On May 13, 2014, in Millennium Laboratories, Inc. v. Darwin Select Insurance Company, Case No. 12-CV-2742 H (KSC), a California federal district court ruled that Darwin Select Insurance Company breached its duty to defend Millennium in a pair of lawsuits in which two business rivals accused Millennium of false advertising, finding that the underlying lawsuits sufficiently alleged covered disparagement claims. In so doing, the court reaffirmed the longstanding rule in California that a carrier’s duty to defend is broad and requires the carrier to defend where there exists a mere “potential for coverage” under the policy. Here, the court determined that the underlying actions fell within the policy’s coverage of claims based on disparagement of an organization’s goods, product or services, even though the underlying parties did not allege a formal disparagement-related cause of action.
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