Coverage for personal injury and advertising injury has been standard in commercial general liability (CGL) policies for several decades. This type of coverage protects policyholders against claims of personal or advertising injury that arise out of a specific list of alleged offenses.
How Are Personal Injury and Advertising Injury Defined?
Insurance policies typically define personal injury as harm other than bodily injury that arises out any of a list of enumerated offenses. Generally speaking, personal injury is construed to include emotional injury that stems from one or more of the specified offenses. Advertising injury is defined as injury caused by a group of offenses, including libel, slander, disparagement, trademark or copyright infringement, and violation of privacy, stemming from the insured’s advertising of its goods or services. Courts generally define advertising as the widespread distribution of promotional materials to the public at large, with the goal of gaining customers or supporters.
What Triggers Personal and Advertising Injury Coverage?
Coverage for personal and advertising injury is triggered when claims against the insured allege any of the enumerated offenses listed in the policy. While the list of offenses can vary from policy to policy, they generally include:
- False arrest, detention or imprisonment
- Malicious prosecution
- Wrongful eviction from, or wrongful entry into, or invasion of the right of private occupancy of a room, dwelling, or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor
- Oral or written publication of material that slanders or libels a person or organization or disparages the goods, products or services of a person or organization
- Oral or written publication of material that violates a person’s right to privacy
- The use of another’s advertising idea in your advertisement
- Infringing on another’s intellectual property, including copyright, trade dress or slogan, in your advertising
Types of Disputes
Over the years, a wide range of cases have been litigated to determine the scope of personal and advertising injury coverage. Areas of dispute have included what constitutes slander, libel and disparagement; right to privacy; advertising; and publishing for purposes of determining if there is coverage under the personal and advertising injury provision.
Libel, Slander and Disparagement
Some insurance coverage disputes hinge on whether claims against a policyholder constitute libel, slander or disparagement as defined in the policy. Many times, courts focus on whether the underlying complaint alleges injury to the claimant’s reputation. Usually if reputational harm is part of the allegation, courts will broadly find the claim falls under the scope of coverage. Some court decisions have limited the scope of claims that qualify as disparagement, however. For instance, the California Supreme Court ruled that allegations of patent and trademark infringement and damage to business and reputation did not trigger coverage for disparagement. The court held that disparagement requires a false or misleading statement that specifically relates to a competitor’s product or business and that clearly discredits that product or business, and no such statements were alleged in that case.1
Violation of the Right to Privacy
Personal and advertising injury provisions typically specify coverage for publication of material that violates a person’s right to privacy. But the definition of “right to privacy” has come under scrutiny. Insurance companies typically argue that the right to privacy refers exclusively to the right to secrecy, or to personal information being kept private. Insureds, however, have asserted that the right to privacy also includes the right to be free from unwanted intrusions. This point was front and center in disputes involving “fax blasting” claims in the wake of the Telephone Consumer Protection Act of 1991, which created a private cause of action for individuals who receive unsolicited advertising facsimiles. Parties who were sued under the Act sought coverage under their policies’ personal and advertising injury provision, and their insurance companies denied coverage, stating that fax blasting claims did not concern violation of a person’s right to keep certain information secret and therefore did not allege a violation of the right to privacy. Courts were split on this issue.
What Activities Constitute Advertising
In determining the scope of coverage for allegations arising out of an insured’s advertising activities, many courts have defined “advertising” as the widespread distribution of promotional materials to the public at large. Courts say direct dealings with a few entities or one-to-one sales calls do not quality as advertising. In one instance, an Illinois appellate court concluded that the policyholder’s display of product and packaging options at a showroom event did not trigger coverage because the policy defined “advertisement” as a “notice that is broadcast or published to the general public or specific market segments.” The court stated that directing displays to a specific market segment – in this case, 75 to 100 retailers who had been invited to the showroom – was more akin to personal solicitation.2 However, other courts have concluded that physical displays, such as in-store retail displays, can constitute an advertisement. Courts have also looked at the extent to which an activity reaches the insured’s entire customer base. The Ninth Circuit found that “advertising activity must be examined in the context of the overall universe of customers to whom a communication may be addressed. Where the audience may be small, but nonetheless comprises all or a significant number of a competitor’s client base, the advertising requirement is met.”3
What Constitutes Publication
In determining whether the “publication” requirement has been satisfied for purposes of determining coverage under the personal and advertising injury provision, courts have focused on whether third parties have received or accessed the information in question. For example, the Seventh Circuit held that a company’s practice of secretly recording customer phone calls for internal purposes did not constitute “publication” because the recordings were not shared with third parties. 4
If you are involved in a dispute with your business insurance company, contact us. We have the expertise, experience and tenacity to make insurance companies keep their promises to you and your business.
1 Hartford Casualty Ins. Co. v. Swift Distribution, Inc., 59 Cal. 4th 277, 326 P.3d 253, 172 Cal. Rptr. 3d 653 (Cal. 2014)
2 Santa’s Best Craft, LLC v. Zurich American Ins. Co., 408 Ill. App. 3d 173, 941 N.E.2d 291 (1st Dist. 2010).
3 Sentex Systems, Inc. v. Hartford Accident & Indemnity Co., 882 F. Supp. 930, 939-49 (C.D. Cal. 1995), aff’d, 93 F.3d 578 (9th Cir. 1996)
4 Defender Security Co. v. First Mercury Ins. Co., 803 F.3d 327 (7th Cir. 2015)