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(Article from Insurance Law Alert, March 2015)

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Our February 2015 Alert reported on an Illinois appellate court decision holding that in store displays constituted "advertisements" under an advertising injury provision. Last month, the Fifth Circuit adopted a similarly expansive interpretation of the term, concluding that houses with a design based on an infringed copyright constituted "advertisements" for the purposes of liability coverage. Mid-Continent Cas. Co. v. Kipp Flores Architects, L.L.C., 2015 WL 795882 (5th Cir. Feb. 26, 2015).

In litigation between an architecture firm and a home builder, a jury found that the builder committed copyright infringement by building homes based on the architect’s copyrighted designs without paying the required license fee. Mid-Continent argued that it had no duty to indemnify the underlying judgment because it did not arise from covered advertising injury. The policy defined advertisement as "a notice that is broadcast or published to the general public … for the purpose of attracting customers or supporters." Mid-Continent argued that because a house is not a "notice" and cannot be "broadcast" or "published," it cannot be an advertisement as a matter of law. The court disagreed. The court reasoned that "the houses themselves were used to attract customers" and were the builder’s "primary form of marketing" because homebuyers viewed model homes, yard signs, and floor plans prior to purchasing a home. The court further reasoned that Texas law supported an expansive interpretation of the terms "notice" and "broadcast" to encompass the general act of imparting information to the public.