Advertising Ideas and Insurance Coverage

The Comprehensive General Liability (“CGL”) insurance policy typically used by many businesses oftentimes includes insurance coverage for misusing another’s “advertising idea.” In Clarcor, Inc. v. Columbia Casualty, U.S. Dist. Ct, M.D. TN, Case No. 3:10-00336 (Dec. 16, 2010)(available here), the district court ruled on summary judgment that the insured, Clarcor, Inc., (website here ) did not misappropriate or use 3M’s advertising idea in an earlier case. Clarcor sued its insurance company, Columbia Casualty Co., when Columbia refused the defend and indemnify Clarcor when 3M (website here sued Clarcor’s subsidiary.

The insurance policy from Columbia covered “Personal and advertising injury … arising out of one or more of the following offenses: … (d) oral or written publication, in any manner, of material that … disparages a person’s or organization’s goods, products or services; … [or] (f) the use of another’s advertising idea in your [the insured’s] advertisement; or (g) infringing upon another’s copyright, trade dress or slogan in your advertisement.”

In the earlier suit, 3M alleged that Clarcor designed the packaging and advertising for Clarcor’s new line of Purolator filters (see  to resemble that of 3M’s Filtrete line (see ) in several key respects. As for product disparagement in the insurance coverage suit, the District Court found that Clarcor made false statements about its own product, but not false statements about 3M’s product. In this analysis, the District Court limits its analysis to the complaint filed by 3M. 3M’s complaint stated that several aspects of the Clarcor Purolator package design created a false impression, such as numerical performance claims of overall filtration efficiency, the claimed “respiratory protection factor,” and the similarities in color. These were false statements about Clarcor’s product. Therefore, there was no insurance coverage under the disparagement clause because Clarcor did not disparage 3M’s product.

As for the advertising injury clause, 3M alleged a scheme to “parasitize” the reputation of the Filtrete products. The Court said:

“An advertising idea has been defined as an idea for advertising that is novel and new, and definite and concrete, such that it is capable of being identified as having been created by one party and stolen or misappropriated by another.” Clarcor , slip opn. p. 19, citing Sorbee Intern. Ltd. v. Chubb Custom Ins. Co., 735 A.2d 712, 714 (Pa. Super. Ct. 1999). The Court found that 3M DID NOT allege a trademark in its color scheme and its rating system nor did 3M allege that its color scheme coupled with its rating system were wrongfully taken. Instead, 3M alleged that Clarcor’s own color scheme and filter ratings reinforced Clarcor’s own false statements about its own product and product packaging.

As a result, the Court found that there was no insurance coverage for the 3M v. Clarcor case.

The Clarcor case was governed by the law of the Sixth Circuit Court of Appeals. In Florida, federal courts follow rulings from the 11th Circuit Court of Appeals. The Trailer Bridge discusses the meaning of advertising idea.

“The [insurance] policy does not define ‘advertising idea.’ Yet, the Eleventh Circuit, applying Florida law, has construed the term to mean ‘any idea or concept related to the promotion of a product to the public.’ Hyman v. Nationwide Mut. Fire Ins. Co., 304 F.3d 1179, 1188 (11th Cir. 2002). Put another way, ‘[a]n advertising idea is a concept about the manner a product is promoted to the public.’ Gemini Ins. Co. v. The Andy Boyd Co., Civil Action No. H-05-1861, 2006 U.S. Dist. LEXIS 28394, 2006 WL 1195639, at *2 (S.D. Tex. May 3, 2006) (citing Hyman, 304 F.3d at 1188).” Trailer Bridge, Inc. v. Illinois National Insurance Co., 2010 U.S. Dist. LEXIS 73970, M.D. Fl., July 21, 2010.

The Clarcor and Trailer Bridge cases highlight the difficulty of obtaining advertizing injury insurance coverage and the potentially confusing meaning of advertising injury. However, it is a best practice to put the defendant’s insurance company on notice of any claim of trademark or other assertion of false advertising.

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