Michael Taylor Designs, Inc. v. Travelers Prop. Cas. Co. of Am., 761 F. Supp. 2d 904 (N.D. Cal. (S.F. Div.) 2011) aff'd, 495 F. App'x 830 (9th Cir. 2012) reh'g denied Nov. 27, 2012.
Ninth Circuit Affirms Ruling Concluding That Implicit Disparagement Arises Despite Absence of
Express Allegations Denigrating Another's Products
The Ninth Circuit Court of Appeal, in a Memorandum decision, Michael Taylor Designs, Inc. v. Travelers Property Cas. Co. of America, 495 F. App'x 830 (9th Cir. 2012), affirmed Michael Taylor Designs, Inc. v. Travelers Prop. Cas. Co. of Am., 761 F. Supp. 2d 904 (N.D. Cal. (S.F. Div.) 2011).
The key aspect of the Ninth Circuit's Opinion Memorandum was its statement that:
Here, Rosequist's original complaint alleged Taylor's showroom salesmen made statements to Taylor's customers that falsely implied Rosequist's high-end wicker chairs were of poor quality, and this allegation made itconceivable that Rosequist could state a claim for trade libel. See, e.g., [Travelers Prop. Cas. Co. of Am. v. Charlotte Russe Holding, Inc., 144 Cal. Rptr. 3d 12, 20-22 (2012), reh'g denied (July 31, 2012), rev'w denied (Sept. 21, 2012)] (holding a complaint alleging the insured made statements that could give the false impression that the plaintiff's goods were of inferior quality triggered an insurer's duty to defend its insured against allegations of trade libel) (emphasis added).
[Memorandum, Case No. 11-16052, p.3, Docket 49-1]
This ruling arose despite the absence of "express allegations of tarnishment through use of material photographs of actual furniture that steered [consumers] to cheap synthetic knock-offs." Statements falsely implying that the claimant's goods were of poor quality implicitly disparaged the claimant by denigrating the claimant.
The court's analysis is consistent with a narrow reading of Charlotte Russe's facts when analyzed in light of three key coverage propositions it adopted: (1) the potential for coverage includes the potential for amendment to state a covered claim; See Scottsdale Ins. Co. v. MV Transp., 36 Cal. 4th 643, 654 (Cal. 2005); (2) the "disparagement" offense is not limited to the specific elements for proof of claims for trade libel or product disparagement; and (3) implicit disparagement is based on how the claimant believed those who heard the statements would effect their views of its products.