The maker of the Bratz line of dolls and toys recently filed suit against its commercial general liability insurer in the Central District of California alleging wrongful refusal to defend it in a lawsuit by Mattel. MGA Entertainment, Inc. v. Evanston Ins. Co., C.A. No. 09-00025 (Jan. 7, 2009).

The underlying action began when Mattel sued a former employee (and current employee of Bratz-maker MGA Entertainment, Inc.) for allegedly developing the Bratz line of toys while at Mattel and then selling the idea to MGA. MGA intervened and filed its own complaint against Mattel, which then filed various counterclaims against MGA relating to the Bratz line. In its Second Amended Answer and Counterclaims, Mattel added a claim for “trade disparagement,” alleging that MGA disparaged Mattel and its products in emails and press releases.

In the lawsuit against its insurer, MGA asserts that the added “trade disparagement” claim triggered the insurer’s duty to defend under the CGL policy it issued to MGA, which provides coverage for “advertising injury” and “personal injury,” both of which are defined to include “oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.” MGA’s Complaint against its insurer includes claims for bad faith, breach of contract and declaratory judgment.

For a copy of the complaint, please click here.