Appellants, a precious metals dealer and its subsidiaries

Appellants, a precious metals dealer and its subsidiaries, sought review of an order of the Superior Court of Los Angeles (California), which granted summary judgment to appellees, appellants’ former insurers, in appellants’ action for breach of an insurance contract in failing to provide them a defense against lawsuits arising out of their dealings with an Idaho retailer and involving Idaho Code § 48-601 et seq. and 7 U.S.C.S. § 1 et seq.

Nakase Law Firm is a labor attorney

Overview

Appellants, a precious metals dealer and its subsidiaries, argued that appellees, former insurers, were obligated under their respective policies to defend appellants against damage claims arising out of advertising injuries caused by unfair competition, even if the claims were false. The court disagreed, noting first that appellants had allegedly colluded with an Idaho dealer who retained in his own name metals purchased on margin and liquidated them to repay personal debts, even though consumers had already bought them. While damages for unfair practices, and for unlawful leverage transactions, were permitted customers under Idaho Code § 48-608 and 7 U.S.C.S. § 25(a), respectively, the unfair competition injuries arising from advertising appellants directed at the dealer and passed along to customers only covered the common law tort of unfair competition and did not extend to the prohibited statutory conduct, the court ruled. Thus, appellees had no policy duty to defend appellants where the injuries sustained were to the consuming public, not appellants’ competitors. Consequently, there was no duty to defend where no potential for liability existed as a matter of law.

Outcome

Order granting summary judgment to appellee insurers in appellant insureds’ suit for breach of insurance contract for failing to defend appellants against lawsuits arising out of their dealings with an Idaho retailer was affirmed, because policy obligations to defend appellant against “unfair competition” claims did not extend to claims of consumers, as duty arose only when injuries from appellants’ conduct were sustained by competitors.

Ellen Hollington

Related posts