. Ford III, Claudia J. Serviss, George H. Kim and Paul C. Cook, Los Angeles, for Plaintiffs and Appellants.

Brown & Bain, Jack E. Brown, Joseph E. Mais, Craig W. Soland, David P. Brooks and Dan L. Bagatell, Phoenix, AZ., for Apple Computer, Inc., as Amicus Curiae on behalf of Plaintiffs and Appellants.

Gauntlett & Associates, David A. Gauntlett, Irvine, and M. Danton Richardson for Mez Industries, Inc., as Amicus Curiae on behalf of Plaintiffs and Appellants.

Heller Ehrman White & McAuliffe, David B. Goodwin and Esta L. Brand, San Francisco, for Pacific Gas and Electric Company as Amicus Curiae on behalf of Plaintiffs and Appellants.

Horvitz & Levy, Peter Abrahams, Mitchell C. Tilner, Holly R. Paul, Encino, Tharpe & Howell, Robert J. Needham, P. Mark Kirwin and Heather A. Sciacca, Santa Barbara, for Defendant and Respondent Truck Insurance Exchange.

Peterson & Ross, Vivian R. Bloomberg and Gina M. Brown, Los Angeles, for Defendants and Respondents American Casualty Company of Reading, Penn., and Continental Casualty Company.

Preuss Walker & Shanagher, Denis F. Shanagher, Alan J. Lazarus, San Francisco, and Edward P. Joy for Westchester Fire Insurance Company and Westchester Surplus Lines Insurance Company as Amici Curiae on behalf of Defendants and Respondents.

Morison-Knox Holden Melendez & Prough, William C. Morison-Knox, Walnut Creek, and Thomas Holden for the Travelers Indemnity Company as Amicus Curiae on behalf of Defendants and Respondents.

Pratt & Associates, Gibson E. Pratt, San Diego, and Charles L. Currier for Federal Insurance Company as Amicus Curiae on behalf of Defendants and Respondents.

Hancock Rothert & Bunshoft, Paul J. Killion, San Francisco, and Kate Cutler for London Market Insurers as Amicus Curiae on behalf of Defendants and Respondents.

Barger & Wolen, Mark C. Goodman, San Francisco, Larry D. Jackson, Richard T. Gieryn, Jr., Steven C. Roycraft; Lopez, Hodes, Restaino, Milman & Skikos, San Francisco, Richard de Saint Phalle and Mark C. Crawford for Industrial Indemnity Company, Industrial Insurance Company of Hawaii, Ltd., and Industrial Indemnity Company of the Northwest as Amici Curiae on behalf of Defendants and Respondents.

BROWN, J.

In this case we consider whether certain insurance policy provisions relating to advertising liability caused by "title" or "slogan" infringement cover infringement of any name. Interpreting the relevant policy language in the context of the policy as a whole, we hold that these provisions only cover infringement of names of literary or artistic works or names that are slogans — and no other names.

I. FACTUAL AND PROCEDURAL BACKGROUND

Newhall Land and Farming Company (Newhall), a California limited partnership, develops real property in Santa Clarita Valley and owns the registered mark for "Valencia." Easton Investments II (Easton), a California limited partnership, developed a residential project in Santa Clarita known as "Valencia Village Apartments" and/or "The Valencia Village at Newhall." Westcreek Properties, Ltd. (Westcreek), a California limited partnership, developed a residential project in Santa Clarita known as "Valencia Vista Condominiums" and "Valencia Terrace Apartments." Geoffrey H. Palmer was a general partner of both Easton and Westcreek.

Newhall filed a complaint in federal district court against Palmer, Easton, Westcreek (collectively the Palmer defendants) and others alleging: (1) Infringement of the registered mark "Valencia"; (2) false designation of origin and false representation; and (3) unfair competition (the Newhall action). In addition to alleging that the Palmer defendants used the Valencia mark, the complaint alleged that they "utilized colored flags, signs and slogans which are remarkably similar to those utilized by [Newhall] for its real estate projects." 1

After a trial, a jury found for Newhall and awarded it $937,678 in damages for Easton's infringement and $1,360,392 in damages for Westcreek's infringement. According to the special verdict forms, the jury found that the Palmer defendants' use of the Valencia mark was "likely to cause confusion," "infringing" and "a false representation or a false designation of origin." The jury also found that their "conduct was willful."

Based on these findings, the district court entered judgment against the Palmer defendants on count 1 for trademark infringement and count 2 for false designation of origin and false representation (the Newhall judgment).2 Citing "extenuating circumstances" and the absence of "exceptional" circumstances, the court then denied Newhall's request for enhanced damages and attorney fees pursuant to title 15, United States Code section 1117, despite the jury's finding of willful conduct.

Soon after the jury verdict, the Palmer defendants tendered the Newhall action to various insurance carriers, including Truck Insurance Exchange (Truck). Truck agreed to pay a portion of the fees and costs on appeal but reserved the right to contest coverage. During the pendency of the appeal, the Palmer defendants settled with Newhall for $1,590,000. Truck, however, denied coverage and refused to contribute to the settlement.

The Palmer defendants then filed the instant action against Truck and other insurers who are not part of this appeal, alleging multiple causes of action for declaratory relief and breach of the implied covenant of good faith and fair dealing. Although the complaint asserted coverage pursuant to multiple insurance policies, the only policy at issue in this appeal is the comprehensive umbrella liability policy (Umbrella Policy or Policy) issued by Truck to Palmer, doing business as Easton Investments. The Umbrella Policy provided coverage for "[advertising [liability" which included "[infringement of copyright or of title or of slogan"3 but excluded coverage "with respect to advertising activities" for "infringement of registered trade mark, service mark or trade name...." The exclusion, however, did "not relate to titles or slogans."

After giving the Palmer defendants two opportunities to amend their complaint, the trial court sustained Truck's demurrer without leave to amend on the grounds that the Palmer defendants lacked standing and breached the "no action" clauses of their policies. The court later entered a judgment of dismissal as to Truck.

The Court of Appeal affirmed the dismissal of most claims but reversed the dismissal of all claims relating to Truck's Umbrella Policy. In doing so, the court rejected both grounds for dismissal cited by the trial court.4 The court further held that: (1) the Newhall judgment fell within the scope of the policy language requiring coverage for infringement "of title or of slogan" despite the language excluding coverage for trademark infringement; and (2) Insurance Code section 533 — which bars indemnity for "wilful" acts — did not bar indemnity for the Newhall judgment despite the jury's finding of willful conduct.

We originally granted review to determine whether: (1) policy language providing coverage for advertising liability caused by infringement "of title or of slogan," but excluding coverage for infringement of "trade mark, service mark or trade name [except relating to] titles or slogans," covers infringement of any name; and (2) Insurance Code section 533 bars indemnity for willful trademark infringement. After reviewing the relevant policy language in context, we find that this language only provides coverage for infringement of a name of a literary or artistic work or a name that is also a slogan. Because our interpretation of the policy language disposes of the entire appeal, we do not reach the second issue.

II. Discussion

Because Truck timely agreed to defend the Newhall action, the parties agree Truck has no duty to reimburse the Palmer defendants for the settlement if the Umbrella Policy does not cover the underlying district court judgment. (See Isaacson v. California Ins. Guarantee Assn. (1988) 44 Cal.3d 775, 793, 244 Cal. Rptr. 655, 750 P.2d 297 [to obtain reimbursement, "the insured must demonstrate that the claim was covered under the policy in question, or that the insurer breached its duty to defend"].) Thus, the dispositive issue is whether the policy language relating to advertising liability actually covers a judgment based on infringement of a name like "Valencia." We conclude it does not.

"[I]nterpretation of an insurance policy is a question of law." (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18, 44 Cal.Rptr.2d 370, 900 P.2d 619 (Waller).) "While insurance contracts have special features, they are still contracts to which the ordinary rules of contractual interpretation apply." (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264, 10 Cal.Rptr.2d 538, 833 P.2d 545 (Bank of the West).) Thus, "the mutual intention of the parties at the time the contract is formed governs interpretation." (AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 821, 274 Cal.Rptr. 820, 799 P.2d 1253 (AIU Ins.).) If possible, we infer this intent solely from the written provisions of the insurance policy. (See id. at p. 822, 274 Cal.Rptr. 820, 799 P.2d 1253.) If the policy language "is clear and explicit, it governs." (Bank of the West, supra, 2 Cal.4th at p. 1264, 10 Cal.Rptr.2d 538, 833 P.2d 545.)

When interpreting a policy provision, we must give its terms their"`ordinary and popular sense,' unless `used by the parties in a technical sense or a special meaning is given to them by usage.'" (AIU Ins., supra, 51 Cal.3d at p. 822, 274 Cal. Rptr. 820, 799 P.2d 1253, quoting Civ. Code, § 1644.) We must also interpret these terms "in context" (Bank of the West, supra, 2 Cal.4th at p. 1265, 10 Cal....

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