The opinion of the court was delivered by: Pallmeyer, District Judge.
MEMORANDUM OPINION AND ORDER
Plaintiff Zurich Insurance Company ("Zurich" or "Insurer")
seeks a declaration that it had no duty to defend or indemnify
Defendant Sunclipse, Inc. ("Sunclipse" or "Insured") for the
defense costs incurred and the settlement reached in an unfair
competition case filed against Sunclipse by Century Container
Corp. ("Century"). In the underlying action, Century sought
damages from Sunclipse resulting from the alleged
misappropriation of proprietary information concerning the
manufacture of conductive surface coating for corrugated boxes.
Century claimed that Sunclipse's manufacture and sale of its own
coating violated the terms of an agreement by which Century
licensed its coating process to Sunclipse.
Zurich claims it is not required to defend Sunclipse against
Century's allegations and now seeks summary judgment. Zurich
contends that Sunclipse did not provide prompt notice of the
underlying action as required by the insurance policy, and that
the subject insurance policy does not cover the alleged injuries.
Sunclipse filed a cross motion for summary judgment. Sunclipse
asserts that California law applies, and under that law Zurich
may not assert the delay in notice defense because it cannot show
prejudice from the delay. Sunclipse argues, further, that the
underlying action involved an "advertising injury" which is
covered under the policy. For the reasons set forth below,
Zurich's motion for summary judgment is granted and Sunclipse's
motion is denied.
Sunclipse, a California corporation which maintains its
principal place of business in that state, is a wholly-owned
subsidiary of Amcor Limited ("Amcor"), a multinational integrated
packaging and paper company with its headquarters in Australia.
(Sunclipse 12(M) ¶¶ 1, 2.) Sunclipse is involved in the
manufacture and sale of corrugated products made from liner board
or sheet stock. (Zurich 12(M) ¶ 16.) Sunclipse manufactures
Corru-Shield, an electro-static discharge ("ESD") container
designed to protect packaged electronic devices from static
electricity. (Id. ¶ 17.) Sunclipse's facilities are located in
several California communities,*fn1 and it services the
California market for corrugated packaging. (Sunclipse 12(M) ¶
13.) It maintains no office, has no property, and has no
employees in Illinois. (Id.)
At the time of the issuance of the subject insurance policies,
Zurich was the United States branch of a Swiss corporation.
(Zurich 12(M) ¶ 1.) During the relevant time period, Zurich
maintained its principal administrative offices in Schaumburg,
Illinois and was licensed to and did transact business in
Illinois. (Id. ¶ 2.)
B. The Insurance Policies
Between November 1, 1992 and November 1, 1995, Zurich issued
three one-year Commercial General Liability insurance policies
("the Policies") to Sunclipse. Each policy provided coverage for
personal and advertising injury with a limit of $1 million.
(Sunclipse 12(M) ¶ 6; Zurich 12(M) ¶¶ 4-6.) Each of the Policies
lists Sunclipse, Inc. as the Named Insured with a California
mailing address. (Sunclipse 12(M) ¶ 7; Exs. A, B, C to Affidavit
of Steven Sheldon*fn2 in Support of Zurich's Mot. for Summ. J.)
On the declarations page of each of the Policies, "Glendale, CA"
is designated as the "Service Office" for the Policy*fn3 and
each of the Policies contains a California amendatory endorsement
regarding cancellation and renewal. (Id.) Each of the Policies
was delivered to Sunclipse's broker, Alexander & Alexander of
California, Inc. ("A & A California") at its offices in Pasadena,
California. (Sunclipse 12(M) ¶ 8.) Amcor arranged the issuance of
the Policies as part of an integrated insurance program for all
of Amcor's subsidiaries throughout the world, including
Sunclipse. (Id. ¶ 9.) Several substantive communications about
the Policies and at least one meeting regarding the Policies
issued to Sunclipse took place between A & A California and the
offices of Zurich International U.S. West located in Glendale,
California ("Zurich's Glendale Office"). (Id. ¶¶ 10-11.)
Sunclipse remitted premium payments to A & A California and
Zurich presumably accepted such payments from A & A
California.*fn4 (Id. ¶ 12.)
Each of the Policies contained a provision describing the
coverage for personal and advertising injury. The relevant
provision reads as follows:
COVERAGE B. PERSONAL AND ADVERTISING INJURY
a. We will pay those sums that the insured becomes
legally obligated to pay as damages because of
"personal injury" or "advertising injury" to
which this coverage part applies. We will have
the right and duty to defend any "suit" seeking
b. This insurance applies to: . . .
(2) "Advertising injury" caused by an offense
committed in the course of advertising your
goods, products or services;
but only if the offense was committed in the
"coverage territory" during the policy period.
a. Oral or written publication of material that
slanders or libels a person or organization or
disparages a person's or organizations' goods,
products or services;
b. Oral or written publication of material that
violates a person's right of privacy;
c. Misappropriation of advertising ideas or style of
doing business; or
d. Infringement of copyright, title or slogan.
(Id.) The Policies also exclude certain "personal" and
"advertising" injuries from coverage. Specifically, the Policies
exclude coverage for "`Advertising Injury' arising out of . . .
Breach of contract, other than misappropriation of advertising
ideas under an implied contract[.]" (Zurich 12(M) ¶ 10.) The
Conditions section of the Policies contain the following duties
of the insured in the event of an occurrence, claim or suit:
a. You must see to it that we are notified as soon as
practicable of an "occurrence" or an offense
which may result in a claim. . . .
b. If a claim is made or "suit" is brought against
any insured, you must:
(1) Immediately record the specifics of the claim or
"suit" and the date received; and
(2) Notify us as soon as practicable.
You must see to it that we receive written notice
of the claim or "suit" as ...