November 13, 2007 : Michael S. Savett Prevails in 'Advertising Injury' Coverage Dispute
The New York Supreme Court in Manhattan recently granted summary judgment to an insurance company in a coverage dispute involving an alleged “advertising injury,” based on a motion drafted and argued by Philadelphia-based partner Michael S. Savett.
In the underlying action, Quest Beads & Cast alleged that Public Service Mutual Insurance Company's insured, Axelrod & Co., infringed its copyright by manufacturing and selling charms created by Quest. After the complaint was filed, Axelrod sought coverage from PSM, which denied coverage because there was no allegation that the alleged infringement occurred in the course of the insured’s advertising of goods, as required by the general liability insurance policy. Based on PSM’s disclaimer, Quest filed an amended complaint specifically alleging that Axelrod’s advertising, in the form of its product catalog, infringed its copyright. However, Axelrod never sent the amended pleading to PSM for consideration of coverage. Axelrod eventually settled the case, and then sued PSM for coverage. Axelrod sought reimbursement of $325,000 in settlement costs and attorneys fees.
The key issue in the motion was whether the catalog attached to the complaint, which contained images of the allegedly infringing charms, could lead to the inference that the infringement took place in the course of advertising. The court held that the pleading was expressly limited to damage from the manufacture and sale of allegedly infringing works, and agreed with Mr. Savett's argument that Quest attached the catalog by way of comparison merely to evidence the infringing manufacture and sale of charms. The court further held that Axelrod’s failure to provide the amended complaint to PSM defeated its argument that the revised pleading triggered coverage.
Not only did the court grant the motion in its entirety and deny the insured’s motion, it has allowed PSM an opportunity to petition for reimbursement of costs and fees associated with defending the case and filing the motion.
A news article on this decision appeared in the November 20, 2007 issue of Mealey's Emerging Insurance Disputes.
File Under: Results, Insurance, Michael S. Savett