In Hershey Creamery Company v. Liberty Mutual Fire Insurance Company and Liberty Insurance Corporation, 386 F.Supp.3d 447 (M.D. Penn. 2019), the court found that a self-serve milkshake machine and related display could constitute an “advertisement” for purposes of insurance coverage. Further, the court found that Hershey’s insurer should have defended Hershey for claims alleging patent and trademark infringement of F’REAL Foods LLC’s (“F’REAL”) similar machine and display. F’REAL developed a display kiosk with a blender atop a merchandizing freezer with a see-through glass door. Its milkshake products are displayed in cylindrical sealed cups arrayed in rows and columns within the freezer. The kiosk prominently features F’REAL’s name with advertising slogans such as “Blend a F’REAL…for REAL” or “REAL Milkshakes, REAL good.” The word “REAL” is a prominent feature of F’REAL’s advertising.
Hershey packed its competing frozen milkshakes in plastic containers of comparable size and shape and sold the products in kiosks that closely mimicked those developed by F’REAL. The Hershey milkshake containers made prominent and repeated the use of the word “REAL” in all capital letters, including “REAL MILKSHAKE” and “REAL ICE CREAM.”
Hershey’s general liability policy excluded coverage for injuries stemming from intellectual property infringement, but included exceptions (and thus expressly provided coverage for) injury arising from Hershey’s infringement of another’s “advertising idea” or “copyright, trade dress or slogan” in an “advertisement”. Specifically, Exclusion “i” barred coverage for “ ‘personal and advertising injury’ arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights,” except for “the use of another’s advertising idea in [the insured’s] ‘advertisement.’ ”
The parties further disputed whether the signage on the purportedly infringing kiosks was an “advertisement”, which the policy defined as “a paid announcement that is broadcast or published in the print, broadcast or electronic media.”
Recognizing that the complaint mentioned Hershey’s advertising several times, the insurer maintained that those allegations referred only to “advertising signage” in stores where the milkshake kiosks are located. The insurer further contended that in-store advertising signage did not qualify as an “advertisement” as that term is defined by the policies, and therefore the insurer had no duty to defend.
Hershey argued that the phrase “published in the print media”, as found in the definition of “advertisement” was broad enough to include slogans published on in-store advertising signage—or at least was ambiguous and should be construed in Hershey’s favor. The court agreed. The allegations made clear that F’REAL believed Hershey infringed on its advertising ideas and slogans and specifically did so in the context of advertising for competing blending machines and milkshakes located in convenience stores.
The court found a sufficient nexus between advertising and injury to trigger a duty to defend, stating, “…it is at least possible that a covered ‘advertising injury’ may be part of F’REAL’s recovery against Hershey. We conclude that, in light of the broad nature of the allegations, and when liberally construing the Complaint in Hershey’s favor, F’REAL’s remaining claims ‘may potentially come within the coverage of the policy.’ ” The court also determined that the insurer violated its obligations under the policy because it wrongfully withdrew from defending Hershey. Interestingly, the court noted that Hershey pled that it suffered injury from the insurer’s withdrawal and refusal to defend, but did not prove any damages.
The takeaway practice tips for insurers assessing personal or advertising injury claims are threefold. First, understand the policy’s definition of “advertisement”, which may be given a broad interpretation by a court. Second, assess the publication requirement broadly, and consider that publication may mean something less than a broadcast in another media. And finally, consider filing a declaratory judgment suit while defending the insured where defense obligations are unclear.
