Personal and Advertising Injury

A Florida district court recently held that an insurer wrongfully refused to defend a Miami-based strip club in a lawsuit filed by 17 models claiming that the club used their images to promote its business without their authorization. The insurer was required to defend the club for allegations of defamation under the policy’s personal and advertising coverage even though 16 of the 17 plaintiffs’ claims alleged conduct outside the covered policy period and no plaintiffs brought a cause of action for “defamation.” The decision highlights the broad duty to defend, in Florida and elsewhere, that policyholders should emphasize when pursuing coverage.

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A federal court in Pennsylvania has held that Liberty Mutual must defend its insured, Hershey Creamery Company, in an intellectual property infringement lawsuit because the suit raises claims that potentially implicate coverage under the policies’ personal and advertising injury coverages. The court further found that the alleged wrongful conduct was not subject to the policies’ IP infringement exclusion.

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On March 22, 2019, a federal judge in Michigan found in Alticor Global Holdings, Inc. v. America Int’l Specialty Lines Ins. Co., that claims of copyright infringement by several major record labels are potentially covered under liability policies issued by AIG.  Alticor involved a claim for coverage stemming from suits by a group of entertainment companies against Amway, “accusing it of infringing hundreds of copyrighted sound recordings.”  Amway sought coverage from its umbrella insurer, AIG.  AIG claimed that the personal injury and advertising injury coverage did not apply because “coverage extends only to advertisements of a Named Insured,” i.e., Amway, and the underlying suit related to advertisements of Amway independent business owners.

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In Zurich American Insurance Co. v. Don Buchwald & Associates, Inc., 2018 N.Y. Slip. Op. 33325(U) (Sup. Ct. N.Y. County, Dec. 21, 2017), the Supreme Court of New York held that Zurich was obligated to defend a talent and literary agency against claims brought by Hulk Hogan alleging that the agency aided and abetted one of its agents—Tony Burton—in publishing racist and sexual footage of Hulk Hogan online.  The decision also gives ammunition to policyholders seeking to recover their fees incurred while litigating against an insurer’s improper denial of coverage.  The court found that the insureds had “been cast in a defensive posture” due to the insurer’s claims seeking a declaratory judgment, and that this justified a fee-shifting award.

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A Colorado district court held last week that a general liability insurer must defend a product disparagement claim despite a broadly-worded intellectual property exclusion in the policy. The court reached its ruling even though the alleged disparagement involved representations about patent infringement. In so holding, the court rejected the insurer’s attempt to deny coverage where the “crux of the dispute” fell within the policy’s personal injury coverage part and the insurer had failed to show that the underlying allegations “unequivocally” fell within the ambiguously worded exclusion.

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In June, Syed S. Ahmad and Jennifer E. White published an article in Risk Management Magazine about how commercial general liability (CGL) policies may help with trademark infringement litigation, despite common exclusions. A recent federal court opinion out of California conforms with the precedent we described in that article, holding that the insurer, Great Lakes Reinsurance (UK) PLC (“Great Lakes”), is required to defend In and Out Fashion, Inc. (“IOF”) in a trademark suit filed by Forever 21, Inc. (“Forever 21”). The fashion giant alleged that IOF essentially sold Forever 21 products as its own by obscuring or removing Forever 21’s marks. IOF requested that its CGL insurer, Great Lakes, defend it in the underlying suit. The relevant CGL policies covered damages because of “personal and advertising injury,” defined to include “infring[ing] upon another’s copyright, trade dress or slogan in your ‘advertisement’.” The policies excluded damages arising from trademark infringement and, according to the insurer, did not cover copyright, trade dress or slogan infringement in non-“advertisement” mediums. Great Lakes refused to defend IOF, and sued for declaratory relief regarding its obligations under the policies.

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