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APPLIED BOLTING TECH. PRODS. v. UNITED STATES FID.

October 21, 1996

APPLIED BOLTING TECHNOLOGY PRODUCTS, INC., Plaintiff
v.
UNITED STATES FIDELITY & GUARANTY COMPANY, Defendant



The opinion of the court was delivered by: VANARTSDALEN

 MEMORANDUM AND ORDER

 VanARTSDALEN, S.J

 October 21, 1996

 Applied Bolting Technology Products, Inc., (Applied) moves for summary judgment in this declaratory judgment action against its insurer, United States Fidelity & Guaranty Company (USF&G). Applied contends that the terms of its Commercial General Liability (CGL) policy obligate USF&G to defend an underlying lawsuit. USF&G cross-moves for summary judgment, claiming that it has neither a duty to defend nor a duty to indemnify. After carefully considering the parties' briefs and oral arguments on these issues, I will deny Applied's motion and grant USF&G's cross-motion for summary judgment.

 I. Facts

 The following facts are not in dispute. Applied is a Vermont corporation which manufactures direct tension indicators, or DTIs. DTIs are round washers with bumps or protrusions spaced around the washer surface. DTIs are used with high-strength bolts and nuts to fasten structural steel on buildings, bridges, over-head highway signs, and other industrial structures. When DTIs are used as part of a bolt assembly, the protrusions on the washer flatten as the bolt is tightened and the clamping pressure is increased. By inserting a feeler gauge into the bolt assembly, a construction worker can measure the extent to which the protrusions have flattened and determine from the extent of flattening whether the bolt has been properly tightened.

 USF&G sold to Applied a standard CGL policy (the policy). The policy's coverage became effective on January 18, 1995, and expired on January 18, 1996. Under the policy, USF&G agreed to defend and indemnify Applied in any suit seeking damages for, inter alia, "advertising injury," which is defined in the policy to mean

 
injury arising out of one or more of the following offenses:
 
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.

 Expressly excluded from the policy coverage is an "'advertising injury' ... arising out of oral or written publication of material whose first publication took place before the beginning of the policy period."

 Applied contends that it is has been sued for an "advertising injury," that USF&G has a duty to defend the underlying suit, and that the "first-publication exclusion" does not bar coverage.

 The underlying suit was filed by J.M. Turner, Inc., (Turner) on April 13, 1995; it is currently pending before this court. See J.M. Turner, Inc. v. Applied Bolting Technology Prod., Inc., et al., 1995 U.S. Dist. LEXIS 8155, Civ. No. 95-2179 (E.D. Pa. 1995). Turner names Applied and two of its corporate officers as defendants and alleges three counts: (1) breach of contract, (2) fraud, and (3) false advertising and unfair competition. According to Applied, Count III seeks damages for an "advertising injury." *fn1"

 In Count III, Turner alleges that Applied engages in false advertising and unfair competition in violation of Section 43(a) of the Lanham Act, 15 U.S.C. ┬ž 1125(a). Turner, which also manufactures DTIs, claims that Applied's DTIs do not satisfy the requirements set by the industry for manufacturing and testing DTIs. The latest industry standard, which the American Society for Testing Materials (ASTM) promulgated on December 1, 1994, is known as "ASTM F959-94a." This standard requires that all DTIs meet certain chemical, mechanical, and dimensional requirements before they are sold by the manufacturer.

 Turner alleges that Applied falsely advertises the claim "all DTIs made to ASTM F959-94a," and that this advertisement influences purchasing decisions and causes Turner to lose sales to Applied. Turner claims that purchasers are influenced when a manufacturer advertises that its DTIs meet the requirements of ASTM F959-94a. Turner also claims that construction projects often require the use of DTIs that have been tested under ASTM F959-94a. Turner alleges that Applied's false advertising began on or about December 1, 1994, when ASTM F959-94a was promulgated, and that ...


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