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Product Cannot Serve As Its Own Advertisement for Purposes of “Advertising Injury” Coverage

On September 26, 2019, Judge Abrams of the SDNY issued a decision in Jovani Fashion, Ltd. v. Fed. Ins. Co., Case No. 17-CV-4518, holding that a complaint alleging that a fashion designer's garment infringed the plaintiff’s copyrighted lace textile design did not trigger “advertising injury” coverage under the designer’s general and excess liability policies.

The insured (Jovani Fashion) argued that “the Subject Design” constituted an “advertisement” under the “the advertising model in the fabric making industry or other industries that use sample swatches or photographs as advertisements.”  Judge Abrams disagreed and granted summary judgment to the insurers, explaining:

Plaintiff’s argument that a product can serve as an advertisement for itself fails in light of the policy's unambiguous language. Under the policy, an “advertisement” is a “notice, about goods, products, or services, designed for the specific purpose of attracting the general public or a specific market segment to use such goods, products or services.” This language creates a clear distinction between a product and an advertisement for that product. Because the Subject Design was designed, according to Malibu, for “purposes of textile printing”—and not for advertising—samples of the Subject Design or displays of it in a showroom cannot constitute advertisements of that design under the policy’s terms. To allow otherwise would render meaningless the policy's express distinction between a product and an advertisement of that product.

Moreover, by arguing that the Subject Design is itself an “advertisement,” as that term is defined, Plaintiff asks the Court to employ an understanding of the term that defies “common speech.” In Ecko Group, Inc. v. Travelers Indemnity Company of Illinois, for instance, the First Circuit rejected an insurer's similar attempt to argue that displaying a product (there, a teapot) served as an ‘advertisement” for itself. 273 F.3d 409, 413 (1st Cir. 2001) (reviewing a policy that defined an “advertising injury” as including a “(m]isappropriation of advertising ideas”). Among the reasons why the insured’s argument failed, the court explained that “[t]o call a real teapot intended for sale as a kitchen utensil an ‘advertising idea’ is not a natural usage.” Id. The “most common” understanding of an advertisement, the court said, is one “where the advertisement is an activity or item distinct from the product being advertised.” Id.

Judge Abrams cited other SDNY decisions that reached a similar conclusion. See, e.g., Accessories Biz, Inc. v. Linda & Jay Keane, Inc., 533 F. Supp. 2d 381, 383 (S.D.N.Y. 2008) (“New York courts have routinely held that the phrase ‘advertising idea’ does not include the product itself.”); Hosel & Anderson, Inc. v. ZV II, Inc., 2001 WL 392229, at *2 (S.D.N.Y. Mar. 21, 2001) (“The product itself is not an advertisement within the meaning of the policy.”). On the other hand, a Fifth Circuit decision, which Judge Abrams found “less persuasive,” supported the insured’s argument.  Mid-Continent Cas. Co. v. Kipp Flores Architects, LLC, 602 F. App’x 985, 994 (5th Cir. 2015) (holding that a home can serve as an advertisement because the “primary means of marketing” is showing the home to prospective buyers). Notably, under New York law, policy language is not examined in isolation. Rather, “the plain meaning of a clause in an insurance contract is determined according to . . . the understanding of someone engaged in the insured’s line of business.” K. Bell & Assocs., Inc. v. Lloyd’s Underwriters, 97 F.3d 632, 639 (2d Cir. 1996) (emphasis added). The insurance policy at issue in Jovani Fashion was likely a standard form. However, as the Second Circuit ruled in a decision covered on this blog , “[t]he parties are not required to tailor language for every policy in order for terms to have industry-specific meanings.” Beazley Ins. Co., Inc. v. ACE Am. Ins. Co., 880 F.3d 64, 70 (2d Cir. 2018). Thus, the meaning of “advertisement” as used in fashion industry is relevant to the analysis. It will be interesting to see if the insured pursues an appeal here.

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