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June 13, 2014. In the November 2, 2012 issue of The Coverage Inkwell, I discussed the California Court of Appeal decision in Hartford Cas. Ins. Co. v. Swift Distribution, Inc., 148 Cal. Rptr. 3d 679 (Cal. Ct. App. 2012), noting its importance because (1) it provided a reminder as to why claims of “passing off” should not constitute trade libel to implicate coverage under general liability policies, and (2) its sharp criticism of Travelers Prop. & Cas. Co. v. Charlotte Russe Holding, Inc., 144 Cal. Rptr. 3d 12 (Cal. Ct. App. 2012). Charlotte Russe had held that allegations of placing fashionable apparel in a markdown display constituted trade disparagement to implicate a duty to defend.
Yesterday, the Supreme Court of California affirmed Swift Distribution and scaled back product disparagement claims for implicating a duty to defend under Coverage B of general liability policies. Hartford Cas. Ins. Co. v. Swift Distribution, Inc., — P.3d –, 2014 WL 2609753 (Cal. June 12, 2014). The decision also disapproves Charlotte Russe and should call into doubt other decisions that broadly construe trade libel and product disparagement to implicate a duty to defend in product knock-off and passing-off litigation.