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Insurance Law

Duty to Indemnify – Personal and Advertising Injury– New Appleman on Insurance Law Library Edition, Chapter 19

    By Sherilyn Pastor, Partner, McCarter & English, LLP

As a consequence of competition, companies increasingly face business tort claims such as misappropriation of trade secrets, false advertisement, patent or copyright infringement, disparagement, and trademark or trade dress infringement.  When faced with such claims, companies typically turn to their commercial general liability (“CGL”) policies for coverage.  Coverage B of the standard CGL policy — titled Personal and Advertising Injury Liability includes a stand-alone insuring agreement covering some of these types of claims.  It also covers claims involving libel, slander, and false imprisonment.

Coverage under this insuring agreement does not include all risks.  The personal and advertising injury liability section offers protection against only certain enumerated offenses, some of which are wrongful acts and torts.  Unlike coverage for bodily injury and property damage under Coverage A, Coverage B of the policy is triggered by an offense, not by an accidental or fortuitous event.  Consequently, this coverage is not governed by the “occurrence” provisions in Coverage A, such as the requirement that damages be “neither expected nor intended.”1

Broadly speaking, advertising injury coverage offers protection for enumerated offenses committed in the course of an insured’s advertising.  Courts have divided over how widespread a policyholder’s promotional materials must be disseminated to constitute advertising.  Courts agree, however, that to be covered, there must be a connection between the insured’s advertising activity and the injury allegedly caused by the covered offense.

The personal and advertising injury liability section of the CGL includes a number of exclusions, including exclusions for criminal activity, the knowing violation of the rights of others, and promotional material that is meant to be false and misleading.  Coverage also is limited where the policyholder’s damages result from its contracts with others, and would not exist except for the policyholder’s own contractual undertakings.

Personal and advertising injury coverage can be difficult to understand.  The wrongful acts covered tend to be creatures of the legal system (i.e., infringement, disparagement, and false imprisonment), and some understanding of the elements of the various covered offenses is necessary to determine the precise scope of coverage.  Advertising injuries typically are losses sustained by a person or organization allegedly caused by the insured’s advertisements, such as copyright infringement or the use of another’s advertising ideas.  Personal injuries are losses not involving actual physical harm.  As a result, personal injury is distinguished from “bodily injury,” and may involve embarrassment or loss of the claimant’s reputation.  Examples of personal injuries are those caused by libel and slander, wrongful eviction, malicious prosecution, and false arrest.

Coverage B applies to certain Internet-based activities.  Businesses with an on-line advertising presence, or those gathering personal and financial information during on-line transactions may be exposed to claims if the information they collect is misused by an employee or “hacked” by someone.   A site’s domain names, meta tags, and banners may infringe others’ trademarks.  Website content — particularly third-party postings — may disparage others or violate their privacy rights.  Most CGL policies afford coverage for cyber-activities by defining “advertisement” to include Internet material and electronic communications.  Policies’ “coverage territories” also likely extend to the Internet.

In the end, whether an insured’s policy will respond to a particular claim turns on a complex grant of coverage and exclusion of liability under policy language that has changed repeatedly over the past several decades.  This chapter begins with a description of personal and advertising injury (see Section 19.01); then describes the general insuring agreement (see Section 19.02); and later discusses the typical exclusions to coverage (see Section 19.03).  Much of the focus of the chapter will be on the enumerated offenses of personal and advertising injury (see Sections 19.04 through 19.07).


1 See, e.g., CA—Cables & Accessories, Inc. v. Hartford Ins. Co., No. H021329, 2002 Cal. App. Unpub. LEXIS 5144, at *18-19 (Cal. Ct. App. Jan. 8, 2002) (highlighting that coverage under part B of a CGL policy is not based on an accidental occurrence), review denied, No. S104488, 2002 Cal. LEXIS 2324 (Cal. Mar. 27, 2002).


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Sherilyn Pastor is the Practice Leader of McCarter & English's Insurance Coverage Group. She has secured hundreds of millions of dollars in insurance assets for a broad range of policyholder clients. She also provides advice to clients assessing their potential risks, analyzing new insurance products and considering the adequacy of their existing insurance programs.

Ms. Pastor, for example, recently obtained summary judgment from New Jersey's Appellate Division, awarding Wakefern Food Corporation insurance coverage for all its 2003 Northeast blackout losses. In so doing, the court rejected Wakefern's insurer's narrow interpretation of the phrase "physical damage," and its too expansive reading of policy exclusions. Ms. Pastor also recently obtained summary judgment from a Kentucky trial court that Exel Inc.'s insurer improperly tried to exhaust its insurance policy's indemnity limits, thereby ending its supplemental defense obligations, by making in appropriate indemnity payments to an uncovered entity. She is now pursuing Exel's bad faith claims against the insurer. Ms. Pastor also is Transamerica Corporation's lead trial counsel in a multi-million dollar dispute with a former subsidiary regarding insurance that Transamerica purchased as part of a consolidated risk management structure for itself and its subsidiaries. She also assisted Lucent Technologies Inc. (now Alcatel Lucent) recover its fiduciary liability coverage following its settlement of various ERISA-based class actions.

Ms. Pastor publishes and lectures frequently on a variety of topics including insurance coverage, trial advocacy, pretrial practice and professional responsibility. She serves on the Editorial Board of the Insurance Coverage Law Bulletin, and teaches the National Institute for Trial Advocacy's trial skills and deposition skills programs.

Ms. Pastor is a Regional Representative to the ABA's Insurance Coverage Committee, and Co-Chair of the ABA's General Liability Subcommittee. She also is a member of the New Jersey Supreme Court's Professional Responsibility Rules Committee.

Ms. Pastor is recognized as a New Jersey Super Lawyer for 2006-2010 editions.