Case No. A105790 (March 8, 2007)

The California Court of Appeal affirmed the trial court’s decision in favor of insurers, holding that $13 million in damages awarded by an Iowa federal court was not covered as advertising injury. The insured was found liable in the underlying action for false advertising in violation of the Lanham Act and for misappropriation of trade secrets under Iowa state law. In the coverage action, the insured argued that its liability for false advertising, including claims that its own products were “as strong as or stronger than” its competitor’s, constituted “disparagement” triggering coverage under the advertising injury coverage of the policies. The First Appellate District affirmed the trial court’s decision that liability for false advertising does not necessarily encompass “disparagement,” and therefore the insured had not proved that its liability was “actually covered” by the policies. Brydon Hugo & Parker’s Heidi Hugo represented International Insurance Company and Westchester Fire Insurance Company at both the trial and appellate levels.