Massachusetts Court Runs Down Insurer’s Defense in Coverage Dispute

Advertising Law

An advertiser using the name of a famed marathoner without permission is entitled to insurance coverage for a lawsuit accusing the company of false association, the highest court in Massachusetts has ruled.

Vibram USA—no stranger to false advertising lawsuits—produces minimalist running shoes that are designed to mimic barefoot running while providing the protection of a conventional shoe. In 2015, the living heirs of Abebe Bikila (the famed runner who won the 1960 Olympic marathon while running barefoot) sued Vibram in Washington federal court.

Bikila’s family members alleged that Vibram’s “Bikila” shoes were purposely named after Abebe to associate the company’s footwear with Bikila’s legendary barefoot Olympic feats. According to the complaint, the Bikila family previously made commercial use of Abebe Bikila’s name and athletic legacy in connection with a sporting goods store named after the runner, a book about his marathon career, a Japanese commercial using his name and a feature film portraying the last years of his life.

Vibram tendered defense of the suit to two insurance companies that had issued several commercial general liability policies to the company during the relevant time period. The policies provided coverage for “personal and advertising injury liability,” including “[t]he use of another’s advertising idea in your ‘advertisement.’” While the policies did not define the term “advertising idea,” they defined “advertisement” as a “notice that is broadcast or published to the general public or specific market segments about your foods, products or services for the purpose of attracting customers or supporters.”

The insurers denied they had a duty to defend the suit, but agreed to do so under a reservation of rights. They then filed suit in Massachusetts state court, seeking a declaration that they did not have a duty to defend Vibram in the underlying action because the complaint did not raise claims covered by the policies. A trial court judge agreed, granting the insurers’ motion for summary judgment.

But in a unanimous opinion, the Supreme Judicial Court (SJC) reversed. Having not previously had the occasion to interpret the phrase “advertising idea” in an insurance coverage dispute where advertising injury liability is at issue, the court looked to how other courts have understood the term.

Most courts have adopted a broad definition of the phrase, the court said, from “an idea about the solicitation of business and customers” in the U.S. Court of Appeals for the Third Circuit to “an idea for calling public attention to a product or business, especially by proclaiming desirable qualities so as to increase sales or patronage” in the Eighth Circuit.

The trial court relied, at least in part, on the conclusion that the Bikila family had not actually used the name “Bikila” as an advertising idea and thus there was no claim that Vibram used another’s idea. But the complaint belied this assertion, the SJC explained, as the Bikila family maintained that they intentionally associated their family name with Abebe Bikila’s name in the sporting goods store named after him, in the feature-length film about his life and in the commercial using his name.

“Accordingly, we conclude that the complaint reasonably may be interpreted as claiming that the Bikila family intentionally created a connection between their family name and Abebe Bikila’s legacy and desirable qualities for purposes of using ‘Bikila,’ and everything it conveyed, to attract customers to their running-related commercial ventures,” the court wrote. “In other words, the Bikila family’s advertising idea was using the name Bikila, and the legacy that name conveyed, to attract business to each of their ventures. Because the allegations in the complaint generally allege that the Bikila family used the Bikila name to advertise and promote their various running-related ventures, the judge erred in concluding that the Bikila family had not actually used the name Bikila as an advertising idea.”

The policies at issue stated that the insurers would defend Vibram in claims that it was liable for an advertising injury through its use of another’s advertising idea.

“At its core, the complaint alleges that Vibram improperly used ‘Bikila’ for the same purposes as the Bikila family had used it—to advertise its running-related ventures and business,” the court said. “Given that determining whether a claim is covered by an insurance policy focuses on the nature of the claim, not its relative strengths or weaknesses, we conclude that it was reasonable for Vibram to expect that the policies it purchased, which provided coverage in the event Vibram was sued for alleged advertising injuries, would cover it for the claims at issue in the underlying action.”

The insurers pushed back, arguing that the complaint raised claims related to Bikila’s right of publicity and not an advertising idea, because the Bikila family use of the name did not develop any “secondary meaning” or association among consumers between a product or service and its source.

But the court refused to narrow the scope of an “advertising idea” by incorporating the secondary meaning requirement proposed by the insurers and reversed the grant of summary judgment in their favor.

To read the opinion in Holyoke Mutual Insurance Company in Salem v. Vibram USA, Inc., click here.

Why it matters: Vibram scored a victory with the SJC decision, which adopted a broad reading of an “advertising idea” in the context of insurance coverage. The court looked beyond the label of the type of lawsuit to the “core” of the allegations in the underlying complaint and concluded that the insurance company was responsible for coverage.