Internet Companies: Personal and Advertising Injury

Surfing for Answers to Coverage Questions

TLT011

Speaker: Robert Williams, Complex Casualty Claims Leader

Wells Fargo Insurance

Learning Objectives

At the end of this session, you will: •  Understand the basics of Personal and Advertising Injury (“PI

and AI”) coverage under the CGL

•  Understand the limited nature and extent of such coverage for intellectual property exposures and for insureds that have an internet presence

•  Understand the basics of a Media Liability coverage and how it addresses the gaps in Personal and Advertising Injury coverage under the CGL for certain exposures and insureds

Elements of Coverage of PI and AI in the CGL

•  Coverage B of the ISO CGL form –  Separate insuring agreement from coverages A (BI and PD) and C (medpay) –  Separate exclusions

•  Applies to PI and AI caused by an enumerated offense –  The offenses are listed in the definition of “Personal and Advertising

Injury” –  No requirement of an “accident” or an “occurrence”

•  Arising out of the insured’s business •  Committed in the coverage territory

–  For PI and AI, defined to include worldwide offenses committed through the internet or similar electronic communication

•  During the policy period

“Personal and Advertising Injury” Defined

•  False arrest, detention and imprisonment •  Malicious prosecution •  Wrongful eviction, entry, or invasion of the right of private occupancy

of a room, dwelling or premises, by or on behalf of the owner, landlord, or lessor

•  Oral or written publication, in any manner, that slanders or libels a person or organization or disparages a person’s or organization’s goods, products, or services

•  Oral or written publication, in any manner, that violates a person’s right of privacy

•  The use of another’s advertising idea in your “advertisement” •  Infringing upon another’s copyright, trade dress or slogan in your

“advertisement”

“Advertisement” Defined

•  A notice that is broadcast to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters

•  This includes material placed on the internet or on similar electronic means of communication

•  Only that part of a website that is about your goods, products or services for the purposes of attracting customers or supporters is considered an advertisement

•  Note: state laws differ on whether widespread distribution is required or whether a limited distribution to a targeted group can be an “advertisement”

Exclusion for “Media and Internet Type Businesses”

•  Exclusion j. “Insureds in Media and Internet Type Businesses” excludes PI and AI committed by an insured whose business is:

•  Advertising, broadcasting, publishing, or telecasting •  Designing or determining content of websites for others •  An internet search, access, content or service provider

•  The placing of frames, borders or links, or advertising, for the insured or for others anywhere on the Internet, is not by itself considered the business of advertising, broadcasting, publishing or telecasting

What is a “Media and Internet Type Business”

•  First two prongs of the definition:

–  “Advertising, broadcasting, publishing, or telecasting” •  the intent is to exclude coverage of traditional media exposures and

injuries, so these businesses need and should be purchasing Media Liability insurance

•  But, advertising for one’s own business is not the business of advertising, even if done on a website over the internet

–  “Designing or determining content of websites for others” •  This targets the business of website design and development

What is a “Media and Internet Type Business”

•  Third prong of the definition:

–  “An internet search, access, content or service provider” •  providers of online news, education, entertainment, commercial,

social, and information content such as Yelp, YouTube, Pandora, NY Times, MSNBC, Disney, Zillow, MarketWatch, FaceBook, LinkedIn

•  search providers like Yahoo, Bing, Google •  access ISPs providing dial-up, ISDN, DSL or satellite internet access

like AT&T, Comcast •  hosting ISPs providing email, web-hosting or online storage services

like Yahoo!mail, Hotmail, Gmail, or Amazon Web Services

Media and Internet Type Businesses

•  Does a company that has a website have any coverage for AI or PI under the CGL?

•  For any business, even a “Media and Internet-Type Business” as defined in the CGL, there is coverage for the first 3 PI offenses: false arrest, malicious prosecution, or wrongful eviction/invasion of right of occupancy

•  For a “Media and Internet Type Business”, there is no AI coverage, and no PI coverage for the offenses of slander/libel/disparagement and violation of rights or privacy

Other PI and AI Exclusions

•  Exclusion i. “The IP Exclusion – Infringement of Copyright, Patent, Trademark or Trade Secret” –  Excludes AI or PI arising out of the infringement of copyright, trademark,

trade secret or other IP rights –  This exclusion restricts AI coverage to infringement of limited IP rights

(only copyright, trade dress, or slogan) and only if committed in the insured’s advertisement

•  Copyright protects artistic works of authorship from improper use •  Trade dress relates to similarities in product packaging •  Slogans are attention getting phrases

–  If a trademark action does not allege the infringement or misuse of a slogan or trade dress (as opposed to a trademark generally), there will be no coverage

Other PI and AI Exclusions

•  Exclusion l. “Unauthorized Use of Another’s Name or Product” in an email address, domain name, or metatag, or similar tactics to mislead another’s potential customers

–  Metatag is a tag in HTML at the top of a web page that provides keywords for use by search engines

•  Exclusion e. “Contractual Liability”, AI or PI for which the insured has assumed liability in a contract (i.e., an indemnity)

•  Exclusion f. “Breach of Contract”, AI or PI arising out of breach of contract

•  Exclusion a. “Knowing Violation of Rights of Another” •  Exclusion b. “Material Published with Knowledge of Falsity”

Media Liability Coverage for Certain Business Activities

•  Producing, publishing or distributing books, flyers, whitepapers, pamphlets, advisories, or other communication to clients or public

•  Contracts with customers or vendors that require media liability coverage

•  The business website goes beyond product selection and payment, such as company-sponsored social media, podcasts, webinars, reviews of products, etc.

•  Any potential for IP infringement that is beyond the CGL definition of “Advertising”

–  “Advertisement” includes only those parts of a website that are about goods, products, or services and that serve the purpose of attracting customers or supporters

–  Other parts of the website that infringe will not be covered by the CGL

Other Advantages of Media Liability Coverage

•  Carve-backs to the breach of contract exclusion for: –  liability assumed under contract (indemnity obligations), including IP infringement –  breach of confidentiality –  breach of express or implied contract regarding submission coverage

•  Worldwide coverage territory •  “Final adjudication” language for knowledge based exclusions •  Coverage of IP infringement even if unrelated to “advertising” •  Coverage of “unfair competition” if related to infringement of

copyright, title, slogan , trademark, trade dress, infringement of domain name, deep-linking or framing, plagiarization, piracy or misappropriate of ideas, disparagement of product, character or reputation

Summary

•  Taken together, the exclusions of CGL Coverage B significantly restrict coverage for PI and AI, particularly for certain insureds and certain activities

•  The CGL is not intended to cover PI or AI committed by any company whose internet presence goes beyond retail product selection and payment

•  The CGL is not intended to cover most IP infringement, PI or AI related to contractual liabilities, representations related to goods, or “knowing” conduct

•  If you currently have a claim, do not overlook the potential for CGL coverage

•  Consider Media Liability coverage as part of a comprehensive risk management program

Questions?

                     “Thank you!”