In a class action suit against Aamco Transmissions, Inc., consumers Joseph R. Tracy and Joseph P. Tracy claimed that Aamco and its network of franchisees used deceptive advertising that inaccurately described Aamco’s services and lured many consumer purchasers of transmission services into paying excessively and for unnecessary repairs. The Tracys asserted that Aamco was liable under the Pennsylvania Unfair Trade Practices and Consumer Protection Law. Aamco was the insured under a comprehensive general liability insurance policy issued by Granite State Insurance Co. This policy provided liability coverage to Aamco “for personal injury or advertising injury… arising out of the conduct of ” Aamco’s business. The policy defined advertising injury as “injury arising . . . in the course of [Aamco’s] advertising activities, if such injury arises out of libel, slander, defamation, violation of right of privacy, piracy, unfair competition, or infringement of copyright, title or slogan.”
Contending that it had coverage under the “unfair competition” category of the advertising injury coverage, Aamco demanded that Granite defend and indemnify it in connection with the consumer class action case described above. When Granite declined to do so, Aamco settled the case on its own. Granite then brought a declaratory judgment action against Aamco in federal district court. Granite sought a ruling that it was not obligated to provide coverage for Aamco in the class action case brought by the Tracys. A federal district court concluded that the unfair competition term in the policy contemplated coverage only for common law–based claims against Aamco, not for any claims based on a state or federal statute. Because the Tracys’ class action case was based on a supposed violation of a Pennsylvania statute, the district court held that Granite’s policy did not furnish coverage to Aamco. In addition, the court held that the term unfair competition was not ambiguous and that Aamco could not have had a reasonable expectation that consumers’ claims against it would be covered. Aamco appealed. Did Aamco win its appeal?

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