Fashion Advertising Case Highlights Insurance Coverage Opportunities and Pitfalls

By: Lucas J. Tanglen and Anwesha Chatterjee

Businesses sometimes overlook valuable coverage that might be available under their existing insurance policies for trademark-infringement and other intellectual property-related lawsuits. A recent federal court ruling confirmed that commercial general liability (CGL) policies may provide coverage for such claims, while also calling attention to coverage exclusions that might present obstacles, depending on the allegations in a given case.

The underlying dispute was between sportswear giant Adidas and a clothing brand named Aviator Nation (Aviator). The two entities already had a years-long history of litigation and settlements, centering on Aviator’s alleged infringement of Adidas’ famed “Three Stripe Mark.” Most recently, Adidas had sued Aviator for trademark infringement and related counts. Aviator tendered defense and indemnity of the lawsuit to its CGL insurer under the “personal and advertising injury” coverage that exists in many typical business insurance policies. The insurer denied coverage, and Aviator responded by suing its insurer in the federal district court for the Central District of California.

The Court ruled that Adidas’ claims against Aviator were potentially within Aviator’s insurance coverage, but the Court held that an exclusion barred coverage based on Aviator’s past alleged infringement of the Three Stripe Mark.¹ More specifically, the Court ruled:

• The allegations triggered the policy’s coverage for “infringing upon another’s . . . trade dress.” Although Adidas did not plead a separate trade dress claim, the Court focused on the facts alleged by Adidas and found potential trade dress liability because the complaint alleged that Aviator’s placement, color treatment, and display of the stripe designs potentially copied the overall look of Adidas’s apparel, and Aviator’s social media posts depicting the allegedly infringing apparel reasonably qualified as advertisements and contributed to consumer confusion. Id. at *7–10.
• However, the policy’s “prior publication” exclusion barred coverage. The Court held that the policy exclusion applied when there are both pre-policy and subsequent publications of the same or substantially similar advertisement, even if the advertisements are not identical. Only a genuine, distinct “fresh wrong” would avoid the exclusion. Because Aviator’s later five-stripe design allegedly created the appearance of Adidas’ protected three-stripe design in substantially the same way as its earlier designs, the advertisements were not a distinct fresh wrong. Id. at *10–12.

For years, we have written about CGL insurance as a potentially overlooked source of coverage for trademark and other IP claims. See Policyholder’s Guide to the Law of Insurance Coverage (§ 8.03) (numerous “advertising injury” cases from 1980s-2020s). The Aviator ruling is the latest reminder that policyholders should consider—in consultation with coverage counsel—notifying CGL insurers of trademark and other IP claims, while remaining aware of exclusions that insurers might cite in their attempts to avoid coverage.

Footnotes

¹ Aviator Nation, Inc. v. Fireman’s Fund Ins. Co., No. CV 25-10484-DMG (ADSx), 2026 WL 2299468 (C.D. Cal. Aug. 10, 2026).