Article
| Publication year | 2014 |
| Pages | 24 |
| Citation | Vol. 27 No. 4 Pg. 24 |
July, 2014
Send in the B Team: Insurance Coverage for Personal and Advertising Injury
Mark W. Dykes
Introduction
Most lawyers are aware that the standard commercial general liability (CGL) policy provides defense and indemnity coverage (subject to policy terms) for bodily injury and property damage. Thus, if the insured (with a CGL policy, almost always a corporate entity) injures another party or damages property of another, the insurer will defend the insured against the subsequent lawsuit and indemnify the insured against a judgment, assuming that all policy requirements for coverage are met and no exclusions apply.
The bodily injury/property damage coverage is sometimes referred to as the "A" coverage for the subheading under which it appears in "Section I: Coverages" of the standard ISO (Insurance Services Office) CGL form. "A" of course implies that there is at least a "B," and indeed there is: coverage for "personal and advertising injury."[1]
The B coverage is arguably less well known than the A coverage and inarguably far more complicated, given the many definitions, "predicate offenses," and exclusions applicable to the coverage, and ever-new and evolving fact patterns involving the internet and cybersecurity. (As discussed below, by the time this article is published there will be a new set of endorsements in place excluding coverage from the CGL policy for cybersecurity claims.)
Nomenclature is confusing here as well because "personal injury" sounds like a synonym for "bodily injury," particularly given the normal use of the term "personal injury" in the legal trade. (Concerning this issue, be very careful in drafting or reviewing insurance requirements that the phrase "personal injury" is not really meant to be "bodily injury.") Under the CGL form, '"[b]odily injury' means bodily injury, sickness, or disease sustained by a person, including death resulting from any of these at any time." Although, as noted below, "personal and advertising injury" has a bodily injury component, the coverage otherwise has nothing to do with bodily injury. The "personal injury" referred to is instead infringement of certain "personal" rights, such as the right to privacy.
It is impossible in a short article to do justice to the B coverage or even a subset of the B coverage. We will hit only some high points, with an emphasis on advertising injury.
Predicate Offenses
Coverage for advertising injury by itself was originally available only via an endorsement. In 1986, this coverage was folded into the standard ISO policy. That policy defined "advertising injury" and "personal injury" separately. In 1998, the ISO form adopted the combined term "personal and advertising injury." The current ISO form defines the combined term as "injury, including consequential 'bodily injury,'" arising out of a series of listed "offenses," including false arrest/detention/imprisonment; malicious prosecution; wrongful eviction/entry; slander of person/disparagement (trade libel) of a person's or organization's goods or services; violation of privacy; and "the use of another's advertising idea" in the insured's "'advertisement'" or "infringing upon another's copyright, trade dress or slogan in the insured's 'advertisement.'"
Although both "property damage" and "bodily injury" under the A coverage are defined terms, "injury" is not defined under the B coverage, save for the inclusion of the defined term "bodily injury" in "consequential bodily injury." Instead, the underlying substantive law must be consulted to determine if there has been an "injury" cognizable under the law. Given that "personal and advertising injury" includes "consequential" bodily injury,& quot; w e can be sure that the B coverage applies to more than just bodily injury.
Concerning coverage for consequential bodily injury under the B coverage, exclusion 2.o of the A coverage provides, "This insurance does not apply to.. .'Bodily injury' arising out of 'personal and advertising injury.'" The thing to keep in mind is that" [t]his insurance" here means the A coverage, not the B coverage. When the ISO drafters added coverage (in 1998) for consequential bodily injury arising from personal and advertising injury, they felt compelled to add an exclusion to the A coverage to ensure that bodily injury arising from the B coverage would not be covered twice and thus entitled to application of two limits rather than one. (A standard example of consequential bodily injury under the B coverage is the claimant who suffers a heart attack from being falsely arrested or imprisoned.)
As to the duty to defend, the Tenth Circuit refers to each of the enumerated offenses in the personal and advertising definition as a "predicate offense," the existence of at least one of which must be shown by the underlying complaint against the insured before any further inquiry into coverage is required. Novell, Inc. v. Federal Ins. Co., 141 F.3d 983,986 (10th Cir. 1998).
"Advertising injury" requires an advertisement. Definitions are contained in Section V of the standard ISO form. Thereunder,
" [a]dvertisement" means a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters. For the purposes of this definition:
a. Notices that are published include material placed on the Internet or on similar electronic means of communication; and
b. Regarding web-sites, only that part of a web-site that is about your goods, products or services for the purposes of attracting customers or supporters is considered an advertisement.
Although the phrase "specific market segments" gives at least running room to the notion that coverage can apply if the advertisement is distributed to an extremely narrow group (perhaps even a single individual), the phrase "broadcast or published" in the definition is usually interpreted as importing a requirement of wide distribution of the advertisement for coverage t o attach and thus is a back-door requirement that the segment at issue be of appreciable size. SeeRombe Corp. v. Allied Ins. Co., 128 Cal. App.4th 482,492 (Ct. App. 2005) (holding that small breakfast meeting of insured's competitors did not constitute a market segment - "The term 'specific market segments' does not relieve an insured of the burden of demonstrating that it was engaged in relatively wide dissemination of its advertisements even if the distribution was focused on recipients with particular characteristics or interests."); see also Santa's Best...
To continue reading
Request your trial