BANK OF WEST v. INDUSTRIAL INDEMNITY COMPANY

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Court of Appeal, First District, Division 4, California.

BANK OF the WEST, Petitioner, v. The SUPERIOR COURT of Contra Costa County, Respondent; INDUSTRIAL INDEMNITY COMPANY et al., Real Parties in Interest.

No. A050298.

Decided: November 15, 1990

Jan T. Chilton, William L. Stern, Severson & Werson, San Francisco, for petitioner. Denis T. Rice, Helane L. Morrison, Kathryn Nelson, Howard, Rice, Nemerovski, Canady, Robertson & Falk, San Francisco, for amicus curiae on behalf of petitioner. No appearance for respondent. Raoul D. Kennedy, Peter W. Davis, Richard de Saint Phalle, Dolores A. Dalton, Crosby, Heafey, Roach & May, Oakland, Paul H. Breslin, Walnut Creek, Frank Gilbert, San Francisco, for amicus curiae on behalf of real parties in interest.

I. INTRODUCTION

This is a first impression case in which we are invited to interpret advertising coverage for unfair competition contained in standard form comprehensive general liability insurance policies (CGL).   The principal issue presented for determination is whether the phrase “unfair competition” giving rise to advertising injury is limited to the narrow tort as defined in common law (i.e., passing off the goods of a business rival as one's own) or whether it also includes the statutory definition which describes unfair competition broadly so as to embrace all unlawful, unfair or fraudulent business practices.   After careful analysis of the policy language, the rules of contract interpretation and the existing case authorities we conclude that the phrase “unfair competition” as used in standard form CGL must be given the broad statutory meaning in order to provide coverage for all unlawful and unfair business practices committed against either a business rival and/or the general public.

II. FACTUAL AND PROCEDURAL BACKGROUND

This petition for writ of mandate grew out of two test cases:  (1) Fallat v. Central Bank, Superior Court No. 865597 (hereafter Fallat), in which the class action involving 32 claims, alleged that Central Bank, the predecessor of petitioner Bank of the West (hereafter Bank),1 was guilty of unfair competition in financing automobile insurance premiums through Coast Program, a subsidiary of the Bank.   The Fallat plaintiffs also asserted various regulatory violations on the part of the Bank.  (2) Eagle Associates embraced six suits filed against the Bank.   The complaints therein alleged that plaintiffs loaned funds to Eagle Associates which funds, pursuant to a written agreement with the Bank, were to be kept in a special interest bearing account and were to be released or transferred only on certain specified conditions.   The plaintiffs charged that the Bank, in violation of the agreement, transferred funds from the special account and, thus, facilitated Eagle Associates' absconding with the money.   Four of the six suits sought damages for emotional distress and all six claimed economic loss.   In addition to breach of contract, the complaints alleged causes of action for breach of fiduciary duty, negligence, fraud and conversion as well.

During the relevant times the Bank was covered by standard form CGL and broad form endorsements to CGL policies which were issued by real parties in interest, Industrial Indemnity Company and Industrial Insurance Company of Hawaii, Ltd. (hereafter together Industrial);  the Bank tendered both the Fallat and Eagle Associates actions to Industrial for defense and indemnity.   Industrial first accepted the Fallat defense under a reservation of rights.   Later on, however, Industrial denied coverage, refused to contribute to the cost of the defense, as well as to the settlement by which the Bank was obligated to pay plaintiffs $500,000 in damages and $250,000 for attorney fees.   Industrial likewise denied coverage in Eagle Associates and filed a summary adjudication motion regarding coverage under the policies.   However, prior to the determination of the issue, the Bank settled the case with the other insurers and withdrew its claim against Industrial, admitting in essence that Industrial's policies provided no coverage in Eagle Associates.

Thereupon, Industrial proceeded to seek a summary adjudication of advertising liability in the Fallat action.   The CGL policies and the broad form endorsements to the standard CGL policies issued to the Bank provided in relevant part:  “The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of personal injury or advertising injury to which this insurance applies, sustained by any person or organization and arising out of the conduct of the named insured's business․”  (Primary Policy, SP 867–4855, subd. (1)(A), original emphasis.)   The broad form endorsement provides:  “ ‘Advertising injury’ means injury arising out of an offense committed during the policy period occurring in the course of the named insured's advertising activities, if such injury arises out of libel, slander, defamation, violation of the right of privacy, unfair competition, or infringement of copyright, title or slogan.”  (Emphasis added.)

Based upon the cited language of the policies, Industrial argued that there was no coverage for the Fallat claims because:  (1) the term “unfair competition” used in the policies meant the common law definition of that tort, rather than the broader statutory definition contained in Business and Professions Code 2 section 17200, and the Fallat claims did not allege (nor could it be amended to allege) the common law tort of unfair competition;  (2) the relief awardable under section 17203 was equitable or restitutionary relief, rather than damages as contemplated by the policy coverage;  and (3) the Fallat claims did not occur in the course of the insured Bank's advertising activities within the purview of the policies.   The trial court agreed with Industrial and declared that there was no triable issue as to any of the above disputed points.

Despite the fact that the coverage issue raised in Eagle Associates became moot due to the dismissal of the claims against Industrial, the trial court proceeded to make further summary adjudications in that case as well.   After extensive briefing, the trial court concluded that the insurance policy in Eagle Associates provided no coverage for any liability (including tort liability for emotional distress) which depended upon the existence of a contractual duty or which was based upon an alleged contractual obligation on the part of the insured.3  Consistent therewith, the trial court entered orders granting summary adjudications on both the advertising liability issues raised in Fallat and the contractual liability (emotional distress) issue raised in Eagle Associates.   Upon the stipulation of the parties, the proceedings were stayed pending review here.

III. DISCUSSION

The Bank argues that both orders of the trial court are unfounded and should be set aside.   In particular, the Bank claims that respondent court erroneously interpreted coverage for “advertising injury” inasmuch as:  (1) the phrase “unfair competition” is not limited to the narrow definition of the common law but also includes the statutory definition of that tort as outlined in section 17200;  (2) the relief under section 17203 is not limited to injunction or restitution alone, but may include monetary damages;  and (3) the unfair competition alleged in Fallat did occur in the course of the Bank's advertising activities.   Moreover, the Bank contends that (4) the summary adjudication of contractual liability in Eagle Associates was mistaken because under settled law breach of duty created by a contract may give rise also to tort liability.  (Ritchie v. Anchor Casualty Co. (1955) 135 Cal.App.2d 245, 256, 286 P.2d 1000.)

We believe the Bank's contentions concerning advertising coverage are well taken and, accordingly, we issue a peremptory writ to set aside the summary adjudication order granted in Fallat.   Simultaneously, we hold that the contractual liability adjudication in Eagle Associates is moot and fails to provide a proper basis for review.

A. Advertising Liability Coverage

(1) The Applicable Law

 Under settled law, a petition for writ of mandate is available to review an order granting summary adjudication of issues.  (State of California v. Superior Court (Fogerty) (1981) 29 Cal.3d 240, 244, 172 Cal.Rptr. 713, 625 P.2d 256.)   Since we have been called upon to construe the standard Insurance Services Office (ISO) insurance policies without extrinsic evidence, the interpretation is one of law (Chong v. Fremont Indemnity Co. (1988) 202 Cal.App.3d 1097, 1100, 249 Cal.Rptr. 264) and we review the issues raised by the petition de novo (Laxague v. Fireman's Fund Ins. Co. (1990) 220 Cal.App.3d 530, 533, 269 Cal.Rptr. 456;  Scroggs v. Coast Community College Dist. (1987) 193 Cal.App.3d 1399, 1401, 239 Cal.Rptr. 916).

 The rules interpreting an insurance contract are also well settled.   Words in the insurance policy must be read in their ordinary sense (McKee v. State Farm Fire & Cas. Co. (1983) 145 Cal.App.3d 772, 776, 193 Cal.Rptr. 745) and must be interpreted according to the plain meaning which a layman would ordinarily attach to them (Reserve Insurance Co. v. Pisciotta (1982) 30 Cal.3d 800, 807, 180 Cal.Rptr. 628, 640 P.2d 764).   As often emphasized, “ ‘The policy should be read as a layman would read it and not as it might be analyzed by an attorney or an insurance expert.’ ”  (Otter v. General Ins. Co. (1973) 34 Cal.App.3d 940, 949, 109 Cal.Rptr. 831;  accord, Delgado v. Heritage Life Ins. Co. (1984) 157 Cal.App.3d 262, 271, 203 Cal.Rptr. 672.)   Since the insurance policies are considered “adhesion contracts” (Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 269–270, 54 Cal.Rptr. 104, 419 P.2d 168), the courts must construe the provisions therein to protect the reasonable expectations of the insured (Cal–Farm Ins. Co. v. TAC Exterminators, Inc. (1985) 172 Cal.App.3d 564, 577, 218 Cal.Rptr. 407).   In order to achieve this objective, the general provisions of the policy are to be interpreted broadly so as to provide the greatest possible coverage for the insured (State Farm Mut. Auto. Ins. Co. v. Partridge (1973) 10 Cal.3d 94, 101, 109 Cal.Rptr. 811, 514 P.2d 123) and any ambiguity or uncertainty in the insurance policy will be resolved against the insurer who drafted or controls the language of the policy (Reserve Insurance Co. v. Pisciotta, supra, 30 Cal.3d at pp. 807–808, 180 Cal.Rptr. 628, 640 P.2d 764;  accord, Producers Dairy Delivery Co. v. Sentry Ins. Co. (1986) 41 Cal.3d 903, 912, 226 Cal.Rptr. 558, 718 P.2d 920).   As stated in Holz Rubber Co., Inc. v. American Star Ins. Co. (1975) 14 Cal.3d 45, 59–60, 120 Cal.Rptr. 415, 533 P.2d 1055:  “ ‘If the insurer uses language which is uncertain any reasonable doubt will be resolved against it;  if the doubt relates to extent or fact of coverage, whether as to peril insured against [citations], the amount of liability [citations] or the person or persons protected [citations], the language will be understood in its most inclusive sense, for the benefit of the insured.’ ”   Under the definition of case law, a policy provision is ambiguous when it is capable of two or more constructions, both of which are reasonable.  (Producers Dairy Delivery Co. v. Sentry Ins. Co., supra, 41 Cal.3d at p. 912, 226 Cal.Rptr. 558, 718 P.2d 920;  Delgado v. Heritage Life Ins. Co., supra, 157 Cal.App.3d at p. 271, 203 Cal.Rptr. 672.)

(2) The Trial Court Erred in Giving a Narrow Meaning to the Phrase “Unfair Competition”

 Advertising injury for which the insurance policies herein provided coverage included the tort of unfair competition.   In interpreting the phrase, the trial court held that as used in the policies, unfair competition embraced only the tort as defined in common law.   The Bank contends that the interpretation of the trial court is erroneous, for unfair competition is a much broader notion which includes not only the common law, but the statutory and dictionary definitions of the tort as well.   We agree.

Unfair competition has two basic meanings.   Under common law, it is equated with hurting the business interests of a commercial rival by way of “palming off,” i.e., passing off one's goods for those of another.  (Pine Top Ins. v. Public Util. D. # 1 of Chelan Cty. (E.D.Wash.1987) 676 F.Supp. 212, 216;  Ruder & Finn Inc. v. Seaboard Sur. Co. (1981) 52 N.Y.2d 663, 439 N.Y.S.2d 858, 862, 422 N.E.2d 518, 522.)   However, in a broader sense (as used in the California statute, decisional law, dictionaries, legal essays and textbooks) unfair competition encompasses any unlawful, unfair or deceptive act committed against both a business competitor or the public.

Thus, pursuant to section 17200 “unfair competition shall mean and include unlawful, unfair or fraudulent business practice and unfair, deceptive, untrue or misleading advertising․”   In interpreting Civil Code section 3369, the predecessor of section 17200, the Supreme Court stated in Barquis v. Merchants Collection Assn. (1972) 7 Cal.3d 94, 109, 101 Cal.Rptr. 745, 496 P.2d 817:  “Although in a common law context, competitive injury originally composed an essential element of the tort of ‘unfair competition,’ the Legislature, by adopting section 3369, broadened the scope of legal protection against wrongful business practices generally, and in so doing extended to the entire consuming public the protection once afforded only to business competitors.   Thus, section 3369 indicates that ‘unfair competition’ as used in the section cannot be equated with the common law definition of ‘unfair competition,’ but instead specifies that, for the purposes of its provisions, unfair competition ‘shall mean and include unlawful, unfair or fraudulent business practice ․’ ”  (Emphasis partially added.)   Webster likewise defines unfair competition as “business competition effected by an act that is deceptive and in effect a fraud on the public or that otherwise violates the legal or equitable rights of a competitor or the public.”  (Webster's New Internat. Dict. (3d ed. 1965) p. 2494.)   Finally, Prosser, a foremost scholar in the field, gives the following description of the tort:  “Unfair competition is now a generic name for a number of related torts involving improper interference with business prospects․  [¶]  Unfair competition thus does not describe a single course of conduct or a tort with a specific number of elements;  it instead describes a general category into which a number of new torts may be placed when recognized by the courts.   The category is open-ended, and nameless forms of unfair competition may be recognized at any time for the protection of commercial values.”  (Prosser & Keeton, Torts (5th ed. 1984) § 130, pp. 1013, 1015, fns. omitted, emphasis added.)

 The policy itself does not define “unfair competition”;  “unfair competition” thus could be defined by resort to the common law or to the statute or to the dictionary;  any of these three definitions would be reasonable.   All law (including common and statutory) becomes a part of every contract by inference (Traders etc. Ins. Co. v. Pac. Emp. Ins. Co. (1955) 130 Cal.App.2d 158, 164, 278 P.2d 493;  Masonite Corp. v. Pacific Gas & Electric Co. (1976) 65 Cal.App.3d 1, 8, 135 Cal.Rptr. 170).   The dictionary definition of a policy term bears relevance as to how a person of average intelligence and experience would understand the policy phrase crafted by the insurer (Reserve Insurance Co. v. Pisciotta, supra, 30 Cal.3d at p. 810, 180 Cal.Rptr. 628, 640 P.2d 764;  Century Bank v. St. Paul Fire & Marine Ins. Co. (1971) 4 Cal.3d 319, 322, 93 Cal.Rptr. 569, 482 P.2d 193;  Underwriters Ins. Co. v. Purdie (1983) 145 Cal.App.3d 57, 66, 193 Cal.Rptr. 248).   Where, as here, a policy provision is capable of two or more reasonable constructions it is inherently ambiguous and the California law compels that the ambiguity must be resolved against the insurer in favor of providing coverage for the insured.  (Reserve Insurance Co. v. Pisciotta, supra, 30 Cal.3d at pp. 807–808, 180 Cal.Rptr. 628, 640 P.2d 764;  Poland v. Martin (9th Cir.1985) 761 F.2d 546, 548.)   As recently confirmed by our Supreme Court:  “It is a basic principle of insurance contract interpretation that doubts, uncertainties and ambiguities arising out of the policy language ordinarily should be resolved in favor of the insured in order to protect his reasonable expectation of coverage.”  (Producers Dairy Delivery Co. v. Sentry Ins. Co., supra, 41 Cal.3d at p. 912, 226 Cal.Rptr. 558, 718 P.2d 920, original emphasis.)   The conclusion is thus inescapable that the trial court violated the well accepted rules of insurance contract interpretation by giving too restrictive a meaning to the ambiguous policy phrase “unfair competition” and by deciding this ambiguity in favor of the insurer.

Industrial nonetheless insists that the trial court should be affirmed because:  (a) when read in context the policy phrase “unfair competition” was not ambiguous but, instead, clearly meant the tort as defined in common law;  and (b) the rule of ambiguity, if any, was not applicable here because the Bank was not an unsophisticated insured but rather an institution which had equal bargaining power with the insurer.   Neither of Industrial's contentions has merit.

(a) The Context Theory

Industrial's first claim rests on the premise that the language in an insurance contract must be construed in the context of the instrument as a whole;  that the provisions in the policy must be given a practical and reasonable interpretation that fulfills the object and purpose of the contract;  and that no ambiguity can be found if in the context of the policy's language or the circumstances of its purchase, only one meaning is reasonable.  (Producers Dairy Delivery Co. v. Sentry Ins. Co., supra, 41 Cal.3d at pp. 912–915, 226 Cal.Rptr. 558, 718 P.2d 920;  Hollingsworth v. Commercial Union Ins. Co. (1989) 208 Cal.App.3d 800, 807, 256 Cal.Rptr. 357;  Mori v. Southern General Ins. Co. (1987) 196 Cal.App.3d 99, 102, 104, 241 Cal.Rptr. 463.)   Based upon these principles, Industrial posits that the phrase, “unfair competition” was not ambiguous because:  (1) statutes do not provide all-purpose definitions (Bd. of Trade of San Francisco v. Swiss (9th Cir.1979) 597 F.2d 146, 148);  (2) the unfair competition appears together with eight common law torts implying that it, too, embraces a common law tort under the maxim of “noscitur a sociis” (Farm Bureau Mutual Insurance Co. v. Carr (1974) 215 Kan. 591, 528 P.2d 134;  Fireman's Fund Ins. Co. v. City of Turlock (1985) 170 Cal.App.3d 988, 997, 216 Cal.Rptr. 796);  (3) the broad meaning defined in the statute would render the additional torts mere surplusage, a construction to be avoided (Coe v. Superior Court (1990) 220 Cal.App.3d 48, 53, 269 Cal.Rptr. 368;  Burak v. General American Life Ins. Co. (10th Cir.1988) 836 F.2d 1287, 1290–1291);  (4) the Unfair Practices Act of which section 17200 is a part does not provide for damages but rather equitable relief which is in direct conflict with the coverage provisions of the policies (State Farm Fire & Cas. Co. v. Superior Court (1987) 191 Cal.App.3d 74, 77, 236 Cal.Rptr. 216;  Hackethal v. National Casualty Co. (1987) 189 Cal.App.3d 1102, 1110, 234 Cal.Rptr. 853;  Fireman's Fund Ins. Co. v. City of Turlock, supra, 170 Cal.App.3d at p. 998, 216 Cal.Rptr. 796);  (5) the amount of premium paid for the policies are indicative that a limited coverage under the policies was intended (International Surplus Lines Ins. Co. v. Devonshire Coverage Corp. (1979) 93 Cal.App.3d 601, 612, 155 Cal.Rptr. 870;  Safeco Ins. Co. v. Gilstrap (1983) 141 Cal.App.3d 524, 533, 190 Cal.Rptr. 425);  and (6) the published opinions outside California adopted the narrow common law definition of unfair competition in insurance policies (Ruder & Finn Inc. v. Seaboard Sur. Co., supra, 439 N.Y.S.2d 858, 422 N.E.2d 518 and its progeny).   We briefly address each of Industrial's contentions.

Contrary to Industrial's position, in determining the meaning of a phrase or word in a contract (including an insurance policy) all the statutory and decisional law may be properly considered because by reason of legal inference all such law becomes a part of the contract.  (See discussion, supra.)

Industrial's contention that the placement of unfair competition among eight common law torts (such as libel, slander, defamation, violation of the right of privacy, infringement of copyright, title and slogan) is indicative that the phrase was intended to cover only the common law tort of unfair competition, must fail for the reason that many of those torts have also been codified by statutes and cannot be considered as merely common law torts anymore.   For instance, libel, slander and defamation have been codified in Civil Code sections 44 to 48.5;  the violation of privacy has been enshrined in California Constitution, article I, section 1;  and the common law tort of infringement of copyright has been preempted by the federal law and no longer exists as a common law wrong (17 U.S.C. § 501 et seq.;  Sony Corp. v. Universal City Studios, Inc. (1984) 464 U.S. 417, 431, 104 S.Ct. 774, 783, 78 L.Ed.2d 574).

Industrial's next claim that the acceptance of the statutory definition of unfair competition would subsume the other listed torts and render them “meaningless surplusage,” is not anymore persuasive.   A cursory look at the definition of libel, slander, defamation, invasion of privacy and infringement of copyright convinces us that all those torts continue to retain ample independent meaning even if a broader statutory definition of unfair competition is adopted.

Industrial's assertion that since policy coverage is provided only for damages which cannot be awarded under section 17200 et seq., “unfair competition” in the policy was intended to have a narrow, common law meaning, is refuted by the fact that a damage award under section 17200 et seq., cannot be categorically excluded.  (See discussion, infra.)

Industrial's contention that the relatively low premium paid for the extended coverage endorsement is a further indication that a narrow coverage for the advertising liability was intended, is unpersuasive for two reasons.   First, the amount paid for the endorsement was $6,700, hardly an insignificant sum.   Moreover, the facts outlined by Industrial indicate that the Bank has repeatedly rejected the more expensive liability policies and approached several CGL and other carriers to obtain low premium coverage for lender and depositor liability.   If anything, this record shows that the Bank has shopped around to get the fullest coverage for the least premium rather than a limited coverage for a low premium.

Industrial's citation to foreign published opinions 4 is of no avail either.   Those cases apply either the New York or Washington law which do not define unfair competition in the same terms as section 17200 does.   Moreover, many of those cases follow Ruder, the leading New York authority, without independent analysis (Pine Top Ins. Co. v. Public Util. Dist. 1, supra, 676 F.Supp. at pp. 215–217;  Globe Indem. Co. v. First American State Bank, supra, 720 F.Supp. at pp. 855–857;  Westfield Ins. Co. v. TWT, Inc., supra, 723 F.Supp. at p. 496) while others arrive at a narrow interpretation of unfair competition by holding that the unfair methods of competition apply only to acts against competitors (i.e., Boggs v. Whitaker, Lipp & Helea, Inc., supra, 784 P.2d at p. 1275), a diametrically opposite conclusion from that reached in California (see Barquis v. Merchants Collection Assn., supra, 7 Cal.3d at p. 109, 101 Cal.Rptr. 745, 496 P.2d 817).

Finally, we observe that the “context” theory works to refute rather than advance Industrial's argument that the CGL policy meant to incorporate the common law definition of “unfair competition.”   This follows from exclusion 5(c) in the policy which provides that the coverage does not apply to advertising injury arising out of “incorrect description or mistake in advertised price of goods, products or services sold, offered for sale or advertised.”  (Emphasis added.)   If unfair competition would be equivalent to palming-off of goods of a business rival as one's own, as suggested by Industrial, the coverage for unfair competition would become not only symbolic, but virtually nonexistent due to the exclusionary clause in the policy.   The result urged by Industrial violates two cardinal rules of contract interpretation advanced by Industrial itself:  (1) that an insurance contract must be so construed as to give effect to each word of the policy, and to avoid any interpretation which would render a portion of the policy “meaningless surplusage” (Coe v. Superior Court, supra, 220 Cal.App.3d at p. 53, 269 Cal.Rptr. 368);  and (2) that insurance contracts must be given a practical and reasonable interpretation that fulfills the object and purpose of the contract and does not lead to an absurd conclusion (Giddings v. Industrial Indemnity Co. (1980) 112 Cal.App.3d 213, 218, 169 Cal.Rptr. 278;  Public Util. Dist. v. Public Util. No. 1 (1989) 112 Wash.2d 1, 771 P.2d 701, 706).

(b) Applicability of Rule of Ambiguity

 In the alternative, Industrial argues that even if the phrase “unfair competition” may be deemed ambiguous, the familiar rules regarding strict construction of the policy language against the insurer does not apply in the present case because the Bank was not an unsophisticated insured and had equal bargaining power with Industrial.  (Garcia v. Truck Ins. Exchange (1984) 36 Cal.3d 426, 438, 204 Cal.Rptr. 435, 682 P.2d 1100;  Fireman's Fund Ins. Co. v. Fibreboard Corp. (1986) 182 Cal.App.3d 462, 467, 227 Cal.Rptr. 203;  Atlantic Mutual Ins. Co. v. Travelers Ins. Co. (1983) 147 Cal.App.3d 1054, 1057, 195 Cal.Rptr. 476.)   Industrial's contention must be rejected for the elementary reason that the exception to the strict rule of construction applies only when the terms of the policy were negotiated between the parties or when the controversy is between insurance companies, but is inapplicable to standardized insurance policies sold to the insured on a take it or leave it basis.

Thus significantly enough, Garcia involved an insurance contract between defendant insurance company and the California Hospital Association (CHA).   By way of dictum, the court remarked that CHA would not be able to invoke the rule of strict construction because CHA “enjoyed substantial bargaining power vis-á-vis the carrier” and that the terms of the policy were “negotiated between the carrier and CHA, and the language in contention was the product of joint drafting.”  (Garcia v. Truck Ins. Exchange, supra, 36 Cal.3d at p. 438, 204 Cal.Rptr. 435, 682 P.2d 1100.)   In Fibreboard the court likewise emphasized that since Fibreboard (the insured) proposed or drafted the policy language at issue, “reasons for the general rule of construction—‘to protect the insured's reasonable expectation of coverage in a situation in which the insurer-draftsman controls the language of the policy’ [citation]—were nonexistent.”  (Fireman's Fund Ins. Co. v. Fibreboard Corp., supra, 182 Cal.App.3d at p. 468, 227 Cal.Rptr. 203.)   In Atlantic Mutual the dispute was between two insurance companies and the rule against strict construction held inapplicable for that reason.  (Atlantic Mutual Ins. Co. v. Travelers Ins. Co., supra, 147 Cal.App.3d at p. 1057, 195 Cal.Rptr. 476;  see also Hartford Accident & Indemnity Co. v. Sequoia Ins. Co. (1989) 211 Cal.App.3d 1285, 1300, 260 Cal.Rptr. 190.)

By contrast, the legal dispute here is not between insurance companies, but rather between an insurance company and a bank.   The policy was not negotiated between the parties and the Bank had no hand in drafting it.   The CGL policy and the extended coverage endorsement thereto were standard industry forms which were sold to the Bank on a take it or leave it basis.   As Garcia itself underscores, in such a situation the insurer must be held responsible for any ambiguity in the language of the insurance policy.   (Garcia v. Truck Ins. Exchange, supra, 36 Cal.3d at p. 438, 204 Cal.Rptr. 435, 682 P.2d 1100;  see also Appalachian Ins. Co. v. McDonnell Douglas Corp. (1989) 214 Cal.App.3d 1, 26, 262 Cal.Rptr. 716.)

(3) The Trial Court Erred in Ruling That the Damages Clause in the Policy Did Not Cover the Relief Sought Under Section 17203

 The Bank next contends that the trial court erroneously held that Industrial's policies did not provide coverage for unfair competition because such coverage existed only for damages which could not be awarded under section 17203.5  The Bank claims the policy provision that “all sums which the insured shall become legally obligated to pay as damages” is ambiguous in at least two respects:  (i) there is an ambiguity as to the meaning of damages vis-à-vis equitable relief;  and (ii) there is another uncertainty whether or not damages may be recovered under section 17203.   Both of these ambiguities, continues the Bank, should be determined in favor of coverage.   The Bank's point is well taken.

Civil Code section 3281 defines damages as compensation for detriment caused by the unlawful act or omission of another.6  Webster likewise provides a broad definition by stating that damages are “compensation in money imposed by law for loss or injury.”  (Webster's New Collegiate Dict. (9th ed. 1984) p. 323.)  Aerojet–General Corp. v. Superior Court (1989) 211 Cal.App.3d 216, 257 Cal.Rptr. 621, 258 Cal.Rptr. 684, a case interpreting a similar damages provision in a CGL policy, explains that the phrase “damages” is subject to two reasonable interpretations and could mean damages at law or equitable monetary relief.  “From the standpoint of the lay insured, ‘damages' could well include any sum expended under sanction of law, including both money damages and sums paid out to an injured party in response to its claim for equitable relief․  [¶]  The fact that the damages do not take the form of a traditional damage award in an action at law is not determinative of the insureds' reasonable expectation of coverage.”  (At pp. 226, 228, 257 Cal.Rptr. 621, 258 Cal.Rptr. 684.)

The second uncertainty lies in the case law which is in conflict as to whether damages are recoverable under section 17203.   While Chern v. Bank of America (1976) 15 Cal.3d 866, 875, 127 Cal.Rptr. 110, 544 P.2d 1310 states that no damages may be recovered under section 17203 for false advertising by private individuals, United Farm Workers of America v. Superior Court (1975) 47 Cal.App.3d 334, 120 Cal.Rptr. 904 confirms the longstanding rule that “The fact that the statutes sound in equity and by their terms do not specify that damages may be awarded does not bar the recovery of damages in a proper case even though the action be one in equity rather than law.”  (At p. 344, 120 Cal.Rptr. 904.)   Significantly enough, in Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 197 Cal.Rptr. 783, 673 P.2d 660 our Supreme Court, citing both Chern and United Farm Workers, left the issue unresolved by declaring that “We do not, however, decide whether a plaintiff other than a business competitor can recover damages on a cause of action based on the unfair competition or false advertising law.”  (At p. 215, 197 Cal.Rptr. 783, 673 P.2d 660, fn. omitted.)

Needless to say, the demonstrated uncertainties surrounding the notion of damages and their recoverability under section 17203, by themselves, dictate an interpretation of that phrase against Industrial, who caused the uncertainty to exist and who could have clarified the ambiguous term in the policies.   But there is yet another reason in this case which requires a ruling in favor of coverage.   The record demonstrates that the Fallat plaintiffs were seeking not only restitution (i.e., the return of the sums they had unlawfully paid to the Bank), but also all the moneys the Bank paid to insurance agents or brokers as compensation for arranging insurance premium financing and all amounts collected by the Bank through its unlawful or unfair business practices.   This prayer, of course, falls squarely within the statutory definition of damages, since the sums sought constitute compensation for detriment caused by an unlawful act of another.  (Civ.Code, § 3281;  see, supra, fn. 6.)

We note in passing that the cases cited by Industrial that equitable or restitutionary relief is not covered by the “damages” clause of an insurance policy (State Farm Fire & Cas. Co. v. Superior Court, supra, 191 Cal.App.3d at p. 77, 236 Cal.Rptr. 216;  Hackethal v. National Casualty Co., supra, 189 Cal.App.3d at p. 1110, 234 Cal.Rptr. 853;  United Pacific Ins. Co. v. Hall (1988) 199 Cal.App.3d 551, 556, 245 Cal.Rptr. 99;  Jaffe v. Cranford Ins. Co. (1985) 168 Cal.App.3d 930, 934–935, 214 Cal.Rptr. 567;  Nationwide Ins. Co. v. King (S.D.1987) 673 F.Supp. 384, 386–387) are not controlling in the present instance for two principal reasons.   First, the new trend of cases holds that under the “damages” clause of CGL policies, recovery may be had not only for damages in a strict legal sense, but also for restitution and other equitable rights.  (Aerojet–General Corp. v. Superior Court, supra, 211 Cal.App.3d at pp. 226, 228, 232, 257 Cal.Rptr. 621, 258 Cal.Rptr. 684;  see also Chesapeake Utilities Corp. v. American Home Assur. (D.Del.1989) 704 F.Supp. 551, 559–560;  New Castle County v. Hartford Acc. and Indem. Co. (D.Del.1987) 673 F.Supp. 1359, 1365.)   Moreover, here the order sought by the Fallat plaintiffs does not present a classic restitutionary scenario—but includes a demand of money from third persons as well which indisputably constitutes damages within the definition of the statute.  (See fn. 6, supra.)

(4) The Unfair Competition Occurred in the Course of the Bank's Advertising Activity

 The insurance policies in dispute provided coverage for unfair competition only if the latter occurred in the course of the insured's advertising activities.   The trial court held that the Industrial policies did not provide coverage for the additional reason that the unfair competition alleged in the Fallat case did not occur in the course of the Bank's advertising activities.   The Bank contends that this ruling of the court was also erroneous.   We agree.

Under standard dictionary definition “advertising” includes any activities designed to bring a seller's goods or services to the attention of potential buyers or to induce them to buy.   The term is not limited to paid announcements in print and broadcast media.   To advertise is “[t]o advise, announce, apprise, command, give notice of, inform, make known, publish” or to “call to the public attention by any means whatsoever.”  (Black's Law Dict. (5th ed. 1979) p. 50, emphasis added.)   California courts similarly interpret advertising broadly:  even one-on-one oral representations are advertising under the California case law (e.g., Nichols v. Great American Ins. Companies (1985) 169 Cal.App.3d 766, 774–775, 215 Cal.Rptr. 416;  Feather River Trailer Sales, Inc. v. Sillas (1979) 96 Cal.App.3d 234, 248, 158 Cal.Rptr. 26).   The “FC & S” bulletin on “Personal and Advertising Injury Liability” (issued in Mar. 1990) takes a similarly broad view of advertising:  “When the named insured (who is not in the advertising, etc. business) is merely advertising its own business, however, it will be protected by coverage B of the CGL against the advertising injury offenses as defined.   A grocery that distributes flyers in its neighborhood is an example of this point.”  (Original emphasis.)

The record herein reveals that the Bank did engage in advertising its premium financing service and that the advertising injury (i.e., unfair competition) occurred during such advertising.   First of all, the Fallat plaintiffs allege in their complaint that “Through the Coast Program, Central Bank induces insurance agents and brokers throughout California to engage in a joint venture with the bank and refer business to the bank by offering a fee of $17, or in some instances $10, for each customer referred to the Coast Program.  [¶] 20.   This fee is ostensibly paid to the insurance agent for assisting the insured in preparing an application for credit, but actually serves to induce agents or brokers to require or induce purchasers to finance their automobile insurance through Central Bank and its Coast Program and to act as conduits for the placing of installment contracts with defendants.”   The transcript further discloses that the Bank advertised to insurance agents and brokers inducing them to recommend to their insureds the Bank's Coast Program instead of Pacific Bank's rival Commonwealth Program, and that ads were placed also in an insurance trade journal.   The fact that the Bank used third parties (i.e., insurance agents and brokers) to carry its advertising message to the consumers (insureds) is no less an advertising activity than a grocer using a youth to distribute his flyers in the neighborhood (see “FC & S” bulletin, supra ).

B. Contractual Liability Coverage

(1) The Adjudication Order Regarding Contractual Liability Is Moot

 In Eagle Associates the Bank tendered the claims for defense and indemnity not only to Industrial, but also to National Union Fire Insurance Company, the Bank's trust department errors and omissions insurer and Aetna Casualty & Surety Company, the Bank's prior CGL carrier.   After Industrial had filed its summary adjudication motion in Eagle Associates, the Bank settled the matter with National Union and Aetna and dismissed the Eagle Associate claims against Industrial by admitting that the Industrial policies provided no coverage for the underlying lawsuits.   Simultaneously, the Bank urged that the contractual liability issue be taken off calendar on the ground that it was moot.   Nonetheless, the trial court proceeded to rule on the motion and held, in essence, that Industrial's policies provided no coverage for tort liability arising from breach of contract.

Although the parties request that we decide the issue of contractual liability coverage as well, we decline the invitation and conclude that the order relating to the adjudication of contractual liability is moot.

It is, of course, well settled that an existing legal controversy may be rendered moot by subsequent events.   As stated in Wilson v. L.A. County Civil Service Com. (1952) 112 Cal.App.2d 450, 453, 246 P.2d 688:  “ ‘although a case may originally present an existing controversy, if before decision it has, through act of the parties or other cause, occurring after the commencement of the action, lost that essential character, it becomes a moot case or question which will not be considered by the court.’ ”  (Accord, 3 Witkin, Cal.Procedure (3d ed. 1985) Actions, § 50, pp. 80–81.)   The case herein falls squarely within the above rule due to the dismissal of the Eagle Associate claims against Industrial prior to summary adjudication of the contractual liability issue raised therein.

Let a peremptory writ of mandate issue directing respondent superior court:  to vacate the summary adjudication order rendered in the Fallat case and enter in its place a different order denying said motion.

FOOTNOTES

1.   Petitioner Bank of the West is successor in interest to Central Bank, which was a party in the proceedings below.   Since the acquisition of Central Bank by petitioner was not effected until after the summary adjudication motions were made, petitioner's status as successor in interest is not reflected in the pleadings and other papers below.   For simplicity of reference, we use the term “Bank” to designate both Central Bank and Bank of the West.

FN2. Unless otherwise indicated, all further statutory references are to the Business and Professions Code..  FN2. Unless otherwise indicated, all further statutory references are to the Business and Professions Code.

3.   In Eagle Associates the court was invited to interpret the following language of the CGL policy:  “The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because ofCoverage A—bodily injury, orCoverage B—property Damageto which this insurance applies, caused by an occurrence ․“Exclusions“This insurance does not apply:“(a) to liability assumed by the insured under any contract or agreement except an incidental contract;  but this exclusion does not apply to a warranty of fitness or quality of the named insured's products or a warranty that work performed by or on behalf of the named insured will be done in a workmanlike manner.”  (Original emphasis.)

4.   For the proposition that the term “unfair competition” in an insurance policy should be given the limited common law meaning, Industrial cites the following out-of California authorities:  Ruder & Finn Inc. v. Seaboard Sur. Co., supra, 439 N.Y.S.2d 858, 422 N.E.2d 518;  Meyers & Sons v. Zurich American Ins. (1989) 74 N.Y.2d 298, 546 N.Y.S.2d 818, 545 N.E.2d 1206;  Seaboard Sur. Co. v. Ralph Williams' N.W. Chrys. P., Inc. (1973) 81 Wash.2d 740, 504 P.2d 1139;  Boggs v. Whitaker, Lipp & Helea, Inc. (1990) 56 Wash.App. 583, 784 P.2d 1273;  Pine Top Ins. v. Public Util. D. # 1 of Chelan Cty., supra, 676 F.Supp. 212;  Globe Indem. Co. v. First American State Bank (W.D.Wash.1989) 720 F.Supp. 853;  Westfield Ins. Co. v. TWT, Inc. (N.D.Cal.1989) 723 F.Supp. 492.

5.   Section 17203 provides:  “Any person performing or proposing to perform an act of unfair competition within this state may be enjoined in any court of competent jurisdiction.   The court may make such orders or judgments, including the appointment of a receiver, as may be necessary to prevent the use or employment by any person of any practice which constitutes unfair competition, as defined in this chapter, or as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition.”

6.   Civil Code section 3281 provides:  “Every person who suffers detriment from the unlawful act or omission of another, may recover from the person in fault a compensation therefor in money, which is called damages.”  (Emphasis added.)

ANDERSON, Presiding Justice.

POCHÉ and PERLEY, JJ., concur.