Gauntlett on Intellectual Property/Antritrust Insurance : Insurance Policyholder Advocate & Attorney David Gauntlett : Gauntlett Law Firm : Insurance Recovery, Policy Interpretation : Irvine, Orange County, California

Judge Magistrate Rosenbaum recommended grant of the motion to dismiss by the insurer.

The underlying suit, alleged by a customer against a restaurant operated by Creative, sued it for violations of the Fair and Accurate Transaction Act (“FACTA”), 15 U.S.C. § 1681c(g).

The issue was printing more than five digits of a credit card for a patron of a retail establishment at a restaurant. The class action suit sought recovery of damages for alleged violations. At issue was the Second Amended Class Action Complaint.

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The court found that the suit by Developers, which asserted, among other rights, redress for violations of constitutional rights, fell outside the scope of exclusions for “zoning and land use determinations; the taking, in whole or in part, of any real or personal property or any interest therein, or the right to the possession, benefit, use or enjoyment thereof; adverse possession; dedication by adverse possession; trespass; or similar actions[.]”

It did, however, fall within

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ABM Indus., Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA, Nos. 06-16939, 06-17144, 2008 WL 3992334 (9th Cir. (Cal.) Aug. 14, 2008) (Fletcher, Tallman, Dawson)

The court looked to the elements under Texas law for pleading causes of action for slander and libel in evaluating whether potential coverage arose. Although hard to believe from the court’s opinion, it appears that there were

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Penn’s Market I, L.P. v. Harleysville Mutual Ins. Co., No. 1442 EDA 2006, 2007 WL 5124011 (Pa. Super. Ct. April 3, 2007)

Constructive eviction of a tenant was found to fall within the “invasion of right of private occupancy” “personal injury” coverage. The policy defined “personal injury” to include the “wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies . . . .”

The occupant was Chanda Enterprises, Inc., which appears to have been a dba for a tenant operating in a shopping center. The dispute arose when the name “Pertucci’s Dairy Barn,” an ice cream store in a shopping center, was changed to “Planet Ice Cream.” Chanda complained that it was disfavored as a franchisee in favor of a Dairy Queen. The court concluded: Continue Reading...

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PAJ, Inc. v. Hanover Ins. Co., 243 S.W.3d 630(Tex. 2008)

The Court found that the “notice prejudice” rule applied. An immaterial breach does not deprive the insurer of the benefit of the bargain, and thus cannot relieve the insurer of its contractual obligation, citing Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691, 692 (Tex. 1994).

The Court also made short shrift of the dissent’s arguments, stating,

The dissent’s construction would have the absurd consequence that identical policy language creates a condition precedent as to one type of coverage (advertising injury) but a covenant as to the other (bodily injury and property damage). We have said unequivocally that “when a condition would impose an absurd or impossible result, the agreement will be interpreted as creating a covenant rather than a condition.” Criswell v. European Crossroads Shopping Ctr., Ltd., 792 S.W.2d 945, 948 (Tex. 1990). Continue Reading...

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Although the general rule is that facts, not labels of causes of action, trigger a defense under offense-based policies, as well as those looking to wrongful acts such as Directors & Officers policies, mere reference to terms that might otherwise trigger a defense, such as disparagement or misrepresentation, were deemed insufficient in and of themselves to show that the conduct fell within potential coverage.

Greektown Casino, LLC v. Zurich Am. Ins. Co., No. 07-CV-13583, 2008 WL 597814 (E.D. Mich. Feb. 29, 2008)

At issue were claims for tortious interference with contract and business relations causing Greektown to breach its agreement with plaintiffs. The court observed:
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BASF AG v. Great Am. Assur. Co., ___ F.3d___, 2008 WL 1701864 (7th Cir. (Ill.) 2008)

This case might better be described as a tale of two courts. Since the inconsistency between the analytic approach of the Seventh Circuit applying Illinois law to that of the Supreme Court of Illinois has been deepened by this new decision.

The court reversed the district court and questioned the Illinois District Court decision on which the district court had relied, Knoll Pharm. Co. v. Automobile Ins. Co., 210 F. Supp. 2d 1017, 1025-28 (N.D. Ill. 2002). That earlier case had resolved following appellate argument on appeal. The judge who was to have authored the opinion for that panel, Judge Kanne, authored the opinion on the BASF Seventh Circuit decision.

Applying Illinois law, the court found that the phrase “arising out of” did not expand the potential plaintiff to a class who could raise potential coverage claims under otherwise uncovered antitrust allegations so long as disparagement formed a basis for the potential coverage. The court rejected the argument that the consumer plaintiff class implicitly advanced a disparagement claim by pleading that Boots violated the Illinois Consumer Fraud and Deceptive Business Practices Act (CFA), 815 ILCS 505/1 et seq.

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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 Continue Reading...

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On occasion people have asked me why I named our firm newsletter “The Policy Holder Advocate”. For a simple reason; there is a ‘missing’ in the equation of insurance product delivery that threatens the rights of policy holders, especially in the context of third party litigation against companies where a range of business tort claims are asserted. Distinctions between various forms of Commercial General Liability Media/Cybernet/Intellectual Property Defense policies are rarely understood by the broker community. There are few resources to distinguish which policies offer the best coverage for the majority of insureds or for the particular insured who is seeking insurance. Underwriters often write policies without appreciating how litigation activity will implicate coverage there under. When information is fed back to underwriters from the claims department, it is often so particularized that the overview to understand the broader complications of the policy language may not readily be appreciated.

Risk management focuses on a range of different topics and the particularized distinctions between various versions of Commercial General Liability Umbrella policy language and how it might intersect with a range of business torts, antitrust, and intellectual property claims and is not a specific focus of the review of policies. While more emphasis is placed on claims made Directors & Officers insurance, which is of keen interest to corporate officers and directors, less attention to the precise language of commercial liability policies tends to be paid. This is unfortunate because such policies often contain opportunities to cover a range of business torts because of the fact allegations in specific complaints, as clarified through discovery responses, may implicate potential coverage triggering at minimum, a duty to defend, or in certain policies, reimbursement of defense fees.

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(1) Parkham Industrial Distributors, Inc. v. Cincinnati Ins. Co.
No. 3:06CV-533-S, 2008 WL 451023 (W.D. Ky. Feb. 15, 2008)

? At issue were alleged buried fact allegations of disparagement triggering coverage under a 1998 ISO CGL policy provision covering personal and advertising injury arising out of “oral ord written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.”

? The court found fact allegations, which have been deemed sufficient by a number of courts to evidence a disparagement claim, insufficient on the facts before it, applying Kentucky law. Judge Simpson stated: Continue Reading...

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(1) West Bend Mut. Ins. Co. v. Rosemont Exposition Servs., Inc.
880 N.E.2d 640, 316 Ill. Dec. 904 (Ill. App. Ct. (1st Dist.) 2007)

? Former employees brought a suit for defamation and retaliatory discharge. The appellate court held that the defamation claim was excluded from coverage so the insured did not have a duty to defend, affirming the trial court opinion. The court reasoned:

The sole defamatory statement alleged in the Bagnalls’ complaint was that they were involved in a fraudulent workers’ compensation claim. That alleged defamation was perpetrated to provide the grounds for RES’s termination of the Bagnalls’ employment and can, therefore, only be construed as being employment-related. The complaint makes no additional allegations of defamation that could ultimately bring the case beyond the scope of the ERP exclusion.

Id. at 652.

? The ERP exclusion states:

“This insurance does not apply to:
‘Personal and advertising injury’ to
(1) A person arising out of any:
. . . .
(b) Termination of that person’s employment; or
(c) Employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, discipline, reassignment, defamation, harassment, humiliation or discrimination directed at that person; . . . .”

Id. at 643.

? The court cited and reviewed a number of cases, principally out of state, and most typically from California, in reaching its determination.

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