E-Alert Case Updates
Court of Appeals finds no advertising injury coverage where causal relationship between injuries and activities are lacking.
Maryland Casualty Company, et al. v. Blackstone International Ltd., et al.
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, and the Insurers filed a declaratory judgment action in the Circuit Court for Baltimore County, seeking a declaration that they had no duty to defend or indemnify Blackstone. Blackstone counterclaimed for indemnification. Both parties moved for summary judgment. The circuit court granted the Insurers' motions, 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 noted that the Insurers had an obligation to defend if there was a potentiality of coverage. After analyzing the Complaint against the terms of the Policy, the Court held that the Insurers’ basis for denying coverage was either waived or not supported by the policy. The Court of Special Appeals held that had actions not been excluded, they would have been implicated in the agreements’ broad and unambiguous definition of “advertising injury,” the Court further held that the unjust enrichment claim did arise out of Blackstone’s use of RMG’s advertising idea, and required the Insurers to defend Blackstone. The Insurers appealed.
The Court of Appeals first noted that in determining coverage, the Court first looks to the policy to determine the scope of coverage, and then to the allegations of the Complaint to determine if the allegations fall within coverage. If the allegations are not “conclusive,” then extrinsic evidence may be relied upon to find coverage. In this matter, the Court of Appeals held that the Second Amended Complaint allegations were “conclusive.”
The Court then analyzed both the policy and the history of the advertising injury provisions. Specifically, it noted that in determining if an insured advertising injury occurred, the Court looks to the specific definition of the offense used in the policy; if the offense was committed in the course of advertising goods, products or services; and finally, the causal connection between the advertising and the injury. To meet the causal connection requirement the advertising injury claimed must be caused by an offense committed in the course of advertising. Therefore, if there are no damages as a result of the advertising, there is no advertising injury claim. The Court then reviewed how various states defined the causal connection. In finding that there was no causal connection between the advertising and the injury, the Court noted that RMG had provided the creative work for the purpose of advertising.
As to the unjust enrichment claim, a claim for which the Court of Special Appeals had found coverage existed, the highest appellate court noted that it was a reformulation of the breach of contract claims, which were not covered as advertising injuries. The Court of Appeals noted:
The Court then reversed the Court of Special Appeals’ holding as to coverage for the unjust enrichment claim and affirmed the holding of the trial court.
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