"Personal Injury" Coverage Disparagement/Invasion of Privacy
Insurers achieved three favorable rulings in cases which to date remain unpublished.
Chimera Investment Co. v. State Farm Fire & Cas. Co., No. 06-4268, 2008 WL 681701 (10th Cir. (Utah) March 11, 2008)
The first addresses coverage for disparagement. It found that an insured could not obtain coverage under the “personal injury” offense of “oral or written publication of material that disparages a goods products or services of another for slandering it own services”. The insured, a real estate management company which allegedly slandered a home owners association services in speaking to a condominium unit owner. The court found that the injuries for which the claimant sought to recover in a state court lawsuit where no reported injuries to the homeowners association arose did not trigger a defense. The connection between the “offense” of slander of the association’s services to the injuries sustained by the claimant did not come within “advertising injury” coverage in the courts view where the suit was for unlawful entry, trespassing and wrongful eviction from a condominium unit. It found that the policy’s “arising out of” language did not make a difference.
The two remaining cases addressing “invasion of privacy” as forms of “personal injury” coverage Ace Mortgage Funding, Inc. v. Travelers Indem. Co. of Am., No. 1:05-cv-1631-DFH-TAB, 2008 WL 686953 (S.D. Ind. March 10, 2008)
In a blast fax case embraced a minority view articulated by Judge Easterbrook in American States Ins. Co. v. Capital Associates of Jackson County, Inc., 392 F.3d 939, 942-943, (C.A.7 (Ill.) 2004) which predicted this would follow the logic of Capital Associates in accord with the views of another district judge in Indiana. See Fury Insurance Exchange v. Kevin T. Watts Inc., No. 1:05-CV-867-JDT-TAP, 2006 WL 1547109 (S.D.Ind. May 30, 2006). This despite the fact that the Supreme Court of Illinois as well as the majority of subsequent cases nationwide have rejected its analytic approach. See Terra Nova Ins. Co. v. Fray-Witzer, 869 N.E.2d 565, 574 (Mass. 2007) (applying New Jersey law).
In effect, the insurers argue that the policy's definition of injury should be read to say “[o]ral or written publication of material, the content of which violates a person's right of privacy.” But New Jersey law is clear that when construing an ambiguous phrase in an insurance policy, courts should “consider whether clearer draftsmanship by the insurer ‘would have put the matter beyond reasonable question.’. . . In other words, had Terra Nova and Royal wished their policies to pertain only to violations of privacy created by the content of material, it was incumbent on them to draft explicit policies to that effect.
The Seventh Circuit found the policies “advertising injury” coverage for “invasion of privacy” refers to injury caused by publication only for intrusions on secrecy. It thereby imported words of limitation not set forth in the policy. There is no part of the policy that requires that the content of the message be that which invades privacy. The “general analytical principals” in Capital Associates ignore proper construction of the policy against the insurer who could have chosen more precise language to achieve an end which the court should not adopt under the guise of interpretation.
National Fire Ins. Co. of Hartford v. NWM-Oklahoma, LLC, Inc., Case No. CIV-07-545-F, 2008 WL 697298 (W.D. Okla. March 12, 2008)
The insured, a weight loss management company, was sued for “invasion of privacy” when it permitted a supervisorial employee, Susanna Reed, to “listen in” on conversations between plaintiff Hammers and customers for training purposes. The publication was disseminated through a baby monitoring system used to keep tabs on a particular employee. The court noted that even if publication required communication of information to third parties other than the corporate participants, that was potentially available since any of the defendant’s customers could overhear the conversations.
The court found, however, that the “willful violation of a penal statute or ordinance committed by or with the consent of the insured” exclusion applied since federal wiretap act, 18 U.S.C. § 2510 were found to fall within the scope of that exclusion.
There was, in the court’s view, no evidence of “implied consent”, nor did the claimants have an expectation that their oral communications would not be intercepted. The court reasoned that “if, as a factual matter, the claims for injury asserted in the civil suit as to which insurance coverage is sought arise from acts that amount to a ‘willful violation of penal statute,’ the exclusion is triggered . . .” Id. at *9. The court’s application of this exclusion to bar a defense prejudged the merits.
The court’s order does not consider the possibility that until there is an adjudication against the insured and liability could arise for mere tort of “invasion of privacy” but not for violation of federal wiretapping law, a potentially covered “offense” would trigger a defense that would not implicate the penal acts exclusion.
Chimera Investment Co. v. State Farm Fire & Cas. Co., No. 06-4268, 2008 WL 681701 (10th Cir. (Utah) March 11, 2008)
The first addresses coverage for disparagement. It found that an insured could not obtain coverage under the “personal injury” offense of “oral or written publication of material that disparages a goods products or services of another for slandering it own services”. The insured, a real estate management company which allegedly slandered a home owners association services in speaking to a condominium unit owner. The court found that the injuries for which the claimant sought to recover in a state court lawsuit where no reported injuries to the homeowners association arose did not trigger a defense. The connection between the “offense” of slander of the association’s services to the injuries sustained by the claimant did not come within “advertising injury” coverage in the courts view where the suit was for unlawful entry, trespassing and wrongful eviction from a condominium unit. It found that the policy’s “arising out of” language did not make a difference.
The two remaining cases addressing “invasion of privacy” as forms of “personal injury” coverage Ace Mortgage Funding, Inc. v. Travelers Indem. Co. of Am., No. 1:05-cv-1631-DFH-TAB, 2008 WL 686953 (S.D. Ind. March 10, 2008)
In a blast fax case embraced a minority view articulated by Judge Easterbrook in American States Ins. Co. v. Capital Associates of Jackson County, Inc., 392 F.3d 939, 942-943, (C.A.7 (Ill.) 2004) which predicted this would follow the logic of Capital Associates in accord with the views of another district judge in Indiana. See Fury Insurance Exchange v. Kevin T. Watts Inc., No. 1:05-CV-867-JDT-TAP, 2006 WL 1547109 (S.D.Ind. May 30, 2006). This despite the fact that the Supreme Court of Illinois as well as the majority of subsequent cases nationwide have rejected its analytic approach. See Terra Nova Ins. Co. v. Fray-Witzer, 869 N.E.2d 565, 574 (Mass. 2007) (applying New Jersey law).
In effect, the insurers argue that the policy's definition of injury should be read to say “[o]ral or written publication of material, the content of which violates a person's right of privacy.” But New Jersey law is clear that when construing an ambiguous phrase in an insurance policy, courts should “consider whether clearer draftsmanship by the insurer ‘would have put the matter beyond reasonable question.’. . . In other words, had Terra Nova and Royal wished their policies to pertain only to violations of privacy created by the content of material, it was incumbent on them to draft explicit policies to that effect.
The Seventh Circuit found the policies “advertising injury” coverage for “invasion of privacy” refers to injury caused by publication only for intrusions on secrecy. It thereby imported words of limitation not set forth in the policy. There is no part of the policy that requires that the content of the message be that which invades privacy. The “general analytical principals” in Capital Associates ignore proper construction of the policy against the insurer who could have chosen more precise language to achieve an end which the court should not adopt under the guise of interpretation.
National Fire Ins. Co. of Hartford v. NWM-Oklahoma, LLC, Inc., Case No. CIV-07-545-F, 2008 WL 697298 (W.D. Okla. March 12, 2008)
The insured, a weight loss management company, was sued for “invasion of privacy” when it permitted a supervisorial employee, Susanna Reed, to “listen in” on conversations between plaintiff Hammers and customers for training purposes. The publication was disseminated through a baby monitoring system used to keep tabs on a particular employee. The court noted that even if publication required communication of information to third parties other than the corporate participants, that was potentially available since any of the defendant’s customers could overhear the conversations.
The court found, however, that the “willful violation of a penal statute or ordinance committed by or with the consent of the insured” exclusion applied since federal wiretap act, 18 U.S.C. § 2510 were found to fall within the scope of that exclusion.
There was, in the court’s view, no evidence of “implied consent”, nor did the claimants have an expectation that their oral communications would not be intercepted. The court reasoned that “if, as a factual matter, the claims for injury asserted in the civil suit as to which insurance coverage is sought arise from acts that amount to a ‘willful violation of penal statute,’ the exclusion is triggered . . .” Id. at *9. The court’s application of this exclusion to bar a defense prejudged the merits.
The court’s order does not consider the possibility that until there is an adjudication against the insured and liability could arise for mere tort of “invasion of privacy” but not for violation of federal wiretapping law, a potentially covered “offense” would trigger a defense that would not implicate the penal acts exclusion.
