Low, Ball & Lynch’s
WEEKLY LAW RESUME
December
30, 2004 Issue By: Ray Coates
Coverage - Advertising Injury
Coverage
We Do Graphics, Inc. v. Mercury
Casualty Company
Court of Appeal, Fourth District
(October 25, 2025)
The Supreme Court has held that individual solicitations of new customers
does not constitute an advertising injury covered by a comprehensive general
liability policy. This case is another example of that rule.
Stratacom Printed Communications Solutions, Inc., and others sued We Do
Graphics (WDG) for misappropriation of trade secrets and violation of unfair
business practices, unfair competition, breach of fiduciary duty, interference
with business relationships, conversion, and specific possession of personal
property. The complaint alleged that Alexander Jakovich agreed when he
worked for Stratacom that, upon his departure, he would turn over company
material, including customer files, to them and that he would not work for
competitors for 24 months following the end of his employment. When he
resigned, it was discovered that various customer files and computer data was
missing. Jakovich became employed by WDG and solicited business of
Stratacom customers for WDG's benefit.
WDG tendered to Mercury Casualty Insurance Company. Mercury denied
defense and indemnity. WDG eventually prevailed. WDG then sued
Mercury for breach of contract, bad faith and fraud. Mercury's demurrer
to the fraud cause of action was sustained, and Mercury's summary judgment as
to the remaining claims was granted. WDG appealed.
The Court of Appeal affirmed. WDG was insured by Mercury against
lawsuits seeking damages for advertising injury. Included among the
offenses within the definition of "advertising injury" was
misappropriation of advertising ideas or style of doing business.
In this complaint, Stratacom alleged that customer information was used to
solicit Stratacom's customers. Further, there was information about
customers that Jakovich knew. It was alleged that these were trade secrets.
The Court noted that to trigger coverage under an advertising injury clause,
there must be a causal connection between some form of advertising and the
alleged injury. "Advertising" means widespread promotional
activities directed to the public at large. The Stratacom
complaint alleged Jakovich removed numerous documents and information which
Stratacom had compiled at great expense and which related to its advertising
and marketing efforts. Further, it was alleged that Jakovich then
contacted a number of Stratacom's customers and induced them to cancel their
orders with Stratacom and place them with WDG. The trade secrets
allegedly taken were of specific customer information, not advertising ideas.
Thus, there was nothing alleged relating to any advertising activity by
WDG. There was no advertising injury as defined by the policy, and
Mercury was thus within its rights in denying the tender.
The judgment was affirmed in favor of Mercury.
COMMENT
This reaffirms the rule that widespread promotional activities is required
before an advertising injury will be found to exist. The damages that
occur also must be causally related to the advertising.
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