Bodily injury insurance coverage: insuring intangible rights

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Almost all businesses carry General Liability (CGL) insurance. Many lawsuits trigger Coverage A of the CGL insurance policy form, which insures liability for bodily injury and property damage. Less well known is coverage B, which insures public liability for bodily injury and publicity damage. This article discusses the broad scope of Cover B, particularly for intangible rights violations and intentional torts, which many companies (and their attorneys) mistakenly assume are not covered.

Intangible rights and intentional crimes

While Coverage A responds to liability claims for bodily injury or property damage caused by an “event” (which is generally defined as an accident including continued exposure to harmful conditions), Coverage B’s key term is ” offence”. The word “event” does not appear in Coverage B. The term “offence” is defined in the insurance policy form and often involves conduct that is not at all accidental.

Generally, with some variation, all of the following offenses are covered: a. False arrest, detention or imprisonment; b. Abusive lawsuits; vs. Abusive eviction, abusive entry or infringement of the right of private occupation of a room, accommodation or premises occupied by a person, committed by or on behalf of its owner, lessor or lessor; D. Publication, oral or written, in any way, of material that slanders or defames any person or organization or disparages the goods, products or services of any person or organization; e. Oral or written publication, in any manner, of material that violates a person’s right to privacy; F. Use of a third party’s advertising idea in your “advertisement”; g. Infringe the copyright, trade dress or slogan of another in your “advertisement”.

Sometimes an insurance policy will cover “unfair competition” or “piracy” as an offense, although these offenses are rarely listed yet. See, for example, Curtis-Universal, Inc. v. Sheboygan Emergency Medical Services, 43 F.3d 1119 (7th Cir. 1994) (dissemination of false information about a competitor amounting to unfair competition and disparagement which were among the following offenses covered: “slander, insult, defamation, invasion of the right to privacy, piracy, competition, or violation of copyright, title or slogan”).

It is important to read the relevant insurance policy (the one in force when the offense occurred and the injury was sustained) in its entirety (including endorsements) to determine the extent of coverage. Coverage B, like coverage A, generally provides not only payment of settlements or judgments (which are subject to a limit of liability), but also unlimited defense costs.

Scope of coverage

Cover B has a surprising breadth. After even a cursory examination of the list of offenses, it becomes clear that many of them involve intentional conduct. The offense need not be accidental. Indeed, most offenses have some level of intent as an essential element. For this reason, the United States Court of Appeals for the Seventh Circuit noted that a broad exclusion of intentional acts would render coverage B illusory. See Tews Funeral Home c. Ohio Casualty Insurance832 F.2d 1037 (7th Cir. 1987).

Within this broad coverage, allegations of actual malice are the basis for finding coverage, not excluding it. The Fourth Circuit reversed summary judgment in favor of an insurance company and ordered judgment entered for the policyholder when considering coverage for a defamation claim alleging both a intentional harm and actual malice. Since liability was possible under the “actual malice” standard through proof of a reckless disregard for falsity, without intent to harm, the insurance company had an obligation to defend the policyholder. insurance in the defamation lawsuit. See Fuisz v Selective Insurance Company of America61 F.3d 238 (4th Cir. 1995).

Infringement of the right of private occupation

Perhaps the most controversial offense is the violation of the right of private occupation. In New Castle County Delaware v National Union Fire Insurance, 243 F.3d 744 (3d Cir. 2001), the Third Circuit held that the offense: “wrongful eviction, unlawful entry, or invasion of the right of private occupation of a room, dwelling or premises occupied by a person, committed by or on behalf of its owner, lessor or lessor.” The Third Circuit cited and elaborated on the District Court’s concern that insurance companies continued to use this language when for decades it had been deemed ambiguous by other courts.The Third Circuit explained that insurance companies are in the best position to clarify potentially ambiguous terms and avoid future litigation; courts and parties to discern the meaning of the term demonstrates its ambiguity.Ambiguous language in insurance policies is always construed against the insurance company.

The phrase “infringement of the right of private occupancy” has been widely interpreted to apply beyond the landlord-tenant context to physical and non-physical infringements, including a county’s failure to grant a building permit. in violation of plaintiff’s due process rights (New Castle County Delaware); filming customers in a women’s fitting room (US warranty and liability insurance around 1906, 273 F.3d 605 (5th Cir. 2001)); interference with the peaceful use of the property resulting from noxious odors, noise and light (Titan Holdings Syndicate v. Town of Keene, 898 F.2d 265 (1st Cir. 1990)); and violation of the implicit guarantee of habitability of an apartment (Beltway Management v Lexington-Landmark Insurance, 746 F. Sup. 1145 (SDC 1990)).

Denigration

Lawsuits brought by competitors alleging an inappropriate comparison of products or services are generally covered by the offense of publishing material that disparages the goods, products or services of a person or organization. If a company claims that its product is better or equivalent to its competitor’s product, or contains the same ingredients, or performs better, such claims may result in a lawsuit based on an allegation that the comparison implicitly disparages the product or services. of the competitor.

Even in the absence of comparative claims, a claim for breach of contract may include factual allegations of disparagement. When the Boston Opera canceled a production involving actress Vanessa Redgrave, she alleged in a breach of contract claim that her reputation had been tarnished. The Massachusetts Supreme Judicial Court ruled that damages for breach of contract for injury to reputation were covered by the offense of “publishing or uttering a defamation or slander or other defamatory acts “. [or] derogatory material. See Boston Symphony Orchestra, Inc. v Commercial Union Insurance545 NE2d 1156 (Mass. 1989).

In addition, a tortious breach of contract based on unflattering statements about a person’s character in a commercial context may fall under the offense of disparagement, even if there is no cause of action alleged. for slander or defamation. See Cincinnati Insurance v. Eastern Atlantic Insurance, 260 F.3d 742 (7th Cir. 2001).

Intellectual Property Claims

Certain intellectual property claims are offenses explicitly covered by Coverage B. In particular, offenses related to copying an advertising idea in an advertisement and infringement of copyright, trade dress or slogan others in an advertisement will encompass numerous intellectual property claims. For example, the Second Circuit reversed a summary judgment that had been entered in favor of an insurance company, finding that the insurance company was obligated to defend an underlying lawsuit alleging that the insured had copied its competitor’s packaging and then displayed that packaging in advertisements. See RC Bigelow v. Liberty Mutual Insurance, 287 F.3d 242 (2nd Cir. 2002).

If not explicitly excluded, patent infringement claims are covered when they fall under one of the covered offenses, such as misappropriation of advertising ideas. See Hyundai Motor America v. National Union Fire Insurance, 600 F.3d 1092, 1101 (9th Cir. 2010); DISH Network v Arch Specialty Insurance659 F.3d 1010 (10th Cir. 2011); Amazon.com International v. American Dynasty Surplus Lines Insurance, 85 P.3d 974 (Wash. Ct. App. 2004).

Abusive lawsuits

Some courts have held that the offense of malicious prosecution extends to a variety of torts involving the misuse of civil process and abuse of process, while other courts have limited the offense of malicious prosecution to the tort malicious prosecution and similar statutory claims. Compare Lunsford v American Guaranty & Liability Insurance, 18 F.3d 653 (9th Cir. 1994) (stating that the insurance company must defend an abuse of process claim) with Westminster American Insurance v Spruce 1530, 853 F. App’x 793 (3d Cir. 2021) (providing that the offense of “malicious prosecution” covers Dragonetti Act claims but does not extend to abuse of process under Pennsylvania law ).

Conclusion

Coverage B extends CGL coverage to liability for the violation of various intangible rights, such as the right to privacy, the right to private occupation, and rights to reputation. It covers intentional torts and extends beyond accidental injury. For these reasons, Cover B can be extremely valuable to businesses and should not be ignored or overlooked when evaluating cover.

Timothy P. Law is an Insurance Recovery Group Partner of Reed Smith, residing in Philadelphia. He represents corporations, universities and non-profit organizations in disputes with their insurance companies. He can be contacted at [email protected]

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