Perfect 10, Inc. is an adult entertainment company. In its operative complaint in a federal court in California, Perfect 10 alleged copyright infringement by two internet purveyors, Giganews, Inc. and Livewire Services, Inc. The operative facts alleged by Perfect 10 were that these defendants displayed its copyrighted adult materials even as they offered them for sale on the Internet.
St. Paul insured Giganews and Livewire under a commercial general liability policy. After disclaiming all coverage for the claim in California, St. Paul filed its own action in a federal court in Texas requesting a declaration that it did not owe any coverage including no duty to defend.
The federal judge in Texas granted St. Paul's motion for summary judgment that it had no CGL coverage for Perfect 10's alleged copyright infringement claim. The Court ruled that the CGL did not extend "advertising" coverage in large part because there was no "advertising" alleged. St. Paul Fire & Marine Ins. Co. v. Giganews, Inc., No. A-15-CA-89-SS, 2016 WL 3457620, at *6-*8 (W.D. Tex. June 17, 2016).
Since St. Paul in this case owed no coverage, it owed no duty to defend and, in addition, the Texas federal court joined a host of other Courts in holding that where there is no coverage, there can be no bad faith. In this case, moreover, the carrier did not commit any independent torts recognized in Texas even as it disclaimed all coverage. St. Paul Fire & Marine Ins. Co. v. Giganews, Inc., No. A-15-CA-89-SS, 2016 WL 3457620, at *8 (W.D. Tex. June 17, 2016).
In addition to internet porn sales, this case highlights an interesting feature of declaratory relief actions in federal courts. This case illustrates that a policyholder can be sued in California but may have to defend its claims to coverage, if any, not in California but somewhere else, in this case, Texas.
Please Read The Disclaimer. ©2016 by Dennis J. Wall. All rights reserved.
Comments