California Union Insurance v. Club Aquarius, Inc.

Defendants appeal from a judgment in favor of an insurer in an action for declaratory relief. We affirm the judgment.

Defendants procured from plaintiff insurance company a policy which, by indorsement, insured them against liability in connection with two named publications—“Aquarius” and “Diving Dealer and Professional Instructor.” In 1974, defendants were sued in federal court for copyright infringement and unfair competition. The complaint in that action named as offending publications only a book referred to as the “Red Book.” Defendants, having retained counsel tendered defense of that action to plaintiff. Plaintiff responded by a letter reading as follows:

“Please acknowledge receipt of this letter and we would ask that defense counsel keep us advised as the matter develops.” Defendants’ privately retained counsel agreed to the terms of that letter and the trial of the action therein referred to proceeded. The private counsel reported to counsel designated by plaintiff and their fees were paid by plaintiff. The trial was bifurcated and the liability issues were first tried. That portion of the trial resulted in findings of fact imposing liability on defendants…