Edwards Theatres, Inc. v. United National Insurance

MEMORANDUM *

The district court determined that United National Insurance Company had a duty to defend Edwards Theatres against IMAX’s lawsuit alleging, inter alia, that Edwards had engaged in “a pattern of deceptive advertising” harming IMAX’s reputation and goodwill. We affirm.

Under California law a duty to defend arises whenever the facts alleged in the third party complaint give rise to potential liability under the policy. Gray v. Zurich Ins. Co., 65 Cal.2d 263, 276-77 , 54 Cal. Rptr. 104 , 419 P.2d 168 (1966). “California courts have been consistently solicitous” of the insured’s expectations that they have a “right to call on the insurer’s superior resources for the defense of third party claims.” Montrose Chem. Corp. v. Superior Court, 6 Cal.4th 287, 295-96 , 24 Cal. Rptr .2d 467, 861 P.2d 1153 (1993). We must interpret the policy “through the eyes of a layman.” Lebas Fashion Imports of USA, Inc. v. ITT Hartford Ins. Group, 50 Cal.App.4th 548, 560-61 , 59 Cal. Rptr .2d 36 (1996).

IMAX alleged that its institutional reputation was injured by Edwards advertisements that used the “IMAX” trademark in connection with conventional films. Under the policy, United National had…