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Chubb unit not obligated to defend Walmart over retail displays


A Chubb Ltd. unit is not obligated to defend Walmart Inc. in a case in which the retailer was sued for trademark infringement in connection with a policyholder’s retail displays.

Cypress, California-based Hybrid Promotions LLC had a policy with Chubb unit Federal Insurance Co. that provided coverage for lawsuits arising out of “advertising injuries,” according to Monday’s ruling by the 9th U.S. Circuit Court of Appeals in San Francisco in Hybrid Promotions LLC v. Federal Insurance Co.

Hybrid had a supplier agreement with Walmart under which it provided Walmart with private-label apparel, such as T-shirts, as well as display racks and related graphic signage for those products. It also agreed to indemnify Walmart for certain lawsuits related to the provided items, according to the ruling.

Los Angeles-based Ultimate Brand Management LLC, which owns the MMA Elite trademark, sued Walmart for trademark infringement, accusing it of displaying the MMA Elite trademark adjacent to or above displays that included Hybrids’ visually similar private-label merchandise.

Hybrid requested Federal defend Walmart in the litigation and filed suit against the insurer in U.S. District Court in Santa Ana, California, when it refused. The district court ruled in Federal’s favor.

A three-judge appeals court panel unanimously affirmed the lower court’s ruling. At issue was whether the retail display constituted an advertisement under the policy’s meaning, and whether there was an advertising injury under the policy.
“Undisputed evidence” established the advertisement was not Hybrid’s “because Hybrid did not design, pay for, possess, or set up the combination; Walmart did,” the ruling said.

“While ‘close proximity’ of Hybrid’s products to the MMA Elite signage arguably may be enough to show that the resulting arrangement was an ‘advertisement about (Hybrid’s) goods,’ it is not enough to establish that the retail display was Hybrid’s advertisement about Hybrid’s goods.”

“Similarly, with respect to the non-MMA Elite signage and display materials that Hybrid paid for and/or designed, the contribution of materials that are used to make a different composite advertisement does not make that resulting advertisement Hybrid’s,” the appeals court panel said in affirming the lower court decision.

Attorneys in the case could not be reached or had no comment.