Md. Casualty v. Blackwell Int'l. , 442 Md. 685 ( 2015 )

Maryland Casualty Company, et al. v. Blackstone International Ltd., et al., No. 51,
September Term, 2014, Opinion by Adkins, J.
INSURANCE LAW — POLICY INTERPRETATION — INSURER’S DUTY TO
DEFEND — ADVERTISING INJURY: The underlying complaint did not implicate an
advertising injury when there was no causation between the injury suffered and the
insured’s advertisement activities.
Circuit Court for Baltimore County
Case No.: 03-C-11-004834
Argued: February 5, 2015
IN THE COURT OF APPEALS
OF MARYLAND
No. 51
September Term, 2014
MARYLAND CASUALTY COMPANY, et al.
v.
BLACKSTONE INTERNATIONAL LTD, et al.
Barbera, C.J.
Harrell
Battaglia
Greene
Adkins
McDonald
Watts,
JJ.
Opinion by Adkins, J.
Battaglia and Watts, JJ., dissent
Filed: April 21, 2015
Under Maryland law, an insurance company has a duty to defend its insured for any
claims brought against it that are potentially covered under the insured’s policy. Thus, a
duty to defend may extend even beyond instances in which an insured is liable and the
insurer must indemnify. In this case, we must assess whether an insurance company had a
duty to defend its insured under a commercial general liability policy’s “advertising injury”
clause against a suit sounding in breach of contract and arising out of a joint business
venture.
FACTS AND LEGAL PROCEEDINGS1
The Business Venture
In October 2006, Robert M. Gray, President of RMG Direct, Inc. (“RMG”), first
met John F. Black, President and Chief Executive Officer of Blackstone International, Ltd.
(“Blackstone”). During their initial conversation, Black informed Gray that he “was in the
business of manufacturing and selling lamps and other lighting products designed to assist
low vision consumers.” Gray then informed Black of his role at RMG and his “professional
background in the vision field.” The two men then proposed a joint venture to “market and
sell lighting products to people with low vision problems,” and agreed to discuss the
venture at a later date.
Approximately one month later, Gray and Black met to discuss the possibility of
working together. At this time, Gray outlined his experience in low vision medicine and
1
The facts of the underlying action are drawn from that suit’s Second Amended
Complaint, which forms the basis of our analysis in determining potentiality of insurance
coverage, as discussed infra.
his working relationships with many of the field’s leading practitioners. In early December
2006, Gray visited Blackstone’s offices, where he met Blackstone’s Product Development
Manager and a member of its sales department. At this meeting, Black and Gray “agreed
that RMG and Blackstone would form a confidential relationship and collaborate [on a]
joint venture to develop plans for the design, marketing and sale of low vision lighting
products to retailers[.]” Gray also agreed to work “in exchange for remuneration.”
Throughout the next four years, Gray—working on behalf of RMG—worked in
collaboration with Black and Blackstone employees to develop and market their joint
venture. During this time, Gray performed multiple tasks without compensation,
including: (1) developing the product brand name “Vision Enhance”; (2) creating graphics
for use in sales sheets; (3) developing and reviewing packaging and marketing of “Vision
Enhance”; (4) contacting low vision experts and sufferers on behalf of the venture, which
involved obtaining written testimonials; and (5) “procur[ing] the placement of a full page
color ad[vertisement in an industry journal,] introducing the ‘Vision Enhance’ brand.”
As part of his work with Blackstone, Gray participated in the development of a sales
presentation to Wal-Mart Stores, Inc. (“Wal-Mart”) in an effort to place the product line
for sale in its stores. Although Gray did not attend the presentation, he played a significant
role in creating the materials and responding to Wal-Mart’s inquiries. Although Black had
informed Gray that no progress had been made with Wal-Mart, Gray learned that “Vision
Enhance” was stocked and sold in Wal-Mart locations across the United States. Blackstone
continued to sell “Vision Enhance” and other low vision lighting products—which Gray
believes were procured through its initial relationship with the retailer via “Vision
2
Enhance”—under the label “Mainstays” at Wal-Mart locations. Blackstone “us[ed] all, or
substantially all, of the ideas, information, input and efforts of Gray[,]” including “the use
of the ‘Vision Enhance’ name on the boxes[, and use of] the same or substantially similar
box design, copy on the box, and product instructions[.]”
While performing this work for Blackstone, Gray believed that RMG and
Blackstone had reached an agreement that Blackstone would create a new division for its
low vision products, and that RMG would receive a 7% sales commission for and a 50%
equity interest in the low vision products. In mid-2007, Gray approached Black in an effort
to memorialize their verbal agreement. Over the course of the following months, Gray
proposed multiple written agreements, each of which Black modified or rejected. The two
men never reached a written agreement.
On February 22, 2010, RMG filed suit against Blackstone and Black in the Circuit
Court for Baltimore County. It later filed two amended complaints, alleging substantially
the same facts and the following causes of action: breach of contract (Count I); promissory
estoppel (Count II); unjust enrichment (Count III); quantum meruit (Count IV); intentional
misrepresentation (Count V); and accounting (Count VI). This Second Amended
Complaint formed the basis of the underlying suit.
Blackstone’s Insurance Policy
Blackstone has been insured by Maryland Casualty Company and Northern
Insurance Company of New York (collectively, “Insurers”) for commercial general
liability insurance since 2001. Its Commercial General Liability Coverage Form (the
3
“Policy”) included coverage for Personal and Advertising Injury Liability. In relevant part,
the Policy provides:
[Insurer] will pay those sums that the insured becomes legally
obligated to pay as damages because of “personal and
advertising injury” to which this insurance applies. We will
have the right and duty to defend the insured against any
“suit”[2] seeking those damages. However, we will have no
duty to defend the insured against any “suit” seeking damages
for “personal and advertising injury” to which this insurance
does not apply. We may, at our discretion, investigate any
offense and settle any claim or “suit” that may result.3
In part, the Policy defines “personal and advertising injury” as “injury . . . arising out of . . .
[t]he use of another’s advertising idea in your ‘advertisement.’”4 Under the terms of the
2
The Policy defines “Suit” as “a civil proceeding in which damages because of
‘bodily injury’, ‘property damage’ or ‘personal and advertising injury’ to which th[e]
insurance applies are alleged,” including an arbitration or other alternative dispute
resolution proceeding.
3
Additionally, the Policy excluded the following:
“Personal and advertising injury”:
(1) Caused by or at the direction of the insured
with the knowledge that the act would violate
the rights of another and would inflict
“personal and advertising injury”;
***
(6) Arising out of a breach of contract, except an
implied contract to use another’s advertising
idea in your “advertisement”[.]
4
In full, the Policy—including an endorsement to the Policy amending paragraph
“f”—defines personal and advertising injury as follows:
“Personal and advertising injury” means injury, including
consequential “bodily injury”, arising out of one or more of the
following offenses:
a. False arrest, detention or imprisonment;
b. Malicious prosecution;
4
Policy, “‘Advertisement’ means a notice that is broadcast or published to the general public
or specific market segments about your goods, products or services for the purpose of
attracting customers or supporters.”5
On February 17, 2011, Blackstone and Black wrote to Insurers, requesting coverage
and litigation defense under the personal and advertising injury provisions of the Policy.6
On May 17, 2011, Insurers filed a Complaint for Declaratory Judgment, seeking a
c. The wrongful eviction from, wrongful entry
into, or invasion of the right of private
occupancy of a room, dwelling or premises
that a person occupies, committed by or on
behalf of its owner, landlord or lessor;
d. Oral or written publication of material that
slanders or libels a person or organization or
disparages a person’s or organization’s
goods, products or services;
e. Oral or written publication of material that
violates a person’s right of privacy;
f. The use of another’s advertising idea in your
“advertisement”; or
g. Infringing upon another’s copyright, trade
dress or slogan in your “advertisement”.
5
This definition appears in an endorsement to the policy, which amended the
Policy’s original definition of advertisement. The definition also provides:
a. Notices that are published include material placed on the
Internet or on similar electronic means of communication;
and
b. Regarding web-sites, only that part of a web-site that is
about your goods, products or services for the purposes of
attracting customers or supporters is considered an
advertisement.
6
Upon reviewing the claim, Insurers learned that Blackstone and Black had moved
to strike the first two complaints and that by the time they became involved, the deadline
to move to strike the Second Amended Complaint—from which the facts of the underlying
litigation were drawn—had passed and was therefore the operative complaint.
5
judgment that they had no duty to defend the claims because, they argued, the Second
Amended Complaint did not allege that Blackstone had engaged in advertising, that RMG
had suffered an advertising injury, or that there was any “causal connection between any
of RMG’s claimed damages . . . and any advertising conducted by Blackstone.” Insurers
also contended that all six counts in the Second Amended Complaint were excluded from
coverage by the Policy’s terms. Thus, Insurers asserted, there was no potentiality of
coverage for Blackstone’s claim, and Insurers had no duty to defend.
Summary Judgment Proceedings
The parties filed cross motions for summary judgment. Following a hearing, the
Circuit Court entered summary judgment in favor of Insurers. Blackstone appealed to the
Court of Special Appeals, which reversed the Circuit Court. Blackstone Int’l Ltd. v. Md.
Cas. Co., 216 Md. App. 471, 477, 88 A.3d 792, 795 (2014).
The intermediate appellate court concluded that the Policy’s definition of
“advertisement” was implicated in a Blackstone website that allegedly used RMG’s
advertising ideas, that “Vision Enhancement” product packaging constituted an
advertisement, and that Gray’s advertising ideas could be described as “another’s,”
although Blackstone contended that it owned the rights to the ideas due to its agreement
with RMG. Id. at 482–85, 88 A.3d at 798–800. The Court of Special Appeals also rejected
Insurers’ contention that RMG did not allege an advertising injury. Id. at 486, 88 A.3d at
801. Concluding that Insurers had waived any defense raised by the Policy’s exclusions,
it reasoned that their duty to defend depended only upon whether RMG’s claims “‘arose
out of’ the use of RMG’s advertising ideas in Blackstone’s advertisements, without regard
6
to whether the acts were intentional or rooted in breach of contract.” Id. at 488–89, 88
A.3d at 802–03. The court also relied upon the exclusions as support for its conclusion
that “had intentional conduct and breaches of contract not been excluded, they would fall
within the agreement’s broad and unambiguous definition of ‘advertising injury.’” Id. at
488, 88 A.3d at 802 (emphasis in original). The Court of Special Appeals concluded that
RMG’s unjust enrichment claim did arise out of Blackstone’s use of its advertising idea,
and, thus, that Maryland law obligated Insurers to defend Blackstone against all of RMG’s
claims. Id. at 489–90, 88 A.3d at 803–04.
We granted Insurers’ Amended Petition for Writ of Certiorari to consider the
following questions:
1. Did the [Court of Special Appeals] err in holding that
product packaging was “advertisement,” and that the “use
of another’s advertising idea” need not be “wrongful use,”
when it substituted its own definitions of those terms for the
clear and unambiguous definitions contained in the Policy?
2. Did the [Court of Special Appeals] err in applying this
Court’s binding precedent requiring an insured to establish
all three elements of coverage for “advertising injury” to
trigger the duty to defend by concluding that the “causal
relationship” element was not necessary in this case?
3. Did the [Court of Special Appeals] err in finding that
Insurers waived policy exclusions as bases for denial of
coverage and creating liability beyond the bounds of the
Policy when, as a matter of public policy, coverage may not
be expanded by waiver?
4. Did the [Court of Special Appeals] err in finding that
Insurers waived Policy exclusions as bases for denial of
coverage when policy exclusion defenses were raised,
argued, and preserved at the trial court level and on appeal?
7
Because we answer yes to the second question, we need not address the other
questions and shall reverse the judgment of the Court of Special of Appeals.
STANDARD OF REVIEW
We review a grant of summary judgment as a matter of law. Eng’g Mgmt. Servs. v.
Md. State Highway Admin., 375 Md. 211, 229, 825 A.2d 966, 976 (2003). “The standard
for appellate review of a trial court’s grant or denial of a summary judgment motion is
whether the trial court was legally correct.” Sheets v. Brethren Mut. Ins. Co., 342 Md. 634,
638, 679 A.2d 540, 542 (1996) (citation omitted). Thus, we conduct an independent review
of the record to determine whether a genuine dispute of material fact exists and whether
the moving party is entitled to judgment as a matter of law. Walk v. Hartford Cas. Ins. Co.,
382 Md. 1, 14, 852 A.2d 98, 105–06 (2004). “We review the record in the light most
favorable to the non-moving party and construe any reasonable inferences which may be
drawn from the facts against the movant.” Id. at 14, 852 A.2d at 106 (citation omitted).
We construe an insurance policy according to contract principles. Moscarillo v.
Prof’l Risk Mgmt. Servs., Inc., 398 Md. 529, 540, 921 A.2d 245, 251 (2007). Maryland
follows the objective law of contract interpretation. Sy-Lene of Wash., Inc. v. Starwood
Urban Retail II, LLC, 376 Md. 157, 166, 829 A.2d 540, 546 (2003). Thus, “‘the written
language embodying the terms of an agreement will govern the rights and liabilities of the
parties, irrespective of the intent of the parties at the time they entered into the contract.’”
Long v. State, 371 Md. 72, 84, 807 A.2d 1, 8 (2002) (quoting Slice v. Carozza Props.,
Inc., 215 Md. 357, 368, 137 A.2d 687, 693 (1958)). “When the clear language of a contract
is unambiguous, the court will give effect to its plain, ordinary, and usual meaning, taking
8
into account the context in which it is used.” Sy-Lene, 376 Md. at 167, 829 A.2d at 546(citation omitted). “Unless there is an indication that the parties intended to use words in
the policy in a technical sense, they must be accorded their customary, ordinary, and
accepted meaning.” Lloyd E. Mitchell, Inc. v. Md. Cas. Co., 324 Md. 44, 56–57, 595 A.2d
469, 475 (1991) (citations omitted). Although Maryland does not follow the rule that
insurance contracts should be construed against the insurer as a matter of course, any
ambiguity will be “‘construed liberally in favor of the insured and against the insurer as
drafter of the instrument.’” Dutta v. State Farm Ins. Co., 363 Md. 540, 556–57, 769 A.2d
948, 957 (2001) (emphasis in original) (citation omitted).
DISCUSSION
Insurer’s Duty To Defend And Potentiality Of Coverage
In Brohawn v. Transamerica Insurance Company, 276 Md. 396, 347 A.2d 842(1975), we recognized an insurance company’s duty to defend its insured for all claims
which are potentially covered under an insurance policy. We explained:
The obligation of an insurer to defend its insured under a
contract provision . . . is determined by the allegations in the
tort actions. If the plaintiffs in the tort suits allege a claim
covered by the policy, the insurer has a duty to defend. Even
if a tort plaintiff does not allege facts which clearly bring the
claim within or without the policy coverage, the insurer still
must defend if there is a potentiality that the claim could be
covered by the policy.
Id. at 407–08, 347 A.2d at 850 (emphasis added) (citations omitted). To ascertain whether
an insurer has a duty to defend its insured, we engage in a two-part inquiry:
In determining whether a liability insurer has a duty to provide
its insured with a defense in a tort suit, two types of questions
9
ordinarily must be answered: (1) what is the coverage and what
are the defenses under the terms and requirements of the
insurance policy? (2) do the allegations in the tort action
potentially bring the tort claim within the policy’s coverage?
The first question focuses upon the language and requirements
of the policy, and the second question focuses upon the
allegations of the tort suit.
St. Paul Fire & Marine Ins. Co. v. Pryseski, 292 Md. 187, 193, 438 A.2d 282, 285 (1981).
“[W]here a potentiality of coverage is uncertain from the allegations of a complaint, any
doubt must be resolved in favor of the insured.” Aetna Cas. & Sur. Co. v. Cochran, 337
Md. 98, 107, 651 A.2d 859, 863–64 (1995).
Bearing these principles in mind, we consider the allegations in RMG’s Second
Amended Complaint to determine whether the action potentially brings a claim within the
Policy’s coverage. In determining whether Insurers had a duty to defend, we are restricted
in the first instance to the Second Amended Complaint and may not look to extrinsic
evidence. See Walk, 382 Md. at 16, 852 A.2d at 106 (“An insured may rely on extrinsic
evidence where the underlying complaint neither conclusively establishes nor negates a
potentiality of coverage.” (citation and internal quotation marks omitted)).7 As will be
evident infra, because we find the terms of Blackstone’s Policy and the allegations in
7
See also Aetna Cas. & Sur. Co. v. Cochran, 337 Md. 98, 107, 651 A.2d 859, 863
(1995) (“Although we have held that an insurer may not use extrinsic evidence to contest
coverage under an insurance policy if the tort suit complaint establishes a potentiality of
coverage; we have not had occasion to determine whether an insured may rely on extrinsic
evidence to establish a potentiality of coverage when the insurance policy and the
allegations in the complaint do not establish a potentiality of coverage.” (emphasis in
original)).
10
RMG’s Second Amended Complaint to be conclusive, we do not consider any extrinsic
evidence.
Advertising Injury In Commercial General Liability Policies
Blackstone contends it is entitled to insurance coverage under the advertising injury
provision of its commercial general liability insurance policy. As discussed supra, the
Policy8 covers advertising injury, which it defines, in part, as “injury . . . arising out of . . .
[t]he use of another’s advertising idea in [Blackstone’s] ‘advertisement.’” It further defines
“advertisement” as “a notice that is broadcast or published to the general public or specific
market segments about [Blackstone’s] goods, products or services for the purpose of
attracting customers or supporters.” The Policy also contains an exclusion, which provides
that advertising injury does not apply to that “[a]rising out of a breach of contract, except
an implied contract to use another’s advertising idea in your advertisement[.]”
In the Second Amended Complaint, RMG asserted breach of contract, promissory
estoppel, unjust enrichment, quantum meruit, intentional misrepresentation, and
accounting for allegations including: (1) developing the product brand name “Vision
Enhance”; (2) creating graphics for use in sales sheets; (3) developing and reviewing
packaging and marketing of “Vision Enhance”; (4) contacting low vision experts and
8
The Policy closely tracks the Insurance Services Office, Inc. general commercial
liability forms. Insurance Services Office, Inc., a subsidiary of Verisk Analytics, is an
insurance industry organization that promulgates model insurance policy forms. Verisk
Analytics, www.verisk.com/iso.html (last visited Apr. 13, 2015); Leo P. Martinez, Marc
S. Mayerson & Douglas R. Richmond, 3 New Appleman Insurance Law Practice Guide,
§ 30.04[2][c], at 30-21 (2015). “Because of the overwhelming proliferation of [these]
forms, an enormous body of case law exists to interpret them.” Id., § 30.04[2][c], at 30-
21.
11
sufferers on behalf of the venture, including obtaining written testimonials; and (5)
introducing the “Vision Enhance” brand by placing a full-page color advertisement in an
industry journal.9
Provisions offering coverage for advertising injury became common in commercial
general liability policies during the second half of the Twentieth Century. 2 Jeffrey W.
Stempel, Stempel on Insurance Contracts, § 14.06[A] 14-60–62 (3d. ed., 2015 supp.).
Such provisions “provide[] coverage for damages that occur in the course of the insured’s
advertising activities, arise out of one of the offenses enumerated in the policy, and occur
during the policy period.” 2 Barry R. Ostrager & Thomas R. Newman, Handbook on
Insurance Coverage Disputes, § 25.03, at 1970 (17th ed.). A court will consider three
inquiries when determining whether a policy provides coverage for advertising injury: “(1)
Is there an ‘advertising injury’ offense as defined by the policy?; (2) Was the offense
committed in the course of advertising your goods, products or services?; and (3) Is there
a causal connection between the advertising and the injury?”10 4 Leo P. Martinez, Marc S.
9
Both the Court of Special Appeals and Insurers refer to Blackstone’s website as
an example of the underlying advertisement for the advertising injury. RMG’s Second
Amended Complaint makes no mention of the website. Even if we were to consider the
website, our analysis and disposition based on the failure to meet the causation
requirement, which is explained infra, would not change.
10
The Dissent charges that we do not address the waiver issue. This presumes that
we rely on the provision excluding breach of contract actions. We do not rely on the
exclusion. Instead, our opinion is based on the case law addressing what constitutes an
advertising injury, specifically the causal connection requirement. See, e.g., Walk v.
Hartford Cas. Ins. Co., 382 Md. 1, 17, 852 A.2d 98, 107 (2004) (“The [p]olicy requires
that the underlying plaintiffs allege the potential for three things: (1) an ‘advertisement’;
(2) an ‘advertising injury,’. . . ; and (3) a causal relationship between the advertising injury
and the alleged damages.”). Relying on this same case law, we conclude that the issue of
12
Mayerson, & Douglas R. Richmond, New Appleman Insurance Law Practice Guide,
§ 43.15, at 43-23 (2015). These three elements have been recognized and applied in
Maryland. See Walk, 382 Md. at 16–17, 852 A.2d at 107 (“The [p]olicy requires that the
underlying plaintiffs allege the potential for three things: (1) an ‘advertisement’; (2) an
‘advertising injury,’. . . ; and (3) a causal relationship between the advertising injury and
the alleged damages.”).
The Causal Connection Requirement
Insurers underscore the causal connection requirement. Citing Walk, they maintain
that the Court of Special Appeals disregarded the requirement that there be a causal
relationship between the advertising injury and the claimed damages and contend that
RMG did not allege its damages were causally related to any Blackstone advertisement.
For its part, Blackstone counters that the Court of Special Appeals considered the causal
connection between advertisement and damages and properly concluded that it was
subsumed in the Policy’s definition of “advertising injury.” It is helpful to preface our
evaluation of these arguments with additional review of relevant authorities addressing
advertising injury liability.
Advertising injury provisions are typically specified risk coverages whose terms
“are designed to provide coverage for the enumerated claims only and not to provide
whether product packaging constitutes advertisement is immaterial to our decision.
Because the three requirements to determine whether a policy will provide coverage are
conjunctive, absence of a causal connection is dispositive.
13
generalized liability coverage.” Stempel at 14-62.6. Thus, “[t]o be covered, the claims
made against the policy holder must arise from advertising activity. A highly attenuated
connection to advertising is not sufficient to create coverage.” Id. at 14-62.7 (footnotes
omitted).
To meet the causal connection requirement, “the advertising injury claimed must be
‘caused by an offense committed in the course of advertising.’” 3 New Appleman Law of
Liability Insurance, § 17.02[2][c], at 17-15 (2d ed. 2014). “When there are no allegations
that the claimant suffered damages as a result of advertising, there will be no advertising
injury claim.” New Appleman Insurance Law Practice Guide, § 43.18, at 43-29 (citation
omitted). Although courts “have not discussed the causation issue in terms of proximate
cause versus ‘but for’ causation . . . there are overtones of this distinction in the caselaw.”
Id. Thus, “[t]he question is not whether the injury could have taken place without the
advertising, but whether the advertising did in fact contribute materially to the injury.” Id.
Courts have addressed advertising injury’s causal connection requirement in a
variety of different circumstances and have helped to define the parameters of coverage.
At times, courts have found coverage. See, e.g., Am. Simmental Ass’n v. Coregis Ins. Co.,
282 F.3d 582 (8th Cir. 2002) (advertising injury clause implicated when insured cattle
breeders association misdesignated cattle as “fullblood” in marketing and advertising
materials, thereby reducing value of true “fullblood” cattle) (Montana law); R.C. Bigelow,
Inc. v. Liberty Mut. Ins. Co., 287 F.3d 242 (2d Cir. 2002) (advertising injury clause
implicated when competitor’s underlying complaint alleged that insured had marketed
herbal teas in new packaging with trade dress confusingly similar to that of competitor’s
14
boxes) (Connecticut law); Letro Products, Inc. v. Liberty Mut. Ins. Co., 114 F.3d 1194 (9th
Cir. 1997) (advertising injury clause implicated when insured infringed upon competitor’s
products when using photographs of competitor’s products in its promotional materials)
(California law); Am. Safety & Risk Servs., Inc. v. Legion Indem. Co., 153 F. Supp. 2d 869(E.D. La. 2001) (advertising injury clause implicated when insured falsely disseminated
information that a competitor was no longer in business) (Louisiana law); Merchants Co.
v. Am. Motorists Ins. Co., 794 F. Supp. 611 (S.D. Miss. 1992) (advertising injury clause
implicated when insured acquired and used competitor’s secret customer list to send direct
mail solicitations to those customers) (Mississippi law); Air Eng’g, Inc. v. Indus. Air
Power, LLC, 346 Wis. 2d 9, 828 N.W.2d 565 (Wis. Ct. App. 2013), review denied, 353
Wis. 2d 839 N.W.2d 617 (Wis. 2013) (advertising injury clause implicated when company
alleged that insured used its internet advertising system to place online ads for the purpose
of attracting customers).
At other times the finding was no coverage. See, e.g., Walk, 382 Md. at 18, 852
A.2d at 108 (no advertising injury when complaint only alleged that insured “violated
numerous agreements with his former employer not to solicit its clients or use its
proprietary information”); Pac. Group v. First State Ins. Co., 70 F.3d 524 (9th Cir. 1995)
(no advertising injury when insured sabotaged a deal to purchase a third party’s hotel so
that it could squeeze a partner out of the deal and acquire the hotel at a lower price because
the injury arose from the squeeze-out and not any advertising) (California law); Info.
Spectrum, Inc. v. The Hartford, 182 N.J. 34, 860 A.2d 926 (2004) (no advertising injury
when insured misappropriated a computerized police reporting system because the alleged
15
harm was not caused by the advertising act itself); Mylan Labs., Inc. v. Am. Motorists Ins.
Co., 226 W.Va. 307, 700 S.E.2d 518 (2010) (no advertising injury when insured issued
publication to drug providers of the price spread in the wholesale price of generic drugs).
See generally Advertising Injury Insurance, 98 A.L.R.5th 1 (2002) (collecting cases).
Despite our study of the cases presented by the parties and our extensive independent
research, we have found no case that addressed a suit to collect a fee for creative services
or enforce an alleged joint venture, like this suit.
Although expressed in six counts, the crux of RMG’s complaint is that Blackstone
failed to accord RMG a share of profits or an equity interest in return for Gray’s services
as called for in an oral contract between them. As might be discerned from the above cases,
this claim differs markedly from those that have been recognized as falling within
advertising injury coverage. In Bank of the West v. Superior Court,11 the “modern
watershed case construing advertising injury coverage,”12 the California Supreme Court
observed that the causal connection requirement limits commercial general liability
policies so that they do not encompass every claim related to an insured’s business. This
observation is instructive, and we agree with Insurers that the lack of causation is
dispositive here.
RMG plainly alleged that Gray and Black formed an oral contract—that they
mutually promised to perform their ends of the bargain. One of the aims of the enterprise
11
10 Cal. Rptr. 2d 538, 560, 833 P.2d 545, 553 (1992).
12
Jeffrey W. Stempel, Stempel on Insurance Contracts, § 14.06[C], at 14-62.9§ (3d.
ed., 2015 supp.).
16
was for Blackstone to use Gray’s work in its advertisements. Given this agreement, it
cannot be fairly said that RMG suffered injury from the use of advertising materials Gray
willingly delivered to Blackstone for that purpose. The wrong RMG alleged was
Blackstone’s failure to pay RMG a percentage of profits and give it an equity stake in the
venture involving the sale of Blackstone’s product. The fallacy in Blackstone’s current
claim against Insurers is that Blackstone’s use of RMG’s creative ideas could only enhance
RMG’s claims for profits or an equity share, not injure him.
Novell, Inc. v. Federal Insurance Company, 141 F.3d 983 (10th Cir. 1998) is another
example of an injury caused by a breach of contract and not by an advertisement. In Novell,
Inc. the underlying claim against Novell was based on claims by Ross, the designer of
certain software, that Novell violated its oral and written representations to the plaintiff
that Novell would not “use, appropriate, or usurp ideas or concepts [developed by Ross] or
do anything to compete with Ross.” Id. at 985. The Tenth Circuit, applying Utah law,
rejected Novell’s claim of an advertising injury, reasoning:
Here, Ross alleged Novell/WordPerfect, in direct violation of
its own oral and written representations to Ross,
misappropriated his product idea . . . and developed and
marketed a competing produce . . . . Even if
Novell/WordPerfect advertised or otherwise marketed [a
competing product], the violations alleged by Ross were not
the result of Novell/WordPerfect doing so. Rather, Ross was
injured when Novel/WordPerfect created and sold a competing
product in direct contravention of oral and written statements
to him. The fact that it may have advertised the competing
product to consumers simply did not cause Ross’ injuries.
17
Id. at 988 (omissions added); see also Microtec Research Inc. v. Nationwide Mut. Ins. Co.,
40 F.3d 968, 971 (9th Cir. 1994) (harm was “caused by misappropriation of the [computer]
code, not by the advertising itself”).
Courts have rejected other entreaties by insureds to extend comprehensive general
liability coverage to breach of contract claims, because that would fundamentally alter the
nature of the insurance relationship and effectively render the insurer a surety. See Fallon
McElligott, Inc. v. Seaboard Sur. Co., 607 N.W.2d 801, 804 (Minn. Ct. App. 2000)
(“Insurer protection of contractual performance is provided by performance bonds, by
errors-and-omissions policies, by insurer guarantees of indemnification agreements or debt
repayment, and some other types of policies. But [the insured’s] enumerated-risks liability
policy . . . was not such a policy.”) (emphasis in original); Structural Bldg. Prods. Corp. v
Bus. Ins. Agency, 281 A.D.2d 617, 619, 722 N.Y.S.2d 559, 562 (N.Y. App. Div. 2001)
(“The general rule is that a commercial general liability insurance policy does not afford
coverage for breach of contract, but rather for bodily injury and property damage. To hold
otherwise would render an insurance carrier a surety for the performance of its insured’s
work.” (citation omitted)). Although—unlike this case—the underlying suit against the
insured in Fallon McElligott claimed professional negligence in addition to breach of
contract, we still consider this case apropos.
Blackstone cannot expand the scope of its Policy simply by pointing to its “arising
from” language. That language is intended to restrict, not expand, coverage. We find
instructive the reasoning employed by the Minnesota Court of Appeals in Fallon
McElligott, Inc. v. Seaboard Surety Company, supra. In that case, an advertising agency
18
“prepared for a client advertisements that copyright holders believed violated their
copyrights.” Fallon McElligott, 607 N.W.2d at 802. When its client sued for breach of
contract and professional negligence, the advertising agency tendered the defense to its
insurer, which denied coverage on the ground that it was beyond the scope of coverage.
Id. The agency’s insurance policy provided that the insurer would defend any suit seeking
damages “resulting from . . . any infringement of copyright or of title or of slogan.”13 Id.
at 803. The agency settled the claim and attempted to recover settlement and defense costs
from its insurer. Id. at 802.
The court rejected the agency’s arguments that the clause was implicated: “Because
[the client’s] underlying claim is grounded on [the agency’s] failure to fulfill a contract
obligation, it falls both outside the . . . policy insuring clause and within the exclusion for
‘failure of performance of contract.’” Id. at 804. The court found unconvincing the
insured’s argument that the policy’s “resulting from” language—similar to the “arising
from” language found in Blackstone’s Policy—extended coverage to the claim:
[The insured] claims that the insuring clause (which covers
“liability imposed upon” the advertising agency for “money
damages resulting from * * * infringement of copyright”)
covers the [underlying] claim, arguing that the losses [its
client] sought to recover through its claim of contract breach
and professional negligence should be viewed as “resulting
from” the copyright violation. [The insured] tries to
accomplish too much with the two words “resulting from.”
The policy might well have used: “arising from,” “following
13
Similar to our case, the policy in Fallon McElligott, Inc. v. Seaboard Surety Co.,
607 N.W.2d 801, 803 (Minn. Ct. App. 2000) included a policy exclusion for breach of
contract, which provided: “The Seaboard policy also specifically excludes claims for
damages that arise from ‘any liability for * * * failure of performance of contract * * * .’”
The court did not, however, rely upon that clause in reaching its conclusion.
19
upon,” “because of,” or a myriad of other phrases to describe a
relationship of causation. But no matter what phrase was used,
the intent would not have been to cover losses based on a “but-
for-the-insured’s-conduct” standard.
Id. at 804–05. Similar to the sentiments articulated by other courts discussed supra, the
Minnesota Court of Appeals expressed concern that a liberal interpretation of the term
“resulting from” could drastically expand the scope of coverage beyond what was intended:
Insurance-industry scriveners would bear an unrealistic burden
if an occasional phrase could convert a liability policy into a
totally different type of policy. The policy in this case is—
notwithstanding the “resulting from” phrase—still an
enumerated-perils policy providing protection against liability
claims, rather than coverage for a failure to perform a contract.
Id. at 805.
We agree with the Minnesota court. Advertising injury clauses do not extend to
breach of contract claims, and the mere inclusion of the phrase “arising from” in the Policy
does not expand the scope to contract claims that happen to have a relationship with
advertisement activity. To do so would transform insurers into sureties and subvert
advertising injury coverage. Our view is consonant with the intermediate appellate court’s
reasoning that contract-based claims do not meet the causal connection requirement
because “the claims remained viable even if Blackstone had never used the disputed
advertising ideas to sell its products.” Blackstone, 216 Md. App. at 489, 88 A.3d at 803.
Thus, we agree with the holding of the Court of Special Appeals that insurance coverage
was not invoked by counts I, II, V, and VI.
RMG’s Unjust Enrichment Count
20
We part company with the Court of Special Appeals, though, in its analysis of
RMG’s unjust enrichment claim, which is the only count given credence by the
intermediate court.14 In its decision to preserve Blackstone’s insurance defense, it
reasoned:
RMG’s remaining unjust enrichment claim did, however,
depend on Blackstone’s use of RMG’s advertising ideas. In
that count, RMG alleged that Blackstone was unjustly
enriched by retaining the benefit flowing from its use of
RMG’s ideas in advertisements for Blackstone’s products.
The complaint’s count for unjust enrichment therefore bore a
“direct and substantial” relationship to the use of RMG’s
advertising ideas in Blackstone’s advertisements, making that
claim an “advertising injury” under the parties’ insurance
agreement.
Id. at 489–90, 88 A.3d at 803 (internal citation omitted) (emphasis added). We disagree
because we see the same causation problem for the unjust enrichment count as we
identified for the other counts.
Count III recites: “[RMG] conferred [a litany of] benefits upon Blackstone, with
whom it had a confidential relationship.” This count includes the same nucleus of factual
allegations as was discussed supra: RMG’s development of the brand name; creation of
copy and graphics for sales sheets; development of packaging and marketing materials;
and placement of a full page advertisement in an industry journal. The facts alleged merely
reiterate those set forth in the Second Amended Complaint: Gray, on behalf of RMG, did
creative work for Blackstone and did not receive the promised dividends.
14
The Court of Special Appeals did not address count IV, the quantum meruit claim,
but as will be evident infra, the analysis for this claim collapses into the unjust enrichment
discussion.
21
We have described the core principle of unjust enrichment as follows:
A person who receives a benefit by reason of an infringement
of another person’s interest, or of loss suffered by the other,
owes restitution to him in the manner and amount necessary to
prevent unjust enrichment.
Berry & Gould P.A. v. Berry, 360 Md. 142, 151, 757 A.2d 108 (2000) (citation omitted).
Unjust enrichment is a quasi-contract, a legal fiction we have described in earlier cases:
An express contract has been defined as an actual agreement
of the parties, the terms of which are openly uttered or declared
at the time of making it, being stated in distinct and explicit
language, either orally or in writing. An implied contract is an
agreement which legitimately can be inferred from intention of
the parties as evidenced by the circumstances and the ordinary
course of dealing and the common understanding of men.
Finally, significant to our analysis is the definition of a quasi-
contract.[15] Black’s Law Dictionary defines it as a
[l]egal fiction invented by common law courts to
permit recovery by contractual remedy in
cases where, in fact, there is no contract, but
where circumstances are such that justice
warrants a recovery as though there had been
a promise. It is not based on intention or consent
of the parties, but is founded on considerations
of justice and equity, and on doctrine of unjust
enrichment. It is not in fact a contract, but an
obligation which the law creates in absence of
any agreement, when and because the acts of the
parties or others have placed in the possession of
one person money, or its equivalent, under such
15
A quasi-contract is a term of art often used interchangeably with the term contract
“implied in law.” Corbin on Contracts, § 1.20, at 62 (1993). Adding to the confusion,
various courts and commentators have also substituted the word “restitution” for these
terms. Id. at 63. “Unjust enrichment,” when used in this context, is also “occasionally
used as a synonym for restitution.” Id. These are all distinct from what we have called an
implied contract, which is often termed an “implied in fact” contract and often considered
a subset of express contract. Id. at 62.
22
circumstances that in equity and good conscience
he ought not to retain it.
Cnty. Comm’rs of Caroline Cnty. v. J. Roland Dashiell & Sons, Inc., 358 Md. 83, 94–95,
747 A.2d 600, 606 (2000) (emphasis added) (internal citations and quotation marks
omitted); see also Pettus v. McDonald, 343 Ark. 507, 513, 36 S.W.3d 745, 749 (2001)
(“[A]n implied-in-law contract is not even a contract at all, but an obligation imposed by
law to do justice even though no promise was ever made or intended.” (emphasis added)
(citing Calamari & Perillo, Contracts § 1–12 (3d ed. 1987))).
Judge Moylan, writing for the Court of Special Appeals, also shed light on the nature
of unjust enrichment:
When we enter the world of restitutionary remedies, we have
arrived in the land of unjust enrichment. The restitutionary
remedies and unjust enrichment are simply flip sides of the
same coin. The generative purpose of a restitutionary remedy
is the prevention of unjust enrichment.
Alternatives Unlimited, Inc. v. New Balt. City Bd. of Sch. Comm’rs, 155 Md. App. 415,
454, 843 A.2d 252, 275 (2004) (“Alternatives”).
The intermediate court in Alternatives looked to several treatises, including George
E. Palmer, The Law of Restitution (1978), which described the relationship of unjust
enrichment to the universe of other “sources of liability”:
It has been traditional to regard tort and contract as the two
principal sources of liability at common law, although liability
arising out of a fiduciary relationship has developed largely
outside these two great categories. There is another category
that must be separated from all of these; this is liability based
in unjust enrichment.
***
23
Restitution based upon unjust enrichment cuts across
many branches of the law, including contract, tort, and
fiduciary relationship, but it also occupies much territory
that is its sole preserve.
Id. at 452–53, 843 A.2d at 274 (emphasis added) (quoting The Law of Restitution, § 1.1, at
1–2).
The Alternatives court also consulted the venerable treatise, Dan B. Dobbs, Law of
Remedies (2d Ed. 1993) (“Dobbs”), which declared restitution to be a “‘simple word but
a difficult subject, partly because restitutionary ideas appear in many guises.’”
Alternatives, 155 Md. App. at 455, 843 A.2d at 275 (emphasis added) (quoting Dobbs at
551–52). The treatise described the evolution of unjust enrichment claims, and how they
“‘went under a splendid variety of names like Money Had and Received, Money Paid,
Money Lent, Quantum Meruit and many others,’” but “‘are now perceived to be merely
subsets of restitution. The modern view is that unjust enrichment is a unifying principle
for all such cases and restitution is the award made to . . . those that used to be brought
in equity.’” Id. at 454, 843 A.2d at 275 (emphasis and omission added) (quoting Dobbs at
564).
This bit of history regarding unjust enrichment confirms our sense that unjust
enrichment is both elemental and elusive. Nevertheless, we can see clearly that the unjust
enrichment claim asserted against Blackstone does not qualify as a suit invoking the
“Advertising Injury Liability” under the Policy. We explain.
The allegations and cause of action in Count III are duplicative of RMG’s Counts I
and II—its breach of contract and promissory estoppel claims. As in those counts, the facts
24
alleged clearly reveal that RMG was not injured by the advertisements Blackstone
published. RMG was allegedly injured by Blackstone’s refusal to pay to RMG its share of
the fruits of that advertising, i.e. profits. But the profits from the sale of Blackstone’s
product were enhanced by the advertising which was the subject of RMG’s complaint.
Styling this count as “unjust enrichment” does not transform the nature of the injury.
The measure of damages in an unjust enrichment claim is the value of the goods or services
rendered by the plaintiff in the hands of the defendant. See Mogavero v. Silverstein, 142
Md. App. 259, 276, 790 A.2d 43, 53 (2002) (“Thus, the classic measurement of unjust
enrichment damages is the gain to the defendant, not the loss by the plaintiff.” (citation and
internal quotation marks omitted)). This is the same measurement of damages that would
apply in RMG’s claims for breach of contract and promissory estoppel, which averred
entitlement to a share of profits and an equity share in the joint venture, both of which were
only enhanced by the advertising.
In sum, in all of the counts alleged by RMG, the advertising done by Blackstone
using Gray’s ideas was all for the positive—it enhanced the value of the profits and joint
venture interest to which RMG claimed entitlement. The advertising, even though utilizing
Gray’s ideas, did not injure RMG. Unlike the majority of cases finding an advertising
injury, it had no competing business. See, e.g., Letro Prods., Inc. v. Liberty Mut. Ins. Co.,
114 F.3d 1194 (9th Cir. 1997) (advertising injury clause implicated when insured infringed
upon competitor’s products when using photographs of competitor’s products in its
promotional materials) and other cases cited, supra. Nor did it claim that it could profit
25
from a different use of those advertising ideas, which were specifically designed for
Blackstone’s product, “Vision Enhance.”
CONCLUSION
In conclusion, after reviewing the coverage and defenses under the Policy and the
allegations in the underlying action, we hold that there was no potentiality of coverage.
Blackstone did not show an advertising injury because none of the allegations of the
underlying suit brought by RMG identified any injury that was caused by the
advertisements created by RMG. Thus, Insurer had no duty to defend its insured.
Accordingly, we reverse the judgment of the Court of Special Appeals.
JUDGMENT OF THE COURT OF
SPECIAL APPEALS AFFIRMED IN
PART AND REVERSED IN PART.
CASE REMANDED TO THAT
COURT WITH INSTRUCTIONS TO
AFFIRM THE JUDGMENT OF THE
CIRCUIT COURT FOR BALTIMORE
COUNTY. COSTS TO BE PAID BY
RESPONDENTS.
26
Circuit Court for Baltimore County
Case No. 03-C-11-004834
Argued: February 5, 2015
IN THE COURT OF APPEALS
OF MARYLAND
No. 51
September Term, 2014
______________________________________
MARYLAND CASUALTY COMPANY, ET
AL.
v.
BLACKSTONE INTERNATIONAL LTD, ET
AL.
______________________________________
Barbera, C.J.
Harrell
Battaglia
Greene
Adkins
McDonald
Watts,
JJ.
______________________________________
Dissenting Opinion by Watts, J., which
Battaglia, J., joins
______________________________________
Filed: April 21, 2015
Respectfully, I dissent. The Majority Opinion appears to assume, but not address,
that product packaging can constitute “advertising” within the meaning of the Policy, and
instead focuses on the “causal connection” requirement as determinative. I would hold that
product packaging constitutes “advertising” as that term is defined in the insurance policy;
and the issues as to policy exclusions were not preserved for appellate review. As such, I
would affirm the judgment of the Court of Special Appeals.
Insurers contend that the Court of Special Appeals erred in concluding that a
product’s packaging was an “advertisement.” According to Insurers, in interpreting the
terms of the Policy, the Court of Special Appeals improperly substituted its own definition
of relevant terms in place of the unambiguous definitions within the Policy. Blackstone
responds that the Court of Special Appeals was correct in holding that a product’s
packaging fits within the Policy’s definition of “advertisement[,]” and argues that nothing
within the Policy’s definition of “advertisement” excludes a product’s packaging or a
product’s display from being an “advertisement.” In Blackstone’s view, the Policy’s
definition of “advertisement” focuses on the act of broadcasting or publishing to the general
public. I agree with Blackstone.
In determining whether an insurer has a duty to defend an insured, the Court must
engage in a two-part inquiry: “(1) what is the coverage and what are the defenses under the
terms and requirements of the insurance policy? (2) do the allegations in the tort action
[underlying action] potentially bring the tort claim within the policy’s coverage?” Walk v.
Hartford Cas. Ins. Co., 382 Md. 1, 15, 852 A.2d 98, 106 (2004) (citations omitted) (brackets
in original). Thus, I would begin the analysis with the scope of coverage under the relevant
terms and provisions of the Policy. See id. at 15, 852 A.2d at 106. The “personal and
advertising injury” provision of the Policy provides, in pertinent part: “[Insurers] will pay
those sums that the insured becomes legally obligated to pay as damages because of
‘personal and advertising injury’ to which this insurance applies. [Insurers] will have the
right and duty to defend the insured against any ‘suit’ seeking those damages.” The Policy
defines “advertisement” as “a notice that is broadcast or published to the general public or
specific market segments about your goods, products or services for the purpose of
attracting customers or supporters.”
In the complaint, RMG alleged that Blackstone sold the “Vision Enhance” product
to Wal-Mart, which resold the product under its “Mainstays” label. According to RMG,
“some of the ‘Mainstays’ low vision lighting products actually include[d] the use of the
‘Vision Enhance’ name on the boxes, and use the same or substantially similar box design,
copy on the box, and product instructions that are identical to the first ‘Vision Enhance’
product, that was created in substantial part by . . . RMG.” From my perspective, the initial
inquiry is whether a product’s packaging falls within the scope the Policy’s definition of
“advertisement.” I would hold that it does.
In examining the Policy’s definition of “advertisement,” I note that the terms used—
specifically, “notice,” “broadcast” and “published”—are exceptionally broad and are not
defined within the Policy. Impliedly, Insurers assert that “broadcast” and “published”
should be strictly construed to encompass only traditional marketing mediums, such as
-2-
television, magazines, and internet.1 Such a constricting definition is not supported by the
plain and common use of the terms. Indeed, “broadcast” means “to make widely known,”
Broadcast, Merriam-Webster, http://www.merriam-webster.com/dictionary/broadcast, and
“publish” means “to make generally known” or “to disseminate to the public,” Publish,
Merriam-Webster, http://www.merriam-webster.com/dictionary/publish. Under these
broad definitions, it can fairly be said that a product’s packaging “disseminates” or “makes
known” to the public information about a product or good.2
Having determined that product packaging falls within the Policy’s definitional
scope of “advertisement,” I would next consider whether RMG’s allegations trigger
coverage under the Policy. See Walk, 382 Md. at 15, 852 A.2d at 106. “Even if a tort
plaintiff does not allege facts which clearly bring the claim within or without the policy
coverage, the insurer still must defend if there is a potentiality that the claim could be
covered by the policy.” Id. at 16, 852 A.2d at 106 (emphasis in original). This inquiry, of
necessity, involves consideration of whether the allegations of RMG’s complaint
demonstrate that RMG claimed an “advertising injury” as that term is defined in the Policy.
See id. at 16, 852 A.2d at 107 (“Under the terms of the Policy, [insurer] had a duty to
defend [insured] only if the [underlying] complaint and the extrinsic evidence claim an
1
It should be noted that Insurers do not contend that a product’s packaging is not a
“notice” within the scope of “advertisement.”
2
Insurers cite numerous cases from other jurisdictions to support its position that a
product’s packaging cannot constitute “advertising.” Insurers’ reliance on these cases is
misplaced, as the other jurisdictions’ courts held that a product itself, not a product’s
packaging, cannot be considered “advertising.” See, e.g., Krueger Int’l, Inc. v. Fed. Ins.
Co., 647 F.Supp.2d 1024, 1035 (E.D. Wis. 2009).
-3-
‘advertising injury.’”). Here, in agreement with the Court of Special Appeals, I would
conclude that RMG’s allegations of unjust enrichment, which specifically refer to the
“Vision Enhance” name, box design, copy, and product instructions, sufficiently alleged
an “advertising injury” and thus could potentially be covered under the Policy; thus, I
would resolve the duty to defend in Blackstone’s favor. I explain.
In the complaint, in the claim for unjust enrichment, RMG alleged that Blackstone
was unjustly enriched because it “continues to retain the benefit conferred upon it by
Plaintiff through, in part, its use of concepts, expert evaluations, ‘Vision Enhance’ brand
name and packaging, all of which were developed by Plaintiff or with Plaintiff’s
assistance.” (Emphasis added). Under the clear terms of the Policy, an “advertising injury”
“means injury . . . arising out of one or more of the following offenses: . . . [t]he use of
another’s advertising idea in your ‘advertisement’; or [i]nfringing upon another’s
copyright, trade dress or slogan in your ‘advertisement’.” (Paragraph breaks omitted). In
my view, RMG’s unjust enrichment claim alleged that it was injured by Blackstone’s use
of RMG’s ideas in advertisements for Blackstone’s product, thus bringing it within the
definition of “advertising injury” under the terms of the Policy. In other words, the unjust
enrichment claim did, indeed, allege an advertising injury resulting from Blackstone’s use
of RMG’s advertising ideas in its advertisements. Having determined that the coverage
and requirements of the Policy include a product’s packaging as advertising and that the
allegations of RMG’s complaint potentially brings the claim for unjust enrichment within
-4-
the Policy’s coverage, I would conclude that Insurers had a duty to defend.3
The Majority also does not address the issues of preservation and waiver.
Blackstone asserts that Insurers waived all defenses, including Policy exclusions, that it
did not raise in the circuit court.
Maryland Rule 8-131(a) provides, in pertinent part: “Ordinarily, the appellate court
will not decide any other issue unless it plainly appears by the record to have been raised
3
The Majority relies on language from Walk, 382 Md. at 17, 852 A.2d at 107, for
the proposition that three requirements must be satisfied to constitute an advertising injury:
“The policy requires that the underlying plaintiffs allege the potential for three things: (1)
an ‘advertisement’; (2) an ‘advertising injury,’ which entails the copying of an advertising
idea or style into an advertisement; and (3) a causal relationship between the advertising
injury and the alleged damages.” Significantly, in Walk, id. at 17, 852 A.2d at 107, the
three requirements were specifically limited to the insurance policy at issue. Moreover, in
Walk, the only discussion of a causal relationship is in the above-quoted language. In
Walk, the large part of the analysis concerned only whether the insured demonstrated that
the underlying complaint alleged an advertising injury, and concluded that the insured did
not show the allegation of an advertising injury either in the complaint or through extrinsic
evidence; i.e., additional discussion of a causal relationship is not included in the case and
the causal relationship prong is not applied. See id. at 17-24, 852 A.2d at 107-11. And,
aside from Walk, the Majority relies on no other Maryland case discussing or applying the
causal relationship requirement, and instead cites to cases from other jurisdictions as well
as a treatise. See Maj. Slip Op. at 13-16. In my view, Maryland case law requires only
that a court engage in the two-part inquiry set forth above—(1) what is the coverage and
defenses under the terms and requirements of the policy and (2) do the allegations of the
underlying complaint potentially bring the claim within the policy’s coverage. Thus,
examining solely whether a causal connection exists is not consistent with Maryland case
law. In any event, in this case, I agree with the Court of Special Appeals that determination
of whether an “advertising injury” was alleged in RMG’s complaint subsumes the
discussion of causation. See Blackstone Int’l Ltd. v. Md. Cas. Co., 216 Md. App. 471, 481
n.6, 88 A.3d 792, 798 n.6 (2014). By the terms of the Policy, a determination that an
advertising injury was alleged necessarily involves a causation analysis and the
determination that the injury alleged “arise[s] out of one or more of the following offenses:
. . . [t]he use of another’s advertising idea in your ‘advertisement’”; i.e., one must determine
that RMG’s claims “arise[] out of” the use of RMG’s advertising ideas in Blackstone’s
advertisements, a causation analysis.
-5-
in or decided by the trial court[.]” Appellate review of a grant of summary judgment must
be “confined to the basis relied on by the trial court.” Sadler v. Dimensions Healthcare
Corp., 378 Md. 509, 536, 836 A.2d 655, 671 (2003).
At bottom, Insurers contend that they did not have a duty to defend Blackstone
against RMG’s suit. To support this position, Insurers, both in their pleadings and during
the hearing on the motion for summary judgment before the circuit court, relied exclusively
on the argument that RMG’s claims did not fall within the scope of an “advertising injury”
as defined under the Policy. Indeed, in a statement of undisputed facts, Insurers
emphasized that, in addressing “whether coverage exists under the insuring agreement of
the policy[, they have] not relied on the breach of contract exclusion.” Moreover, during
his argument before the circuit court, Insurers’ counsel stated:
[I]t’s clear on the face of [RMG’s] second amended complaint that the
allegations don’t come within the [P]olicy[’s] coverage[]. But even if
Blackstone could get over that hurdle, then we do look down to the . . .
exclusions. And there are two relevant exclusions in this case. . . . [A]nd
there’s a very clear reason why [Insurers] didn’t put [the exclusions] in the
litigation at this point. . . . If we go down to the exclusion, it becomes [the
Insurers’] burden [of proof]. It makes it harder to deal with on summary
judgment[,] and so we decided not to include it.
The Court of Special Appeals held that Insurers affirmatively “waived” an
exclusion-based defense to the denial of coverage that was not raised or addressed in filings
or at the hearing. See Blackstone Int’l Ltd. v. Md. Cas. Co., 216 Md. App. 471, 486, 88
A.3d 792, 801 (2014). I agree with this characterization of Insurers’ procedural posture
before the circuit court, and would conclude that the issue of an exclusion-based defense
to the denial of coverage was not raised or addressed by Insurers in the circuit court such
-6-
that they could raise the issue on appeal. See Md. R. 8-131(a).4
For the above reasons, respectfully, I dissent and would affirm the judgment of the
Court of Special Appeals.
Judge Battaglia has authorized me to state that she joins in this opinion.
4
Although the Majority asserts that it does not rely on the provision of the Policy
excluding breach of contract actions from coverage as an “advertising injury,” see Maj.
Slip Op. at 12 n.10, the Majority discusses breach of contract actions exclusions and
concludes that “[a]dvertising injury clauses do not extend to breach of contract claims, and
the mere inclusion of the phrase ‘arising from’ in the Policy does not expand the scope to
contract claims that happen to have a relationship with advertisement activity[,]” Maj. Slip
Op. at 20. The Majority later concludes that RMG’s unjust enrichment claim is duplicative
of its breach of contract and promissory estoppel claims. See Maj. Slip Op. at 24. Thus,
in my view, whether Insurers waived or failed to preserve the Policy’s exclusions,
including the breach of contract actions exclusion, should have been addressed on the
merits.
-7-