Illinois Court Finds Coverage for Advertising Injury

In Selective Insurance Co. of the Southeast v. Creation Supply Inc., 2015 Ill. App. (1st) 140152-U, the Appellate Court of Illinois, First District, had occasion to consider whether an insured’s in-store retail displays of its products constitute “advertisements” in the context of a policy’s “personal and advertising injury” coverage.

Selective Insurance Co. of the Southeast (“Selective”) issued a business owners’ policy to Creation Supply, Inc. (“Creation Supply”). Creation Supply is in the business of importing and selling markers. Creation Supply was sued by competitors for trademark infringement, violation of trade dress and unfair competition over a line of Creation Supply’s markers (“the underlying suit”). The underlying plaintiffs alleged that they had preexisting and enforceable rights in the squarish shape of their marker and end-cap configuration, and, without permission or approval, Creation Supply “advertised and sold (or caused to be sold) products” with these two characteristics. The underlying plaintiffs also allege that Creation Supply’s acts constitute an infringement of their rights in and to the use of their squarish marker body configuration and squarish marker cap-end configuration, with consequent damages to plaintiffs and the business and goodwill associated with and symbolized by plaintiffs’ two configurations. Plaintiff sought, among other things, a permanent nationwide injunction against Creation Supply.

The Selective policy excluded coverage for infringement of copyright, trade dress, or slogan unless such infringement was in the insured’s advertisement. The policy defined “advertisement” as “a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters.”

Selective filed a declaratory judgment action against Creation Supply and Creation Supply counterclaimed, seeking, among other things, a declaratory judgment finding that Selective owed it a defense. In Creation Supply’s motion for partial summary judgment, it argued that it was entitled to coverage under the policy on the basis that certain Creation Supply retail store displays constituted “advertisements.” It also argued that a photograph of the display, which Creation Supply attached to its motion, satisfied the causal nexus requirement by connecting the complained-of advertising to the damages asserted by the underlying plaintiffs. The trial court granted Creation Supply’s motion for summary judgment and the appeal followed.

On appeal, the court addressed the photograph of Creation Supply’s retail product display attached to Creation Supply’s successful motion for partial summary judgment. The court observed that the photograph depicts Creation Supply’s retail product display, which includes placards exhibited above the markers with an enlarged picture of the marker. The court found that the placards served as an announcement disseminating the product to the public, which fits within the definition of “advertisement” under the Selective policy. The court noted that the retail product displays appeared in stores throughout Oregon (where the underlying litigation was filed) and the United States. Further, the placards were more than the mere display of the product itself and affirmatively serve to attract customers. Finally, the shape and design of the markers are prominently displayed in the placard, which is the source of the underlying trade dress claim. The court found that, if, for example, the retail product display merely included a large bin containing the markers and nothing more, then Selective would have a valid argument that the retail product display did not constitute advertising as contemplated under the policy.

In affirming the trial court’s decision to grant Creation Supply’s motion for partial summary judgment, the court noted that, although not included in the underlying complaint, it considered the photograph of the retail product display intrinsic evidence. Therefore, it was appropriate to evaluate that photograph in adjudicating the duty to defend because the underlying complaint specifically alleged an advertising injury stemming from the retail product display.

A copy of the court’s order (including the photograph of Creation Supply’s retail product supply, page 6) can be accessed here.