NU Online News Service, Nov. 8, 3:38 p.m. EST

In an important ruling this summer, the Eighth Circuit Court ofAppeals decided that an online marketing firm was entitled todefense cost coverage under two different types of liabilitypolicies for the same spyware download incident.

Lawyers Richard J. Bortnick and Stephanie Gantman of CozenO'Connor detailed the facts of the underlying case and thesubsequent ruling by the July 23, 2010 ruling by the appeals courtin Eyeblaster Inc. v. Federal Ins. Co. in a special article published in this week's edition ofNational Underwriter's print magazine.

The court found concurrent coverage for an online marketingcompany, known as Eyeblaster, under both its commercial generalliability insurance policy and a separate Information and NetworkTechnology errors and omissions liability policy in circumstanceswhere the company had installed software on a consumer's computersystem, allegedly corrupting the consumer's operating system, thetwo attorneys reported.

Mr. Bortnick and Ms. Gantman revealed in the article that one ofthe specific coverage issues addressed by the Eighth Circuit courtincluded whether there was "property damage" as defined in a CGLpolicy--"physical injury to tangible property, including resultingloss of use of that property."

Also addressed was the question of whether there was a "wrongfulact," defined in the E&O policy--as "an error, an unintentionalomission, or a negligent act."

Detailing the court's reasoning to find coverage under bothpolicies, the lawyers concluded that the Eighth Circuit's ruling"demonstrates the importance of a well-crafted insurance policy,particularly in our evolving technological age."

They wrote, "It is axiomatic that courts are protective ofpolicyholders, many reaching to find coverage where none wasintended to exist or was never contemplated. Needless to say, it isincumbent on insurers to continually review and refine their CGL,E&O and other policy wordings."

In the underlying tort action, a consumer sued Eyeblaster--afirm that creates and manages online advertising--for allegedly"enticing" him to "visit" an Internet website.

His complaint alleged that this "visit" resulted in spyware,tracking cookies, JavaScript and other alleged rogue programs beingdownloaded onto his computer. He further alleged that the programshijacked his computer, causing changes to his computer's securitysettings, and introduced spyware that caused his computer to freezeup or operate so slowly that it was inoperable--descriptions thatconvinced the appeals court that the CGL policy language referringto "loss of use" was applicable.

The court found defense cost coverage for under the E&Opolicy finding that Eyeblaster's activities were intentional, butnot intentionally wrongful, according to the Cozen O'Connorlawyer's account of the ruling.