PERSONAL AND ADVERTISING INJURY LIABILITY COVERAGE: AN ANALYTICAL APPROACH TO CLAIMS

PERSONAL AND ADVERTISING INJURY LIABILITY COVERAGE: AN ANALYTICAL APPROACH TO CLAIMS Annual Update Covering cases from January 2013 -January 2014 Authors: Shaun McParland Baldwin Thomas W. Arvanitis Dennis N. Ventura sbaldwin@tresslerllp.com tarvanitis@tresslerllp.com dventura@tresslerllp.com Tressler LLP 233 South Wacker Drive 22nd Floor Chicago, Illinois 60606 T 312.627.4000 F 312.627.1717 www.tresslerllp.com CALIFORNIA ILLINOIS NEW JERSEY NEW YORK

This article is for general information only and is not intended to give, and should not be relied on for, legal advice in any particular circumstance or fact situation. The reader is advised to consult with an attorney to address any particular situation. The opinions expressed herein are those of the authors and do not reflect the views of Tressler LLP or any of its clients. ATTORNEY ADVERTISING PURSUANT TO NEW YORK DR 2 101(F). 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 2

THE PERSONAL AND ADVERTISING INJURY LIABILITY COVERAGE: AN ANALYTICAL APPROACH TO CLAIMS I. GENERAL REQUIREMENTS OF THE PERSONAL AND ADVERTISING INJURY COVERAGE A. THE INJURY MUST ARISE OUT OF ONE OF THE ENUMERATED OFFENSES The insured in State Farm Fire & Cas. Co. v. Anderson, No. 1:11-cv-304, 2013 U.S. Dist. Lexis 57837 (S.D. Miss. Apr. 23, 2013) (applying Mississippi law), was a board member of a homeowner s association in a neighborhood largely destroyed by Hurricane Katrina. The insured was alleged to have used his position for self-dealing and to facilitate a gaming corporation s takeover of the association in order to build a casino in the neighborhood. With little discussion, the court held that the allegations did not fall within any of the policy s enumerated personal injury and advertising injury offenses and that the insurers had no duty to defend or indemnify. B. THE OFFENSE MUST BE COMMITTED DURING THE POLICY PERIOD In 2003, the claimants in Chicago Ins. Co. v. City of Council Bluff, 713 F.3d 963 (8th Cir. 2013) (applying Iowa law), were exonerated and released from prison for a 1977 murder. The claimants sued the insured-city, alleging that it had wrongfully instituted legal process against them in violation of their constitutional rights. At issue was whether the personal injury coverage was triggered under policies issued to the City from 1982 through 1985, both of which afforded coverage for malicious prosecution caused by an occurrence. The 1982-1983 policy defined an occurrence as an accident... which results, during the policy period, in such personal injury.... The 1983-85 policy defined occurrence as any injury or damages sustained during the policy term. The court held that the policies were not triggered based on its ruling in a related matter, Genesis Ins. Co. v. City of Council Bluffs, 677 F.3d 806 (8th Cir. 2012), in which it held that the tort of malicious prosecution occurs on the date when the underlying charges are filed. The court rejected the insured s argument that the policies occurrence definition made it so coverage was implicated by allegations of damages during their policy periods even if the alleged injury began prior to their policy periods. In Alticor, Inc. v. National Union Fire Ins. Co., 916 F. Supp. 2d 813 (W.D. Mich. 2013) (applying Michigan law), the insured was sued for certain antitrust violations, tortious interference, civil conspiracy and injurious falsehood. The insurer argued that, although a disparagement offense was alleged, the underlying complaint did not allege that the insured made any false statements during the policy period of the subject policy. The court agreed. However, the court noted that the interrogatory answers in the underlying suit revealed that the allegedly false statements occurred during the policy period. Therefore, the court found that the insurer had a duty to defend. In City of Glendale v. National Union Fire Ins. Co., No. 12-cv-380, 2013 U.S. Dist. Lexis 45468 (D. Ariz. Mar. 29, 2013) (applying Arizona law), the insured, Glendale, Arizona, was 3 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

alleged to have discriminated against a tenant of one of its airport hangers with the intent of making the sub-lease of the hangar unprofitable and with the hope that the tenant would give up its rights under the lease. The court first held that the alleged discrimination implicated the personal injury offense for wrongful eviction from, wrongful entry into or invasion of the right private occupancy of a... premises that a person occupies by or on behalf of its owner, landlord, or lessor. The court then addressed whether the policies in effect from 2008 to 2010 were triggered. While the city s wrongful conduct was alleged to have begun sometime shortly after the lease incepted in the early 1990s, it was also alleged to be part of an ongoing scheme and a long-standing policy that continued through the policy periods. Deposition and trial testimony identifying specific discriminatory conduct during the policy periods was also considered. Based on the foregoing, the court held that the complaint alleged a potential claim for personal and advertising injury caused by an offense committed during the policy periods, implicating a duty to defend. In Tria Beauty, Inc. v. National Fire Ins. Co. of Hartford, No. C 12-05465, 2013 U.S. Dist. Lexis 71499 (N.D. Cal. May 20, 2013) (applying California law), the insured s competitor alleged that the insured made false and misleading statements about its own acne-treatment and hair removal products, which the court found gave rise to a potential claim for implied disparagement that fell within the disparagement offense. Because none of the potentially disparaging statements were made during the policy period of one of the policies, however, the court held there was no duty to defend under that policy. The court found that the insured s argument, that there could have been disparaging statements made on its website during the policy period, to be pure speculation because the only disparaging statements on the website were dated after the policy period. C. THE OFFENSE MUST OCCUR IN THE NAMED INSURED S BUSINESS In Hanover American Ins. Co. v. Saul, No. Civ-12-0922, 2013 U.S. Dist. Lexis 121454 (W.D. Okla. Aug. 27, 2013) (applying Oklahoma law), the insured operated a chiropractic practice. The claimant, a patient of the insured, was allegedly molested by the insured s spouse at the insured s clinic. The underlying claim asserted a claim for negligence, which included the insured s failure to warn the claimant of the spouse s history and propensity for molestation and allowing the spouse access to the clinic. The underlying negligence claim alleged that the claimant suffered injuries arising out of spouse s humiliating actions in the clinic, and sought relief for the alleged humiliation. The court found that the claim did not implicate the humiliation offense in the definition of personal and advertising injury because the assailant was not an employee, nor was he otherwise a part of the insured s chiropractic business. Thus, the court determined that any humiliation did not arise out of the insured s business, as required by the insuring agreement. Accordingly, the court held that the insurer did not owe any duty to defend or indemnify. In Lexington Ins. Co. v. Tudor Ins. Co., No. 11-c-809, 2013 U.S. Dist. Lexis 16026 (E.D. Wis. Feb. 6, 2013) (applying Wisconsin law), the insured, Trek Bicycle Corp., had contractual relationships with cyclists Greg LeMond and Lance Armstrong, both of whom endorsed Trek- 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 4

brand bicycles. Trek allegedly failed to protect LeMond from defamatory statements made by Armstrong, which the court found implicated the policy s disparagement offense for purposes of a duty to defend. While the statements were allegedly made by Armstrong, the court found that the alleged disparagement arose out of the insured s business because Trek was in the Lance Armstrong business. D. CERTAIN OFFENSES MUST BE COMMITTED IN THE NAMED INSURED S ADVERTISEMENT In Basalite Concrete Products, LLC v. National Union Fire Ins. Co., No. 2:12-civ-02814, 2013 U.S. Dist. Lexis 70597 (E.D. Cal. May 17, 2013) (applying California law), the insured allegedly infringed upon the claimant s trademarks and patents by breaching a licensing agreement which permitted the claimant to utilize the claimant s know-how, molds, patent rights, and trademarks to manufacture, market and sell the claimant s products. The insured allegedly continued to use the trademarks and patents after the claimant requested that the insured cease doing so. The court held that the allegations did not implicate a duty to defend under the personal and advertising injury coverage s use of another s advertising idea offense because they did not refer to any advertisement of the insured, let alone allege that any of the infringement took place in an advertisement. In Epson Electronics America, Inc. v. Tokio Marine & Nachido Fire Ins. Co., 2013 U.S. Dist. Lexis 101430 (N.D. Cal. July 19, 2013) (applying California law), the insured was sued for unfair competition and violation of deceptive trade practice statutes of various states. The underlying claim alleged that the defendants made false promotional public statements which misrepresented the reasons for the high prices it was charging for its liquid crystal display products. Such statements were allegedly made in the media, to investors and the like. The court first found that such statements did not constitute advertisements. Additionally, even if the alleged statements were considered advertisements, the court determined that such statements did not constitute the use of another s advertising idea, because the insured was not alleged to have misappropriated any aspect of the claimant s advertising. Therefore, the court found that the insurer did not owe any defense obligation. In Liberty Corp. Capital Ltd. v. Security Safe Outlet, Inc., No. 5:12-cv-178, 2013 U.S. Dist. Lexis 42975 (E.D. Ky. Mar. 27, 2013) (applying Kentucky law), the insured was alleged to have misappropriated the claimant-competitor s trade secrets by using the claimant s confidential client information to send e-mails to the claimant s customers which advertised the insured s products and services. The court held that the allegations implicated the use of another s advertising idea in your advertisement offense because the e-mails to the claimant s customers constituted an advertisement, or notice that is broadcast to a specific market segment about the insured s goods. The court went on to find that the breach of contract exclusion precluded coverage for the claim. The insured in Purplus Inc. v. Hartford Cas. Ins., No. C-12-03689, 2013 U.S. Dist. Lexis 38367 (N.D. Cal. Mar. 19, 2013) (applying California law), allegedly infringed upon the 5 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

claimant s copyrights and trademarks by selling unauthorized copies of Adobe Acrobat and other Adobe software products on its website. The court held that these allegations did not implicate the personal and advertising injury coverage for copying, in your advertisement, a person s or organization s advertising idea or style of advertisement because the complaint did not allege that the infringement took place in any advertisement. The court rejected the insured s argument that its advertisements of Adobe software extrinsic to the complaint should be considered, because neither the allegations in the complaint nor the causes of action alleged revealed the potential for any injury arising out of the insured s advertising. The court concluded that the insurer had no duty to defend or indemnify. In Air Engineering, Inc. v. Industrial Air Power, LLC, 828 N.W.2d 565 (Wis. App. Jan. 3, 2013) (applying Wisconsin law), the insured was sued for trade secret misappropriation, breach of contract, breach of fiduciary duty and unjust enrichment for allegedly using the same website source code and content as found on the claimant s website and for misappropriating an Internet Advertising System ( IAS ). This IAS was allegedly developed by the claimant to advertise its products to the public in order to facilitate sales. The IAS was designed to direct persons to the claimant s advertising and links detailing product information, based on certain Google search terms entered by such persons. The court first determined that the complaint alleged the use of another s advertising idea, based on the allegations that the insured misappropriated the claimant s IAS and the claimant s website source code and content. The court then determined that such misappropriation occurred in the insured s advertisement because the IAS and the insured s website gave potential customers notice about the insured s goods, products and services. The court further determined that there was a causal connection between the insured s advertising activity and the claimant s advertising injury, as the complaint alleged that the insured s conduct drew present and prospective customers away from the claimant. Accordingly, the court found that the insurer had a duty to defend. In Continental Cas. Co. v. Quality King Distributors, Inc., 2013 N.Y. Misc. Lexis 1045, 2013 N.Y. Slip OP 50346(u) (N.Y. Sup. Ct. Mar. 1, 2013) (applying New York law), the insured was sued for selling counterfeit products that infringed the claimant s copyrights and trademarks. The underlying claim included allegations that the insured sold the counterfeit products from the insured s website. The insured settled the claims against it for an amount within the limit of two primary policies issued by Continental. National Union, which issued two commercial umbrella policies sitting above the Continental policies, argued that it did not owe any defense or indemnity obligation on the basis that the primary Continental policies were implicated by the claims against the insured and that the Continental policies had not yet been exhausted. The court agreed with National Union that the claims against the insured implicated the advertising injury liability coverage of the Continental policies. Specifically, the court found that the underlying claims sufficiently alleged the advertising injury offenses of use of another s advertising injury and infringement of another s copyright, trade dress or slogan. In making this determination, the court noted that the alleged copyright and trademark offenses were committed in the insured s advertisement, based on the allegation that the insured sold the counterfeit products on the insured s website. Accordingly, the court found 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 6

that underlying claims implicated the advertising injury liability coverage of the Continental policies and that National Union did not owe any defense or indemnity obligation. (PRE-1998 FORMS) CERTAIN OFFENSES MUST BE COMMITTED IN THE COURSE OF ADVERTISING 1. What Is Advertising? 2. In The Course Of Advertising In CGS Industries, Inc. v. Charter Oak Fire Ins. Co., 720 F.3d 71 (2d Cir. June 11, 2013) (applying New York law), the insured allegedly supplied Wal-Mart with jeans that infringed upon the claimant s distinctive rear pocket stitching design. The court held there was a duty to defend the insured because, at the time the underlying suit was filed, there was legal uncertainty as to whether the infringement of another s design or symbol implicated the advertising injury coverage s infringement of title offense. The court also held that the advertising injury coverage s in the course of advertising requirement was satisfied because the insured was alleged to have advertised the jeans. The court stated that if the insured had never actually advertised the jeans or if the insurer believed that the claimant did not intend to allege that the insured s infringement occurred in its advertising, it should have sought a bill of particulars to resolve any ambiguity in the underlying pleadings. In Dish Network Corp. v. Arch Specialty Ins. Co., No. 09-cv-00447-JLK, 2013 U.S. Dist. Lexis 151520 (D. Colo. Oct. 22, 2013) (applying Colorado law), the insureds were sued for patent infringement of certain telephone technology. The insureds were primarily engaged in the business of providing satellite television programming. One of the policies issued by National Union required that the advertising injury arise solely out of your advertising activities as a result of one or more of the enumerated offenses. The insured argued that the policy was ambiguous because the foregoing limitation conflicted with another policy limitation in the definition of occurrence, which required that the offense be committed in the course of advertising the named insured s good, products or services. The court disagreed with the insured and found that the limitations complement each other and ensure that advertising injury coverage is not expanded to encompass exposures only tangentially related to advertising. Accordingly, because the underlying claims did not arise solely out of the insured s advertising activity, the court found that National Union did not owe any duty to defend or indemnify. In Travelers Indem. Co. of Conn. v. Sterling Wholesale, LLC, No. 2:12-cv-156, 2013 U.S. Dist. Lexis 102223 (E.D. Va. July 19, 2013) (applying Virginia law), the insured was sued for trademark infringement based on the insured s involvement in a scheme involving the repackaging and sale of the claimant s products with counterfeit packaging and information. The insured was not among the defendants named as co-conspirators who were active in the production and re-packaging of the counterfeit products. The underlying claim, however, generally alleged that all of the defendants, including the insured, used a slogan, trade dress, 7 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

word, term, name, symbol or device in commercial advertising or promotion. The court found that the claim alleged the personal and advertising injury offense of infringement of copyright, title or slogan, based on the fact that Virginia law recognizes that trademarked terms can constitute slogans and based on the potential that the alleged counterfeit packaging and trademarks included slogans or copyrighted material. Additionally, the court determined that the alleged infringement was committed in the course of advertising, and that the alleged advertising activity potentially caused the claimant s injury. Thus, the court found that the personal and advertising injury liability coverage was implicated and that the insurer owed a duty to defend. E. THE OFFENSE MUST BE COMMITTED IN THE COVERAGE TERRITORY F. THE SUIT MUST SEEK DAMAGES In Big 5 Sporting Goods Corp. v. Zurich Am. Ins. Co., No. CV 012-03699, 2013 U.S. Dist. Lexis 100757 (C.D. Cal. July 10, 2013) (applying California law), the insured was sued in multiple class actions for infringing customers privacy rights by requesting, recording and publishing customers zip codes in connection with credit card transactions in violation of the Song-Beverly Act of 1991. The underlying suits included claims for common law negligence and invasion of privacy. The court initially found that the underlying claims implicated the personal and advertising injury offense of oral or written publication of material that violates a person s right of privacy. However, the court found that the statutory violations exclusions applied to preclude any personal and advertising injury liability coverage because all of the underlying claims related to the alleged violation of the claimants privacy rights that were created by statute, and which were not based on common law. Additionally, the court determined that civil penalties recoverable under the Song-Beverly Act did not constitute damages covered under the policies. Accordingly, the court determined that the insurers did not owe any duty to defend or indemnify the insured. At issue in Arch Ins. Co. v. Michaels Stores, Inc., No. 37-2011-00097053 (Cal. Super. Ct. Dec. 20, 2013) (applying California law), was whether the insurer had a duty to defend or indemnify the insured against six putative class actions alleging that the insured had violated the Song-Beverly Act by requiring customers to provide ZIP codes in conjunction with credit card transactions. The court held that the statutory penalties available under the Song-Beverly Act up to $250 for the first violation and $1,000 for each subsequent violation are not sums payable as damages because of personal and advertising injury. The court reasoned that the penalties are not compensatory but, rather, are designed to discourage retailers from combining personal identification information with credit card data. Because the putative class actions did not seek damages within the meaning of the policies, the court held that the insurer had no duty to defend or indemnify. While two of the underlying suits originally contained common law invasion of privacy claims, the court held that there was no duty to defend under the right of privacy offense because the common law claims were dismissed. 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 8

In Indiana Ins. Co. v. Brown Packing Co., No. 1-11-3039, 2013 Ill. App. Unpub. Lexis 988 (Ill. App. Ct. May 10, 2013) (applying Illinois law) (unpublished), the federal government filed a criminal information against the insured, which was engaged in the business of producing meat for human consumption. The federal government accused the insured of felony conspiracy to commit mail and wire fraud by unlawfully implanting veal calves with hormones and steroids, concealing that fact from customers, competitors and the federal government, and making fraudulent claims that its veal does not contain steroids. Thereafter, the insured pled guilty to the charges and agreed to a civil forfeiture of $2 million, which represented the proceeds obtained by the insured from the sale of the illegal hormone-enhanced veal. The court first determined that the civil forfeiture of $2 million constitutes a penalty and does not constitute damages within the meaning of the liability policy. The court also determined that the criminal information did not allege the personal injury offense of wrongful entry. Additionally, the court found that the criminal information did not allege the advertising injury offenses of disparagement or violation of person s right of privacy. Accordingly, the court determined that the insurer did not owe any defense or indemnity obligation to the insured. In Standard Mut. Ins. Co. v. Lay, 2013 IL 114617 (2013) (applying Illinois law), the claimant sought satisfaction of a settlement for claims that the insured sent unsolicited facsimile advertisements in violation of the Telephone Consumer Protection Act ( TCPA ). Reversing the appellate court, the Illinois Supreme Court held that the TCPA s liquidated damages of $500 per offense are remedial in nature, not penal. As a result, the court concluded that insurance coverage for statutory damages under the TCPA is not barred by Illinois law or public policy. The court reasoned that the TCPA is among a class of remedial statutes which are designed to grant remedies for the protection of rights and the public good. The court further noted that the TCPA s provision for treble damages indicates that the treble damages, not the liquidated damages, serve the goals of punishment and deterrence. At issue in Columbia Cas. Co. v. HIAR Holding, LLC, 411 S.W.3d 258 (Mo. 2013) (applying Missouri law), was whether an insurer was obligated to defend and indemnify its insured for claims that it had violated the Telephone Consumer Protection Act ( TCPA ) by sending unsolicited facsimile advertisements. The Missouri Supreme Court concluded that the TCPA s liquidated damages of $500 per offense are not in the nature of fines or penalties and, thus, constitute damages under the policies advertising injury coverage. This part of the court s decision overruled a Missouri appellate court case, Olsen v. Siddiqi, 371 N.W.3d 93 (Mo. App. 2012). The court went on to find that the advertising injury offense of publication of material that violates a person s right to privacy was implicated, rejecting the insurer s argument that the offense was limited to violations arising out of the content of advertising material itself and only applied to the privacy interests of individuals. Finally, the court held that coverage for the TCPA claims did not violate public policy because the insured s conduct was not willful or malicious. 9 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

G. THE CLAIM MUST FALL OUTSIDE THE EXCLUSIONS FOR PERSONAL AND ADVERTISING INJURY 1. The Exclusions Contained In The 1998 And 2001 CGL Policy Forms (a) Knowing Violation Of Another s Rights In CGS Industries, Inc. v. Charter Oak Fire Ins. Co., 720 F.3d 71 (2d Cir. June 11, 2013) (applying New York law), the insured was sued for trademark infringement for allegedly supplying Wal-Mart with jeans that infringed upon the claimant s distinctive rear pocket stitching design. The court held that the policy s advertising injury offense for infringement of title was implicated for purposes of a duty to defend and rejected the insurer s argument that the allegations fell within the knowing violation exclusion. The court reasoned that while the insured s infringement was alleged to have been committed intentionally, trademark infringement claims under the Lanham Act do not require proof of intentional conduct. Further, unlike cases where a defendant is alleged to be a serial infringer or to have falsely advertised its knock-off products as those of another, the facts alleged in the complaint raised the potential that the insured would be found liable for trademark infringement based on unintentional conduct. In State Auto Prop. & Cas. Ins. Co. v. Lagrotta, 529 Fed. Appx. 271 (3d Cir. June 26, 2013) (applying Pennsylvania law) (not precedential), the insured, a member of the Pennsylvania House of Representatives, faced claims of tortious interference with contract and prospective business relations arising out of press releases issued by the congressman s office stating that the claimant had relations with organized crime. It was alleged that as a result, the state health department rescinded approval of the sale of a nursing home to the claimant. The statements in the press release were allegedly made with malice and intent to harm the claimant and to convince the county not to consummate the sale. Based on the foregoing, the Third Circuit held that the knowing violation and knowledge of falsity exclusions precluded a duty to defend and indemnify the congressman. The court rejected the insured s argument that the exclusions did not apply because there were allegations of recklessness, reasoning that those allegations were a mere legal conclusion, while the facts in the complaint alleged an intent to harm. In Association Cas. Ins. Co. v. Major Mart, Inc., No. 1:12CV022-SA-DAS, 2013 U.S. Dist. Lexis 94797 (N.D. Miss. July 8, 2013) (applying Mississippi law), the insureds were sued for beach of the covenant of good faith and fair dealing, slander, defamation, tortious interference with business relationship, and conversion. The claim alleged that the insured engaged in guerilla warfare designed to ruin the claimant after a dispute arose over the pricing of beer products sold by the claimant. The claim alleged that the insureds told customers that the claimant was distributing bad or stale beer, and that such slanderous and defamatory statements were made intentionally, recklessly or negligently. The court found that the knowing violation and knowledge of falsity exclusions did not apply to preclude a defense obligation because of the potential that the complained of statements were made without 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 10

knowledge of their falsity or that the statements would violate the rights of another. Therefore, the court found that the insurer owed a duty to defend. In Assurance Co. of America v.waldman, No. 1:13-cv-179, 2013 U.S. Dist. Lexis 177437 (S.D. Ohio Dec. 18, 2013) (applying Ohio law), the dissolution of the insured, an accounting firm, resulted in a myriad of litigation between its former partners. In one of the suits, two of the partners alleged that another, Waldman, disparaged them in written correspondence to the IRS. The court first noted that the complaint alleged claims that likely fell within the disparagement and right of privacy offenses in the personal and advertising injury coverage. However, the court went on to find that the knowing violation and breach of contract exclusions precluded any defense or indemnity obligation. The court reasoned that the complaint alleged that Waldman knowingly disclosed information designated as confidential to the IRS in bad faith. The complaint also contained several breach of contract counts which alleged that Waldman s conduct violated the non-disparagement clause of the dissolution settlement agreement entered into by the partners in another suit. In Charter Oak Ins. Co. v. Maglio s Fresh Food, No. 12-3967, 2013 U.S. Dist. Lexis 152741 (E.D. Pa. Oct. 24, 2013) (applying Pennsylvania law), the insured was sued for allegedly selling inferior frozen stromboli under the claimant s brand name. The court held that the claim fell within the scope of the disparagement offense. However, the claimant advanced uncovered claims at trial as well, such as the insured s use of deceptive samples. The court held that because the insured could not demonstrate whether the jury s verdict was based on covered or uncovered claims, the insurer had no duty to indemnify the insured. In a separate trial, the insured was found to have sold its stromboli by using product information applicable to the claimant s product, rather than its own, inferior stromboli. The court held that the insured failed to meet its burden of establishing that the claim fell within the scope of the disparagement offense. The evidence presented at trial indicated that the insured had only misrepresented the ingredients and characteristics of its own stromboli, not that it had made any misrepresentations about the claimant s stromboli. The court also held that the policies knowing violation exclusion precluded coverage because the insured s sales manager testified that the insured knew its product packaging did not accurately describe its stromboli and that the insured misled the public. In Cincinnati Ins. Co. v. Gage Center Dental Group, P.A., No. 12-2387-KHV, 2013 U.S. Dist. Lexis 156844 (D. Kan. Nov. 1, 2013) (applying Kansas law), the insured was sued for breach of fiduciary duty, defamation, intentional interference with business expectancies, intentional interference with contract, and conspiracy to defame and slander. The court first found that the underlying claims implicated the disparagement offense in the definition of personal and advertising injury. The court then found that the knowing violation exclusion did not apply to preclude liability coverage, because the underlying claim for breach of fiduciary duty did not require a showing of intent and thus, the claimants could recover even if the insured did not have knowledge that its acts would inflict injury. Accordingly, the court found that the insurer owed a duty to defend. 11 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

The insured in Erie Ins. Prop. & Cas Co. v. Viewpoint, Inc., No. 5:12-cv-81, 2013 U.S. Dist. Lexis 30646 (N.D.W.V. Mar. 6. 2013) (applying West Virginia law), was alleged to have fraudulently induced a 71 year-old widow to sign a document which purportedly reinstituted an old oil and gas lease on her property for a significantly smaller sign-on bonus and royalties than were available on the open market. Based on these allegations the insured faced claims of civil conspiracy, outrage, unlawful-holding over, slander of title, negligence, and breach of implied covenant to diligently develop, produce and market. The court held that the knowing violation and knowledge of falsity exclusions precluded a duty to defend because the insured was alleged to have intentionally conspired with the other defendants to modify an expired lease in order to avoid paying a fair market price. In Lexington Ins. Co. v. Tudor Ins. Co., No. 11-c-809, 2013 U.S. Dist. Lexis 16026 (E.D. Wis. Feb. 6, 2013) (applying Wisconsin law), the insured, Trek Bicycle Corp., had contractual relationships with cyclists Greg LeMond and Lance Armstrong, both of whom were spokespersons for Trek-brand bicycles. Trek allegedly failed to protect LeMond s brand from defamatory statements made by Armstrong about LeMond. Trek also allegedly failed to protect LeMond against Armstrong s release of confidential arbitration statements made by LeMond and Armstrong s orchestration of a fake LeMond interview published in USA Today. Trek also allegedly drafted fake consumer emails expressing a negative reaction to the newspaper article. The court held that the knowing violation exclusion did not preclude a duty to defend because the complaint did not allege that Trek intended to harm LeMond s cycling brand. In Signal Products, Inc. v. American Zurich Ins. Co., No. 2:13-cv-04581, 2013 U.S. Dist. Lexis 179933 (C.D. Cal. Dec. 19, 2013) (applying California law), Gucci America, Inc. alleged that the insured s handbags infringed upon Gucci s trade dress. The court in the liability suit entered judgment against the insured and awarded Gucci an accounting of profits based on its finding that the insured had intentionally and willfully copied Gucci s trade dress. The coverage court held that the insurer had no duty to indemnify the insured for the accounting of profits based on the policies knowing violation exclusion. In so doing, the court rejected the insured s argument that the standard for willfulness applied in the liability suit was distinct from the standard for willfulness applicable under the insurance policies. The court went on to hold that coverage was further precluded by California Insurance Code Section 533 because the insured s infringement was committed with knowledge that damage was highly probable or substantially certain to result. In U.S. Fire Ins. Co. v. Cyanotech Corp., No. 12-00537 JMS-BMK, 2013 U.S. Dist. Lexis 152160 (D. Haw. Oct. 23, 2013) (applying Hawaii law), the insured was sued for patent infringement with respect to a certain drug compound called astaxanthin, tortious interference with a business relationship, and breach of confidentiality agreement. The underlying patent infringement claim alleged, in part, that the insured advertised certain products that infringed the claimants patent. The court first found that the underlying claims did not allege any of the personal and advertising injury offenses. Additionally, the court found that even if the underlying claims alleged personal and advertising injury, the knowing violation exclusion applied to preclude coverage, because the underlying claims alleged that the insured 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 12

intentionally and knowingly interfered with the claimant s business relationship with a thirdparty. Accordingly, the court found that insurer did not owe any duty to defend or indemnify. In Air Engineering, Inc. v. Industrial Air Power, LLC, 828 N.W.2d 565 (Wis. Ct. App. Jan. 3, 2013) (applying Wisconsin law), the insured was sued for trade secret misappropriation, breach of contract, breach of fiduciary duty and unjust enrichment for allegedly using the same website source code and content as found on the claimant s website and for misappropriating an Internet Advertising System. The court determined that the underlying suit alleged the use of another s advertising idea offense. The court found that the knowing violation exclusion did not apply to preclude a defense obligation because the underlying suit included claims for trade secret misappropriation, breach of fiduciary duty and unjust enrichment, which do not require a showing of actual knowledge or intent. Accordingly, the court found that the insurer had a duty to defend. In American Economy Ins. Co. v. Haley Mansion, Inc., No. 3-12-0368, 2013 Ill. App. Unpub. Lexis 836 (Ill. App. Ct. Apr. 23, 2013) (unpublished) (applying Illinois law), the insured was sued by a former employee for defamation, false light, sexual harassment, retaliatory discharge, retaliation and violation of the Illinois Consumer Fraud and Deceptive Trade Practices Act. The insured allegedly told certain third parties that the claimant was mentally unstable, incompetent, untrustworthy, engaged in criminal activity and was a dishonorable woman. The insured allegedly made these statements either knowing the statements to be false or with reckless disregard as to their falsity. The insurer argued that the knowing violation and knowledge of falsity exclusions precluded any personal and advertising injury liability coverage for the insured. The court disagreed, finding that the exclusions did not preclude a defense obligation, because the allegations of recklessness suggested that the insured made the defamatory statements without knowledge of their falsity. Accordingly, the court held that the insurer owed a duty to defend. In Grange Ins. Assoc. v. Roberts, No. 69356-5-I, 2013 Wash. App. Lexis 2550 (Wash. App. Ct. Oct. 28, 2013) (applying Washington law), the insured was sued for making false statements and false accusations and for badmouthing the claimants. Because the underlying claim did not seek recovery for damages based on a claim for defamation, the court questioned whether the complaint adequately alleged a claim for defamation. Nonetheless, even assuming that a defamation claim was sufficiently alleged, the court found that the knowing violation and knowledge of falsity exclusions applied to preclude coverage because the complaint alleged that the insured only committed certain intentional and deliberate wrongful conduct. Therefore, the court found that the insurer did not owe any defense obligation. (b) Knowing Publication Of Falsehoods In State Auto Prop. & Cas. Ins. Co. v. Lagrotta, 529 Fed. Appx. 271 (3d Cir. June 26, 2013) (applying Pennsylvania law), the insured, a member of the Pennsylvania House of Representatives, faced claims of tortious interference with contract and prospective business relations arising out of press releases issued by the congressman s office stating that the 13 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

claimant had relations with organized crime. It was alleged that as a result, the state health department rescinded approval of the sale of a nursing home to the claimant. The statements in the press release were allegedly made with malice, the intent to harm the claimant, and to convince the county not to consummate the sale. Based on the foregoing, the Third Circuit held that the knowing violation and knowledge of falsity exclusions precluded a duty to defend and indemnify the congressman. The court rejected the insured s argument that the exclusions did not apply because there were allegations of recklessness, reasoning that recklessness is a mere legal conclusion while the facts in the complaint alleged an intent to harm. In Association Cas. Ins. Co. v. Major Mart, Inc., No. 1:12-cv-022, 2013 U.S. Dist. Lexis 94797 (N.D. Miss. July 8, 2013) (applying Mississippi law), the insureds were sued for beach of the covenant of good faith and fair dealing, slander, defamation, tortious interference with business relationship, and conversion. The claim alleged that the insured engaged in guerilla warfare designed to ruin the claimant after a dispute arose over the pricing of beer products sold by the claimant. The claim alleged that the insureds told customers that the claimant was distributing bad or stale beer, and that such slanderous and defamatory statements were made intentionally, recklessly or negligently. The court found that the knowing violation and knowledge of falsity exclusions did not apply to preclude a defense obligation because of the potential that the complained of statements were made without knowledge of their falsity or that statements would violate the rights of another. Therefore, the court found that the insurer owed a duty to defend. In Cincinnati Ins. Co. v. Gage Center Dental Group, P.A., No. 12-2387-KHV, 2013 U.S. Dist. Lexis 156844 (D. Kan. Nov. 1, 2013) (applying Kansas law), the insureds were sued for breach of fiduciary duty, defamation, intentional interference with business expectancies, intentional interference with contract, and conspiracy to defame and slander. The court first found that the underlying claims implicated the disparagement offense in the definition of personal and advertising injury. The court then found that the knowledge of falsity exclusion did not apply to preclude liability coverage because testimony in the underlying suit indicated that the insureds did not know that their defamatory statements were false. Accordingly, the court found that the insurer owed a duty to defend. The insured in Erie Ins. Prop. & Cas. Co. v. Viewpoint, Inc., No. 5:12-cv-81, 2013 U.S. Dist. Lexis 30646 (N.D.W.V. Mar. 6. 2013) (applying West Virginia law), was alleged to have fraudulently induced a 71 year-old widow to sign a document which purportedly reinstituted an oil and gas lease on her property from 1963 for a significantly smaller sign-on bonus and royalties than were available on the open market. Based on these allegations the insured faced claims of civil conspiracy, outrage, unlawful-holding over, slander of title, negligence, and breach of implied covenant to diligently develop, produce and market. The court held that the knowing violation and knowledge of falsity exclusions precluded a duty to defend because the insured was alleged to have intentionally conspired with the other defendants to modify an expired lease so as to avoid paying a fair market price. 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 14

In Lexington Ins. Co. v. Tudor Ins. Co., No. 11-c-809, 2013 U.S. Dist. Lexis 16026 (E.D. Wis. Feb. 6, 2013) (applying Wisconsin law), the insured, Trek Bicycle Corp., had contractual relationships with cyclists Greg LeMond and Lance Armstrong, both of whom endorsed Trekbrand bicycles. Trek allegedly failed to protect LeMond s brand from defamatory statements made by Armstrong. It was also alleged that Trek failed to protect LeMond against Armstrong s disclosure of confidential arbitration statements made by LeMond and Armstrong s fabrication of an interview published in the USA Today. Trek also allegedly drafted fake consumer emails expressing a negative reaction to the newspaper article. The court held that the knowledge of falsity exclusion did not preclude a duty to defend. While Trek allegedly failed to stop Armstrong from publishing false information about LeMond, the court found that the insured was not alleged to have published false information itself or to have directed Armstrong s publishing of false information, as required by the exclusion. In Stafford v. Jewelers Mut. Ins. Co., No. 3:12-cv-050, 2013 U.S. Dist. Lexis 29011 (S.D. Ohio Mar. 4, 2013) (applying Ohio law), the insured allegedly committed fraud by claiming to have shipped a 5.5 karat pink diamond that it sold to the claimant in a box that it knew did not contain the diamond. The court held that defense and indemnity were precluded by the knowledge of falsity exclusion because the insured was alleged to have known that its statements concerning the shipment of the pink diamond were false. In American Economy Ins. Co. v. Haley Mansion, Inc., No. 3-12-0368, 2013 Ill. App. Unpub. Lexis 836 (Ill. App. Ct. Apr. 23, 2013) (unpublished) (applying Illinois law), the insured was sued by a former employee for defamation, false light, sexual harassment, retaliatory discharge, retaliation and violation of the Illinois Consumer Fraud and Deceptive Trade Practices Act. The insured allegedly told certain third parties that the claimant was mentally unstable, incompetent, untrustworthy, engaged in criminal activity and was a dishonorable woman. The insured allegedly made these statements either knowing the statements to be false or with reckless disregard as to their falsity. The insurer argued that the knowing violation and knowledge of falsity exclusions precluded any personal and advertising injury liability coverage for the insured. The court disagreed, finding that the exclusions did not preclude a defense obligation because the allegations of recklessness suggested that the insured made the defamatory statements without knowledge of their falsity. Accordingly, the court held that the insurer owed a duty to defend. In Grange Ins. Assoc. v. Roberts, No. 69356-5-I, 2013 Wash. App. Lexis 2550 (Wash. App. Ct. Oct. 28, 2013) (applying Washington law), the insured was sued for making false statements and false accusations and for badmouthing the claimants. Because the underlying claim did not seek recovery for damages based on a claim for defamation, the court questioned whether the complaint adequately alleged a claim for defamation. Nonetheless, even assuming that a defamation claim was sufficiently alleged, the court found that the Knowing Violation of Another s Rights exclusion and the knowledge of falsity exclusion applied to preclude coverage because the complaint alleged that the insured only committed certain intentional and deliberate wrongful conduct. Therefore, the court found that the insurer did not owe any defense obligation. 15 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

(c) Publication Of Material Before Inception Of Policy In Encore Receivable Management, Inc. v. ACE Property & Cas. Ins. Co., No. 1:12-cv-297, 2013 U.S. Dist. Lexis 93513 (S.D. Ohio July 3, 2013) (applying Ohio law), the insureds were sued for recording the claimants telephone conversations without their consent. The claimants were various Hyundai customers. The recordings were not distributed to anyone aside from the insureds employees. The court first found that the personal and advertising injury offense of oral or written publication of material that violates a person s right of privacy was implicated. The court also found that the prior publication exclusion did not apply to preclude coverage because the recording of each claimant s conversation was a separate publication of material, and some claimants were alleged to have first telephoned the insureds during the policy period. Therefore, the court found that the insurer owed a duty to defend. In Hanover Ins. Co. v. Urban Outfitters, No. 12-cv-3961, 2013 U.S. Dist. Lexis 116889 (E.D. Pa. Aug. 19, 2013) (applying Pennsylvania law), the insured was sued for trademark infringement and disparagement of the claimant s products, based on the insured s unauthorized use of the trademarked Navajo and Navaho names in the insured s sale of its products in its catalogs and in its stores. The underlying claim alleged that the insured s first use of the trademarked names occurred in March 2009, which was prior to the July 7, 2010 inception date of the subject policy. The court determined that the prior publication exclusion applied to preclude personal and advertising injury liability coverage, as the complained of publication first took place before the inception of the policy. The court additionally determined that it was immaterial that the insured advertised other products using the Navajo and Navaho names during the policy period, because such later publications did not contain any new matter or substantively different content. Therefore, the court held that the insurer did not owe any defense or indemnity obligation. In JAR Laboratories LLC v. Great American E&S Ins. Co., No. 12-cv-7134, 2013 U.S. Dist. Lexis 67516 (N.D. Ill. May 10, 2013) (applying Illinois law), the insured was alleged to have falsely advertised its over-the-counter pain-relief patch, LidoPatch, to be as effective as the claimant s prescription only pain-relief patch, Lidoderm. During the policy period, the insured was alleged to have falsely stated that its LidoPatch product contained the same active ingredient as the leading prescription patch and, like the prescription brand, offered 24-hour relief. The court held that the statements set forth a potential claim for implied disparagement. The complaint also alleged that the insured made representations to potential customers that its product was an over-the-counter version of Lidocaine before the policy period, but did not specifically identify any such statements. The court held that the prior publication exclusion did not preclude a duty to defend because the only disparaging statements identified specifically in the complaint were made during the policy period. Further, there were no allegations that the covered statements were merely the continuation of a defamatory scheme that began before coverage incepted or that the statements made during the policy period were republications of pre-policy period statements. 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 16

(d) Criminal Acts In Indiana Ins. Co. v. Brown Packing Co., No. 1-11-3039, 2013 Ill. App. Unpub. Lexis 988 (Ill. App. Ct. May 10, 2013) (applying Illinois law) (unpublished), the federal government filed a criminal information against the insured, which was engaged in the business of producing meat for human consumption. The federal government accused the insured of felony conspiracy to commit mail and wire fraud, by unlawfully implanting veal calves with hormones and steroids, concealing that fact from customers, competitors and the federal government, and making fraudulent claims that its veal does not contain steroids. Thereafter, the insured plead guilty to the charges and agreed to a civil forfeiture of $2 million, which represented the proceeds obtained by the insured from the sale of the illegal hormone-enhanced veal. The court found that the criminal information did not allege the advertising injury offenses of disparagement or violation of a person s right of privacy. The court also found that the criminal acts exclusion applied to preclude any liability coverage for the insured, because the insured allegedly engaged in criminal activities, not innocent or accidental advertising injury. Accordingly, the court determined that the insurer did not owe any defense or indemnity obligation to the insured. In Encore Receivable Management, Inc. v. ACE Prop. & Cas. Ins. Co., No. 1:12-cv-297, 2013 U.S. Dist. Lexis 93513 (S.D. Ohio July 3, 2013) (applying Ohio law), the insureds were sued for recording the claimants telephone conversations without their consent. The claimants were various Hyundai customers. The insureds were in the business of operating customer call centers for clients. The court first found that the personal and advertising injury offense of oral or written publication of material that violates a person s right of privacy was implicated. The court also found that the criminal acts exclusion did not apply to preclude coverage because there had been no finding in the underlying suits that the insureds committed a criminal act. Therefore, the court found that the insurer owed a duty to defend. (e) Contractual Liability In Encore Receivable Management, Inc. v. ACE Prop. & Cas. Ins. Co., No. 1:12-cv-297, 2013 U.S. Dist. Lexis 93513 (S.D. Ohio July 3, 2013) (applying Ohio law), the insureds were sued for recording the claimants telephone conversations without their consent. The claimants were various Hyundai customers. The insureds were in the business of operating customer call centers for clients. The court first found that the personal and advertising injury offense of oral or written publication of material that violates a person s right of privacy was implicated. The court also found that the contractual liability exclusion did not apply to preclude coverage because the court determined that the insured would have been liable for its operation of the call centers even absent its agreement with Hyundai. Therefore, the court found that the insurer owed a duty to defend. At issue in Columbia Cas. Co. v. HIAR Holding, LLC, 411 S.W.3d 258 (Mo. 2013) (applying Missouri law), was whether an insurer was obligated to defend and indemnify its insured for claims that it violated the Telephone Consumer Protection Act ( TCPA ) by sending unsolicited 17 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

facsimile advertisements. The Missouri Supreme Court held that the TCPA claims implicated the policy s advertising injury coverage under the right of privacy offense and sought damages as contemplated by the policies. The court went on to reject the insurer s argument that the contractual liability exclusion precluded coverage for the $5 million settlement on the theory that only a small percentage of potential claims were submitted, making the settlement gratuitous in nature. (f) Breach Of Contract In Association Cas. Ins. Co. v. Major Mart, Inc., No. 1:12-cv-022, 2013 U.S. Dist. Lexis 94797 (N.D. Miss. July 8, 2013) (applying Mississippi law), the insureds were sued for beach of the covenant of good faith and fair dealing, slander, defamation, tortious interference with business relationship, and conversion. The claim alleged that the insured engaged in guerilla warfare designed to ruin the claimant after a dispute arose over the pricing of beer products sold by the claimant. The claim alleged the claimant regularly placed price tags on its products, and that a disagreement between the insureds and the claimant arose over the price tags. However, the claim also alleged that the pricing of the claimants beer products was undertaken as a service to the customers, and not as a contractual obligation between the claimant and the insureds. Therefore, the court found that the breach of contract exclusion did not apply to preclude coverage and that the insurer owed a duty to defend. In Assurance Co. of America v. Waldman, No. 1:13-cv-179, 2013 U.S. Dist. Lexis 177437 (S.D. Ohio Dec. 18, 2013) (applying Ohio law), the dissolution of the insured, an accounting firm, resulted in a myriad of litigation between its former partners. In one of the suits, two of the partners alleged that another, Waldman, disparaged them in written correspondence to the IRS. The court first noted that the complaint alleged claims that likely fell within the disparagement and right of privacy offenses in the personal and advertising injury coverage. However, the court went on to find that the knowing violation and breach of contract exclusions precluded any defense or indemnity obligation. The court reasoned that the complaint alleged that Waldman knowingly disclosed information designated as confidential to the IRS in bad faith. The complaint also contained several breach of contract counts which alleged that Waldman s conduct violated the non-disparagement clause of the dissolution settlement agreement entered into by the partners in another suit. In Lexington Ins. Co. v. Tudor Ins. Co., No. 11-c-809, 2013 U.S. Dist. Lexis 16026 (E.D. Wis. Feb. 6, 2013) (applying Wisconsin law), the insured, Trek Bicycle Corp., had contractual relationships with cyclists Greg LeMond and Lance Armstrong, both of whom endorsed and were spokespersons for Trek-brand bicycles. Trek allegedly failed to protect LeMond s brand from defamatory statements made by Lance Armstrong. Trek also allegedly failed to protect LeMond against Armstrong s disclosure of confidential arbitration statements made by LeMond and a fake interview orchestrated by Armstrong and published in USA Today. The court held that the breach of contract exclusion did not preclude a duty to defend because the allegations falling with the disparagement and right of privacy offenses did not arise out of a breach of contract. The court reasoned that the opposite was true Trek s breach of its 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 18

contract with LeMond allegedly arose out of its failure to protect LeMond against the disparaging statements made by Armstrong. In Liberty Corp. Capital Ltd. v. Security Safe Outlet, Inc., No. 5:12-cv-178, 2013 U.S. Dist. Lexis 42975 (E.D. Ky. Mar. 27, 2013) (applying Kentucky law), the insured sought coverage for misappropriation of trade secrets, breach of contract, violations of the Lanham Act, and other claims. The misappropriation claim alleged that a former employee of the claimant stole the claimant s client lists and went to work for the insured. The insured then allegedly began to e- mail the claimant s customers using the claimant s confidential client information. The court held that the breach of contract exclusion precluded coverage for the misappropriation claim because the claimant s former employee was alleged to have breached a non-compete agreement by working for the insured. The court noted that it did not matter that the insured was not a party to the contract and that a breach of contract claim was not filed against the employee. The Lanham Act claim was based on the insured s alleged use of the claimant s Buds Gun Shop trademark in conjunction with its online sale of firearms. The insured and the claimant had entered into a licensing agreement under which the insured was allowed to use the mark, but only with respect to the sale of guns at a single retail store. The court held that the Lanham Act claim was also precluded from coverage by the breach of contract exclusion because the infringement was alleged to have arisen out of the breach of the parties licensing agreement. In U.S. Fire Ins. Co. v. Cyanotech Corp., No. 12-00537, 2013 U.S. Dist. Lexis 152160 (D. Haw. Oct. 23, 2013) (applying Hawaii law), the insured was sued for patent infringement with respect to a certain drug compound called astaxanthin, tortious interference with a business relationship, and breach of confidentiality agreement. The underlying patent infringement claim alleged, in part, that the insured advertised certain products that infringed the claimants patent. The court first found that the underlying claims did not allege any of the personal and advertising injury offenses. Additionally, the court found that even if the underlying claims alleged personal and advertising injury, the breach of contract exclusion applied to preclude coverage because the underlying claims sought recovery for the insured s alleged breach of a confidentiality agreement and, that by such breach, the insured was allegedly able to interfere with the claimant s business relationship with a third-party. Accordingly, the court found that insurer did not owe any duty to defend or indemnify. In John T. Doyle Trust v. Country Mut. Ins. Co., No. 1-12-1238, 2013 Ill. App. Unpub. Lexis 2143 (Ill. App. Ct. Sept. 25, 2013) (applying Illinois law), the insured was sued for violation of the Illinois Forcible Entry and Detainer Act for evicting the claimant from premises leased by the insured to the claimant and disposing of the claimant s personal property. The court first found that the claim alleged the personal and advertising injury offense of wrongful eviction. The court also found the breach of contract exclusion to be ambiguous under the facts of the case and construed the exclusion against the insurer. Therefore, the court determined that the insurer owed a duty to defend. 19 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

In Natural Organics, Inc. v. OneBeacon America Ins. Co., 959 N.Y.S.2d 204 (N.Y. Jan. 16, 2013), the insured was sued for unfair competition under the Lanham Act. The underlying complaint alleged that the insured, after wrongfully terminating an exclusive distributorship agreement with the claimant, issued a press release announcing that a third-party was the exclusive distributor of the insured s products. The complaint alleged that the press release caused confusion, mistake and deception as to the claimant s distribution of the insured s products. The court determined that the allegations constituted the written publication of material that disparages a person s or organization s goods, products or services, because the press release could be construed as implying that the claimant s inventory of the insured s products was unauthorized. The court held that the breach of contract exclusion did not apply because the product disparagement claim did not necessarily arise out of the insured s alleged breach of the exclusive distributorship agreement. The court noted that the claimant can establish a product disparagement claim under the Lanham Act by relying on the press release and without reference to the exclusive distributorship agreement. Accordingly, the court found that the insurer had a duty to defend. (g) Quality Of Goods In Dollar Phone Corp. v. St. Paul Fire and Marine Ins. Co., 12-cv-1770, 2013 U.S. App. Lexis 5065 (2d Cir. Mar. 14, 2013) (applying New York law), the insured was alleged to have advertised calling cards that offered fewer minutes than advertised. The court held that the allegations clearly fell within the policy s exclusion for advertising injury that results from the failure of your products, your work, or your completed work to conform with advertised quality or performance. The court held that, as a result, the insurer had no duty to defend or indemnify. In JAR Laboratories LLC v. Great American E&S Ins. Co., No. 12-cv-7134, 2013 U.S. Dist. Lexis 67516 (N.D. Ill. May 10, 2013) (applying Illinois law), the insured faced claims of false advertising, unfair competition, and violations of various states consumer protection statutes. The claims were based on allegations that it falsely advertised its over-the-counter pain-relief patch, LidoPatch, to be as effective as the claimant s prescription only pain-relief patch, Lidoderm. The insured s allegedly false statements included that its LidoPatch product contained the same active ingredient as the leading prescription patch and, like the prescription brand, offers 24-hour relief. The court held that the allegations implicated the policy s disparagement offense for purposes of a duty to defend. The court also held that the quality of goods exclusion did not preclude coverage because the insured s disparaging statements concerned the quality of the claimant s products, not its own. In Tria Beauty, Inc. v. National Fire Ins. Co. of Hartford, No. C 12-05465, 2013 U.S. Dist. Lexis 71499 (N.D. Cal. May 20, 2013) (applying California law), the insured was sued by its competitor for false advertising, unfair competition, and trademark infringement based on false and misleading statements it was alleged to have made about its own products. The statements included that its hair removal product was the equivalent to professional laser hair removal and was the first and only at-home laser hair removal cleared by the FDA, and that its acne- 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 20

treatment products were faster, superior, and more powerful than other products on the market. The court held that the allegations set forth a potential claim for implied disparagement, implicating the personal and advertising injury coverage s disparagement offense for purposes of a duty to defend. The court then held that the qualify of goods exclusion did not preclude a duty to defend because it only applies to injuries arising out of the failure of the insured s product to live up to an advertised level of quality, while the injury arising out of a claim of implied disparagement is damage to the reputation of a competitor s product. The court noted that in a claim of implied disparagement it is irrelevant whether the defendant s products actually possess the attributes advertised by it. In Basic Research, LLC v. Admiral Ins. Co., 297 P.3d 578 (Utah Feb. 8, 2013) (applying Utah law), the insured marketed a weight-loss product using the slogans "Eat All You Want And Still Lose Weight" and "And we couldn't say it in print if it wasn't true!" The insured was sued by customers that purchased the insured s products for false advertising, defective product, and failure to perform as promised. The insured argued that the underlying claim implicated the personal and advertising injury offense of use of another s advertising idea. The court disagreed. The court found that because the underlying claims were not dependent on the insured s use of slogans, the underlying claims did not implicate the use of another advertising injury offense. Additionally, the court found that the quality of goods exclusion otherwise precluded any personal and advertising injury liability coverage because the underlying claims alleged injury arising from the product s failure to live up to the promises of quality and performance expressed by the insured s slogans. Accordingly, the court determined that the insurer did not owe any defense obligation. (h) Infringement Of Copyright, Patent, Trademark Or Trade Secret ( IP Exclusion ) In JAR Laboratories LLC v. Great American E&S Ins. Co., No. 12-cv-7134, 2013 U.S. Dist. Lexis 67516 (N.D. Ill. May 10, 2013) (applying Illinois law), the insured faced claims of false advertising, unfair competition, and violations of various states consumer protection statutes. The claims were based on allegations that it falsely advertised its over-the-counter pain-relief patch, LidoPatch, to be as effective as the claimant s prescription pain-relief patch, Lidoderm. The policy contained an IP exclusion precluding coverage for any actual or alleged violation of any laws or regulations concerning... unfair competition, unfair trade practices, or other unfair similar practices. The court held that the exclusion must be read narrowly so as to only apply to a claim of unfair competition arising out of the infringement of another s intellectual property rights and, thus, did not apply to the unfair competition claims against the insured. The court based its holding on the title of the exclusion, Claim or Suit Alleging Infringement of Intellectual Property, and the fact that the exclusion s other enumerated conduct, including infringement of copyright, patent, trademark, trade secret, service mark, and any other intellectual property rights or law, all concerned violations of intellectual property rights. In light of the foregoing, the court found that applying the exclusion to a non-ip claim would fly in the face of the parties reasonable expectations. 21 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

In Liberty Corp. Capital Ltd. v. Security Safe Outlet, Inc., No. 5:12-cv-178, 2013 U.S. Dist. Lexis 42975 (E.D. Ky. Mar. 27, 2013) (applying Kentucky law), the insured sought coverage for misappropriation of trade secrets, breach of contract, violations of the Lanham Act, and other claims. The insured had a license agreement with the claimant to use the claimant s trademark with respect to one of the insured s retail firearm stores, which it allegedly breached by using the trademark in conjunction with its online sale of firearms. The court concluded that the IP exclusion precluded coverage. The court rejected the insured s argument that the allegations set forth a potential claim for trade dress infringement, noting that trade dress and trademark infringement are separate and distinct causes of action under the Lanham Act. Further, nowhere in the complaint was the insured alleged to have infringed upon the claimant s trade dress or the design or packaging of the claimant s products. In Power Corp. v. Amerisure Ins. Co., No. 2:12-cv-192, 2013 U.S. Dist. Lexis 121077 (M.D. Fla. Aug. 26, 2013) (applying Florida law), the insured was sued for false advertising under the Lanham Act. Specifically, the underlying claim alleged that the insured reproduced, copied and imitated the claimant s registered mark and name in selling, offering for sale, marketing and/or advertising its services and products in connection with a residential community development, and that such conduct constituted false advertising under the Lanham Act. The court initially found that the underlying claim implicated the personal and advertising injury liability coverage. However, the court found that such coverage was precluded by the IP exclusion because the false advertising claim was grounded on the alleged improper use of the claimant s trademark. In other words, the false advertising claim arose out of the alleged trademark infringement and, thus, was within the scope of the IP exclusion. Additionally, the court found that the IP exclusion s exception for infringement of trade dress did not apply because the underlying suit did not allege a claim for trade dress, and did not allege any facts supporting the necessary elements for a trade dress claim. Accordingly, the court held that Amerisure did not owe any defense or indemnity obligation. The insured in Purplus Inc. v. Hartford Cas. Ins., No. C-12-03689, 2013 U.S. Dist. Lexis 38367 (N.D. Cal. Mar. 19, 2013) (applying California law), allegedly committed copyright and trademark infringement by selling unauthorized copies of Adobe Acrobat and other Adobe software products on its website. The policy s IP exclusion precluded coverage for any intellectual property infringement except a copyright violation of another s advertising idea or style or an infringement of a non-trademarked slogan. The court held that the alleged software piracy did not fall within either exception to the exclusion and, thus, the exclusion precluded a duty to defend. In Tria Beauty, Inc. v. National Fire Ins. Co. of Hartford, No. C 12-05465, 2013 U.S. Dist. Lexis 71499 (N.D. Cal. May 20, 2013) (applying California law), the insured was sued by its competitor for false advertising, unfair competition, and trademark infringement. The false advertising and unfair competition claims were based on allegations that the insured made false and misleading statements about its own acne-treatment and hair removal products, which damaged the claimant-competitor s business. The court held that these allegations implicated the policies disparagement offense. One of the policies contained a broad IP 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 22

exclusion applying to claims of trademark infringement or any other advertising injury alleged in any claim or suit that also alleges any such infringement or violation. The court held that the exclusion unambiguously precluded coverage for the underlying suit, rejecting the insured s argument that the exclusion required a logical or legal link between the alleged trademark infringement and disparagement. In U.S. Fire Ins. Co. v. Cyanotech Corp., No. 12-00537, 2013 U.S. Dist. Lexis 152160 (D. Haw. Oct. 23, 2013) (applying Hawaii law), the insured was sued for patent infringement with respect to a certain drug compound called astaxanthin, tortious interference with a business relationship, and breach of confidentiality agreement. The underlying patent infringement claim alleged, in part, that the insured advertised certain products that infringed the claimants patent. The court first found that the underlying claims did not allege any of the personal and advertising injury offenses. Additionally, the court found that even if the underlying claims alleged personal and advertising injury, the IP exclusion applied to preclude coverage. In making such determination, the court found that the exception to the IP exclusion did not apply because the insured was not alleged to have used any advertising idea. Accordingly, the court held that the insurer did not owe any duty to defend or indemnify. (i) Media And Internet Business Exclusion (Publishing, Advertising) In Dish Network Corp. v. Arch Specialty Ins. Co., No. 09-cv-00447, 2013 U.S. Dist. Lexis 151520 (D. Colo. Oct. 22, 2013) (applying Colorado law), the insureds were sued for patent infringement of certain telephone technology. The insureds were primarily engaged in the business of providing satellite television programming. The court found that even if the underlying claims alleged personal and advertising injury, the exclusion for personal and advertising injury arising out of an offense committed by an insured whose business is advertising, broadcasting, publishing or telecasting would apply to preclude coverage. Specifically, the court found that the insureds business constituted broadcasting and telecasting as used in the exclusion. The court noted that the exclusion applies to limit an insurer s exposure to mass media-type injuries, citing to a portion of Shaun McParland Baldwin s article Commercial General Liability Coverages An Overview, 707 PLI/Lit 83, 188 (2004). Accordingly, the court held that the insurer did not owe any defense or indemnity obligation for the underlying claims. (j) Electronic Chat Rooms Or Bulletin Boards (k) Unauthorized Use Of Another s Name In Collegesource, Inc. v. Travelers Indem. Co., 507 Fed. Appx. 718 (9th Cir. Feb. 11, 2013) (unpublished) (applying California law), the insured was alleged to have used the claimant s domain name in the domain name of its own website in a way that was likely to cause confusion in the marketplace. The Ninth Circuit held that the Unauthorized Use of Another s 23 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

Name exclusion was unambiguous and clearly applied to the allegations against the insured, precluding both a defense and indemnity obligation. In so doing, the court disregarded the insured s argument that Travelers removal of a trademark infringement exclusion from the policy evidenced an intent to provide coverage for domain name infringement, reasoning that because the exclusion was unambiguous there was no need to consider drafting history or extrinsic evidence of the parties intent. In St. Luke s Cataract and Laser Institute v. Zurich American Ins. Co., 506 Fed. Appx. 970 (11th Cir. Feb. 7, 2013) (applying Florida law), the insured was sued for false designation of origin, cyber piracy, trademark dilution, copyright infringement, violation of the Digital Millennium Copyright Act, and injury to business reputation, among other claims. The insured was alleged to have wrongfully used the domain names of his former employer for the websites of his own competing practice. The websites were also alleged to have almost the same appearance, content, layout, and design as the former employer s website. Reversing the lower court, the Eleventh Circuit held that the exclusion for injury arising out of the unauthorized use of another s name or product in your e-mail address, domain name or metatag, or any other similar tactics to mislead another s potential customers did not preclude a duty to defend. The court reasoned that the use of the claimant s website content was not the same as the use of another s name or product and, further, the infringing conduct was found not just on the insured s e-mail address, domain name or metatag, but on the website itself. The court also rejected the insurer s argument that the other similar tactics to mislead another s potential customers language incorporates copyright infringement on a website because, if it did, it would swallow the preceding, narrower language. (l) Pollution Exclusion 2. Other Exclusions or Provisions (a) (b) Willful Violation Of A Penal Statute Employment-Related Practices Exclusion In State National Ins. Co. v. Khatri, No. C 13-00433, 2013 U.S. Dist. Lexis 65847 (N.D. Cal. May 7, 2013) (applying California law), the insurer defended and settled claims against its insured for defamation by slander per se, unfair business practices, assault, false imprisonment, and intentional/negligent infliction of emotional distress. The claimants, former employees of the insured, alleged that the insured had made false and disparaging statements about them, had used threatening and abusive language against them, and had restrained one of the claimants against her will and through use of physical force. There was no dispute that the allegations implicated the false imprisonment and disparagement offenses. As concerns the employment-related practices exclusion, the court held that it was unclear at the time the complaint was filed whether the exclusion would apply, because the claims were based on conduct that may have occurred only after the termination of the claimants employment. The court concluded that the insurer was not entitled to reimbursement of the insured s defense costs. 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 24

In American Economy Ins. Co. v. Haley Mansion, Inc., No. 3-12-0368, 2013 Ill. App. Unpub. Lexis 836 (Ill. App. Ct. April 23, 2013) (unpublished) (applying Illinois law), the insured was sued by a former employee for defamation, false light, sexual harassment, retaliatory discharge, retaliation and violation of the Illinois Consumer Fraud and Deceptive Trade Practices Act. The insured allegedly told certain third parties that the claimant was mentally unstable, incompetent, untrustworthy, engaged in criminal activity and was a dishonorable woman. The insurer argued that the employment-related practices exclusion precluded any personal and advertising injury liability coverage for the insured. The court disagreed, finding that the allegedly defamatory statements included personal insults that had no bearing on the claimant s employment or her previous work performance. Thus, the court found that the exclusion did not apply to all of the allegedly defamatory statements. Accordingly, the court held that the insurer owed a duty to defend. (c) Professional Services Exclusion In Encore Receivable Management, Inc. v. ACE Prop. & Cas. Ins. Co., No. 1:12-cv-297, 2013 U.S. Dist. Lexis 93513 (S.D. Ohio July 3, 2013) (applying Ohio law), the insureds were sued for recording the claimants telephone conversations without their consent. The claimants were various Hyundai customers. The recordings were not distributed to anyone aside from the insureds employees. The court first found that the personal and advertising injury offense of oral or written publication of material that violates a person s right of privacy was implicated. The court also found that the professional services exclusion did not apply to preclude coverage because the insureds were in the business of operating customer call centers for clients, which the court determined was not a professional service. Therefore, the court found that the insurer owed a duty to defend. In Standard Mut. Ins. Co. v. Lay, 2013 IL App (4th) 110527 (unpublished) (applying Illinois law), the insured settled claims of unsolicited facsimile advertising in violation of the Telephone Consumer Protection Act ( TCPA ). The Illinois Supreme Court previously reversed the appellate court by holding that coverage for the TCPA claims was not precluded by public policy. On remand, the appellate court held that the TCPA claims implicated the personal and advertising injury coverage s right of privacy offense based on Valley Forge Insurance Co. v. Swiderski Electronics, Inc., 860 N.E.2d 307 (Ill. 2006). The court also held that the professional services exclusion did not preclude coverage because the insured was not performing professional services in sending the faxes. The court reasoned that the insured was a real estate agency, not an advertising company, and the insured s faxing of advertisements was ancillary to the performance of its real estate/professional services. (d) Distribution of Material in Violation of Statute In Big 5 Sporting Goods Corp. v. Zurich Am. Ins. Co., 2013 U.S. Dist. Lexis 100757 (C.D. Cal. July 10, 2013) (applying California law), the insured was sued in multiple class actions for infringing customers privacy rights by requesting, recording and publishing customers zip 25 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

codes in connection with credit card transactions in violation of the Song-Beverly Act of 1991. The underlying suits included claims for common law negligence and invasion of privacy. The court initially found that the underlying claims implicated the personal and advertising injury offense of oral or written publication of material that violates a person s right of privacy. However, the court found that the statutory violations exclusions applied to preclude any personal and advertising injury liability coverage because all of the underlying claims related to the alleged violation of the claimants privacy rights that were created by statute, and which were not based on common law. Accordingly, the court determined that the insurers did not owe any duty to defend or indemnify the insured. In Collective Brands, Inc. v. National Union Fire Ins. Co. of Pittsburgh, Pa., No. 11-4097- JTM, 2013 U.S. Dist. Lexis 1338 (D. Kan. Jan. 4, 2013) (applying Kansas law), the insured was sued for violation of the Telephone Consumer Protection Act ( TCPA ) for allegedly sending unauthorized pre-recorded telephone messages and text messages that advertised the insured s products. The court found that the allegations triggered the oral or written publication, in any manner, of material that violates a person s right of privacy offense. However, the court determined that the insurer did not have a duty to defend or indemnify because the claims fell within the policy s exclusion for liability arising out of any act that violates any statute, ordinance or regulation of any federal, state or local government that prohibits or limits the sending, transmitting or communicating of material or information. In Encore Receivable Management, Inc. v. ACE Prop. & Cas. Ins. Co., No. 1:12-cv-297, 2013 U.S. Dist. Lexis 93516 (S.D. Ohio July 3, 2013) (applying Ohio law), the insureds were sued for recording the claimants telephone conversations without their consent. The claimants were various Hyundai customers. The insureds were in the business of operating customer call centers for clients. The court found that the distribution of material in violation of statute exclusion did not apply to preclude personal and advertising injury liability coverage because the claimants did not receive any unsolicited communications, but instead, specifically made calls to the insureds customer call centers. Therefore, the court found that the insurer owed a duty to defend. In Nationwide Mut. Ins. Co. v. Harris Medical Associates, No. 4:13-cv-7, 2013 U.S. Dist. LEXIS 135497 (E.D. Mo. Sept. 23, 2013) (applying Missouri and Georgia law), the insured sought coverage for claims of common law conversion and violations of the Telephone Consumer Protection Act ( TCPA ) based on its alleged transmission of unsolicited facsimile advertisements. The policies contained an exclusion precluding coverage for claims arising directly or indirectly out of any action or omissions that violates or is alleged to violate: a. the [TCPA], including any amendment of or addition to such law. The court held that the exclusion unambiguously precluded coverage for the TCPA claims under either Georgia or Missouri law. The court was unable to determine whether the violation of statute exclusion precluded coverage for the conversion claim because it did not have the facts necessary to make a choiceof-law determination. 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 26

In Oregon Mut. Ins. Co. v. Rain City Pizza, LLC, No. 67471-4-1, 2013 Wash. App. Lexis 46 (Wash. App. Jan. 14, 2013) (unpublished) (applying Washington law), the insured was sued for violation of the Telephone Consumer Protection Act, violation of Washington statutes relating to unsolicited text messages, and negligence. The insured was in the business of operating various Papa John s pizza stores. The insured allegedly hired a third-party marketing company, which compiled the names and phone numbers of the insured s customers and then sent text messages to those customers advertising the insured s Papa John s stores. The underlying suit alleged that the insured was responsible for the claimants injuries because the insured negligently allowed the text messages to be sent and/or were vicariously liable for their transmission. The court agreed with the insurer s argument that the exclusion for personal and advertising injury arising out of any act or omission that violates or is alleged to violate the Telephone Consumer Protection Act or any statute, ordinance or regulation that prohibits or limits the sending, transmitting, communicating or distribution of material or information, applied to any act or omission that violates the foregoing laws, regardless of whether the insured actually committed such act or omission. In other words, although the insured was not alleged to have actually sent the text messages, the court construed the exclusion as applying to the underlying claims for negligent supervision and vicarious liability. Therefore, the court found that the insurer did not owe any duty to defend or indemnify the insured. In Bridgeview Health Care Center, Ltd. v. State Farm Fire & Cas. Co., No. 1-12-1920, 2013 Ill. App. Lexis 409 (Ill. App. Ct. June 19, 2013), the insured was sued for sending unsolicited faxes, in violation of Telephone Consumer Protection Act ( TCPA ). The parties agreed that no Indiana state court has addressed the issue of whether TCPA claims are covered under a CGL policy as either advertising injury or property damage. However, two Indiana federal court decisions predicted that Indiana state courts would hold that TCPA claims are not covered by a CGL Policy. State Farm argued that Indiana law applied to the coverage dispute and, that under Indiana law, State Farm did not owe a defense obligation. The underlying claimant argued that Illinois law applied, that no conflict existed between Indiana and Illinois law, and that State Farm owed a defense obligation. The trial court applied Illinois law and determined that State Farm owed a defense obligation. In making such determination, the trial court found that State Farm had failed to show that Indiana law conflicted with Illinois law on the question of whether TCPA claims are covered under a CGL policy. However, the appellate court disagreed and found that the application of Indiana law could possibly lead to a different result than that reached under Illinois law. Thus, the appellate court reversed and remanded the case, holding that the trial court must first determine the state with the most significant contacts, and then apply that state s law to the dispute. 27 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

(e) (f) (g) Defects or Errors in Testing Entertainment Industry Exclusion Section 533 of the California Insurance Code In Big 5 Sporting Goods Corp. v. Zurich Am. Ins. Co., 2013 U.S. Dist. Lexis 100757 (C.D. Cal. July 10, 2013) (applying California law), the insured was sued in multiple class actions for infringing customers privacy rights by requesting, recording and publishing customers zip codes in connection with credit card transactions in violation of the Song-Beverly Act of 1991. The underlying suits included claims for common law negligence and invasion of privacy. The court initially found that the underlying claims implicated the personal and advertising injury offense of oral or written publication of material that violates a person s right of privacy. However, the court found that the statutory violations exclusions applied to preclude any personal and advertising injury liability coverage because all of the underlying claims related to the alleged violation of the claimants privacy rights that were created by statute, and which were not based on common law. Additionally, the court determined that because all of the complained of conduct fell within the scope of the Song-Beverly Act, which requires intentional conduct for recovery, the court determined that Section 533 of the California Insurance Code applied to preclude any personal and advertising injury liability coverage. Therefore, the court determined that the insurers did not owe any duty to defend or indemnify the insured. In Signal Products, Inc. v. American Zurich Ins. Co., No. 2:13-cv-04581, 2013 U.S. Dist. Lexis 179933 (C.D. Cal. Dec. 19, 2013) (applying California law), Gucci America, Inc. alleged that the insured s handbags infringed upon Gucci s trade dress. The court in the liability suit entered judgment against the insured and awarded Gucci an accounting of profits based on its finding that the insured had intentionally and willfully copied Gucci s trade dress. The coverage court held that the insurer had no duty to indemnify the insured for the accounting of profits based on the policies knowing violation exclusion. In so doing, the court rejected the insured s argument that the standard for willfulness applied in the liability suit was distinct from the standard for willfulness applicable under the insurance policies. The court went on to hold that coverage was further precluded by California Insurance Code Section 533 because the insured s infringement was committed with knowledge that damage was highly probable or substantially certain to result. (h) Business Pursuits In Country Mut. Ins. Co. v. Molburg, No. 3-12-0364, 2013 Ill. App. Unpub. Lexis 1176 (Ill. App. Ct. Apr. 23, 2013) (applying Illinois law), the insured was sued by her former employer for defamation, which included allegations that the insured made false statements to third parties after the insured voluntarily left her employment with the claimant. The insurer argued that any personal injury liability coverage in the homeowner s policy was precluded by the exclusion for personal injury arising out of any business pursuit of any insured. In analyzing the insurer s argument, the court noted that the term business pursuit has been defined by 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 28

courts as a continuous or regular activity, done for the purpose of earning a profit. The court then found that the complaint did not contain any allegation that the insured s alleged defamatory statements arose out of a continuous or regular activity, done for the purpose of making a profit. Additionally, the court determined that although the insured s statements to co-workers that the claimant made sexually graphic and vile statements about each of the coworkers may have been defamatory, such statements did not relate to, or arise out of, the insured s business. For those reasons, the court determined that the business pursuits exclusion did not apply and that the insurer owed a defense obligation. II. ANALYSIS OF THE ENUMERATED OFFENSES IN THE DEFINITION OF PERSONAL AND ADVERTISING INJURY A. FALSE ARREST, IMPRISONMENT OR DETENTION B. MALICIOUS PROSECUTION In 2003, the claimants in Chicago Ins. Co. v. City of Council Bluffs, 713 F.3d 963 (8th Cir. 2013) (applying Iowa law), were exonerated and released from prison for a 1977 murder. The claimants sued the insured-city, alleging that it had wrongfully instituted legal process against them in violation of their constitutional rights. A 1977 excess policy afforded coverage to the insured for personal injury caused by an occurrence. Personal injury was defined to include false arrest and malicious prosecution. An occurrence was defined as an accident... which results, during the policy period, in personal injury... neither expected nor intended from the standpoint of the insured. The Eighth Circuit found that the insured s conduct fell outside the scope of the occurrence definition. However, because the policy provided coverage for malicious prosecution, an intentional tort, the court also found that an ordinary layperson would have misunderstood the policy s scope as providing coverage for the insured s intentional conduct. The court concluded that the reasonable expectations doctrine precluded application of the occurrence definition and that the policy s personal injury coverage was implicated for purposes of a defense and indemnity. In Stafford v. Jewelers Mut. Ins. Co., No. 3:12-cv-050, 2013 U.S. Dist. Lexis 29011 (S.D. Ohio Mar. 4, 2013) (applying Ohio law), the insured allegedly committed fraud by claiming to have shipped a 5.5 karat pink diamond it sold to the claimant in a box that it knew did not contain the diamond. The court rejected the insured s argument that the fraud counterclaim against the insured implicated the malicious prosecution offense because none of the elements of a malicious prosecution claim under Ohio law were satisfied. The court held that there was no duty to defend or indemnify. In Travelers Prop. & Cas. Co. of America v. KFx Medical Corp., No. C 13-00710, 2013 U.S. Dist. Lexis 97777 (N.D. Cal. July 12, 2013) (applying California law), a claim was filed against the insured seeking declaratory relief that the claimant s products did not infringe the insured s patents and that the patents were otherwise invalid. The insured argued that such claims constituted a claim for abuse of process, and that such claim fell within the scope of the 29 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

malicious prosecution offense. The court disagreed and found that the underlying claims did not allege any claim for abuse of process in the first instance, and therefore, the insurer did not owe any duty to defend. The court did not address whether an abuse of process claim falls within the scope of the malicious prosecution offense in the definition of personal and advertising injury. In Hinkle v. State Farm Fire & Cas. Co., No. 31,707, 2013 N.M. App. Lexis 52 (N.M. Ct. App. June 3, 2013) (applying New Mexico law), petition for cert. granted, 2013-NMCERT-077 (N.M. July 26, 2013), the insured was sued for economic duress, breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment, prima facie tort, civil conspiracy, and punitive damages. The insured argued that the depositions taken in the underlying suit revealed that the underlying claimant claimed that the insured threatened to use the litigation process in order to obtain an economic and business advantage. The insured argued that such claim triggered a defense obligation under the personal injury offense of abuse of process, malicious prosecution. The court disagreed and found that the complaint did not assert a claim for malicious abuse of process. The court also determined that even if the underlying facts revealed that the basis for the underlying claim was the insured s threat of litigation in order to obtain an economic and business advantage, such facts were insufficient to state a claim for malicious abuse of process. Therefore, the court held that the insurer did not owe a defense obligation. C. WRONGFUL EVICTION, WRONGFUL ENTRY OR INVASION OF THE RIGHT OF PRIVATE OCCUPANCY In City of Glendale v. National Union Fire Ins. Co., No. 12-cv-380, 2013 U.S. Dist. Lexis 45468 (D. Ariz. Mar. 29, 2013) (applying Arizona law), the insured, Glendale, Arizona, was alleged to have discriminated against a tenant of one of its airport hangers with the intent of making the sub-lease of the hangar unprofitable and with the hope that the tenant would give up its rights under the lease. The court held that the personal injury coverage for wrongful eviction from, wrongful entry into or invasion of the right private occupancy of a... premises that a person occupies by or on behalf of its owner, landlord, or lessor, was implicated for purposes of a duty to defend. The court reasoned that the phrase invasion of the right of private occupancy is ambiguous as to whether it requires a physical invasion of real property or whether it incorporates an interference with other real property rights. The insurer s argument that the phrase wrongful eviction limits the scope of invasion of the right of private occupancy to a physical invasion was rejected by the court because a wrongful eviction claim does not require a physical invasion under Arizona law. The court also rejected the insurer s argument that the offense s use of the term person, as opposed to person or organization as found in other personal injury offenses, requires the injured party to be a natural person. The insured in Erie Ins. Prop. & Cas. Co. v. Viewpoint, Inc., No. 5:12-cv-81, 2013 U.S. Dist. Lexis 30646 (N.D.W.V. Mar. 6. 2013) (applying West Virginia law), was alleged to have fraudulently induced a 71 year-old widow to sign a document which purportedly reinstituted an 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 30

old oil and gas lease on her property for a significantly smaller sign-on bonus and royalties than were available on the open market. Based on these allegations, the insured faced claims of civil conspiracy, outrage, unlawful-holding over, slander of title, negligence, and breach of implied covenant to diligently develop, produce and market. The court concluded that the wrongful entry offense was not implicated because the offense requires a wrongful entry or eviction to have been committed on behalf of the property s owner, landlord, or lessor, while the insured was not any of those. The court concluded that the insurer had no duty to defend or indemnify. In Hartford Fire Ins. Co. v. Gandy Dancer, LLC, 2013 U.S. Dist. Lexis 156735 (D.N.M. Aug. 30, 2013) (applying New Mexico law), the insureds were sued for trespass and nuisance. One insured was hired by BNSF Railway Company (also an insured) to construct a water diversion system on certain unoccupied land that was owned by the claimant, and on which BNSF owned an easement. The underlying claim alleged that the insureds work on the land exceeded the scope of BNSF s easement. The Hartford argued that the wrongful eviction offense was not implicated by the claim because the offense only applies to claims involving structures and premises that persons occupy and because the insureds were not an owner, landlord, lessor of the property on which they worked. The court disagreed. It found that the terms premises and a person occupies in the wrongful eviction offense to be ambiguous and construed the terms to include the subject vacant land. In analyzing the trespass and nuisance claims, the court found that the trespass claim did not implicate the wrongful eviction offense, but that the nuisance claim triggered a duty to defend. In Indiana Ins. Co. v. Brown Packing Co., No. 1-11-3039, 2013 Ill. App. Unpub. Lexis 988 (Ill. App. Ct. May 10, 2013) (applying Illinois law) (unpublished), the federal government filed a criminal information against the insured, which was engaged in the business of producing meat for human consumption. The federal government accused the insured of felony conspiracy to commit mail and wire fraud, by unlawfully implanting veal calves with hormones and steroids, concealing that fact from customers, competitors and the federal government, and making fraudulent claims that its veal does not contain steroids. Thereafter, the insured pled guilty to the charges and agreed to a civil forfeiture of $2 million, which represented the proceeds obtained by the insured from the sale of the illegal hormone-enhanced veal. The insured argued that the criminal information alleged that the insured entered the property of those raising the calves owned by the insured and injected the calves with hormones and steroids. However, the court disagreed. The court determined that the criminal information did not allege the personal injury offense of wrongful entry, because there were no allegations of wrongful entry of a premises by its owner, landlord or lessor. The court also found that there were no allegations suggesting that the insured entered the property of those raising its veal calves without authority. Accordingly, the court determined that the insurer did not owe any defense or indemnity obligation to the insured. In Lexington Ins. Co. v. St. Bernard Parish Government, No. 11-1865, 2013 U.S. Dist. Lexis 31561 (E.D. La. Mar. 7, 2013), aff d by No. 13-30300, 2013 U.S. App. Lexis 24292 (5th Cir. Dec. 6, 2013) (applying Louisiana law), St. Bernard Parish approved the condemnation of the claimants properties after they were damaged by Hurricane Katrina. The claimants sued the parish for 31 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

inverse condemnation. At issue was whether the claims were covered under the parish s personal and advertising injury coverage for wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies on behalf of its owner, landlord or lessor. The court held that the offense is ambiguous as to whether it requires an invasion of the right of private occupancy to be committed by the property s owner, landlord or lessor or whether it requires the person whose rights were violated to be the owner, landlord, or lessor of the property. Resolving the ambiguity in favor of the insured, the court held that the parish s lack of ownership of the properties it approved for condemnation did not preclude a defense or indemnity obligation being owed by its insurer. In John T. Doyle Trust v. Country Mut. Ins. Co., No. 1-12-1238, 2013 Ill. App. Unpub. Lexis 2143 (Ill. App. Ct. Sept. 25, 2013) (applying Illinois law), the insured was sued for violation of the Illinois Forcible Entry and Detainer Act for evicting the claimant from premises leased by the insured to the claimant and disposing of the claimant s personal property. The court first found that the claim alleged the personal and advertising injury offense of wrongful eviction. The court also found the breach of contract exclusion to be ambiguous under the facts of the case and construed the exclusion against the insurer. Therefore, the court determined that the insurer owed a duty to defend. D. DEFAMATION, LIBEL, SLANDER, DISPARAGEMENT In Assurance Co. of America v. Waldman, No. 1:13-cv-179, 2013 U.S. Dist. Lexis 177437 (S.D. Ohio Dec. 18, 2013) (applying Ohio law), the dissolution of the insured, an accounting firm, resulted in a myriad of litigation between its former partners. In one of the suits, two of the partners alleged that another, Waldman, disparaged them in written correspondence to the IRS. The court first noted that the complaint alleged claims that likely fell within the disparagement and right of privacy offenses in the personal and advertising injury coverage. However, the court went on to find that the knowing violation and breach of contract exclusions precluded any defense or indemnity obligation. The court reasoned that the complaint alleged that Waldman knowingly disclosed information designated as confidential to the IRS in bad faith. The complaint also contained several breach of contract counts which alleged that Waldman s conduct violated the non-disparagement clause of the dissolution settlement agreement entered into by the partners in another suit. In Basalite Concrete Products, LLC v. National Union Fire Ins. Co., No. 2:12-civ-02814, 2013 U.S. Dist. Lexis 70597 (E.D. Cal. May 17, 2013) (applying California law), the insured allegedly infringed upon the claimant s trademarks and patents by breaching a licensing agreement with the claimant and continuing to use the marks and patents after the claimant asked the insured to stop doing so. The court held that the allegations failed to implicate the personal and advertising injury coverage s disparagement offense because they did not include any false or injurious statements about the quality of the claimant s product. The court held the insurer owed no duty to defend or indemnify the claims. 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 32

In Charter Oak Ins. Co. v. Maglio s Fresh Food, No. 12-3967, 2013 U.S. Dist. Lexis 152741 (E.D. Pa. Oct. 24, 2013) (applying Pennsylvania law), the insured was sued for allegedly selling inferior frozen stromboli under the claimant s brand name. The court held that the claim fell within the scope of the disparagement offense. However, the claimant advanced uncovered claims at trial as well, such as the insured s use of deceptive samples. The court held that because the insured could not demonstrate whether the jury s verdict was based on covered or uncovered claims, the insurer had no duty to indemnify the insured. In a separate trial, the insured was found to have sold its stromboli by using product information applicable to the claimant s product, rather than its own, inferior stromboli. The court held that the insured failed to meet its burden of establishing that the claim fell within the scope of the disparagement offense. The evidence presented at trial indicated that the insured had only misrepresented the ingredients and characteristics of its own stromboli, not that it had made any misrepresentations about the claimant s stromboli. The court also held that the policies knowing violation exclusion precluded coverage because the insured s sales manager testified that the insured knew its product packaging did not accurately describe its stromboli and that the insured misled the public. In Cincinnati Ins. Co. v. Gage Center Dental Group, P.A.., No. 12-2387-KHV, 2013 U.S. Dist. Lexis 156844 (D. Kan. Nov. 1, 2013) (applying Kansas law), the insured was sued for breach of fiduciary duty, defamation, intentional interference with business expectancies, intentional interference with contract, and conspiracy to defame and slander. The court first found that the underlying claims implicated the disparagement offense in the definition of personal and advertising injury. The court then found that the knowing violation and knowledge of falsity exclusions did not apply to preclude liability coverage. Accordingly, the court found that the insurer owed a duty to defend. In JAR Laboratories LLC v. Great American E&S Ins. Co., No. 12-cv-7134, 2013 U.S. Dist. Lexis 67516 (N.D. Ill. May 10, 2013) (applying Illinois law), the insured faced claims of false advertising, unfair competition, and violations of various states consumer protection statutes. The claims were based on allegations that it falsely advertised its over-the-counter pain-relief patch, LidoPatch, to be as effective as the claimant s prescription pain-relief patch, Lidoderm. The insured s allegedly false statements included that its LidoPatch product contained the same active ingredient as the leading prescription patch and a promise of fastacting relief. The court concluded that the allegations set forth a potential claim for oral or written publication... that disparages a person s or organization s goods, products, or services. While the statements made by the insured did not refer to the claimant s product by name, the underlying complaint alleged that many consumers would recognize the reference to the leading prescription patch as directed to Lidoderm. The claimant also alleged that the insured made the statements to make it seem as if the products were equal while, in fact, the insured s product was inferior. In Lexington Ins. Co. v. Tudor Ins. Co., No. 11-c-809, 2013 U.S. Dist. Lexis 16026 (E.D. Wis. Feb. 6, 2013) (applying Wisconsin law), the insured, Trek Bicycle Corp., had contractual relationships with cyclists Greg LeMond and Lance Armstrong, both of whom endorsed Trek- 33 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

brand bicycles. Trek allegedly failed to protect LeMond from defamatory statements made by Armstrong, which the court found implicated the policy s disparagement offense for purposes of a duty to defend. While the only claims alleged were for breach of contract, the court found that the facts alleged, not the causes of action pled, determine coverage. Also, while the statements were allegedly made by Armstrong, the court found that allegations of disparagement arose out of Trek s business because Trek was in the Lance Armstrong business. Trek was also alleged to have told distributors that the LeMond line of bicycles was being discontinued, to have asked LeMond not to attend a yearly dealer show, and to have drafted fake consumer emails expressing a negative reaction to LeMond's remarks in a newspaper interview. The court held that those allegations also set forth a potential claim for product disparagement because they disparaged the LeMond brand. In Stafford v. Jewelers Mut. Ins. Co., No. 3:12-cv-050, 2013 U.S. Dist. Lexis 29011 (S.D. Ohio Mar. 4, 2013) (applying Ohio law), the insured was alleged to have committed fraud by agreeing to ship a 5.5 karat pink diamond it sold to the claimant in a box that did not, in fact, contain the diamond. The court held that the claim failed to implicate the personal injury coverage s disparagement offense because the insured was not alleged to have published statements to anyone other than the insured and was not alleged to have made a false and defamatory statement about the plaintiff or its products or services. The court held that the insurer had no duty to defend or indemnify. In Travelers Prop. & Cas. Co. of America v. KFx Medical Corp., No. C 13-00710, 2013 U.S. Dist. Lexis 97777 (N.D. Cal. July 12, 2013) (applying California law), a claim was filed against the insured seeking declaratory relief that the claimant s products did not infringe the insured s patents and that the patents were otherwise invalid. The claim against the insured also sought to enjoin the insured from threatening or charging infringement, which the insured argued implicated the disparagement offense in the definition of personal and advertising injury. The court disagreed and found that the underlying claims did not contain any allegation that the insured published material that disparaged the claimant s goods, products or services. Therefore, the court found that the insurer did not owe any duty to defend. In Tria Beauty, Inc. v. National Fire Ins. Co. of Hartford, No. C 12-05465, 2013 U.S. Dist. Lexis 71499 (N.D. Cal. May 20, 2013) (applying California law), the insured was sued by its competitor for false advertising and unfair competition based on false and misleading statements it was alleged to have made about its own products. The statements included that its hair removal product was the equivalent to professional laser hair removal and was the only product of its kind cleared by the FDA, and that its acne-treatment products were faster, superior, and more powerful than other products on the market. The court held that those allegations set forth a potential claim for implied disparagement, implicating the personal and advertising injury coverage s disparagement offense for purposes of a duty to defend. The court noted a split in authority on whether the offense applies to allegations of implied disparagement some courts holding that the offense may be implicated by an insured s claims about its own products superiority, and other courts holding that allegations sufficient to support a claim for trade libel, which requires a specific reference to the claimant s products or 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 34

services, must be alleged. The court sided with the former courts, concluding that the disparagement offense does not require the pleading of any specific cause of action. The court also found that to the extent the offense is ambiguous with regard to claims of implied disparagement, the ambiguity must be construed in favor of the insured. The court went on to find that there was no duty to defend or indemnify based on allegations of trademark infringement and the policy s broad IP exclusion. In Indiana Ins. Co. v. Brown Packing Co., No. 1-11-3039, 2013 Ill. App. Unpub. Lexis 988 (Ill. App. Ct. May 10, 2013) (applying Illinois law) (unpublished), the federal government filed a criminal information against the insured, which was engaged in the business of producing meat for human consumption. The federal government accused the insured of felony conspiracy to commit mail and wire fraud, by unlawfully implanting veal calves with hormones and steroids, concealing that fact from customers, competitors and the federal government, and making fraudulent claims that its veal does not contain steroids. Thereafter, the insured pled guilty to the charges and agreed to a civil forfeiture of $2 million, which represented the proceeds obtained by the insured from the sale of the illegal hormone-enhanced veal. The court determined that the criminal information filed against the insured did not allege the advertising injury offenses of disparagement or violation of person s right of privacy. With respect to the disparagement offense, the court found that the criminal information lacked any allegation that the insured slandered or libeled anyone. Accordingly, the court determined that the insurer did not owe any defense or indemnity obligation to the insured. In Grange Ins. Assoc. v. Roberts, No. 69356-5-I, 2013 Wash. App. Lexis 2550 (Wash. App. Ct. Oct. 28, 2013) (applying Washington law), the insured was sued for making false statements and false accusations and for badmouthing the claimants. Because the underlying claim did not seek recovery for damages based on a claim for defamation, the court questioned whether the complaint adequately alleged a claim for defamation. Nonetheless, even assuming that a defamation claim was sufficiently alleged, the court found that the knowing violation and knowledge of falsity exclusions applied to preclude coverage because the complaint alleged that the insured only committed certain intentional and deliberate wrongful conduct. Therefore, the court found that the insurer did not owe any defense obligation. E. VIOLATION OF RIGHT OF PRIVACY In Collective Brands, Inc. v. National Union Fire Ins. Co. of Pittsburgh, Pa., No. 11-4097- JTM, 2013 U.S. Dist. Lexis 1338 (D. Kan. Jan. 4, 2013) (applying Kansas law), the insured was sued for violation of the Telephone Consumer Protection Act ( TCPA ) for allegedly sending unauthorized pre-recorded telephone messages and text messages, advertising the insured s products. The court found that the allegations triggered the oral or written publication, in any manner, of material that violates a person s right of privacy offense, even if such telephone messages and text messages did not reveal secrets of the recipient. However, the court determined that the insurer did not have a duty to defend because the policy excluded coverage for any liability arising out of any act that violates any statute, ordinance or regulation of any federal, state or local government that prohibits or limits the sending, 35 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

transmitting or communicating of material or information. Therefore, the court determined that the insurer did not have any duty to defend or indemnify. In Encore Receivable Management, Inc. v. ACE Prop. & Cas. Ins. Co., No. 1:12-cv-297, 2013 U.S. Dist. Lexis 93513 (S.D. Ohio July 3, 2013) (applying Ohio law), the insureds were sued for recording the claimants telephone conversations without their consent. The claimants were various Hyundai customers. The recordings were not distributed to anyone aside from the insureds employees. The insurer argued that the personal and advertising injury offense of oral or written publication of material that violates a person s right of privacy was not implicated because there was no publication as the conversations were not disseminated to the public. The court disagreed and found that there was a publication the moment that the conversations were disseminated or transmitted to the recording device, and that it was not necessary to establish that the communications were actually disseminated to third parties. Therefore, the court found that the insurer owed a duty to defend. In Hartford Cas. Ins. Co. v. Corcino & Assoc., No. CV 13-3728, 2013 U.S. Dist. Lexis 152836 (C.D. Cal. Oct. 7, 2013) (applying California law), the insured was sued for violation of the constitutional right of privacy, violation of the common law right of privacy, violation of the California Confidentiality of Medical Information Act and violation of the California Lanterman Petris Short Act. The policy at issue defined personal and advertising injury in part as the electronic publication of material that violates a person s right of privacy. However, the policy contained an exclusion for personal and advertising injury arising out of the violation of a person s right to privacy created by any state or federal act. The exclusion contained an exception stating that the exclusion does not apply to liability for damages that the insured would have in the absence of such state or federal act. Pursuant to the foregoing exclusion, the insurer argued that it did not owe any coverage for any statutory relief. However, the court disagreed and determined that the two California statues at issue did not create new privacy rights, but instead only codified existing privacy rights and created remedies for violations of those rights. Thus, the court determined that relief sought under the statutes fell outside the scope of the exclusion and the court held that the insurer owed a duty to defend. In Indiana Ins. Co. v. CE Design, Ltd., No. 12 C 8839, 2013 U.S. Dist. Lexis 179372 (N.D. Ill. Dec. 20, 2013) (applying Michigan law), an Illinois federal district court predicted that the Michigan Supreme Court would hold that Telephone Consumer Protection Act ( TCPA ) claims implicate the advertising injury offense of oral or written publication of material that violates a person s right of privacy. The court relied primarily upon a Michigan appellate court and trial court s holdings that the right of privacy offense is implicated by TCPA claims because it applies to both the right to secrecy and the right to seclusion, the latter of which being the right violated by the sending of unsolicited facsimile advertisements. The court concluded that the lower courts decisions were persuasive precedent that fairly interpreted Michigan law. Thus, the court concluded that the insurer had a duty to defend. In Lexington Ins. Co. v. Tudor Ins. Co., No. 11-c-809, 2013 U.S. Dist. Lexis 16026 (E.D. Wis. Feb. 6, 2013) (applying Wisconsin law), the insured, Trek Bicycle Corp., had contractual 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 36

relationships with cyclists Greg LeMond and Lance Armstrong, both of whom endorsed Trekbrand bicycles. Among other allegations, it was alleged that Armstrong leaked LeMond's confidential arbitration testimony from a suit Armstrong filed against a third-party. It was also alleged that after LeMond acquiesced to Trek s wishes and agreed to release a public statement concerning his views on Armstrong s affiliation with a doctor, Armstrong fabricated a fake interview on the subject that was published in USA Today. With little analysis, the court found that the foregoing allegations implicated the personal and advertising injury coverage s right of privacy offense for purposes of a duty to defend. At issue in Arch Insurance Co. v. Michaels Stores, Inc., No. 37-2011-00097053 (Cal. Super. Ct. Dec. 20, 2013) (applying California law), was whether the insurer had a duty to defend or indemnify the insured against six putative class actions alleging that the insured had violated the Song-Beverly Act by requiring customers to provide ZIP codes in conjunction with credit card transactions. The court held that the statutory penalties available under the act up to $250 for the first violation and $1,000 for each subsequent violation are not sums payable as damages because of personal and advertising injury. The court reasoned that the penalties are not compensatory but, rather, are designed to discourage retailers from combining personal identification information with credit card data. Because the putative class actions did not seek damages within the meaning of the policies, the court held that the insurer had no duty to defend or indemnify. While two of the underlying suits originally contained common law invasion of privacy claims, the court held that there was no duty to defend under the right of privacy offense because the common law claims had been dismissed. At issue in Columbia Cas. Co. v. HIAR Holding, LLC, 411 S.W.3d 258 (Mo. 2013) (applying Missouri law), was whether an insurer was obligated to defend and indemnify its insured for claims that it violated the Telephone Consumer Protection Act ( TCPA ) by sending unsolicited facsimile advertisements. The Missouri Supreme Court concluded that the TCPA s liquidated damages of $500 per offense are not in the nature of fines or penalties and, thus, constitute damages under the policies advertising injury coverage. The court went on to find that the advertising injury offense of the publication of material that violates a person s right to privacy was implicated, rejecting the insurer s argument that the offense is limited to violations arising out of the content of advertising material and only applies to the privacy interests of individuals. The court reasoned that the offense is not clearly limited to the content of material and that the TCPA was enacted to protect the privacy interests of both individuals and businesses. Finally, the court held that coverage for the TCPA claims did not violate public policy because the insured s conduct was not willful or malicious. In General Star Indem. Co. v. Travelers Indem. Co., No. CV0840233383S, 2013 Conn. Super. Lexis 808 (Conn. Super. Ct. Apr. 9, 2013) (applying Arizona and Connecticut law), the insureds were sued for breach of the right of publicity, the insureds alleged wrongful use of the claimant s name, likeness, identity, autograph and persona in, among other things, comic books, trading cards, an HBO animated television series, and an interview given by [the insured] to Wizard magazine. In determining whether such claims were covered under the Travelers 37 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

policy, the court first found that the claims implicated the personal injury offense of oral or written publication of material that violates a person s right of privacy. However, the court also determined that the underlying claims were excluded under the Travelers policy. Specifically, the court determined that each of the complained of injuries fell squarely within the exclusionary language in the insuring agreement stating that the policy applies to personal injury caused by an offense arising out of your business, excluding advertising, publishing, broadcasting or telecasting done by or for you. In Indiana Ins. Co. v. Brown Packing Co., No. 1-11-3039, 2013 Ill. App. Unpub. Lexis 988 (Ill. App. Ct. May 10, 2013) (applying Illinois law) (unpublished), the federal government filed a criminal information against the insured, which was engaged in the business of producing meat for human consumption. The federal government accused the insured of felony conspiracy to commit mail and wire fraud, by unlawfully implanting veal calves with hormones and steroids, concealing that fact from customers, competitors and the federal government, and making fraudulent claims that its veal does not contain steroids. Thereafter, the insured pled guilty to the charges and agreed to a civil forfeiture of $2 million, which represented the proceeds obtained by the insured from the sale of the illegal hormone-enhanced veal. The court found that the criminal information did not allege the advertising injury offense of violation of person s right of privacy. Accordingly, the court determined that the insurer did not owe any defense or indemnity obligation to the insured. In Standard Mut. Ins. Co. v. Lay, 2013 IL 114617 (2013) (applying Illinois law), the claimant sought satisfaction of a settlement for claims that the insured had sent unsolicited facsimile advertisements in violation of the Telephone Consumer Protection Act ( TCPA ). Reversing the appellate court, the Illinois Supreme Court held that the TCPA s liquidated damages of $500 per offense are remedial in nature, not penal. As a result, the court concluded that insurance coverage for statutory damages under the TCPA is not barred by Illinois law or public policy. The court reasoned that the TCPA is among a class of remedial statutes which are designed to grant remedies for the protection of rights and the public good. The court further noted that the treble damages available under the TCPA, not the liquidated damages, serve the goals of punishment and deterrence. On remand, the Illinois Appellate Court in Standard Mut. Ins. Co. v. Lay, 2013 IL App (4th) 110527-UB (2013) (unpublished), addressed the issues remaining after the Illinois Supreme Court s decision, supra. The appellate court held that the TCPA claims implicated the personal and advertising injury coverage s right of privacy offense based on Valley Forge Ins. Co. v. Swiderski Electronics, Inc., 860 N.E.2d 307 (Ill. 2006). Unlike in Swiderski, the insured was a corporation, which arguably does not have a right to seclusion. However, with little discussion, the court concluded that the distinction had no material effect on coverage. In Windmill Nursing Pavilion, Ltd. v. Cincinnati Ins. Co., 2013 IL App (1st) 122431 (Dec. 13, 2013) (applying Ohio law), the insured and insurer agreed that CGL and umbrella policies in effect from 2003 2006 afforded coverage for underlying Telephone Consumer Protection Act ( TCPA ) claims, but disputed whether the insurer s notice to the insured of a TCPA exclusion 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 38

in the 2007 policies was sufficient. The court concluded that the notice was sufficient because the exclusion was separately attached to the CGL policy on individual pages, was clearly worded in large, bold, capital letters, and stated specifically that it applied to both the CGL and umbrella 2007 policies. Thus, the court concluded that the exclusion precluded coverage under those policies. The court went on to find that the separate limits under the 2003 2006 policies products-completed operations hazard coverage were not available because unsolicited facsimile advertisements do not constitute products, goods, or work as defined therein. F. USE OF ANOTHER S ADVERTISING IDEA 1 In Basalite Concrete Products, LLC v. National Union Fire Ins. Co., No. 2:12-civ-02814, 2013 U.S. Dist. Lexis 70597 (E.D. Cal. May 17, 2013) (applying California law), the insured allegedly infringed upon the claimant s trademarks and patents by breaching a licensing agreement which permitted the claimant to utilize the claimant s know-how, molds, patent rights, and trademarks to manufacture, market and sell the claimant s products. The insured allegedly continued to use the trademarks and patents after the claimant requested that the insured cease doing so. The court held that the allegations did not implicate a duty to defend under the personal and advertising injury coverage s use of another s advertising idea offense because they did not allege that any of the infringement took place in an advertisement. In Country Mut. Ins. Co. v. Deatley, No. 13-cv-3029, 2013 U.S. Dist. Lexis 166500 (E.D. Wash. Nov. 21, 2013), the insured was sued for making fraudulent and/or negligent misrepresentations about the validity of conservation easements tax credits that were sold to the claimants. The underlying claim sought recovery for the claimants lost investments. The insured argued that because he advertised the tax credits to investors, the underlying claims implicated the personal and advertising injury offenses of use of another s advertising idea and infringing upon another s copyright, trade dress or slogan. The court disagreed and found that the underlying claims did not allege any of the personal and advertising injury offenses. The court found that the insured s liability did not arise from his use of another s advertising injury, nor did his liability arise from his infringing upon another s copyright, trade dress or slogan. The court therefore held that the insurer did not owe any duty to defend. In Epson Electronics America, Inc. v. Tokio Marine & Nachido Fire Ins. Co., 2013 U.S. Dist. Lexis 101430 (N.D. Cal. July 19, 2013) (applying California law), the insured was sued for unfair competition and violation of deceptive trade practice statutes of various states. The underlying claim alleged that the defendants made false promotional public statements which misrepresented the reasons for the high prices it was charging for its liquid crystal display products. Such statements were allegedly made in the media, to investors and the like. The court first found that such statements did not constitute advertisements. Additionally, even if the alleged statements were considered advertisements, the court determined that such 1 See analogous cases addressing the offense of misappropriation of advertising ideas or style of doing business in Section H, infra. 39 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

statements did not constitute the use of another s advertising idea, because the insured was not alleged to have misappropriated any aspect of the claimant s advertising. Therefore, the court found that the insurer did not owe any defense obligation. The insured in Purplus Inc. v. Hartford Cas. Ins., No. C-12-03689, 2013 U.S. Dist. Lexis 38367 (N.D. Cal. Mar. 19, 2013) (applying California law), allegedly infringed upon the claimant s copyrights and trademarks by selling unauthorized copies of Adobe Acrobat and other Adobe software products on its website. The court held that these allegations did not implicate the personal and advertising injury coverage for copying, in your advertisement, a person s or organization s advertising idea or style of advertisement because the complaint did not allege that the infringement took place in any advertisement. In so doing, the court rejected the insured s argument that its advertisements of Adobe software extrinsic to the complaint should be considered because neither the allegations in the complaint nor the causes of action alleged revealed the potential for any injury arising out of the insured s advertising. The court concluded that the insurer had no duty to defend or indemnify. In U.S. Fire Ins. Co. v. Cyanotech Corp., No. 12-00537, 2013 U.S. Dist. Lexis 152160 (D. Haw. Oct. 23, 2013) (applying Hawaii law), the insured was sued for patent infringement with respect to a certain drug compound called astaxanthin, tortious interference with a business relationship, and breach of confidentiality agreement. The underlying patent infringement claim alleged, in part, that the insured advertised certain products that infringed the claimants patent. The insured argued that such allegations of advertising implicated the personal and advertising injury offense of use of another s advertising idea. The court disagreed and determined that the underlying patent claim related to the insured s use and administration of astaxanthin. The court found that the underlying claim did not allege any misappropriation, sale, offer, or use of the claimant s advertising idea, nor did the underlying claim relate to any method of advertising. Therefore, the court found that the underlying claims did allege the use of another s advertising idea and determined that insurer did not owe any duty to defend or indemnify. In Air Engineering, Inc. v. Industrial Air Power, LLC, 828 N.W.2d 565 (Wis. Ct. App. Jan. 3, 2013) (applying Wisconsin law), the insured was sued for trade secret misappropriation, breach of contract, breach of fiduciary duty and unjust enrichment for allegedly using the same website source code and content as found on the claimant s website and for misappropriating an Internet Advertising System ( IAS ). This IAS was allegedly developed by the claimant to advertise its products to the public in order to facilitate sales. The IAS was designed to direct persons to the claimant s advertising and links detailing product information, based on certain Google search terms entered by such persons. The court found that the alleged misappropriation of the IAS triggered the use of another s advertising idea offense because the system was an idea that called public attention to a product or business. With respect to the alleged misappropriation of the website source code and content, the court also found that such conduct triggered the use of another s advertising idea offense because the content of a website could be reasonably read as constituting or including an advertisement. As such, the court found that the insurer owe a duty to defend. 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 40

In Basic Research, LLC v. Admiral Ins. Co., 297 P.3d 578 (Utah Feb. 8, 2013) (applying Utah law), the insured marketed a weight-loss product using the slogans "Eat All You Want And Still Lose Weight" and "And we couldn't say it in print if it wasn't true!" The insured was sued by customers that purchased the insured s products, for false advertising, defective product, and failure to perform as promised. The insured argued that the underlying claim implicated the personal and advertising injury offense of use of another s advertising idea. The court disagreed. The court found that while the underlying claims alleged that the insured used the foregoing slogans, the underlying causes of actions were not dependent on the source or ownership of those slogans. The court also found that the claimants injuries did not result from the insured s misappropriation or wrongful use of another s slogan. Accordingly, the court determined that the insurer did not owe any defense obligation. In Continental Cas. Co. v. Quality King Distributors, Inc., No. 602459/02, 2013 N.Y. Misc. Lexis 1045 (N.Y. Sup. Ct. Mar. 1, 2013) (applying New York law), the insured was sued for selling counterfeit products that infringed the claimant s copyrights and trademarks. The underlying claim included allegations that the insured sold the counterfeit products from the insured s website. The insured settled the claims against it for an amount within the limit of two primary policies issued by Continental. National Union, which issued two commercial umbrella policies sitting above the Continental policies, argued that it did not owe any defense or indemnity obligation, on the basis that the primary Continental policies were implicated by the claims against the insured and that the Continental policies had not yet been exhausted. The court agreed with National Union that the claims against the insured implicated the advertising injury liability coverage of the Continental policies. Specifically, the court found that the underlying claims sufficiently alleged the advertising injury offenses of use of another s advertising injury and infringement of another s copyright, trade dress or slogan. In making this determination, the court noted that the alleged copyright and trademark offenses were committed in the insured s advertisement, based on the allegation that the insured sold the counterfeit products on the insured s website. Accordingly, the court found that the underlying claims implicated the advertising injury liability coverage of the Continental policies and that National Union did not owe any defense or indemnity obligation. In TetraVue, Inc. v. St. Paul Fire & Marine Ins. Co., D061002, 2013 Cal. App. Unpub. Lexis 5074 (July 19, 2013) (unpublished) (applying California law), the insured was sued for misappropriation of trade secrets and unfair business practices. The policy at issued defined "advertising injury" in part as "injury... caused by... [the] unauthorized use of any advertising material... of others in your advertising." The term "advertising" was defined as "attracting the attention of others by any means for the purpose of" either "seeking customers or supporters" or "increasing sales or business." "Advertising material" was defined as "any covered material that: is subject to copyright law; and others use and intend to attract attention in their advertising." The underlying claim alleged that the insured misappropriated certain trade secret and confidential materials, as well as non-confidential presentation materials belonging to the claimant. Although the underlying claim did not contain an express allegation that the insured misappropriated materials that constituted the claimant's advertising, the court nonetheless 41 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

determined that the claim alleged facts that raised the inference or possibility that the insured misappropriated the claimant's advertising. Thus, the court determined that the insurer owed a defense obligation. G. INFRINGING UPON ANOTHER S COPYRIGHT, TRADE DRESS OR SLOGAN IN YOUR ADVERTISEMENT 1. Copyright Infringement In Country Mut. Ins. Co. v. Deatley, No. 13-cv-3029, 2013 U.S. Dist. Lexis 166500 (E.D. Wash. Nov. 21, 2013), the insured was sued for making fraudulent and/or negligent misrepresentations about the validity of conservation easements tax credits that were sold to the claimants. The underlying claim sought recovery for the claimants lost investments. The insured argued that because he advertised the tax credits to investors, the underlying claims implicated the personal and advertising injury offenses of use of another s advertising idea and infringing upon another s copyright, trade dress or slogan. The court disagreed and found that the underlying claims did not allege any of the personal and advertising injury offenses. The court found that the insured s liability did not arise from his use of another s advertising injury, nor did his liability arise from his infringing upon another s copyright, trade dress or slogan. Therefore, the court held that the insurer did not owe any duty to defend. In U.S. Fire Ins. Co. v. Cyanotech Corp., No. 12-00537, 2013 U.S. Dist. Lexis 152160 (D. Haw. Oct. 23, 2013) (applying Hawaii law), the insured was sued for patent infringement with respect to a certain drug compound called astaxanthin, tortious interference with a business relationship, and breach of confidentiality agreement. The underlying patent infringement claim alleged, in part, that the insured advertised certain products that infringed the claimants patent. The court determined that the underlying patent claim did not implicate the personal and advertising injury offense of infringing upon another s copyright, trade dress or slogan in your advertisement. In making this determination, the court stated that the offense conspicuously and plainly omits patent infringement. Therefore, the court held that insurer did not owe any duty to defend or indemnify the insured. In Continental Cas. Co. v. Quality King Distributors, Inc., No. 602459/02, 2013 N.Y. Misc. Lexis 1045 (N.Y. Sup. Ct. March 1, 2013) (applying New York law), the insured was sued for selling counterfeit products that infringed the claimant s copyrights and trademarks. The underlying claim included allegations that the insured sold the counterfeit products from the insured s website. The insured settled the claims against it for an amount within the limit of two primary policies issued by Continental. National Union, which issued two commercial umbrella policies sitting above the Continental policies, argued that it did not owe any defense or indemnity obligation, on the basis that the primary Continental policies were implicated by the claims against the insured and that the Continental policies had not yet been exhausted. The court agreed with National Union that the claims against the insured implicated the advertising injury liability coverage of the Continental policies. Specifically, the court found that the underlying claims sufficiently alleged the advertising injury offenses of use of 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 42

another s advertising injury and infringement of another s copyright, trade dress or slogan. In making such determination, the court noted that the alleged copyright and trademark offenses were committed in the insured s advertisement, based on the allegation that the insured sold the counterfeit products on the insured s website. Accordingly, the court found that the underlying claims implicated the advertising injury liability coverage of the Continental policies and that National Union did not owe any defense or indemnity obligation. 2. Trade Dress Infringement In Basalite Concrete Products, LLC v. National Union Fire Ins. Co., No. 2:12-civ-02814, 2012 U.S. Dist. Lexis 70597 (E.D. Cal. May 17, 2013) (applying California law), the insured allegedly infringed upon the claimant s Keystone trademark, the name of the claimant s product, by continuing to use the mark after the insured breached a licensing agreement with the claimant. The court held that the trademark infringement allegations did not set forth a potential claim for personal and advertising injury arising out of infringement of trade dress in the insured s advertisement because the trademarked product name was not the total image, design, and appearance of a product. In Liberty Corp. Capital Ltd. v. Security Safe Outlet, Inc., No. 5:12-cv-178, 2013 U.S. Dist. Lexis 42975 (E.D. Ky. Mar. 27, 2013) (applying Kentucky law), the insured sought coverage for misappropriation of trade secrets, breach of contract, violations of the Lanham Act, and other claims. The insured had a license agreement with the claimant to use the claimant s trademark with respect to one of the insured s retail firearm stores, which it allegedly breached by using the trademark in conjunction with its online sale of firearms. The court concluded that the trademark infringement exclusion precluded coverage. The court rejected the insured s argument that the allegations set forth a potential claim for trade dress infringement, noting that trade dress and trademark infringement are separate and distinct causes of action under the Lanham Act. Further, nowhere in the complaint was the insured alleged to have infringed upon the claimant s trade dress or the design or packaging of the claimant s products. 3. Infringement Of Slogan In Basalite Concrete Products, LLC v. National Union Fire Ins. Co., No. 2:12-civ-02814, 2012 U.S. Dist. Lexis 70597 (E.D. Cal. May 17, 2013) (applying California law), the insured allegedly infringed upon the claimant s Keystone trademark by continuing to use the mark after the insured breached a licensing agreement with the claimant. The court held that the allegations did not set forth a potential claim for personal and advertising injury arising out of infringement of slogan in the insured s advertisement, because the trademark at issue was a name of a product, not a brief attention-getting phrase used to promote a product. In Travelers Indem. Co. of Conn. v. Sterling Wholesale, LLC, No. 2:12cv156, 2013 U.S. Dist. Lexis 102223 (E.D. Va. July 19, 2013) (applying Virginia law), the insured was sued for trademark infringement based on the insured s involvement in a scheme involving the repackaging and sale of the claimant s products with counterfeit packaging and information. The 43 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

insured was not among the defendants named as co-conspirators who were allegedly active in the production and re-packaging of the counterfeit products. The underlying claim, however, generally alleged that all of the defendants, including the insured, used a slogan, trade dress, word, term, name, symbol or device in commercial advertising or promotion. The court found that the claim alleged the personal and advertising injury offense of infringement of copyright, title or slogan, based on the fact that Virginia law recognizes that trademarked terms can constitute slogans and based on the potential that the alleged counterfeit packaging and trademarks included slogans or copyrighted material. Additionally, the court determined that the alleged infringement was committed in the course of advertising, and that the alleged advertising activity potentially caused the claimant s injury. Thus, the court found that the personal and advertising injury liability coverage was implicated and that the insurer owed a duty to defend. H. PRE-1998 FORMS: DISCRIMINATION OR HUMILIATION In Hanover American Ins. Co. v. Saul, No. CIV-12-0922, 2013 U.S. Dist. Lexis 121454 (W.D. Okla. Aug. 27, 2013) (applying Oklahoma law), the insured operated a chiropractic practice. The claimant, a patient of the insured, was allegedly molested by the insured s spouse at the insured s clinic. The underlying claim asserted a claim for negligence, which included the insured s failure to warn the claimant of the spouse s history and propensity for molestation and allowing the spouse access to the clinic. The underlying negligence claim alleged that the claimant suffered injuries arising out of spouse s humiliating actions in the clinic, and sought relief for the alleged humiliation. The court found that the claim did not implicate the humiliation offense in the definition of personal and advertising injury because the insured was not sued for a claim of humiliation, but instead was only sued for negligence. In other words, because the underlying claim for negligence was not an enumerated offense in the definition of personal and advertising injury, the court concluded that the insurer did not owe any defense or indemnity obligation. In West American Ins. Co. v. Midwest Open MRI, Inc., No. 1-12-1034, 2013 Ill. App. Lexis 235 (Ill. App. Ct. Apr. 16, 2013) (applying Illinois law), the insured, which was in the business of providing MRI services to patients, was sued by a corporate competitor for allegedly engaging in a kick-back scheme. The insured argued that the claims against it implicated the personal and advertising injury offense of discrimination or humiliation that results in injury to the feelings or reputation of a natural person. The court disagreed and found that the claimant competitor was a corporate entity, not a natural person as required by the offense. The court also found that the underlying claims did not allege any discrimination or reputational harm. Accordingly, the court determined that the insurer did not owe any defense obligation to the insured. 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 44

I. PRE-1998 FORMS: MISAPPROPRIATION OF ADVERTISING IDEAS OR THE STYLE OF DOING BUSINESS 2 J. PRE-1998 FORMS: INFRINGEMENT OF TITLE In CGS Industries, Inc. v. Charter Oak Fire Ins. Co., 720 F.3d 71 (2d Cir. June 11, 2013) (applying New York law), the insured allegedly supplied Wal-Mart with jeans that infringed upon the claimant s distinctive rear pocket stitching design. On appeal, the Second Circuit held that the allegations did not implicate the policy s advertising injury offense of infringement of copyright, title, or slogan for purposes of a duty to indemnify. The court reasoned that the trademarked stitching was neither a slogan, nor a phrase used to promote or advertise a house mark or product mark, nor a title, or a name or appellation of a product. However, the court also found that because some courts in other jurisdictions had interpreted the term title to include a design or symbol similar to the claimant s pocket stitching, there was a legal uncertainty sufficient to implicate the insurer s duty to defend at the time the action was filed. K. PRE-1996 FORM: PIRACY, UNFAIR COMPETITION III. ANALYSIS OF NON-ENUMERATED OFFENSES A. ABUSE OF PROCESS; VEXATIOUS LITIGATION In Travelers Prop. & Cas. Co. of America v. KFx Medical Corp., No. C 13-00710, 2013 U.S. Dist. Lexis 97777 (N.D. Cal. July 12, 2013) (applying California law), a claim was filed against the insured seeking declaratory relief that the claimant s products did not infringe the insured s patents and that the patents were otherwise invalid. The insured argued that such claims constituted a claim for abuse of process, and that such claims fell within the scope of the malicious prosecution offense. The court disagreed and found that the underlying claims did not allege any claim for abuse of process in the first instance, and therefore, the insurer did not owe any duty to defend. The court did not address whether an abuse of process claim falls within the scope of the malicious prosecution offense in the definition of personal and advertising injury. B. ANTITRUST VIOLATIONS C. DISCRIMINATION AND HARASSMENT In City of Glendale v. National Union Fire Ins. Co., No. 12-cv-380, 2013 U.S. Dist. Lexis 45468 (D. Ariz. Mar. 29, 2013) (applying Arizona law), the insured, Glendale, Arizona, was alleged to have discriminated against a tenant of one of its airport hangers with the intent of making the sub-lease of the hangar unprofitable and with the hope that the tenant would give 2 See analogous cases addressing the offense of use of another s advertising idea in your advertisement in Section F, supra. 45 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

up its rights under the lease. The court held that the personal injury coverage for wrongful eviction from, wrongful entry into or invasion of the right private occupancy of a... premises that a person occupies by or on behalf of its owner, landlord, or lessor, was implicated for purposes of a duty to defend. The court reasoned that the phrase invasion of the right of private occupancy is ambiguous as to whether it requires a physical invasion of real property or whether it incorporates an interference with other real property rights. The insurer s argument that the phrase wrongful eviction limits the scope of invasion of the right of private occupancy to a physical invasion was rejected by the court because a wrongful eviction claim does not require a physical invasion under Arizona law. The court also rejected the insurer s argument that the offense s use of the term person, as opposed to person or organization as found in other personal injury offenses, requires the injured party to be a natural person. D. HUMILIATION E. INTERFERENCE WITH PROSPECTIVE BUSINESS ADVANTAGE OR WITH CONTRACTUAL RELATIONS In State Auto Prop. & Cas. Ins. Co. v. Lagrotta, 529 Fed. Appx. 271 (3d Cir. June 26, 2013) (applying Pennsylvania law), the insured, a member of the Pennsylvania House of Representatives, faced claims of tortious interference with contract and prospective business relations arising out of press releases issued by the congressman s office stating that the claimant had relations with organized crime. It was alleged that, as a result, the state health department rescinded approval of the sale of a nursing home to the claimant. The statements in the press release were allegedly made with malice and intent to harm the claimant, and to convince the county not to consummate the sale. Based on the foregoing, the Third Circuit held that the knowing violation and knowledge of falsity exclusions precluded a duty to defend and indemnify the congressman. The court rejected the insured s argument that the exclusions did not apply because there were allegations of recklessness. The court reasoned that the allegations of recklessness were merely a legal conclusion, while the facts in the complaint alleged an intent to harm. F. UNFAIR COMPETITION G. PATENT INFRINGEMENT In Basalite Concrete Products, LLC v. National Union Fire Ins. Co., No. 2:12-civ-02814, 2013 U.S. Dist. Lexis 70597 (E.D. Cal. May 17, 2013) (applying California law), the insured allegedly infringed upon the claimant s trademarks and patents by breaching a licensing agreement, which permitted the claimant to utilize the claimant s know-how, molds, patent rights, and trademarks to manufacture, market and sell the claimant s products. The insured allegedly continued to use the trademarks and patents after the claimant requested that the insured cease doing so. The court held that the allegations did not implicate a duty to defend under the personal and advertising injury coverage s use of another s advertising idea 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 46

offense because they did not allege that any of the infringement took place in an advertisement. In U.S. Fire Ins. Co. v. Cyanotech Corp., No. 12-00537, 2013 U.S. Dist. Lexis 152160 (D. Haw. Oct. 23, 2013) (applying Hawaii law), the insured was sued for patent infringement with respect to a certain drug compound called astaxanthin, tortious interference with a business relationship, and breach of confidentiality agreement. The underlying patent infringement claim alleged, in part, that the insured advertised certain products that infringed the claimants patent. The court determined that the underlying patent claim did not implicate the personal and advertising injury offense of infringing upon another s copyright, trade dress or slogan in your advertisement. In making this determination, the court stated that the offense conspicuously and plainly omits patent infringement. Therefore, the court held that insurer did not owe any duty to defend or indemnify the insured. H. TRADE SECRETS In Liberty Corp. Capital Ltd. v. Security Safe Outlet, Inc., No. 5:12-cv-178, 2013 U.S. Dist. Lexis 42975 (E.D. Ky. Mar. 27, 2013) (applying Kentucky law), the insured was alleged to have misappropriated the claimant-competitor s trade secrets by using the claimant s confidential client information to send e-mails to the claimant s customers, which advertised the insured s products and services. The insured allegedly obtained the claimant s customer lists through the claimant s former employee. The court held that the misappropriation claim implicated the use of another s advertising idea in your advertisement because the e-mails to the claimant s customers constituted an advertisement, or notice that is broadcast to a specific market segment about the insured s goods. The court went on to find that the breach of contract exclusion precluded coverage for the claim because the former employee of the claimant breached its non-compete agreement by working for the insured. In Air Engineering, Inc. v. Industrial Air Power, LLC, 828 N.W.2d 565 (Wis. Ct. App. Jan. 3, 2013) (applying Wisconsin law), the insured was sued for trade secret misappropriation, breach of contract, breach of fiduciary duty and unjust enrichment for allegedly using the same website source code and content as found on the claimant s website and for misappropriating an Internet Advertising System. The court first determined that the underlying suit alleged the use of another s advertising idea offense, based on the allegations that the insured misappropriated the claimant s Internet Advertising System and the claimant s website source code and content. The court held that the knowing violation exclusion did not apply to preclude a defense obligation because the underlying suit included claims for trade secret misappropriation, breach of fiduciary duty and unjust enrichment, which do not require a showing of actual knowledge or intent. Accordingly, the court found that the insurer had a duty to defend. In TetraVue, Inc. v. St. Paul Fire & Marine Ins. Co., D061002, 2013 Cal. App. Unpub. Lexis 5074 (July 19, 2013) (unpublished) (applying California law), the insured was sued for misappropriation of trade secrets and unfair business practices. The policy at issued defined 47 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP

"advertising injury" in part as "injury... caused by... [the] unauthorized use of any advertising material... of others in your advertising." The underlying claim alleged that the insured misappropriated certain trade secret and confidential materials, as well as non-confidential presentation materials belonging to the claimant. Although the underlying claim did not contain an express allegation that the insured misappropriated materials that constituted the claimant's advertising, the court nonetheless determined that the claim alleged facts that raised the inference or possibility that the insured misappropriated the claimant's advertising. Thus, the court determined that the insurer owed a defense obligation. I. TRADEMARK INFRINGEMENT In Basalite Concrete Products, LLC v. National Union Fire Insurance Co., No. 2:12-civ- 02814, 2012 U.S. Dist. Lexis 70597 (E.D. Cal. May 17, 2013) (applying California law), the insured allegedly infringed upon the claimant s trademark and patents by continuing to use them in its manufacture and sale of its products after the insured breached a licensing agreement with the claimant. The court concluded that the allegations did not implicate a duty to defend under the personal and advertising injury offense for infringement of copyright, trade dress, or slogan in the insured s advertisement because the claimant s trademarked product name was neither trade dress nor a slogan and the infringement was not alleged to take place in any advertisement. In CGS Industries, Inc. v. Charter Oak Fire Ins. Co., 720 F.3d 71 (2d Cir. June 11, 2013) (applying New York law), the insured faced claims of trademark infringement for allegedly supplying Wal-Mart with jeans that infringed upon the claimant s distinctive rear pocket stitching design. On appeal, the Second Circuit held that the allegations did not implicate the policy s advertising injury offense for infringement of copyright, title, or slogan for purposes of a duty to indemnify. The court reasoned that the trademarked stitching was neither a slogan, or a phrase used to promote or advertise a house mark or product mark, nor a title, or a name or appellation of a product. However, the court also found that because some courts in other jurisdictions had interpreted the term title to include a design or symbol similar to the claimant s pocket stitching, there was a legal uncertainty sufficient to implicate the insurer s duty to defend at the time the action was filed. In Liberty Corp. Capital Ltd. v. Security Safe Outlet, Inc., No. 5:12-cv-178, 2013 U.S. Dist. Lexis 42975 (E.D. Ky. Mar. 27, 2013) (applying Kentucky law), the insured sought coverage for misappropriation of trade secrets, breach of contract, violations of the Lanham Act, and other claims. The insured had a license agreement with the claimant to use the claimant s trademark with respect to one of the insured s retail firearm stores, which it allegedly breached by using the trademark in conjunction with its online sale of firearms. The court concluded that the trademark infringement exclusion precluded coverage. The court rejected the insured s argument that the allegations set forth a potential claim for trade dress infringement, noting that trade dress and trademark infringement are separate and distinct causes of action under the Lanham Act. Further, nowhere in the complaint was the insured alleged to have infringed upon the claimant s trade dress or the design or packaging of the claimant s products. 2014 Tressler LLP Personal and Advertising Injury Liability Coverage 48

In Travelers Indem. Co. of Conn. v. Sterling Wholesale, LLC, No. 2:12-cv-156, 2013 U.S. Dist. Lexis 102223 (E.D. Va. July 19, 2013) (applying Virginia law), the insured was sued for trademark infringement based on the insured s involvement in a scheme involving the repackaging and sale of the claimant s products with counterfeit packaging and information. The insured was not among the defendants named as co-conspirators who were active in the production and re-packaging of the counterfeit products. The underlying claim, however, generally alleged that all of the defendants, including the insured, used a slogan, trade dress, word, term, name, symbol or device in commercial advertising or promotion. The court found that the claim alleged the personal and advertising injury offense of infringement of copyright, title or slogan, based on the fact that Virginia law recognizes that trademarked terms can constitute slogans and based on the potential that the alleged counterfeit packaging and trademarks included slogans or copyrighted material. Additionally, the court determined that the alleged infringement was committed in the course of advertising, and that the alleged advertising activity potentially caused the claimant s injury. Thus, the court found that the personal and advertising injury liability coverage was implicated and that the insurer owed a duty to defend. #594785 49 Personal and Advertising Injury Liability Coverage 2014 Tressler LLP