Auto Sox USA, Inc. v. Zurich North America

121 Wash. App. 422
Court of Appeals of Washington·Decided April 29, 2004·No. No. 21576-8-III·Published·Cited by 7 cases

Opinion

Kurtz, J.

William Elmer sued Auto Sox USA, Inc., for patent infringement. Auto Sox tendered the claim to its insurance company, Northern Insurance Company of New York, Inc. It claimed coverage as an “advertising injury.” Northern denied coverage. Auto Sox then sued Northern and its parent company, Zurich North America. The trial court held that Auto Sox’s claim for patent infringement was an advertising injury. Northern moved for discretionary review here. We granted review and now reverse.

FACTS

Auto Sox manufactures and sells rooftop advertising signs for vehicles. William A. Elmer patented an improvement to vehicle roof signs. Specifically, he improved the way the signs attach to the roof. In June 2001, Mr. Elmer sued Auto Sox and others. Northern insured Auto Sox. Its Commercial General Liability policy covers an “ ‘[advertising injury^ caused by an ‘offense’ committed in the course of [425] advertising your goods, products or services.” Clerk’s Papers (CP) at 301.

Auto Sox tendered the defense of the Elmer lawsuit to Northern. Northern denied coverage because the complaint did not allege an advertising injury. Auto Sox asked Northern to reconsider. Northern refused and again denied coverage. Auto Sox then sued Northern, Zurich, and the insurance agents who sold it the policy. Among other things, the complaint sought a declaration of coverage.

Northern moved for summary judgment. Auto Sox responded with a motion for partial summary judgment. The court concluded that the policy covered the claim and granted Auto Sox’s motion.

ANALYSIS

We review partial summary judgments de novo. Weyerhaeuser Co. v. Commercial Union Ins. Co., 142 Wn.2d 654, 665, 15 P.3d 115 (2000). In doing so, we engage in the same inquiry as the trial court. Ellis Court Apartments Ltd. P’ship v. State Farm Fire & Cas. Co., 117 Wn. App. 807, 811, 72 P.3d 1086 (2003). Interpretation of an insurance contract is a question of law, which we review de novo. Roller v. Stonewall Ins. Co., 115 Wn.2d 679, 682, 801 P.2d 207 (1990). “In construing the language of an insurance policy, the policy should be given a fair, reasonable, and sensible construction as would be given to the contract by the average person purchasing insurance.” Id. at 682. “ ‘If the language is clear and unambiguous, the court must enforce it as written and may not modify it or create ambiguity where none exists.’ ” Ellis, 117 Wn. App. at 814 (quoting Weyerhaeuser, 142 Wn.2d at 666).

Auto Sox’s policy covers an “ ‘[advertising injury’ caused by an ‘offense’ committed in the course of advertising your goods, products or services.” CP at 301. The policy defines “offense” as one or more of the following:

[426] b. With respect to “advertising injury”:

(1) Oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services;

(2) Oral or written publication of material that violates a person’s right of privacy;

(3) Misappropriation of advertising ideas or style of doing business; or

(4) Infringement of copyright, title or slogan.

CP at 309. Auto Sox claims coverage under both subpara-graphs (3) and (4). Auto Sox also argues that the language of both subparagraphs is ambiguous and could be reasonably read to include a patent infringement claim.

The question before us is whether the conduct alleged in Auto Sox’s complaint — manufacturing and selling a patented rooftop sign — is covered by the “advertising injury provision” of the Northern policy. The meaning of “misappropriation of an advertising idea” has recently been addressed in Amazon.com International, Inc. v. American Dynasty Surplus Lines Insurance Co., 120 Wn. App. 610, 85 P.3d 974 (2004). There, the court defined “misappropriation of an advertising idea” as the “ ‘wrongful taking of another’s manner of advertising.’ ” Id. at 616 (quoting Am. States Ins. Co. v. Vortherms, 5 S.W.3d 538, 543 (Mo. Ct. App. 1996)). Other courts have offered similar definitions. The Third Circuit has suggested the following meaning: “the wrongful taking of an idea about the solicitation of business and customers.” Green Mach. Corp. v. Zurich-American Ins. Group, 313 F.3d 837, 839 (3d Cir. 2002); see also Heritage Mut. Ins. Co. v. Advanced Polymer Tech., Inc., 97 F. Supp. 2d 913, 926 (S.D. Ind. 2000) (adopting Third Circuit definition). The Sixth Circuit has defined the phrase as “ ‘an idea for calling public attention to a product or business.’ ” Advance Watch Co. v. Kemper Nat’l Ins. Co., 99 F.3d 795, 801 (6th Cir. 1996) (quoting Atl. Mut. Ins. Co. v. Badger Med. Supply Co., 191 Wis. 2d 229, 239, 528 N.W.2d 486 (Wis. Ct. App. 1995)). The Eleventh Circuit has defined the phrase as “any idea or concept related to the promotion of a [427] product to the public.” Hyman v. Nationwide Mut. Fire Ins. Co., 304 F.3d 1179, 1188 (11th Cir. 2002).

Generally, these definitions focus on what the insured has taken. If the insured took an idea for soliciting business or an idea about advertising, then the claim is covered. See Heritage, 97 F. Supp. 2d at 927. But if the allegation is that the insured wrongfully took a patented product and tried to sell that product, then coverage is not triggered. Id.

For example, in Green Machine the insured merely took a patented method of cutting concrete and advertised the “results of that theft.” Green Machine, 313 F.3d at 840. The claim for patent infringement was then not an advertising injury. Id. The insured did not take an actual advertising idea. It took a product idea.

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Auto Sox USA, Inc. v. Zurich North America, 121 Wash. App. 422 (Wash. Ct. App. 2004).

121 Wash. App. 422 (Auto Sox USA, Inc. v. Zurich North America) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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