The Ninth Circuit affirmed the dismissal of Bullpen Distribution’s (Bullpen) suit against Sentinel Insurance Company (Sentinel) for breach of insurance contract, bad faith failure to defend, and declaratory relief. Bullpen Distribution, Inc. v. Sentinel Ins. Co., No. 12-16369, 2014 U.S. App. LEXIS 17497 (9th Cir. Sept. 10, 2014). The coverage dispute derives from allegations by A.Y. International, Inc (AYI) that Bullpen sought to take credit for AYI’s business practices and achievements and pass of AYI’s achievements, business relationships and practices, and history of prompt customer payment. The Sentinel Policy contained standard “personal and advertising injury” coverage and, in pertinent part, defined “personal and advertising injury” as an injury arising out of “[o]ral, written or electronic publication of material that … disparages a person’s or organization’s goods, products or services.”
In its first decision on the subject since the California Supreme Court decided Hartford Casualty Insurance Co. v. Swift Distribution, Inc., 59 Cal. 4th 277 (2014), the Ninth Circuit concluded that AYI’s complaint did not set forth a claim of implied “disparagement.” The Ninth Circuit reasoned that Bullpen’s public announcements contained no specific references to AYI, nor did they necessarily refer to AYI or make it the subject of derogation. Further, Bullpen’s public announcements did not imply that only Bullpen, and not AYI, had the advertised positive attributes. The Ninth Circuit found compelling that Bullpen’s public announcements never directly cast any aspersions on AYI.
This decision is favorable for insurers as it signifies that federal courts are now interpreting the Disparagement Offense in a more predictable and limited manner than they did prior to Swift Distribution.