Sentex Systems, Inc. v. Hartford Acc. & Indem. Co

In Sentex Systems, Inc. v. Hartford Acc. & Indem. Co.(C.D. Cal. 1995) 882 F. Supp. 930, the insured sued its CGL insurer asserting that the insurer had a duty to defend against a competitor's allegations that a former employee had misappropriated trade secrets and confidential information used while employed by the insured. Much as in the present case, the complaint in Sentex alleged misappropriation of customer lists, methods of billing jobs, marketing techniques, and other inside and confidential information. And the insured used such information to solicit business from customers of its competitor. (Id. at p. 935.) The District Court held that the competitor's allegations in the complaint were potentially within the scope of the CGL policy which covered "advertising injury" that included, as here, "misappropriation of advertising ideas or style of doing business." (Id. at p. 934.) The District Court in Sentex found that some "courts have defined 'advertising activity' as broadly as possible 'to encompass a great deal of activity,'" and that "the term 'advertising' encompasses the kind of personal, one-on-one and group solicitations" engaged in on behalf of the insured. ( Sentex, supra, 882 F. Supp. at p. 939.) The court reasoned, in part, that giving "'advertising activity' a narrow interpretation is only reasonable if the term is contained in an advertising injury exclusion," and that "if an insurer wants to avoid such a broad interpretation of the term 'advertising,' it can narrow the term's scope by defining it in the policy." ( Id. at p. 940.) The Ninth Circuit affirmed, aptly observing: "This policy's language, given its ordinary meaning, does not limit itself to the misappropriation of an actual advertising text. It is concerned with 'ideas,' a broader term." ( Sentex, supra, 93 F.3d at p. 580.) "In this day and age, advertising cannot be limited to written sales materials, and the concept of marketing includes a wide variety of direct and indirect advertising strategies." (Ibid.)