Trademark infringement lawsuits are among the risks faced by businesses running comparative advertisements referring to a competitor’s products. When facing such a suit, policyholders should be sure to look to their commercial general liability (CGL) policies as potentially valuable sources of insurance coverage. This important point is underscored by a recent decision of the United States Court of Appeals for the Third Circuit.
That court recently confirmed, in a precedential decision, that a CGL insurer had a duty to defend its policyholder against a competitor’s trademark-infringement lawsuit arising from advertisements that allegedly contained false or misleading product comparisons.1 The court confirmed that valuable defense coverage for suits alleging product “disparagement” can be triggered by comparative statements flattering the policyholder’s own product, thereby implying a competitor’s product is inferior. The court squarely rejected common insurance industry arguments for a far narrower scope of coverage in its pro-policyholder ruling, including arguments that the advertising at issue must overtly and affirmatively attack the competitor’s product. Importantly for policyholders, the ruling confirms that standard “disparagement” coverage can apply to a variety of causes of action—including trademark infringement—and is not limited to a narrow set of torts such as trade libel.
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