Unpublished Disposition, 855 F.2d 861 (9th Cir. 1988)

MEMORANDUM^* 

The defendant in this action, Insurance Company of North America ("INA"), issued an insurance policy to Golden Rain Foundation ("Golden Rain"), a non-profit corporation which holds in trust common areas of a planned residential community known as Leisure World. Leisure World Foundation sponsored the residential project and published the Leisure World News, which was distributed to every residence in Leisure World.

The plaintiff in this action, Laguna Publishing Company ("Laguna"), expects to obtain a judgment in state court against Golden Rain for its unlawful exclusion of Laguna's newspaper, the Laguna News Post, from Leisure World. Laguna brought this action against INA, seeking a declaratory judgment that INA's policy covers the damages Laguna expects to obtain against Golden Rain. The district court found that the INA policy did not cover damages from the anticipated judgment against Golden Rain. Laguna appeals. The appeal is timely, and we have jurisdiction pursuant to 28 U.S.C. § 1291. Because the resolution of the issue must be based on the language of the policy and applicable principles of insurance law, the district court's decision is reviewed de novo. Miller v. Safeco Title Ins. Co., 758 F.2d 364, 367 (9th Cir. 1985).

DISCUSSION

The policy provides in pertinent part: "INA will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of

(A) personal injury

(B) property damage

(C) advertising offense or

(D) malpractice

to which this insurance applies, caused by an occurrence...." (Emphasis added.) The policy defines "advertising offense" as follows: " ' [A]dvertising offense' means libel, slander, defamation, infringement of copyright, title or slogan, piracy, unfair competition, idea misappropriation or invasion of rights of privacy, arising out of the Named Insured's advertising activities...." (Emphasis added.)

To prevail, Laguna must demonstrate that the damages to be awarded arise from an advertising offense, defined to include various acts. Laguna claims that Golden Rain's exclusion of Laguna's paper amounted to "unfair competition." We disagree. Golden Rain, by excluding the Laguna News Post from Leisure World, cannot be said to have engaged in unfair competition. It was not "competing" in any sense of the word against Laguna. Though Leisure World News might have competed for advertising with Laguna, it does not follow that Golden Rain did. The district court expressly found that "Golden Rain had no involvement in publishing Leisure World News nor did Golden Rain require Leisure World Foundation to publish it. Golden Rain received none of the profits nor participated in selling advertising space in Leisure World News." Because Golden Rain lacked any involvement with the Leisure World News, it can hardly be said that its exclusion of the Laguna News Post amounted to unfair competition, as the term is used in the policy.

Moreover, to establish coverage INA must assert that the unfair competition arose "out of the Named Insured's advertising activities." Again, Golden Rain, the Named Insured, did not conduct any advertising activities. Leisure World Foundation and its successors did, in publishing the Leisure World News, but Golden Rain had no involvement in that activity.

Laguna offers two arguments to circumvent this obvious bar to recovery. First, Laguna states that Leisure World Foundation was also a "Named Insured." This might well be true, but the action underlying this dispute is against only one Named Insured, Golden Rain. The activities of Golden Rain, not those of Leisure World Foundation, form the basis for damages. The fact that Leisure World Foundation might also have been covered by an INA policy is of no consequence.¹ 

Second, Laguna argues that Leisure World Foundation is an agent of Golden Rain and, therefore, that the activities of Leisure World Foundation are attributable to Golden Rain. There was, however, no factual basis in the record below from which such an agency relationship could be found.

Because we find that Golden Rain's activities cannot be described as an "advertising offense," as the term is used in the policy, we need not address the several other arguments INA offers to defeat coverage.

The district court's judgment is AFFIRMED.