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Maryland Intermediate Appellate Court holds that breach of contract action fell within commercial general liability policy’s coverage for “advertising injury”
Blackstone Int’l Ltd. v. Maryland Cas. Co.
In Blackstone International Limited v. Maryland Casualty Company, Maryland’s intermediate appellate court held that an underlying plaintiff’s lawsuit against an insured, alleging that the insured used the plaintiff’s marketing ideas without compensation, was covered under the insured’s commercial general liability policy as “advertising injury.” Writing for the Court of Special Appeals, Judge Albert J. Matricciani, Jr. held that at least one (1) of the underlying plaintiff’s claims against the insured potentially fell within the insurance policy’s coverage for “advertising injury.” Therefore, insurers had a duty to indemnify the insured for attorneys’ fees incurred in reaching settlement in the underlying suit.
On February 2010, RMG Direct, Inc. (“RMG”) sued Blackstone International Limited (“Blackstone”). RMG alleged several claims, all stemming from an alleged joint venture to market “low vision” lighting products manufactured by Blackstone. Specifically, RMG claimed that Blackstone used and distributed advertising content created by RMG. According to RMG, Blackstone used RMG’s marketing ideas in product packaging, Blackstone’s website, trade publications, third-party catalogs, and presentations to retailers like Wal-Mart. RMG’s Complaint alleged breach of oral contract, estoppel, unjust enrichment, and intentional misrepresentation. Blackstone notified its insurers, Maryland Casualty Company and Northern Insurance Company of New York (collectively, the “Insurers”), of the RMG suit. The Insurers, which insured Blackstone for commercial general liability, refused to defend Blackstone. The Insurers’ policies promised Blackstone a defense and indemnification in any suit seeking damages from “advertising injury.” According to Blackstone, RMG’s claims did not fall within the definition of “advertising injury.”
Blackstone and RMG settled their dispute. In the process, Blackstone allegedly incurred approximately one million dollars in attorney’s fees. The Insurers refused to pay Blackstone’s costs. The Insurers filed a declaratory judgment action in the Circuit Court for Baltimore County, seeking a declaration that it had no duty to defend or indemnify Blackstone. Blackstone counterclaimed for indemnification. Both parties moved for summary judgment. The circuit court granted the Insurers’ motion, which Blackstone appealed.
The Court of Special Appeals reversed the Circuit Court for Baltimore County’s entry of summary judgment in favor of the Insurers. The Court reiterated the well-established “potentiality rule” under Maryland law, which states that an insurer has a duty to defend a lawsuit in which any one (1) of the underlying plaintiff’s claims could potentially be covered under the insured’s policy. The Court examined the allegations of Blackstone’s Complaint in order to determine whether it alleged any one (1) claim that potentially fell within the policy’s coverage for “advertising damage.” The Court rejected that product packaging would not constitute an “advertisement” under the policy, finding dispositive the fact that Blackstone distributed advertising on standardized package with the evident intent to reach and attract a wide audience. The Court similarly rejected the Insurers’ argument that coverage for “advertising injury” could not include a purposeful failure to abide by an agreement. According to the Insurers, “advertising injury” coverage would only protect an insured from its own inadvertent negligence. The Court noted that the Insurers deliberately waived policy exclusions in the circuit court dealing with breach of contract claims and intentional misconduct. The Insurers could not now seek to rely on an argument that was essentially the same as those exclusions it waived in the lower court. Furthermore, Maryland law does not look to the gravamen of the underlying plaintiff’s complaint to determine the potentiality of coverage, but rather the gravamen of each particular claim. The Court rejected the Insurers’ contention that injuries arising from intentional conduct of breach of contract are, by default, excluded from coverage for “advertising injury.” The Court, therefore, reversed the circuit court’s decision, and remanded the case to determine whether Blackstone’s attorneys’ fees were reasonable in the underlying litigation.
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