The California Court of Appeal reversed the trial court's ruling and held that the insurer had a duty to defend a "personal injury" and/or "advertising injury" suit. See Travelers Prop. Cas. Co. of Am. v. Charlotte Russe Holding, Inc., 2012 Cal. Ct. App. LEXIS 807 (Cal. Ct. App. July 13, 2012).

   A clothing manufacturer, Versatile, sued a distributor of its products, Charlotte Russe, for breach of contract, fraudulent and negligent misrepresentation. The parties had entered a contract under which Charlotte Russe would be the exclusive sales outlet for Versatile's "People's Liberation" brand of apparel,which included jeans and knits. Charlotte Russe promised to promote the sale of Versatile's products, which Versatile deemed to be a premium product.

   The underlying complaint alleged Charlotte Russe sold Versatile's products at a severe discounts, which not only violated the contract, but would also result in significant and irreparable damage to the People's Liberation brand and trademark. An expert opined that a 70 to 85 percent markdown of People's Liberation brand clothing had the potential of creating a disparaging effect on the People's Liberation brand.

   Charlotte Russe was insured by Travelers. The CGL policy included "personal injury" and "advertising injury" coverage. Personal injury "caused by an offense arising out of your business . . ." was covered. Further, advertising injury coverage applied to "'[a]dvertising injury' caused by an offense committed in the course of advertising your goods, products or services. . ."

   Travelers denied the tender. Travelers contended there was no coverage because the reduction of a product's price was not a disparagement of that product. The district court granted Travelers' motion for summary judgment.

   The Court of Appeals reversed. In was not essential that the underlying claims be expressly phrased in terms of "disparagement" or trade libel in order to trigger personal injury coverage. The underlying claims could trigger a duty to defend if the conduct for which the policy provided coverage was charged by implication, as well as by direct accusation. Here, Versatile's pleading alleged that the People's Liberation brand had been identified in the market as premium, high-end goods; and that Charlotte Russe had published prices for goods implying they were not. Versatile therefore pled that the implication carried by Charlotte Russe's pricing was false. This was enough to invoke a duty to defend.