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A federal appeals court on Friday affirmed a lower court ruling in favor of Nationwide Mutual Insurance Co. units in a dispute with a franchisee.
Fulton, California-based AutoDistributors Inc. had a franchise agreement with Pullach, Germany-based Sixt Franchise USA LLC and Sixt Rent a Car LLC that allowed it to operate a Sixt retail car franchise and use its trademarks, according to the ruling by the 9th U.S. Circuit Court of Appeals in San Francisco in AutoDistributors Inc.; Steven Schneider v. Nationwide E&S Specialty, et al.
Sixt sued AutoDistributors, alleging it had violated the franchise agreement by operating a used-car sales business at the franchise location and using Sixt’s trademarks in connection with that business, the ruling said.
AutoDistributors Nationwide insurers denied coverage, and the company sued the insurers in U.S. District Court in Oakland, California, for breach of contract and of the implied covenant of good faith.
The district court ruled in the insurers’ favor and was affirmed by a three-judge appeals court panel.
Among other issues, some of Sixt’s allegations “clearly fell outside the policy’s coverage,” including that AutoDistributors breached the franchise agreement by operating the unauthorized used car sales business, it said.
“That alleged conduct did not implicate any of the offenses in the definition of ‘personal and advertising injury,’ so it did not trigger the duty to defend,” the ruling said.
Attorneys in the case did not respond to requests for comment.