To Be An Advertising Injury, Or Not To Be: That Is The Question


By: Michael Weinberg

The benefits of advertising injury coverage in the standard CGL policy  (the “Policy”) are welcomed by many insureds.  After all, marketing and advertising are important to most if not all businesses.  Under the Policy, coverage is afforded for “sums the insured becomes legally obligated to pay as damages because of personal and advertising injury” offenses.  Personal and advertising injury offenses are defined to include, among others, “the use of another’s advertising idea” or  “infringing upon another’s copyright, trade dress or slogan” in the insured’s advertisement.  Based on policy exclusions, however, there are limits to this coverage.
In the matter of Sterngold Dental, LLC v. HDI Global Insurance Company, 926 F.3d 1 (1st Cir. 2019), the U.S. Court of Appeals for the First Circuit had the chance to “sink [its] teeth” into the so-called intellectual property exclusion (“IP exclusion”). The IP exclusion precludes coverage for advertising injury “arising out of the infringement of copyright, patent, trademark, trade secrets or other intellectual property rights.” In the underlying suit, Intra-Lock, a competitor of Sterngold in the market for dental products, alleged Sterngold acquired value, name and brand recognition and goodwill in Intra-Lock’s OSSEAN trademark as a result of continuous and substantial advertising.  Intra-Lock’s OSSEAN trademark protected a dental coating component it developed for its dental implant product.  Here Sterngold’s advertising was alleged to cause confusion between Intra-Lock’s products and its competitor Sterngold’s.
Sterngold asserted that its insurer HDI Global owed both defense and indemnity because the complaint alleged advertising injury in that the Intra-Lock’s claims embodied an advertising idea taken and used by Sterngold.   Sterngold presented every possible scenario to its insurer to show the advertising concept was allegedly Intra-Lock’s idea.
The Court acknowledged the phrase “advertising idea”, as used in the Policy, was somewhat “nebulous.”  Yet, it was not without its limits.  If the insured took an advertising idea for soliciting business or an idea about advertising from a competitor, then the claim constitutes exactly that – an advertising injury for using the advertising idea of another.   However, not every advertisement using an idea from a competitor is enough.   If the advertising idea relates to a trademark and arises solely out of that,  then it falls within the IP exclusion, and there is no coverage.
The Court noted Intra-Lock’s allegations were narrow and could only be read to encompass Intra-Lock’s trademark infringement claim. Had the allegations been broader, and the advertising idea asserted a secondary source of infringement, (e.g., slogan) this may have impacted HDI’s obligation to defend and indemnity.  No such allegations were made.
The First Circuit’s decision in Sterngold draws attention to the importance of the particular facts alleged in a complaint when analyzing coverage issues. In that sense, it will be of interest in other jurisdictions as well, given that it interprets language in a common policy form in the context of trademark law.
If you have any questions or would like more information, please contact Michael Weinberg at