PERSONAL AND ADVERTISING INJURY LIABILITY COVERAGE: OFFENSES, EXCLUSIONS, AND UPDATES. Heidi L. Vogt Lee Anne N. Conta. von Briesen & Roper, s.c.

Transcription

1 PERSONAL AND ADVERTISING INJURY LIABILITY COVERAGE: OFFENSES, EXCLUSIONS, AND UPDATES WISCONSIN DEFENSE COUNSEL S SPRING CONFERENCE The American Club, Kohler April 24-25, 2014 Heidi L. Vogt Lee Anne N. Conta 411 E. Wisconsin Avenue, Suite 1000 Milwaukee, Wisconsin hvogt@vonbriesen.com lconta@vonbriesen.com I. INTRODUCTION Commercial general liability ( CGL ) policies traditionally have protected the policyholder in the event of property damage or injury to an individual in the course of the policyholder s business. In the mid-1980s, advertising injury and personal injury liability coverages were incorporated into CGL policies. Claims for such coverage have increased dramatically over the years, with policyholders asserting coverage for a variety of business disputes, including intellectual property, consumer fraud, and Internet-related violations. Courts disagree considerably as to the interpretation of these policy provisions. II. THE POLICY PROVISIONS Coverage B - Personal and Advertising Injury Liability 1. Insuring Agreement a. We will pay those sums that the insured becomes legally obligated to pay as damages because of personal and advertising injury to which this insurance applies.... b. This insurance applies to personal and advertising injury caused by an offense arising out of your business but only if the offense was committed in the coverage territory during the policy period. 2. Exclusions [See page 6, infra] * These materials are furnished as general information only and are not intended as a substitute for obtaining specific legal advice from qualified legal counsel. The materials do not necessarily reflect the opinions of von Briesen & Roper, s.c. or any of its attorneys or clients.

2 SECTION V - DEFINITIONS 1. Advertisement means a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters. For the purposes of this definition: a. Notices that are published include material placed on the Internet or on similar electronic means of communication; and b. Regarding web-sites, only that part of a website that is about your goods, products or services for the purposes of attracting customers or supporters is considered an advertisement. 14. Personal and advertising injury means injury, including consequential bodily injury, arising out of one or more of the following offenses: a. False arrest, detention or imprisonment; b. Malicious prosecution; c. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor; d. Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person s or organization s goods, products or services; e. Oral or written publication, in any manner, of material that violates a person s right of privacy; f. The use of another s advertising idea in your advertisement ; or g. Infringing upon another s copyright, trade dress or slogan in your advertisement. 1 III. ADVERTISING INJURY COVERAGE In order for coverage to exist under what we traditionally view as the advertising injury provisions, the claim must consist of: (a) an injury arising out of an enumerated offense; (b) committed in the coverage territory during the policy period; and (c) occurring in the course of advertising the insured s goods, products or services. 1 This policy language is reproduced from ISO Form CG However, please note there are numerous versions of personal and advertising injury liability language contained in ISO forms over the years. At one time the advertising injury and personal injury offenses were defined separately and case law developed respectively. 2

3 A. Is There An Enumerated Offense? The underlying complaint must allege one of the enumerated offenses. See Atlantic Mut. Ins. Co. v. Badger Medical Supply Co., 191 Wis. 2d 229, 237, 528 N.W.2d 486 (Ct. App. 1995). The enumerated offenses typically 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. Oral or written publication of material that violates a person s right of privacy. Misappropriation of advertising ideas or style of doing business, or The use of another s advertising idea in your advertisement. Infringement of copyright, title or slogan, or Infringing upon another s copyright, trade dress or slogan in your advertisement. 1. 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. Skylink Techs., Inc. v. Assurance Co. of Am., 400 F. 3d 982 (7th Cir. (Ill.) 2005) (false advertising suit did not allege disparagement); BASF AG v. Great American Assurance Co., 522 F.3d 813 (7th Cir. (Ill.) 2008) (underlying complaint failed to allege a false statement about the plaintiff and, therefore, the claim did not fall within this offense). 2. Oral or written publication of material that violates a person s right of privacy. Courts are split as to whether junk fax claims (violations of the Telephone Consumer Protection Act (TCPA)) constitute a privacy violation. In Sawyer v. West Bend Mut. Ins. Co., 2012 WI App 92, 343 Wis. 2d 714, 821 N.W.2d 250 (Ct. App. 2012), rev. granted, 345 Wis. 2d 400, 827 N.W.2d 95, 2013 WI 6 (Nov. 14, 2012), voluntary dismissal by order, 350 Wis. 2d 706, the Wisconsin Court of Appeals held the recipient was a person or organization within the meaning of the offense; the TCPA violation was a violation of the recipient s right to privacy; and the unsolicited sending of the fax was publication. 3

4 3. Misappropriation of advertising ideas or style of doing business, or The use of another s advertising idea in your advertisement. In Air Engineering, Inc. v. Industrial Air Power, LLC, 2013 WI App 18, 346 Wis. 2d 9, 828 N.W.2d 565 (Ct. App. 2013), rev denied, 2013 WI 80, the Wisconsin Court of Appeals held the insured s alleged use of an Internet advertising system constituted use of another s advertising idea. See also Badger Medical, 191 Wis. 2d at 229 (no coverage for claims that the insured intentionally induced plaintiff s employee to breach a restrictive covenant in order to obtain and control numerous customers served by the employee while employed with the plaintiff); Krueger International, Inc. v. Federal Ins. Co., 647 F. Supp. 2d 1024 (E.D. Wis. 2009) (misappropriation of furniture design did not allege unauthorized taking or use of any advertising idea, material, slogan, style or title of others ). 4. Infringement of copyright, title or slogan, or Infringing upon another s copyright, trade dress or slogan in your advertisement. See Acuity v. Bagadia, 2008 WI 62, 310 Wis. 2d 197, 750 N.W.2d 817 (2008) (coverage for infringement of title extended to trademark infringement); Fireman s Fund Ins. Co. v. Bradley Corp., 2003 WI 33, 261 Wis. 2d 4, 660 N.W.2d 666 (2003) (finding coverage under the infringement of trademark, copyright, title or slogan offense); Acuity v. Ross Glove Co., 2012 WI App 70, 344 Wis. 2d 29, 817 N.W.2d 455 (Ct. App. 2012) (holding a complaint alleging trade dress infringement fell within the infringing upon another s copyright, trade dress or slogan in your advertisement offense). B. Did The Injury Take Place In the Coverage Territory During The Policy Period? Where multiple offenses are committed, questions arise both as to whether, and the extent to which, a course of conduct involves a single act or multiple acts. Another question concerns the issue of who has coverage responsibility for an infringing product manufactured in one policy period but not sold until the next policy period. C. Did The Advertising Injury Occur In The Course Of Advertising The Insured s Goods, Products Or Services? 1. Advertising Activity In order to determine whether the offense was committed in the course of the insured s advertising, it must first be determined whether the insured engaged in advertising. Fireman s Fund, 2003 WI 33, 41. Courts have applied either a 4

5 broad or narrow interpretation to advertising (absent a definition in the policies). Wisconsin applied a broad interpretation in Acuity v. Bagadia, 2008 WI Causal Connection. An insured must demonstrate there is a causal connection between the plaintiff s claims and the insured s advertising. Fireman s Fund, 2003 WI 33 (holding so long as the advertising materially contributed to the plaintiff s injury, the connection element is met); see also Acuity v. Bagadia, 2008 WI 62. IV. PERSONAL INJURY COVERAGE In order for coverage to exist under what we traditionally view as the personal injury provisions, the claim must consist of: (a) an injury arising out of an enumerated offense; (b) committed in the coverage territory during the policy period; and (c) arising out of the conduct of the insured s business, excluding advertising, publishing, broadcasting or telecasting done by or for the insured. 2 A. Is There An Enumerated Offense? Like advertising injury, the personal injury must arise from an enumerated offense. The offenses include: False arrest, detention or imprisonment; Malicious prosecution; The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, by or on behalf of its owner, landlord or lessor; or 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; Oral or written publication of material that violates a person s right of privacy. Wisconsin cases have addressed the wrongful eviction/entry/invasion offense in the discrimination context, e.g., U.S. v. Security Mgmt. Co., 96 F.3d 260 (7 th Cir. 2 The language arising out of the conduct of the insured s business, excluding advertising, publishing, broadcasting or telecasting done by or for the insured was included in older versions of CGL policies. Now the personal injury and advertising injury offenses are combined and the Insuring Agreement requires the offense to arise out of the insured s business (see page 1, supra). 5

6 (Wis.) 1996) and the environmental context, e.g., Scottish Guar. Ins. Co. Ltd. v. Dwyer, 19 F.3d 307 (7 th Cir. (Wis.) 1994). Cases have also construed the disparagement offense. See, e.g., Towne Realty, Inc. v. Zurich Ins. Co., 193 Wis. 2d 544, 534 N.W.2d 886 (Ct. App. 1995), aff d in part, rev d in part, 201 Wis. 2d 260, 548 N.W.2d 64 (1996) (claim that the plaintiffs were seriously maligned by the insured s actions and that this injury precluded them from engaging in their chosen profession was sufficiently broad to suggest a claim within the definition of personal injury ); see also Bradley Corp. v. Zurich Ins. Co., 984 F.Supp (E.D. Wis. 1997) (relying on Towne Realty to find a duty to defend a discrimination claim). B. Was The Injury Committed In The Coverage Territory During The Policy Period? See Section III. B. of this outline. C. Did The Personal Injury Arise Out Of The Conduct Of The Insured s Business, Excluding Advertising, Publishing, Broadcasting Or Telecasting Done By Or For The Insured? Under the personal injury provisions, the insured must demonstrate a causal connection between the plaintiff s claims and the insured s regular business activities, excluding advertising, publishing, broadcasting or telecasting. See, e.g., Grossman v. American Family Mut. Ins. Co., 461 N.W.2d 489 (Minn. Ct. App. 1990) (holding the business of a partnership does not include internecine legal strife). V. THE APPLICABLE EXCLUSIONS A. Personal and advertising injury policies contain numerous and varied exclusions, depending on the ISO form contained in the policy at issue. The following are some of the relevant exclusions: 3 This insurance does not apply to: a. Knowing Violation Of Rights Of Another Personal and advertising injury caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict personal and advertising injury. b. Material Published With Knowledge Of Falsity Personal and advertising injury arising out of oral or written publication of material, if done by or at the direction of the insured with knowledge of its falsity. 3 These exclusions are taken from ISO Form CG

7 c. Material Published Prior To Policy Period Personal and advertising injury arising out of oral or written publication of material whose first publication took place before the beginning of the policy period. d. Criminal Acts Personal and advertising injury arising out of a criminal act committed by or at the direction of the insured. i. Infringement Of Copyright, Patent, Trademark Or Trade Secret Personal and advertising injury arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. Under this exclusion, such other intellectual property rights do not include the use of another s advertising idea in your advertisement. However, this exclusion does not apply to infringement, in your advertisement, of copyright, trade dress or slogan. j. Insureds In Media And Internet Type Businesses Personal and advertising injury committed by an insured whose business is: (1) Advertising, broadcasting, publishing or telecasting; (2) Designing or determining content of websites for others; or (3) An Internet search, access, content or service provider. However, this exclusion does not apply to Paragraphs 14.a., b. and c. of personal and advertising injury under the Definitions Section. For the purposes of this exclusion, the placing of frames, borders or links, or advertising, for you or others anywhere on the Internet, is not by itself, considered the business of advertising, broadcasting, publishing or telecasting. k. Electronic Chatrooms Or Bulletin Boards Personal and advertising injury arising out of an electronic chatroom or bulletin board the insured hosts, owns, or over which the insured exercises control. l. Unauthorized Use Of Another s Name Or Product Personal and advertising injury arising out of the unauthorized use of another s name or product in your address, domain name or metatag, or any other similar tactics to mislead another s potential customers. 7

8 p. Distribution Of Material In Violation Of Statutes Personal and advertising injury arising directly or indirectly out of any action or omission that violates or is alleged to violate: (1) The Telephone Consumer Protection Act (TCPA), including any amendment of or addition to such law; or (2) The CAN-SPAM Act of 2003, including any amendment of or addition to such law; or (3) Any statute, ordinance or regulation, other than the TCPA or CAN-SPAM Act of 2003, that prohibits or limits the sending, transmitting, communicating or distribution of material or information. B. Issues related to the exclusions. 1. Knowing Violation Of The Rights Of Another. In Acuity v. Ross Glove, 2012 WI App 70, Acuity argued the knowing violation exclusion precluded coverage because the complaint alleged the trade dress infringements were willful and done with the intent to cause harm, and sought treble damages. The Wisconsin Court of Appeals disagreed, noting the complaint also alleged non-intentional infringement and intent is not a required element of trade dress infringement; see also Air Engineering, 2013 WI App 18 (following Acuity v. Ross Glove to hold the exclusion did not apply where complaint stated claims that do not base liability on a showing of a knowing violation of another s rights and the infliction of advertising injury). In Sawyer, 2012 WI App 92, the Wisconsin Court of Appeals rejected the insurer s argument that the knowing violation exclusion applied, holding that because the complaint alleged the insured knew or should have known that it was not given permission to fax the advertisement, it allowed for the possibility the insured acted negligently. 2. Oral Or Written Publication Of Material Done By Or At The Direction Of The Insured With Knowledge Of Its Falsity. See Curtis-Universal, Inc. v. Sheboygan Med l Servs., Inc., 43 F.3d 1119, (7th Cir. 1994) (holding the exclusion applies if the elements of the tort require the actor to have knowledge of the falsity of the representation or if the complaint sufficiently states the insured acted with knowledge of the falsity of the representations); Quad Graphics, Inc. v. One2One Communications, LLC, 2011 WL (E.D. Wis. 2011) (unpublished) (holding the exclusion applied to a defamation claim). 8

9 3. First Publication Before Policy Period. See Applied Bolting Tech. Prods., Inc. v. USF&G, 942 F. Supp (E.D. Pa. 1996), aff d, 118 F.3d 1574 (3d Cir. 1997) (exclusion applied to preclude coverage for false advertising and unfair competition claims); but see Taco Bell Corp. v. Continental Cas. Co., 388 F.3d 1069 (7th Cir. (Ill.) 2004) (the exclusion did not apply where the misconduct differed in later years). 4. Intellectual Property. In T.C. Development and Design, Inc. v. Discount Ramps.com, LLC, 2011 WL (E.D. Wis. 2011) (unpublished), the Eastern District of Wisconsin applied the intellectual property exclusion to preclude coverage for a lawsuit alleging, inter alia, patent infringement and trademark infringement. Given the lawsuit did not allege copyright, trade dress or slogan (which are excepted from the exclusion), the court held the claims fell squarely within the exclusion. 5. Willful Violation Of A Penal Statute. Some versions of the CGL form include an exclusion for willful violation of a penal statute. See, e.g., Carney v. Village of Darien, 60 F.2d 1273 (7 th Cir. 1992) (exclusion applied where officer s actions of restraint and confinement could have violated a false imprisonment statute). In Gillund v. Meridian Mut. Ins. Co., 2010 WI App 4, 323 Wis. 2d 1, 778 N.W.2d 662 (Ct. App. 2010), the Wisconsin Court of Appeals held the injury caused by a violation of a penal law or ordinance committed by or with the knowledge or consent of the insured was dispositive and excluded coverage for a complaint filed by the insured s niece alleging the insured videotaped his niece in the nude or partially nude without her consent. Even though the insured was not convicted, his conduct violated a criminal statute for invasion of privacy. VI. RELIEF SOUGHT Injunctive relief is not covered by CGL policies. See, e.g., Shorewood Sch. Dist. v. Wausau Ins., 170 Wis. 2d 347, N.W.2d 82 (1992), limited by Johnson Controls, Inc. v. Emplrs. Ins. of Wausau, 2003 WI 108, 38, 264 Wis. 2d 60, 89, 665 N.W.2d 257. Moreover, to the extent the underlying complaint seeks disgorgement of profits, some courts have held this relief does not constitute damages pursuant to CGL policies. See Bank of West v. Superior Ct., 833 P.2d 545 (Cal. 1992). 9

10 VII. CONCLUSION Courts are rendering more and more decisions construing personal and advertising injury provisions with varying results. In addition, insurers have modified their coverage forms to refine the offenses and to reflect additional exclusions, including exclusions for intellectual property and Internet violations. As we move forward, we can anticipate further decisions from the Courts interpreting these offenses and exclusions, particularly in light of the developing law on the underlying claims. 10