Paper Recovery of Northern California v. Travelers Casualty & Surety Co.
Docket: No. 02-17323; D.C. No. CV-01-03333-SBA
Court: Court of Appeals for the Ninth Circuit; March 4, 2004; Federal Appellate Court
Travelers Casualty and Surety Company of Illinois was not obligated to defend Paper Recovery of Northern California in a lawsuit filed by Havas Interactive. The district court determined that even if the Havas complaint's mention of "advertising" activity could be interpreted as falling under the policy's "advertising injury" provisions, the exclusion for injuries arising from breach of contract was applicable. It was established that Paper Recovery's agreement with Havas required it to destroy Havas software, not to resell it. Paper Recovery informed Travelers that it was contracted to destroy the software, but Havas alleged that Paper Recovery instead allowed the software to be distributed. Each of Havas' claims was based on Paper Recovery's failure to fulfill its contractual obligation to destroy the software, thus activating the breach of contract exclusion. Consequently, Travelers had no duty to defend against these claims. The decision was affirmed, with a note that it may not be published or cited except as allowed by Ninth Circuit Rule 36-3. Paper Recovery contended that the exclusion should not apply to injuries stemming from tort, citing a precedent; however, the California Supreme Court had overruled the relevant cases that supported this distinction, thereby reinforcing the applicability of the breach of contract exclusion in this context.