Personal and Advertising Injury Liability Coverage, Exclusions, and Updates

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1 Personal and Advertising Injury Liability Coverage, Exclusions, and Updates Heidi L. Vogt Lee Anne N. Conta von Briesen & Roper, s.c. 411 East Wisconsin Avenue, Suite 1000 Milwaukee, WI (414) Milwaukee Madison 411 East Wisconsin Avenue Suite 1000 Milwaukee, WI

2 History Of Personal And Advertising Injury Liability Coverage Incorporated into CGL policies in mid-1980s. Initial cases involved discrimination and environmental contamination. Explosion of claims involving business disputes and intellectual property violations. Sharp disagreement among courts as to how to apply these provisions.

3 Nature Of Personal And Advertising Injury Liability Coverage Bodily injury and property damage = injury based Personal and advertising injury = offense based Bodily injury and property damage coverage is all risk Personal and advertising injury coverage is narrow in scope

4 Read The Policy Coverage has gone through substantial changes Used to be separate provisions Many variations still in use More changes to come

5 Personal And Advertising Injury Liability Coverage Is Offense-Based In order for coverage to exist, the claim must trigger an enumerated offense. The offense must be committed in the coverage territory during the policy period. The personal and advertising injury must arise out of the insured s business.

6 The Personal and Advertising Injury Offenses 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, committed by or on behalf of its owner, landlord or lessor; 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; Oral or written publication, in any manner, of material that violates a person s right of privacy; The use of another s advertising idea in your advertisement ; or Infringing upon another s copyright, trade dress or slogan in your advertisement.

7 Advertising Injury Liability Coverage In order for a duty to defend to exist under the advertising injury liability provisions, three questions must be answered yes : 1. Did the damages arise from an enumerated offense in the policy? 2. Did the insured engage in advertising? 3. Is there a causal connection between the insured s advertising and the damages alleged? Fireman s Fund Ins. Co. of Wisconsin v. Bradley Corp., 2003 WI 33.

8 The Advertising Injury Offenses 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. Oral or written publication, in any manner, of material that violates a person s right of privacy. The use of another s advertising idea in your advertisement. Infringing upon another s copyright, trade dress or slogan in your advertisement.

9 Slander / Libel / Disparagement False advertising suits may or may not allege disparagement. Skylink Techs., Inc. v. Assurance Co. of America, 400 F.3d 982 (7th Cir. 2005). BASF AG v. Great American Assurance Co., 522 F.3d 813 (7th Cir. 2008). Acme United Corp. v. St. Paul Fire & Marine Insurance Co., 214 Fed. Appx. 596, 2007 WL (7th Cir. 2007) (unpublished).

10 Oral Or Written Publication Of Material That Violates A Person s Right Of Privacy Wisconsin defines the right of privacy as: The right of an individual to be free from unreasonable interference by others in matters of which they are concerned. Zinda v. Louisiana Pacific Corp., 149 Wis. 2d 913, 928 (1989). Courts are split as to whether junk fax claims constitute a privacy violation. See Sawyer v. West Bend Mut. Ins. Co., 2012 WI App 92.

11 The Use Of Another s Advertising Idea In Your Advertisement Trade secrets. Atlantic Mut. Ins. Co. v. Badger Medical Supply Co., 191 Wis. 2d 229 (Ct. App. 1995); Air Engineering, Inc. v. Industrial Air Power, LLC, 2013 WI App 18. Trademark/trade dress infringement. Misappropriation of furniture design. Krueger International, Inc. v. Federal Ins. Co., 647 F. Supp. 2d 1024 (E.D. Wis. 2009).

12 Infringing Upon Another s Copyright, Trade Dress Or Slogan In Your Advertisement Copyright infringement. Acuity v. Bagadia, 2008 WI 62. Trademark/trade dress infringement. Acuity v. Bagadia, 2008 WI 62; Fireman s Fund Ins. Co. of Wisconsin v. Bradley Corp., 2003 WI 33; Acuity v. Ross Glove Co., 2012 WI App 70.

13 Did The Insured Engage In Advertising? Courts have applied either a broad or narrow interpretation. In Acuity v. Bagadia, 2008 WI 62, the Wisconsin Supreme Court applied a broad interpretation. Policy definition of advertisement: [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. Ø Additional clarifying statements regarding the Internet and websites

14 Is There A Causal Connection? The insured must demonstrate there is a causal connection between the plaintiff s claims and the insured s advertising. The Wisconsin Supreme Court has held that so long as the advertising contributed materially to the plaintiff s injury, the causal connection requirement is met. Fireman s Fund, 2003 WI 33. Dispute as to whether the product, by itself, constitutes advertising. Compare Krueger International, Inc., 647 F. Supp. 2d 1024 with Acuity v. Ross Glove, 2012 WI App 70.

15 Personal Injury Liability Coverage In order for a duty to defend to exist under the personal injury liability provisions, a claim must allege: 1. An injury arising out of an enumerated offense; and 2. The injury must arise out of the insured s business.

16 The Personal Injury Offenses 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. 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. Oral or written publication, in any manner, of material that violates a person s right of privacy.

17 Slander / Libel / Disparagement In order for a duty to defend to exist, the complaint must allege false or injurious statements about the plaintiff or plaintiff s goods, products or services. See Towne Realty, Inc. v. Zurich Ins. Co., 193 Wis. 2d 544 (Ct. App. 1995), aff d in part, rev d in part, 201 Wis. 2d 260 (1996) (claim that the plaintiffs were seriously maligned by the insured s actions fell within definition of personal injury ). Difference between duty to defend and duty to indemnify.

18 Wrongful Eviction / Wrongful Entry / Invasion Of The Right Of Private Occupancy The discrimination context. See U.S. v. Security Management Co., Inc., 96 F.3d 260 (7th Cir. 1996) (persons discriminated against did not have a present right of private occupancy and, therefore, there was no coverage); Gatlin v. Deluxe Entertainment, LLC, 2010 WL (E.D. Wis. 2010). The environmental context. See, e.g., Robert E. Lee & Associates v. Peters, 206 Wis. 2d 509 (Ct. App. 1996); but see Scottish Guar. Ins. Co., Ltd. v. Dwyer, 19 F.3d 307 (7th Cir. 1994). Property interests. See Liebovich v. Minn. Ins., 2008 WI 75.

19 False Arrest/Malicious Prosecution False arrest, detention or imprisonment Ø Cases typically involve either law enforcement or security guards Ø Must arise out of the insured s business Malicious prosecution Ø Is there a difference between malicious prosecution and abuse of process? See Heil Co. v. Hartford Accident, 937 F.Supp (E.D. Wis. 1996).

20 Did The Injury Arise Out Of The Insured s Business? There must be a connection between the plaintiff s injury and the insured s business. See Grossman v. American Family Mut. Ins. Co., 461 N.W.2d 489 (Minn. Ct. App. 1990) (the business of a partnership does not include internecine legal strife).

21 The Exclusions Knowing violation of the rights of another or material published with the insured s knowledge of its falsity Prior publication Criminal acts Intellectual property Insureds in media or Internet type businesses Electronic chat rooms or bulletin boards Unauthorized use of another s name or product Violations of the Telephone Consumer Protection Act ( TCPA )

22 Knowledge And Intentional Conduct Exclusions Knowing violation Knowledge of its falsity Willful violation of a penal statute/ criminal acts.

23 Knowing Violation Personal and advertising injury must be 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. Recent duty to defend decisions have held the exclusion does not apply where intent is not an element of the underlying claim. See Acuity v. Ross Glove, 2012 WI App 70; Air Engineering, Inc. v. Industrial Air Power, LLC, 2013 WI App 18; see also Sawyer v. West Bend, 2012 WI App 92.

24 Knowledge Of Its Falsity Personal and advertising injury arising out of oral or written publication of material. See Western Wisconsin Water, Inc. v. Quality Beverage of Wisconsin, 2007 WI App 188. If done by or at the direction of the insured with knowledge of its falsity. Generally requires intent to deceive or some level of intentional conduct. See Western Wisconsin Water, Inc., 2007 WI App, 188; Quad Graphics, Inc. v. One2One Communications, LLC, 2011 WL (E.D. Wis. 2011) (holding the exclusion applied to a defamation claim). Difference between duty to defend and duty to indemnify.

25 Willful Violation Of A Penal Statute/ Criminal Acts Personal and advertising injury caused by the violation of a penal statute or ordinance committed by or with the consent of the insured. Violation of penal statute = violation of a criminal law. Alternatively, personal and advertising injury arising out of a criminal act committed by or at the direction of the insured. Conviction is unnecessary, it is the allegation of a violation that triggers the exclusion. See Gillund v. Meridian Mut. Ins. Co., 2010 WI App 4; Carney v. Village of Darien, 60 F.3d 1273 (7th Cir. 1995).

26 Material Published Prior To Policy Period The exclusion should apply to all publications even if publication continued during the policy period. See Applied Bolting Technology Products, Inc. v. USF&G, 942 F. Supp (E.D.Pa. 1996), aff d, 118 F.3d 1574 (3rd Cir. 1997). The exclusion may not apply if the misconduct differs in subsequent years. See Taco Bell Corp. v. Continental Cas. Co., 388 F.3d 1069 (7th Cir. 2004).

27 The Intellectual Property Exclusion This provision excludes: 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. TC Development & Design Inc. v. Discount Ramps.com, LLC, 2011 WL (E.D. Wis. 2011) (exclusion applied to lawsuit alleging patent and trademark infringement).

28 Relief Sought Injunctive relief is not covered by CGL policies. Shorewood School District v. Wausau Insurance, 170 Wis. 2d 347 (1992), as limited by, Johnson Controls v. Employers Ins. of Wausau, 2003 WI 108. Lost profits, which are equitable in nature, may not be covered. See Bank of the West v. Superior Ct., 833 P.2d 545 (Cal. 1992).

29 The Right To Reimbursement Courts disagree as to whether an insurer has the right to reimbursement for defense fees in the event it is determined the insurer had no duty to defend. See Buss v. Superior Court of Los Angeles, 939 P.2d 766 (Ca. 1997). Some courts allow a right to reimbursement if the insurer properly reserved such right in a reservation of rights letter. Others allow the right to reimbursement only where there is an express provision in the policy providing for reimbursement. See Krueger International, Inc. v. Federal Ins. Co., 647 F. Supp. 2d 1024 (E.D. Wis. 2009).

30 What Is On The Horizon? 2013 ISO revision to the definitions of personal and advertising injury liability deletes the right of privacy offense. Another ISO revision includes a data breach exclusion. Continued development in the law concerning TCPA claims, data breach claims, and other privacyrelated claims.

31 Conclusion Carefully review the allegations to determine whether the elements for coverage are met. Analyze the personal and advertising injury language in the policy for the applicable period in which the offense occurred. Determine which state s law applies. Be aware of the duty to defend and waiver/estoppel law in the applicable jurisdiction.