On January 5, 2022, the Third Circuit confirmed that the “potentially covered” standard for the duty to defend is far broader than the “actually covered” standard for the duty to indemnify, also confirming that the duty to defend is based on the factual allegations as they appear in the complaint. See, Vitamin Energy, LLC v. Evanston Ins. Co., — F.4th —, 20-3461, 2022 WL 39839 (3d Cir. Jan. 5, 2022). These principles are applied and discussed with regularity in the context of complaints alleging bodily injury and property damage, but apply equally to alleged advertising injury.
THE ALLEGATIONS AND EVENTS LEADING TO THE THIRD CIRCUIT OPINION
Vitamin Energy is a competitor of 5-Hour Energy and advertised its product by comparing the claimed benefits of its own product to 5-Hour Energy with a chart using script similar to the script used in 5-Hour Energy products. The owners of trademarks for 5-Hour Energy sued Vitamin Energy, alleging a wide variety of wrongs and seeking damages for trademark infringement, false designation of origin, false advertising, and trademark dilution claims based in federal law, and unfair competition. In particular, 5-hour Energy alleged that a comparison chart in Vitamin Energy’s advertisements was “false and misleading comparative advertising” because it falsely implied that Vitamin Energy had more Vitamins B and C than 5-Hour Energy and other liquids.
Vitamin Energy sought coverage (defense and indemnity) from its commercial general liability...
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