Doron Precision Systems, Inc. v. United States Fidelity & Guarantee Co.

SCHROEDER, Justice,

dissenting.

I respectfully dissent from the Court’s opinion. Under the Court’s interpretation of the policy, advertising injury is defined to include injury arising out of copyright infringement. The Court reasons that because the policy does not state any restriction that it applies only to copyright infringement arising in the course of advertising, it is not necessary to allege that the advertising, injury arose out of an infringement of copyright. While this is an issue of first impression in Idaho, federal courts that have examined this issue have held that there must be a connection between the alleged infringement and the advertising injury. Sentry Ins. v. R.J. Weber Co., Inc., 2 F.3d 554 (5th Cir.1993); Iolab Corp. v. Seaboard Sur. Co., 15 F.3d 1500 (9th Cir.1994). • Furthermore, during oral argument, this Court asked Doron whether it was his position that the policy required a connection between advertising and the infringement. Doron stated that some connection was necessary: “I am comfortable with the fact that some connection has to be there.” In this case the policy language is clear; it covers a copyright infringement suit only if the insured infringes someone’s copyright in the course of advertising. If the insured infringes a copyright in another context, there is no coverage under the terms of the policy.

*685While it is true that if an “arguable potential exists for a claim covered by the policy ... the insurer must immediately step in and defend the suit,” the insurer is not required to defend if there is not even the potential for coverage. When the insurer believes that a complaint does not reveal a potential for liability that would be covered in the policy, it is not required to bring a declaratory judgment action. In this ease, the allegations in the complaint did not reveal a potential for liability. Merely placing copyrighted materials on the market does not give rise to the potential that Denison’s copyright infringement activities were related to or connected with advertising. In fact, during oral argument the Court asked Doron whether this “was a belated effort to call it advertising, because that really wasn’t the crux of the complaint.” Doron conceded that “the focus was on copyright infringement, we didn’t say this was advertising activity, no it wasn’t stressed at that time.” If advertising activity was not “stressed” in the complaint, then the allegations in the complaint did not raise a potential for a covered claim. Accordingly, the district court’s grant of summary judgment in favor of USF & G should be affirmed.