An insurer has a duty to defend its insured despite the presence of a trademark exclusion, even when most of the claims involve trademark issues, the Ninth Circuit has held. The case is Western Intern. Syndication Corp. v. Gulf Ins. Co., No. 05-55092, 2007 WL 625264 (9th Cir.) (unpublished) (no opinion online).
In December 2002, the Apollo Theater Foundation filed a lawsuit against Western International Syndication Corp. in the Southern District of New York. Apollo alleged that Western had embarked on a systematic campaign of misconduct, including making misrepresentations about Apollo’s TV show, “It’s Showtime at the Apollo,” and using Apollo’s trademarks in connection with a competing program. In March 2004, Western notified Gulf Insurance Co. about the action and requested defense and indemnity pursuant to its commercial insurance policy. Gulf refused, so Western filed a declaratory action in California state court, which Gulf removed to the Central District of California.
The Central District held that Gulf had a duty to defend Western against Apollo’s deceptive acts and practices claim under New York law. On February 26, the Ninth Circuit affirmed.
It found: “In the Underlying Action, Apollo alleged that Western requested extensions from the United States Patent and Trademark Office to oppose Apollo’s trademark registration applications; that it did so solely for the purpose of disrupting the production financing of the Apollo Show; and that Western, for the purpose of placing a cloud on the title of the Apollo Show trademark, informed banking institutions that the ownership rights of the trademark were contested. According to Apollo, Western’s actions succeeded in making it difficult for Apollo to obtain insurance necessary to secure production financing. Apollo further alleged that Western made ‘statements to television stations and broadcasters to the effect that … the Apollo Show w[ould] not be distributed for the 2003/2004 broadcast season.’”
Western’s policy excludes from coverage personal injuries regarding “infringement of copyright or trademark.” The Ninth Circuit nonetheless found: “While the vast majority of Apollo’s claims do involve trademark issues, the allegations that Western made disparaging statements are distinct….”
“Apollo alleges not only that Western contested Apollo’s ownership rights but also that it informed banking institutions of this dispute, creating the false impression that Apollo’s ownership was in doubt. Apollo also alleged that Western disseminated false information to advertisers regarding limited distribution of the Apollo Show. These factual allegations go beyond the elements of a trademark claim and exceed the scope of the trademark exclusion.”