|
Commercial General
Liability |
Copyright Infringement |
|
Personal And Advertising
Injury |
Duty To Defend |
Jeannette Nicholson of Career
Assessment Atlanta, Inc. (Career Assessment) entered into a written agreement
with Sales Management Training Institute of Atlanta, Inc. (SMTI) in 1987 to
develop career assessment tools. As part of the agreement, Nicholson was to
develop an "Interest Inventory" to be included in an SMTI publication
called "Career Direction." Under the agreement, SMT was to retain
ownership rights in all work created by Nicholson.
Later, in 1993, SMTI and
Nicholson orally agreed that Nicholson would develop another "Interest
Inventory" to be included in a new publication called "Future
Focus." The parties later disagreed as to how Nicholson was to be
compensated for this work. SMTI, which was later succeeded by a company called
Career Training Concepts, Inc. (CTC), argued that the work was governed by the
1987 agreement. Nicholson argued that the 1987 agreement covered only work
created for the "Career Direction" publication. She later sued CTC
Chief Executive Officer James C. Shafe, SMTI and CTC in federal district court.
SMTI and later CTC were covered by several commercial general liability
policies issued by American States Insurance Company (American States).
American States provided them with a defense.
On May 18, 2005, the federal
district court found that Future Focus represented a joint work between
SMTI/CTC and Nicholson and that the parties were co-owners of that material.
The effect was that Nicholson no longer had a federal claim. She then filed
suit against SMTI/CTC in a state court. SMTI/CTC tendered this claim to
American States. American States denied coverage and filed an action seeking a
declaratory judgment as to its obligations under the insurance contract. The
trial court granted summary judgment in favor of American States and SMTI/CTC
appealed.
SMTI and CTC argued that
American States was obligated to provide a defense under the policy for claims
resulting from "personal and advertising injury." The policy defined
personal and advertising injury as injury resulting from the "[m]isappropriation
of advertising ideas or style of doing business" or "arising out of
... [t]he use of another's advertising idea in your 'advertisement.'" The
policy defined "advertisement," in relevant part, 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."
On appeal, the Court of
Appeals of Georgia found that the nature of the claims asserted by Nicholson
was outside the scope of the coverage provided by the policy. There was no
allegation of misappropriation of an idea or style of business belonging to
Nicholson. To the contrary, the facts supported a finding that Nicholson and
SMTI/CTC were co-owners of the publication "Future Focus" and that
all of Nicholson's claims were from one business partner to another.
However, SMTI/CTC argued
that they had provided American States with additional facts regarding the true
nature of the business dealings that would have placed the claim within the
scope of policy coverage. They specifically claimed that they had informed it
that they did not make money directly from the sale of "Future Focus"
but that the benefit was in marketing their services.
The court was not convinced
by this argument. It stated: "What the insureds' argument fails to
recognize is that the mere use of another's material in their advertising does
not invoke coverage; rather, there must be an allegation that the insureds' use
of such material was wrongful, i.e. that they were not otherwise entitled to
use the same." The key question was whether Nicholson's complaint alleged
that the insureds misappropriated that work. Because the federal court found
that Future Focus was a joint work, and that Nicholson could not assert a copyright
infringement claim against the insureds for their use of that material,
Nicholson could not assert that the insureds misappropriated her work.
The trial court's decision
was affirmed.
Shafe vs. American States
Insurance Company-No. A07A0879-Court of Appeals of Georgia-November 8, 2007-653
South Eastern Reporter 2d 870