By Louis A. Chiafullo and Brett D. Kahn, Attorneys, McCarter & English, LLP
The New Jersey Appellate Division's recent decision in Penn National Company v. Group C Communications may help policyholders secure coverage for Advertising Injury liability. The opinion helps to explain the meaning and effect of the "Business of Advertising" exclusion in CGL policies. The decision might also affect how courts treat advertising injury and privacy claims under CGL policies, which may cover the dissemination of private information (secrecy interests) and unwarranted intrusions into one's sphere of privacy (seclusion interests). The article discusses advertising injury coverage in general, the policy language implicated by advertising and privacy claims, and the impact that the Penn National decision might have in this area of the law.
In Penn National, the policyholder faced liability in an underlying class action suit for violation of the Telephone Consumer Protection Act-specifically, for the unsolicited transmission of "blast fax" advertisements. The policyholder sought from its insurer indemnity coverage and a defense under the "Advertising Injury" section of its Business Owners' Liability policy. Unfortunately for the policyholder, in its policy application it classified its business as "Offices - Advertising." The insurer denied coverage under an exclusion that precluded coverage for policyholders "whose business is advertising."
The Appellate Division reversed the Superior Court's grant of summary judgment for the insurer. The court cited to precedent from other jurisdictions to find that the exclusion only applied where the policyholder's "principal or primary" business was advertising. Although the policyholder's self-classification as "Offices - Advertising" constituted compelling evidence of its primary line of business, the Appellate Division found that the lower court made an incorrect finding of fact necessitating remand and reconsideration. The court, therefore, gave the policyholder a second chance to secure coverage. Policyholders litigating in New Jersey may benefit from the court's moderate interpretation of the disputed exclusion.
Louis A. Chiafullo, Esq. is a partner in the Insurance Coverage Group at McCarter & English, LLP. Mr. Chiafullo's practice consists primarily of complex civil and commercial litigation, with an emphasis on insurance coverage disputes on behalf of policyholders. He represents clients ranging from Fortune 50 companies to individuals, and counsels policyholders on a wide variety of general and insurance-related matters. He is experienced at representing policyholders in many types of insurance coverage disputes, and has counseled clients on and litigated matters involving insurance coverage for environmental impairment, products liability, business interruption, directors' and officers' liability, employers' liability, computer crime and fraud issues, and other types of losses and issues, including broker liability. In addition, he provides advice to clients by assessing their potential risks, analyzing new insurance products, and considering the adequacy of their existing insurance programs.
Brett D. Kahn is an associate in the Insurance Coverage Group at McCarter & English, LLP. He primarily represents corporate policyholders in insurance coverage matters. His practice in this regard includes cases arising in both state and federal court, as well as international arbitrations in London involving a major pharmaceutical company with hundreds of millions of dollars in dispute. In addition, he works on a broad range of product liability, general litigation, title insurance and pro bono matters. During law school, Mr. Kahn was a judicial intern for the Honorable Donald S. Goldman, J.S.C. (ret.) He was also an Editor of the Rutgers Law Review, President of the Labor and Employment Law Society and was selected as a member of the Rutgers National Mock Trial Team.
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Download a free copy of the Lexis unenhanced version of the Penn National Insurance Co. v. Group C Communications, Inc., A-2813-09T3, 2011 N.J. Super. Unpub. LEXIS 2077 (App. Div. Aug. 1, 2011).
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