Seventh Circuit Seeks Guidance for Interpreting “Pollution” Exclusion
In previous blogs, we have written about the unfortunate trend of federal judges ruling against policyholders based on rationale that conflicts with state court decisions. Ideally, federal courts should adopt the policyholder-friendly stance of the state courts, but a recent decision by the Seventh Circuit highlights an acceptable alternative: certification to the state’s highest court.
Worrying Trend: Ninth Circuit Expansively Interpreting Exclusions
In previous blogs, we have discussed several rulings by federal courts in New York that improperly deviated from standards of coverage law established by state decisions. In recent years, several Ninth Circuit panels have fallen victim to this same poor practice. Three decisions in the span of just over a year evidence a pattern of flawed analysis that is depriving California policyholders of the full protection that should be afforded under the terms of their insurance agreements.
Second Circuit Errs in Disparagement Analysis
In a pair of recent decisions, two Second Circuit panels affirmed district court rulings concluding there was no potential coverage under offense “d” of standard Commercial General Liability (“CGL”) policies. Both panels erred by failing to understand that the “potential coverage” standard that triggers an insurer’s duty to defend does not require perfect pleading and overlooked the significance of explicit statutory claims in the underlying complaints.
Lessons to Learn from Recent Lloyd’s Coverage Settlement
Since 2018, Monster Energy Company (“Monster”) has been embroiled in litigation with Vital Pharmaceuticals, Inc. (“Vital”). The dispute has generated over two dozen judicial decisions with more still to come. The related coverage action between Vital and Certain Underwriters at Lloyd’s London (“Lloyd’s”) was recently resolved via settlement. Although the settlement avoids creation of new coverage case law, helpful inferences can be made based upon Lloyd’s decision to settle. This saga also highlights an important lesson for policyholders about the importance of notifying all insurers of litigation as soon as possible.
Confusing and Deceitful Insurer Exclusions Invite Challenge
A recurring theme in Commercial General Liability (“CGL”) policy forms is that there has been an ongoing narrowing of “personal injury”/ “advertising injury” coverage provisions. The 1976 ISO CGL form broadly defined “advertising injury” as “any injury arising out of an offense committed during the policy period occurring in the course of the named policyholder’s advertising activities, if such injury arises out of such libel, slander, defamation, violation of right of privacy, piracy, unfair competition or infringement of copyright title or slogan.” Updates to the ICO forms in 1986 and 1998 resulted in the modern offenses that remain in policies to this day.
Best Billing Practices to Minimize Fee Disputes
You did everything right. You gave prompt notice of a claim and secured a defense from your insurer. No need to worry about the expensive legal bills anymore, right? Not so fast. Even if an insurer acknowledges its duty to defend (either willingly or following a declaratory judgment action), the carrier will carefully review every legal invoice line by line and search for expenses that are either uncovered or (in the carrier’s opinion) unreasonable.
Insured vs. Insured: An Exclusion Often Conspicuous by Its Absence
An Insured vs. Insured Exclusion is, as the name suggests, a policy provision that precludes coverage for lawsuits where people or organizations insured by the policy appear on both sides. They are virtually omnipresent in Directors & Officers (“D&O”) and Errors & Omissions (“E&O”) policies, but they are far less common in other policies that can potentially cover business litigation. Knowing all the coverage options under your own policies is obviously important as a defendant, but defendants are also advised to consider the plaintiffs policies.
Trademark Dilution “Tarnishment” Claims Implicate Offense “d” Coverage
Following our previous blog addressing trademark dilution based on “blurring,” we now turn to dilution based on “tarnishment.” The Lanham Act defines trademark dilution based on “tarnishment” as “association arising from the similarity between a mark or trade name and a famous mark that harms the reputation of the famous mark.” Like “blurring,” this form of dilution also commonly implicates one of the “personal and advertising injury offenses found in Commercial General Liability (“CGL”) policies
Trademark Dilution “Blurring” Claims Fall Outside Standard Exclusions
A typical trademark suit will assert various causes of action with names familiar to the average person, including the well-known trademark “infringement.” Unfortunately for policyholders, these claims are typically excluded by a policy’s IP exclusion. Though less known, trademark “dilution” is also common and can often be leveraged to attain coverage for the entire suit. This path to coverage is rarely recognized by insurance claims handlers, leading to a quick denial. Luckily, experienced coverage counsel can explain that mistake and secure coverage despite an initial denial.
“Pollution” Exclusion Interpretation Highlights Need for Appropriate Coverage
In St. Paul Fire & Marine Ins. Co. v. Getty Properties Corp., 213 N.Y.S.3d 185 (2024), the New York Appellate Division determined that insurers had no duty to defend or indemnify a policyholder due to the “Pollution” exclusions in the policies. The case illustrates the perils of businesses that fail to obtain insurance coverage suited to their needs.
Defining the Scope of “Advertising” Required for “Advertising Injury”
As in our previous blog, I am once again addressing mistakes and oversights included in an article published in DRI For the Defense.
Disparagement Coverage: Exactly as Broad as the Policy Says
In this blog, I respond to many mistakes and omissions commonly weaponized by insurer counsel that were encapsulated in an article published in DRI For the Defense. Although the authors appear to have attempted a neutral evaluation of the “implicit disparagement” doctrine in various jurisdictions, the article neglects several aspects of coverage law that protect policyholders.
Implicit Disparagement Insurance Coverage Survey
A standard provision in Commercial General Liability (“CGL”) policies provides coverage for “[o]ral or written publication, in any manner, of material that . . . disparages a person’s or organization’s goods, products or services.” A growing number of states have embraced the doctrine of “implicit” (or “implied”) disparagement where inferences from statements about the quality of one’s own products imply negative comparative statements about a rival’s products. This blog examines the most prominent cases addressing the issue in the five most populous states.
Second Circuit Takes Limited View of Implicit Disparagement under New York Law
A Second Circuit panel including Judges Pierre Leval, Sarah Merriam, and Maria Kahn affirmed the district court’s denial of potential coverage in Tzumi Innovations, LLC v. Twin City Fire Ins. Co. Their Summary Order adopted District Judge Abrams’ conclusion that “‘there is no possible factual or legal basis on which’ Twin City would be obligated to defend Tzumi under the ‘personal and advertising injury’ provision of the policy.” Neither court analyzed whether claims under California Civil Code § 1770(a)(8) evidenced implicit disparagement by Tzumi of its competitors’ products so as to require a defense under offense “d” of the policy’s “personal and advertising injury” coverage.
California District Court Fails to Accept Deposition Testimony as Extrinsic Evidence
A recent Southern District of California decision ignored several critical pieces of California coverage law, including the impact of extrinsic evidence on an insurer’s duty to defend. In Aram Logistics v. United States Liability Insurance Co., the court refused to acknowledge allegations falling within potential coverage of an insurance policy because they were part of deposition testimony from the underlying action. Judge Huff’s assertions in her decision are like those advanced by adherents of the “Earth is flat” theory.
“Slander of Title” Coverage under E&O Policy Unearthed by Ninth Circuit
“Slander of Title” is a commonly added cause of action in lawsuits addressing disputes over real property. Historically, such claims have had a limited intersection with insurance coverage. The principle exception is where the targeted defendant procured a Title Insurance policy providing directly applicable coverage. A recent decision by the Ninth Circuit analyzing potential coverage under an Errors & Omissions (“E&O”) Management Liability policy, however, has finally acknowledged the potential for coverage under more general policies. The decision’s rationale allows policyholders to reap policy benefits from both a Commercial General Liability (CGL”) policy as well as a Title Insurance policy if both are implicated by the fact dispute.
Mistaken Denial of Coverage for Trademark Dilution Claims
A typical trademark suit will assert various causes of action with names familiar to the average person, including the well-known trademark “infringement.” Unfortunately for policyholders, these claims are typically excluded by a policy’s IP exclusion. Though less known, trademark “dilution” is also common and can often be leveraged to attain coverage for the entire suit. This path to coverage is rarely recognized by insurance claims handlers, leading to a quick denial. Luckily, experienced coverage counsel can explain that mistake and secure coverage despite an initial denial.
Enforceability of “Voluntary Payments” Provisions
Standard Commercial General Liability (“CGL”) policies contain a “Voluntary Payments” clause, which states the insurer must not “voluntarily make a payment, assume any obligation, or incur any expense for damages [or] loss[.]” Courts have recognized that this language cannot be enforced literally as it is written. Litigation over these provisions typically focuses on the actions of the policyholder, but, interpreted broadly, these provisions could allow insurers to bypass state laws requiring prejudice for late notice. Furthermore, they may incentivize insurers to delay their decisions of whether to defend in the hope that the underlying lawsuit will resolve itself. Neither of these practices should be tolerated by the courts.
Challenges in Securing Coverage for Antitrust Litigation
Aside from insurance policies secured by a larger corporation that directly address antitrust litigation exposure, there is no express coverage for “antitrust litigation” in Commercial General Liability (“CGL”), Umbrella, Excess, Errors and Omissions (“E&O”), or Directors and Officers (“D&O”) policies. Rather, coverage extends to “categories of wrongdoing,” which includes a list of offenses under “personal and advertising injury” coverage. This offense-based coverage is often implicated by the allegations accompanying business tort claims. It is of no moment that the conduct alleged is intentional as the offenses covered in such CGL policies expressly include intentional conduct such as malicious prosecution, disparagement, and defamation.
Turning Ambiguous Draftsmanship Against the Insurer
Insurance policies are notoriously difficult to understand. Many policyholders fail to realize that this applies to insurance brokers and adjusters as much as it does to anyone else. Even on the rare occasions that an insurance worker is fully informed of all the legal contours of a policy’s coverage provisions, they obviously have a bias clouding their view of how it would apply to a costly claim.