The commercial general liability (CGL) policy has progressed through three updates since the 1998 edition; the first in 2001, then 2004 and most recently 2007. Each update has produced additions to the list of “personal and advertising injury” exclusions. Three exclusions were added in 2001, one in 2004 and one in 2007, resulting in the current list of 16 exclusions.
Eleven “personal and advertising injury” exclusions from the 1998 edition were detailed in the last post. The remaining five are detailed in the following paragraphs; each is presented in the order of introduction by edition date.
2001 Edition – Three Exclusions Added
Prior to the adoption of the 2001 edition of the CGL, courts sometimes found sufficient ambiguity in the CGL’s “personal and advertising injury” section as to allow coverage to be extended to charges of copyright and/or trademark infringement (based on individual circumstances). Additionally, the 2001 edition was the first to address the exposures created by the web, specifically the proliferation of chat rooms, bulletin boards and the general use or misuse of the Internet.
Three exclusions were added to the 2001 edition to manage these gaps and exposures:
- Infringement of Copyright, Patent, Trademark or Trade Secret;
- Electronic Chatrooms or Bulletin Boards; and
- Unauthorized Use of Another’s Name or Product
Infringement of Copyright, Patent, Trademark or Trade Secret (exclusion “2.i.”): Created and added to clarify the insurance industry’s intent to not provide coverage for violating the intellectual property (IP) rights of another. Using and taking credit for someone else’s IP amounts to an intentional act and is also a business risk. Specialized polices are available to defend the insured against these charges.
However, an insured’s use of and infringement on another’s IP in its “advertising” is not excluded in the current policy wording. Copying the look and feel of another entity’s ad is not excluded. For example, running an ad featuring two actors dressed like cavemen talking about your insurance agency, even though not related to GEICO, would be an infringement of a trade dress character, but would still be covered under the CGL. However, calling the agency GEICO would be excluded.
There is an important change in terminology between the exclusion title and the exception to the exclusion. The form excludes violation of a trademark, but gives back coverage for use of another’s “trade dress” in the insured’s advertising. A trademark is a name or slogan specific and identifiable as pertaining to a particular product. Use of a trademarked product or name in an advertisement is not necessarily protected by the policy (this is why ads say, “facial tissue” rather than “Kleenex”). Conversely, use of a trade dress in an advertisement is protected. Trade dress has to do with the overall, distinctive image of the product; and it must be something that is non-functional. This is why use of the cavemen by another agency is protected: they are associated with the GEICO brand and definitely distinctive, but they are not a functional part of the name or operation of the company.
An interesting fact about a trademark; a trademark and its protection arises out of use, not necessarily or exclusively registration. Food Lion, a large grocery store chain, was known as Food Town until it tried to enter Johnston County, NC (a county just outside of Raleigh). Clayton, a town in the northeast part of the county, already had a long-existing local grocery store known as Food Town; it sued the larger chain and forced the name change because it had rights to the use of the name, even though it was not large and the name was not “registered” with anyone other than the Secretary of State.
Electronic Chatrooms or Bulletin Boards (exclusion “2.k.”): A chat room is a “real-time” group of users using instant messaging to communicate; the “rooms” are usually divided or arranged by topic. A bulletin board is better thought of as a forum or message board; users generally post to existing questions or answer on their own schedule without having to be there the time anyone else is posting. Any “personal or advertising injury” resulting from or arising out of these “facilities” is excluded if the insured hosts, owns or controls the rooms or forums. Merely posting to or being a part of a conversation is not grounds for exclusion; the insured must, in some way, control the “facility.”
Unauthorized Use of Another’s Name or Product (exclusion “2.l.”): Specifically, this exclusion eliminates coverage should the insured use another entity’s name or product name in its email address, domain name, metatag or any other tactics meant to mislead buyers. A copy machine retailer, for example, can’t use “Xerox” in its web address, email address or in any other such manner (unless specifically licensed and contractually permitted to by the company). The purpose of such use is generally to bring the customer to the insured’s site (real or virtual) by false pretense.
2004 and the Addition of War
Only one exclusion was added to the 14 existing after the 2001 change and prior to 2004 edition – War. This exclusion (“2.o.”) is rather self-evident; it excludes any “personal and advertising injury” arising out of war; whether declared, undeclared or simply war like. While this seems like an odd “personal and advertising injury” exclusion, but look at when it was introduced, after 9/11/2001. False arrest, detention or imprisonment of individuals meeting certain visual profiles became very possible. Entities that perform background checks, surveillance or investigation may also be subject to charges of violation of a person’s right of privacy. How that will play out in the “war on terrorism” is yet unknown – especially if the individual is a “person of interest.”
The Most Current Edition – 2007
Distribution of Materials in Violation of Statutes (exclusion “2.p.”): This last exclusion was created in response to the CAN-SPAM Act of 2003 and somewhat to the Telephone Consumer Protection Act (TCPA) which limited access to consumers by solicitors trying to sell them goods, products or services. These laws gave rise to the no-call requirements telemarketers and really any cold-call-to-consumer-operations in business today.
CAN-SPAM was signed into law on December 16, 2003. It’s an acronym that stands for: Controlling the Assault of Non-Solicited Pornography And Marketing Act of 2003. The TCPA was first signed into law in 1991 (amending the Communications Act of 1934) and modified by the CAN-SPAM Act. Portions of the TCPA dealt with unsolicited fax advertising. July 9, 2005, saw the signing into law of the Junk Fax Prevention Act of 2005. The Junk Fax act can impose hefty fines on violators of the law (up to $500 per page). Violation of these laws can be rather expensive and the costs are not covered by insurance.
Prior to the addition of this exclusion in the CGL, insurers attached the CG 00 67 – Exclusion – Violation of Statutes That Govern E-Mails, Fax, Phone Calls Or Other Methods Of Sending Material Or Information.
This ends the four-part series on “personal and advertising injury” coverage. The differences between Coverage A and Coverage B, the named perils or “offenses” that make up the coverage and the 16 exclusions have all been detailed.
As stated earlier, agents desiring to stand out need to understand this coverage part, point out the exposures and manage the risk. Insureds may have exposures that require additional or alternate protection. Even if they choose to not purchase the protection, the agent has done his/her duty, pointed out the exposure/option and protected his errors and omissions exposure.