Most of our experience with the commercial general liability (CGL) policy is
with bodily injury or property damage claims. It is relatively easy to
understand why liability may be imposed when someone receives an unexpected
bump on the head or when their property is ruined by our actions.
In other words, most claims involve physical harm to a person or their
property. But what of allegations by a person or organization that certain
legally protected rights have been violated which do not involve bodily harm or
physical injury to tangible property? No coverage? Enter Coverage B—Personal
and Advertising Injury Liability Insurance.
Coverage B—Personal and Advertising Injury Liability Insurance
For quite some time now, the standard Insurance Services Office, Inc. (ISO),
CGL policy has included under Section I of the policy an entirely
independent insuring agreement—Coverage B—Personal and Advertising
Injury Liability. Not only does the Coverage B insuring agreement stand alone,
14 exclusions apply only to personal and advertising injury claims.
Not Completely Separate
But before we allow personal and advertising injury liability coverage to
overpower the rest of the CGL, it is important to recognize that most other
sections of the policy apply equally to Coverage B and Coverage A—bodily injury
and property damage liability. For example, supplementary payments apply to
both coverages, which is apparent from the supplementary payments title. Those
persons or organizations with the status of insured under Section II—Who Is an
Insured are also protected for personal and advertising injury liability claims
covered by the CGL. Section III—Limits of Insurance addresses Coverage B: the
CGL has a separate limit for personal and advertising injury claims
(the limit applies to any one person or organization), but any claim paid under
Coverage B will result in a reduction of the policy's general aggregate
limit. Finally, Section IV—Commercial General Liability Conditions also applies
to Coverage B.
Similarities to Coverage A—Bodily Injury and Property Damage
While Coverage B is independent and stands alone within the CGL policy, it is
helpful to understand the promise of coverage is arranged in a manner similar
to Coverage A.
The insurer promises to pay sums the insured is legally obligated to pay as
damages because of personal and advertising injury. Similar to Coverage A, the
insurer has the duty to defend (and right to defend) a suit seeking damages
under this coverage; but there is no duty to defend when the insurance does not
apply or when the applicable limit has been exhausted due to payment of
judgments or settlements. Of course, the insurer expressly reserves the right,
at its discretion, to investigate and settle any Coverage B claim or suit—even
if the policyholder does not agree to the settlement.
In an "occurrence" CGL policy, the offense (that is the alleged
act that caused the injury resulting in the damages being claimed—such as false
arrest) must be committed during the policy period; in a
"claims-made" CGL policy, the claim for damages resulting from the
offense must be made during the policy period, provided the offense itself was
committed after the claims-made policy's retroactive date (if any).
To summarize, as long as the claim is for a covered personal or advertising
injury offense, Coverage B responds much the same as Coverage A.
Personal and Advertising Injury—The Nature of a Claim
The intangible and legalistic nature of claims involving personal or
advertising injury leaves many struggling to grasp what Coverage B is about.
The difficulty in understanding the nature of a personal injury claim is
further exacerbated by the legal community's use of the term "personal
injury" to describe what the insurance industry has elected to call
"bodily injury." Nonetheless, as explained in more detail below, an
act that somehow violates or infringes on the rights of others, referred to in
the policy as an offense, is the subject of personal and advertising injury
liability coverage.
No Accident
For the most part, Coverage B claims involve intentional acts. That is, a
person or organization alleged to have committed a personal or advertising
injury offense usually intended their actions (but not necessarily the result
of their actions). This concept is central to understanding personal and
advertising injury claims—and is thus a factor that distinguishes it from
Coverage A—Bodily Injury or Property Damage Liability claims. For Coverage A to
apply, bodily injury and property damage must be caused by an
"occurrence," which means, at minimum, an accident.
The term "occurrence" is irrelevant to Coverage B—it does not
appear in the Coverage B insuring agreement or in the application of Coverage B
limits. In other words, whether the claim is considered an
"occurrence" or accident is not to be considered when determining
whether an offense falls within the personal and advertising injury liability
insuring agreement. That is not to say that the knowing violation of the rights
of others will always be covered. But it is
the Coverage B exclusions and not the insuring agreement that address the
scope of coverage for intentional acts.
Personal and Advertising Injury—Definition
Possibly the easiest way to think, at least in the abstract, about personal
and advertising injury claims is to remember that persons and organizations
have legally protected rights that, if violated or infringed, may result in
loss to them. The law often provides a remedy to those who suffer such
loss—they may seek damages as compensation in a court of law from the person or
organization alleged to have caused the loss.
Persons or organizations have numerous legally protected rights that arise
from countless sources—including common law, statute, state constitutions, and
the U.S. Constitution. Coverage B of the CGL policy does not attempt to protect
an insured from violating all the rights of another; coverage is
limited to specifically listed acts of an insured.
The Definition
For an act to be considered a personal and advertising injury offense, the act
must fall within the policy definition of personal and advertising injury. Put
another way, if the allegations do not fall within the definition of personal
and advertising liability, they are not covered by Coverage B of the CGL. Some
have described this as analogous to a "named peril" approach to
coverage: the burden of demonstrating the possibility that an allegation falls
within the definition of personal and advertising injury falls on the insured
demanding protection. If the insured cannot meet this burden, the insurer
generally has no obligation to respond.
Here is where Coverage B becomes difficult to understand—the definition of
personal and advertising injury includes terminology that is quite legalistic.
To determine whether an act committed by an insured falls within the seven
listed offenses requires at least a basic understanding of rights being
protected and what constitutes infringement or violation of such rights. The
Coverage B exclusions applicable to the listed offenses also have some of
the same characteristics—the exclusions contain terms that have legal
definitions (such as copyright, trademark, etc.) not included within the
policy.
For Coverage B to apply, the offense must arise out of the business of the
named insured. Further, if the claimant alleges bodily injury as a
consequence of a covered offense, Coverage B will pay damages arising
out of the consequential bodily injury. For example, while being wrongly
detained for shoplifting, a customer of a department store suffers a heart
attack. Personal and advertising injury coverage will respond to the damages
for not only the wrongful detention but also the resulting physical harm (heart
attack).
Personal and Advertising Injury—Covered Offenses
Providing the precise legal elements that are necessary for each offense is
beyond what is intended by this article. Instead, what follows is a generic
description to help promote a basic understanding of Coverage B. The
descriptions of the offenses listed are summaries taken in part from certain
definitions found in Black's Law
Dictionary (8th ed.).
a. False arrest, detention or imprisonment;
Here the offense involves unjustified forcible restraint (arrest) or keeping a
person against their will (detention). Imprisonment usually implies the
detention is in prison. The offense is based largely on the deprivation of a
person's right to liberty.
The actual range of this offense is considerable—it has been found in
circumstances where a gas station attendant drained the water from the radiator
of a person's car with the intent of keeping the person from leaving.
Another case involved a practical joke in which an athlete's clothing was
taken when he was in the shower, depriving him of the opportunity to leave the
premises.
b. Malicious prosecution; This offense involves
the instituting of legal proceedings, either criminal or civil, against another
without probable cause or proper cause. Malice is required (ill will is the
motivation) and the proceeding must end favorably for the defendant. The
successful defendant has this cause of action against the person or
organization that wrongfully started the legal proceeding; the person or
organization that brought the action (who now is a defendant in the malicious
prosecution case) is covered by their CGL, subject to exclusions.
c. Wrongful eviction from, 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;
Wrongly expelling a person from their premises, wrongly entering their
premises, or otherwise invading or preventing the private right to occupy their
premises (including a room or dwelling) is the essence of this offense.
Insurers generally take the position that these offenses are covered only if
the eviction, entry, or invasion of the right of private occupancy is committed
by the owner, landlord, or lessor. Exactly what is "wrongful" or an
"invasion" is a matter of both fact and law that has to be considered
in any claim scenario.
Invasion of the right of private occupancy was found when a hotel provided
entry into a hotel room for a male business traveler that was already occupied
by a female business traveler, who met the startled new occupant as she exited
her shower. The hotel was found to have invaded the female business
traveler's right to private occupancy.
d. Oral or written publication, in any manner, of material that
slanders or libels a person or organization or disparages a person's or
organization's goods, products or services;
The issue that is central to this offense is defamation: harm to a person's
reputation resulting from a false statement. Slander is defamation by speech;
libel is defamation in written or visual form. Disparagement is similar to
defamation, but involves a comparison that detracts or discredits the goods,
products, or services of another because of false statements.
Publication is a critical element to defamation or disparagement, and simply
means that the false statements (either by speech, written or visual) have been
made to third parties other than the person or organization whose reputation,
goods, products, or services are allegedly harmed.
e. Oral or written publication, in any manner, of material that
violates a person's right of privacy;
The concern of privacy continues to grow. Keeping secure medical records,
financial information, and social security numbers, to name but a few, are
major duties and concerns for both public and private organizations nationwide.
The right of privacy (and the invasion of that right) is well established in
common law. The following are four well recognized categories as respects
invasion of privacy.
- Misappropriation of a person's likeness or name, usually for the
commercial benefit of another
- Intrusion upon a person's right of seclusion or solitude, or
intrusion into private affairs
- Use of publicity to place another in a false light, if a reasonable
person would find it objectionable (the depiction does not have to be
defamatory)
- Public disclosure of private facts, even if the information is true and
not defamatory, if the revelation is embarrassing or otherwise reasonably
objectionable
Found to be an invasion of privacy, specifically intrusion into private
affairs, was unauthorized wiretapping and eavesdropping conducted by a large
corporation against a critic and author who was preparing to release a book
severely critical of the corporation's products.
To be covered, the last two offenses must be contained within the named
insured's "advertisement," a term defined in the CGL policy.
Advertisement is a notice broadcast or published to the general public (or
specific target markets within the general public) about the named
insured's goods, products, or services.
The purpose of the broadcast or publication must be for the purpose of
attracting customers or supporters. Included in the definition of
"advertisement" is material placed on the Internet as well as
websites (but only that part of the website that is about the named
insured's goods, products, or services).
f. The use of another's advertising idea in your
"advertisement"; or
This is straightforward. If another person or organization alleges your
organization is using their advertising ideas in your advertisements, Coverage
B is triggered as this is a covered offense, further subject to the coverage
exclusions.
g. Infringing upon another's copyright, trade dress or
slogan in your "advertisement".
Similar to the above, if the named insured is alleged to have, in their
advertising campaign, infringed on the copyright, trade dress, or slogan of
another, coverage exists under Coverage B, further subject to the coverage
exclusions. Trade dress is a business style or image that is unique or
distinctive. For example, a hamburger store with golden arches would probably
be alleged to have infringed on the trade dress of another.
Real-Life Examples
The following are a couple of real-life examples that might bring to life
some of the legal wrangling that often triggers the offenses included within
the definition of personal and advertising injury liability coverage. This is
not to suggest that the described actions are covered by Coverage B of the CGL
policy, but are simply actions that fall within the rather abstract realm of
violation of the rights of others.
Galella v. Onassis, 487 F.2d 986 (2d Cir. 1973)
A freelance photographer, Donald Galella, who specialized in photographing
well-known persons, was involved in a lawsuit with Jacqueline Kennedy Onassis,
widow of the late President John F. Kennedy, and at the time wife of Aristotle
Onassis. Mr. Galella was a self-described "paparazzo" (singular for
paparazzi—literally, an annoying insect) who aggressively pursued photographs
of the two Kennedy children, John and Caroline. His conduct included jumping
into the path of John Kennedy riding his bicycle, interrupting Caroline at
tennis, and invading their private schools.
U.S. Secret Service agents, assigned to protect Ms. Onassis and children,
fearing for the physical safety of the children, ultimately arrested and
interrogated Mr. Galella, who in turn brought an action against Ms. Onassis for
false arrest and malicious prosecution, contending that Ms. Onassis ordered the
arrest and prosecution, which included interference with his trade (a temporary
restraining order was issued against Mr. Galella). After trial, the court
dismissed Mr. Galella's claim and granted relief to Ms. Onassis, finding
Mr. Galella to have engaged in, among other things, harassment, intentional
infliction of emotional distress, and invasion of privacy. While Ms. Onassis
was found to be a public figure, the court commented:
Galella's action went far beyond reasonable bounds of newsgathering.
When weighed against the de minimis public importance of the daily activities
of the defendant [Onassis], Galella's constant surveillance, his
obtrusive and intruding presence, was unwarranted and unreasonable. If there
was any doubt in our minds, Galella's inexcusable conduct toward the
defendant's minor children would resolve it.
Bennett v. Norban, 151 A.2d 476 (1959)
The plaintiff was shopping in a busy self-service department store, when she
picked out a purse but could not find a cashier to wrap the purse for her. She
moved to another aisle within the store, carrying the purse with her. In a
hurry to leave, she put the purse back and left the store without making a
purchase. Outside the store, an angry store assistant manager caught up with
her, blocked her path, and ordered her to take off her coat. After removing her
coat, the assistant store manager asked her about the pockets on her dress,
actually reaching into her pockets. Not finding anything, he then took her
purse (one she had with her, not the one from the store) and emptied it out,
searching through her personal items. Again not finding anything, he placed the
items back into her purse, then went back into the store. People on the street
had stopped to watch, much to the embarrassment of the women. The plaintiff
brought the suit against the store, alleging, among other things, slander.
The court found in favor of the plaintiff in the matter of slander. The
judge stated:
The direction to remove her coat, the questions about her pockets, the
action of feeling in them and then searching her purse: these events formed a
dramatic pantomime suggested to the assembled crowd that the appellant
[women] was a thief. We are satisfied to hold that the meaning of the entire
incident suffered by the plaintiff, taken in the round, was slanderous.
Conclusion
While the above incidents may be adjudicated differently today, they do give
some insight into the types of behavior that might result in litigation which
makes Coverage B—Personal and Advertising Injury Liability important.
The second article in this series deals with the
exclusions to Coverage B.