B&C: Michigan appellate court finds no advertising injury coverage for copyright claims

In a recent per curiam decision rendered June 20, 2006 (Michigan COA Docket No. 266774), the Michigan Court of Appeals affirmed an order of the Oakland Circuit Court granting summary disposition in favor of American Home Assurance Company, represented by Robert S. Marshall and Daniel I. Graham, Jr. of Bates & Carey LLP, in American Home Assurance Company v. The Selective Group, Inc., et al., (Case No. 04-056997-CK).

The trial court had been asked to determine whether American Home Assurance Company (“American Home”), an excess-umbrella insurer, was obligated under its “advertising injury” coverage to indemnify The Selective Group, Inc. (“The Selective Group”), an insured condominium developer, for settlement of an underlying lawsuit alleging infringement of copyrighted architectural designs. Although the primary carrier contributed its $1 million limits toward the underlying settlement, American Home denied indemnity and filed a complaint for declaratory relief. The Selective Group, in turn, filed a counterclaim against American Home.

The Michigan Court of Appeals held that the trial court had correctly determined that American Home had no indemnity obligation owing The Selective Group under American Home’s policy. In doing so, however, the Court held that the trial court had incorrectly found architectural plans that The Selective Group had submitted to a local zoning commission to be an “advertisement.” Reversing the trial court’s determination on this issue, the Michigan Court of Appeals held that the submission did not constitute an “advertisement” for purposes of implicating American Home’s “advertising injury” coverage because The Selective Group had not paid for the “advertisement” and had been legally required to submit those filings in order to obtain the township’s zoning approval for the condominium project. The Court went on to observe that there was no evidence that members of the general public or prospective purchasers had ever actually been provided copies of the township filings.

The Michigan Court of Appeals also concluded that the “infringing upon another’s … trade dress … in your ‘advertisement’” offense enumerated in the American Home policy’s definition of “advertising injury” did not encompass the Lanham Act allegations asserted against The Selective Group in the underlying lawsuit. In doing so, the Court observed that the Lanham Act claims were for reverse passing off, a category of wrongful conduct distinct from the infringement of trademark or trade dress. Because the definition of “advertising injury” did not include claims of “reverse passing off,” the Court held that such claims did not trigger American Home’s indemnity obligation under its policy.

Any questions regarding this decision can be directed to Robert S. Marshall or Daniel I. Graham, Jr.