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Insuring agreement

Exclusions

Insuring Agreement

 a.We will pay those sums that the insured becomes legally obligated to pay as damages because of "personal and advertising injury" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "personal and advertising injury" to which this insurance does not apply. We may, at our discretion, investigate any offense and settle any claim or "suit" that may result. But:

(1)The amount we will pay for damages is limited as described in Section III—Limits of Insurance; and

(2)Our right and duty to defend end when we have used up the applicable limit of insurance in the payment of judgments or settlements under Coverages A or B or medical expenses under Coverage C.

No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Supplementary Payments—Coverages A and B.

b.This insurance applies to "personal and advertising injury caused by an offense arising out of your business, but only if the offense was committed in the "coverage territory" during the policy period.

Analysis

The coverage B insuring agreement expresses the insurer's promise to pay those sums that the insured becomes legally obligated to pay as damages because of "personal and advertising injury" to which the insurance applies.

The all-important definition of "personal and advertising injury" is discussed in other pages of this tab; see Commercial General Liability Definitions; Public Liability A.2 pages. But, in brief, the terms include a wide range of offenses that often result in neither bodily injury nor damage to tangible property and consequently are not insured under coverage A of the CGL coverage form.

Personal injury offenses are covered if they arise out of the conduct of the named insured's business, other than advertising, publishing, broadcasting, or telecasting done by or for the named insured. So, if the named insured is itself in the business of advertising, publishing, broadcasting, or telecasting—for example, an advertising agency, a newspaper, or a radio or television station—it will need to have a more specialized form of coverage designed for firms in those businesses.

Advertising injury offenses are covered if they arise in the course of advertising the named insured's goods, products, or services; conversely; if the insured's advertising activity is not the direct or proximate cause of the alleged injury, there is no legal liability and the insuring agreement will not apply. When the named insured (who is not in the advertising, etc. business) is merely advertising its own business, however, it will be protected by coverage B of the CGL forms against the advertising injury offenses as defined. A grocery that distributes flyers in its neighborhood is an example of this point.

Note that the insurance applies only if the offense was committed in the coverage territory. Offense is not a defined term in the CGL forms (as is occurrence under coverage A), but it is used in the personal and advertising injury insuring agreement instead of occurrence because this insuring agreement is meant to apply to intended actions of the insured. Occurrence, of course, means an accident, but if the insured commits an act for which personal injury or advertising injury coverage is applicable, that act is not an accident. For example, if the insured detains someone or writes an article that libels a person, those acts of detention and writing are intentional (not accidental), and the insured needs protection for such intentional acts. Occurrence-as-an-accident coverage will not do the job.

It is interesting to note that the Montrose provisions (known loss provisions) that are in the coverage A insuring agreement are not part of the coverage B insuring agreement. It could be that the particular nature of coverage B—personal and advertising injury caused by an offense (intended actions as opposed to accident)—does not warrant Montrose provisions. Or, perhaps since the Montrose case itself dealt with property damage and with an occurrence, there was no perceived threat to personal and advertising injury coverage. For whatever reason, coverage B does not have the Montrose clauses.

 Exclusions

 This insurance does not apply to:

a.Knowing Violation of Rights of Another

     "Personal and advertising injury" caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict "personal and advertising injury".

b.Material Published With Knowledge of Falsity

     "Personal and advertising injury" arising out of oral or written publication, in any manner, of material, if done by or at the direction of the insured with knowledge of its falsity.

c.Material Published Prior To Policy Period

     "Personal and advertising injury" arising out of oral or written publication, in any manner, of material whose first publication took place before the beginning of the policy period.

d.Criminal Acts

     "Personal and advertising injury" arising out of a criminal act committed by or at the direction of the insured.

e.Contractual Liability

     "Personal and advertising injury" for which the insured has assumed liability in a contract or agreement. This exclusion does not apply to liability for damages that the insured would have in the absence of the contract or agreement.

f.Breach Of Contract

     "Personal and advertising injury" arising out of a breach of contract, except an implied contract to use another's advertising idea in your "advertisement".

g.Quality Or Performance of Goods—Failure To Conform To Statements

     "Personal and advertising injury" arising out of the failure of goods, products, or services to conform with any statement of quality or performance made in your "advertisement".

h.Wrong Description of Prices

     "Personal and advertising injury" arising out of the wrong description of the price of goods, products or services stated in your "advertisement".

i.Infringement of Copyright, Patent, Trademark or Trade Secret

     "Personal and advertising injury" arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. Under this exclusion, such other intellectual property rights do not include the use of another's advertising idea in your "advertisement".

    However, this exclusion does not apply to infringement, in your "advertisement", of copyright, trade dress or slogan.

j.Insureds In Media And Internet Type Businesses

     "Personal and advertising injury" committed by an insured whose business is:

(1)Advertising, broadcasting, publishing or telecasting;

(2)Designing or determining content of websites for others; or

(3)An Internet search, access, content or service provider.

     However, this exclusion does not apply to Paragraphs 14.a, b., and c. of "personal and advertising injury" under the Definitions Section.

     For the purposes of this exclusion, the placing of frames, borders or links, or advertising, for you or others anywhere on the Internet, is not by itself, considered the business of advertising, broadcasting, publishing or telecasting.

k.Electronic Chatrooms Or Bulletin Boards

     "Personal and advertising injury" arising out of an electronic chatroom or bulletin board the insured hosts, owns, or over which the insured exercises control.

l.Unauthorized Use Of Another's Name Or Product

     "Personal and advertising injury" arising out of the unauthorized use of another's name or product in your e-mail address, domain name or metatag, or any other similar tactics to mislead another's potential customers.

m.Pollution

     "Personal and advertising injury" arising out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release or escape of pollutants at any time.

n.Pollution-Related

     Any loss, cost or expense arising out of any:

(1)Request, demand, order, or statutory or regulatory requirement that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of "pollutants"; or

(2)Claim or suit brought by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to, or assessing the effects of "pollutants".

o.War

"Personal and advertising injury", however caused, arising, directly or indirectly, out of:

(1)War, including undeclared or civil war;

(2)Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign, or other authority using military personnel or other agents; or

(3)Insurrection, rebellion, revolution, usurped power, or action taken by governmental authority in hindering or defending against any of these.

p.Recording and Distribution of Material in Violation of Law

"Personal and advertising injury" arising directly or indirectly out of any action or omission that violates or is alleged to violate:

(1)The Telephone Consumer Protection Act (TCPA), including any amendment of or addition to such law; or

(2)The CAN-SPAM Act of 2003, including any amendment of or addition to such law; or

(3)The Fair Credit Reporting Act (FCRA), and any amendment of or addition to such law, including the Fair and Accurate Credit Transactions Act (FACTA); or

(4)Any federal, state or local statute, ordinance or regulation, other than the TCPA, CAN-SPAM Act of 2003 or FCRA and their amendments and additions that addresses, prohibits or limits the printing, dissemination, disposal, collecting, recording, sending, transmitting, communicating or distribution of material or information.

Analysis

The first and fourth exclusions listed above mean that, even though personal and advertising injury liability coverage is for intentional acts of the insured, that coverage will not extend to an intentional act that the insured knows is illegal or wrong. Knowingly violating the rights of another or committing a criminal act are things that an insurer would have to prove against the insured if the exclusions were to be applied; but the existence of the exclusions on the CGL policy are meant to show that, while the insured is covered for some intentional acts under coverage B of the CGL form, there is a line which the insured should not cross.

The second exclusion presents another example of an intentional act that is not covered by the CGL form. If the insured knows that the material he or she has is false and publishes it anyway, any personal or advertising injury that arises out of that publication is not covered under the CGL form. Note that, in order to address Internet and electronic publications and their impact on personal and advertising injury offenses that may arise from publication via e-mail or a web site, the 2013 edition of the CGL form has added the phrase "in any manner" to this exclusion.

The third exclusion simply means that the insurer does not want the CGL form to apply to offenses of the insured that took place before the CGL form's policy period begins. The claims-made version of the CGL form replaces the phrase "before the beginning of the policy period" with the phrase "before the Retroactive Date, if any, shown in the Declarations", but the basic thrust of the exclusion is the same—no coverage before the date that the insurer and the insured have agreed upon. This exclusion also has the phrase "in any manner" added to it under the 2013 edition of the CGL form.

The fifth exclusion, affecting assumed contractual liability coverage, includes the qualification clarifying that the exclusion does not eliminate coverage for liability that the insured would have in the absence of the contract or agreement. Note that insured contracts are not mentioned in this exception to the contractual exclusion.

The sixth exclusion simply reinforces the fact that a CGL form is not meant to apply to breach of contract liabilities; any contractual liability coverage under the CGL form is for the assumption of another's liability under an insured contract as defined on the CGL form. The exception to this exclusion involves an implied contract, a term not defined on the form but which means an agreement that is legitimately inferred from the conduct of the parties or by the law, as a matter of reason and justice. An example of this would be a business acquaintance of the insured suggesting an idea to be used in the insured's ads about the insured's products; if the acquaintance renders this service indicating that he expects to be paid something, and the insured uses the idea knowing that the acquaintance expects compensation, that is an implied contract between the two parties. If some personal or advertising injury arises out of the use of that ad, coverage B of the CGL form will respond to the resultant claim.

Sometimes, a product or service just does not live up to its hype, for whatever reason; this is a business risk that an insured must bear himself. If the CGL form were to guarantee the quality or performance of every product or service that the insured advertises, not only would the number of lawsuits overwhelm the insurer and the insured, but the limits of insurance would be used up rather quickly. The seventh exclusion acknowledges this point.

The eighth exclusion realizes that an insured can make a mistake and advertise a product for sale at, say, $6.90 when the correct price is $9.60. Once again, this is a business risk that the insured must bear himself or else, the CGL form would quickly lose its efficacy.

The exclusion pertaining to the infringement of copyright, patent, trademark, or trade secrets is meant to strengthen the fact that the CGL form does not apply to infringement of intellectual property rights, like patent or trademark infringement. Some claims have been made trying to have the CGL form cover allegations especially of patent infringement, and this exclusion makes the point that such infringements are better covered by a specialty type policy. Also, the exclusion clarifies the fact that "the use of another's advertising idea in your advertisement" is still included in the definition of personal and advertising injury. Exclusion i. will not be used to deny personal and advertising injury coverage to an insured should a claim arise against him based on the use of another's idea in the named insured's advertisements.

There is an exception made in this exclusion for the infringement of another's copyright, trade dress or slogan in the named insured's advertisement, but that is in keeping with the definition of personal and advertising injury (see Commercial General Liability Definitions).

The next three exclusions are part of the October, 2001 revisions of the CGL forms. They recognize the possible liabilities that the insured could face in the brave new world of e-commerce and electronic communications.

Exclusion j. is simply an e-commerce extension of the fact that coverage B is not intended to apply to those who are in the business of advertising, broadcasting, publishing, or telecasting. This exclusion recognizes the fact that, today, advertising, broadcasting, and publishing companies can carry on their respective business via the Internet and over the Web. These particular businesses—no matter their format—are professional activities with unique liability exposures that should be covered under specialty type policies and this exclusion makes that point. The exclusion does not apply to certain paragraphs of the definition of "personal and advertising injury"; these paragraphs deal with false arrest, malicious prosecution, and the wrongful eviction from or invasion of the right of private occupancy.

Exclusion k., dealing with chatrooms and bulletin boards, is a response to the idea that an entity that hosts a chatroom or bulletin board can be considered in control of the content as the publisher. This could thus open that entity to liability claims based on publishing libelous information or violating a person's right of privacy. This publisher type of exposure should be handled by a specialty type policy.

Exclusion l. deals with the unauthorized use of another's name or product, such as using metatags and domain names, to mislead another's potential customers. If an insured were to use these methods to intentionally divert business away from others and toward the insured itself, this is not the type of activity meant to be covered by an insurance policy. Even if such actions are not illegal, they are certainly unethical and the CGL form will not protect the insured under such circumstances.

Coverage B has a pollution exclusion because some courts had looked at part of the definition of personal injury (that is, the wrongful entry into or invasion of the right of private occupancy of a … premises) and declared that pollution was an invasion of the right of private occupancy. Therefore, this exclusion was written in a manner meant to be more absolute than that found in coverage A of the CGL form. Coverage B is not meant to apply to a pollution claim.

The pollution-related exclusion is basically the same as the clean up exclusion found under coverage A of the CGL form; see CGL Coverage Form—Coverage A. The CGL form will not respond to any demands or requests for clean up costs associated with pollution.

The war exclusion simply wants to preclude any coverage under the personal and advertising injury liability section of the CGL form that does not exist under the bodily injury and property damage liability pertaining to war or warlike actions. The thinking here is that someone would claim a personal injury (for example, false arrest, slander, or libel) arising out of a warlike action, such as a terrorist attack, and then the insured would seek coverage under the CGL form; this exclusion would prevent insurance coverage under the insured's CGL form.

Exclusion p. makes endorsement CG 00 67, which was introduced by ISO in 2005, part of the CGL form; the wording was incorporated into the CGL form in the December 2007 revision of the form. The same exclusion is now also part of coverage A and pertains to injury arising from the distribution of material in violation of TCPA, the CAN-SPAM Act of 2003, and other such laws. Endorsement CG 00 67 has now been withdrawn from use. Note that the April 2013 revision of the CGL form incorporates the wording of endorsement CG 00 68 pertaining to the Fair Credit Reporting Act and the Fair and Accurate Credit Transaction Act into this exclusion. The endorsement has been withdrawn from use.