Defining the Scope of “Advertising” Required for “Advertising Injury”

Defining the Scope of “Advertising” Required for “Advertising Injury”

By David A. Gauntlett*

Introduction

As in our previous blog,[1] I am once again addressing mistakes and oversights included in an article published in DRI For the Defense.[2]

Case Law Does Not Establish Lower Limit for Dissemination

The article opens with an overview of the history of how policies have defined “advertisement” over the years. After that, its first heading boldly declares “Majority View: ‘Advertising’ Requires Widespread Dissemination.” That conclusion is supported by only two cases,[3] neither of which considered a modern policy with the current standard definition of “advertisement.”[4] This distinction is critical as that definition specifically states an “advertisement” can be “published to the general public or specific market segments” with no indication of a minimum size required to constitute a “specific market segment.”

All three of the remaining cases cited concluded that the publications were sufficiently disseminated to constitute “advertising.”[5] It is widely accepted that a decision is only precedent for issues squarely addressed and decided by a court.[6] None of the cited cases include a holding that “widespread dissemination” is required. Therefore, none of these cases can be used as authority for that premise.[7]

Virtual Business Enters., LLC v. Maryland Cas. Co,[8] analyzing coverage under the “advertising injury” offense of defamation/disparagement, explained that “publication” can include communications to small groups that constitute “specific market segments.”

Because the Policy does not expressly define the terms “published” or “publication,” the Court must look to ordinary and usual meanings.  Black’s Law Dictionary defines “publish” as “[t]o distribute copies (of a work) to the public.”  Black’s Law Dictionary also defines “publication” as “the act of declaring or announcing to the public.”

. . . 

[T]he Court finds that the Policy’s definition of “advertisement” clearly and unambiguously includes electronic communications sent to a segment of the market that is smaller than the public at large.

Because the Policy provides coverage for publications made to “specific market segments” without defining the size of the market segments, the Court finds the Policy vague only on this point and construes it against the insurer.[9]

Another court, discussing the required breadth of publication in considering the “personal and advertising injury” offenses of defamation or invasion of privacy, also noted that widespread publication was not necessary.[10]

Flawed Analysis of Cited Cases Not Addressed

The topic given most attention in the article is the causation element. In doing so, it analyzes and quotes at length from Bank of the West.[11] Yet no time is spent addressing the problematic aspects of that case identified by later cases. For example, MGA Ent., Inc. v. Hartford Ins. Grp.[12] rejected reliance on Bank of the West and explained the deficiencies in applying its holdings as a general standard. The court began by noting that Bank of the West dealt with an insurer’s duty to indemnify, thereby making its holdings inapplicable to the more often litigated duty to defend standard.[13]

Next, it highlighted the fact that the insured in Bank of the West conceded there was no causal nexus:

Bank of the West is inapposite because there the insured conceded that its “advertisements”—which were directed to non-consumers—“did not cause the harm” to consumers alleged by the claimants in the underlying suit. [citation] Instead, the insured argued that the insurance policy did not require causation. Id. The court rejected this argument, simply holding that the policy's requirement that the injury “arise[ ] out of ... the named insured's advertising activities” meant that the injury “must have a causal connection with the insured's ‘advertising activities’.” Id. at 1262, 1277. Because the insured indisputably “did not advertise . . . to consumers,” the court held that there was no causal connection between the insured's advertisements to non-consumers and any injury to consumers. Id. at 1274, 1277. Because there was no causal connection, there was no duty to indemnify. Id. Here, in contrast, the Evanston Defendants have not negated all facts showing that MGA did advertising to the relevant audience and the MGA Plaintiffs do not concede the lack of a causal connection between MGA's advertising and Mattel's injury.[14]

Even referring to this element as a “causal” requirement is misleading as legal causation usually connotes either “but-for” or “proximate” causation. As several cases have noted, neither standard is appropriate:

It is not necessary to take a position of defendants’ further argument that the term “advertising injury” necessarily applies only to activities arising in the course of advertising activity. By this argument defendants would replace the missing causation language by implication.[15]

[W]here an advertising injury is alleged, the relevant causation issue is not whether “the injury could have taken place without the advertising,” but “whether the advertising did in fact contribute materially to the injury.”[16]

Conclusion

Contrary to the DRI article’s conclusions, proper analysis of policy language demands a broad interpretation of the terms “advertising” and “advertisement.” Furthermore, insurers choose to forego an explicitly stated causal connection requirement in favor of the broadly interpreted “arising out of” phrase. That choice means the advertising activity need only contribute to the alleged injury, not be a “but-for” or proximate cause.

*David A. Gauntlett is a principal of Gauntlett & Associates and represents policyholders in insurance coverage disputes regarding intellectual property, antitrust, and business tort claims, as well as in the underlying actions. Mr. Gauntlett can be reached at (949) 553-1010 by voicemail or dag@gauntlettlaw.com. For more information, visit Gauntlett & Associates at www.gauntlettlaw.com.

[1] David A. Gauntlett, Disparagement Coverage: Exactly as Broad as the Policy Says, https://www.gauntlettlaw.com/news/disparagement-coverage-exactly-as-broad-as-the-policy-says (May 23, 2024).

[2] Alissa Christopher and Ashley Gomez-Rodon, Coverage B “Advertising” Then and Now, 61 No. 12 DRI For the Defense 30 (Dec., 2019).

[3] Select Designs, Ltd. v. Union Mut. Fire Ins. Co., 674 A.2d 798, 801–02 (Vt. 1996); Imaging All. Grp., LLC v. Am. Econ. Ins. Co., No. CIV. 05-384 PAMRLE, 2006 WL 145428, *3–4 (D. Minn. Jan. 19, 2006).

[4] Modern Commercial General Liability (“CGL”) policies include a standard definition of “advertisement”: “a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters. For the purposes of this definition: a. notices that are published include material placed on the Internet or on similar electronic means of communication; and b. regarding web-sites, only that part of a website that is about your goods, products or services for the purposes of attracting customers or supporters is considered an advertisement.”

[5]  John Deere Ins. Co. v. Shamrock Industries, 696 F. Supp. 434, 440 (D. Minn. 1988) (letters sent to one person);  New Hampshire Ins. Company v. Foxfire, Incorporated, 820 F. Supp. 489, 494 (N.D. Cal. 1993) (letter sent to “22 to 31 customers”);  Hyundai Motor America v. National Union Fire Insurance Company of Pittsburgh, Pennsylvania, 600 F.3d 1092 (9th Cir. (Cal.) 2010) (website feature accessible by general public).

[6] Rosen v. State Farm Gen. Ins. Co., 30 Cal. 4th 1070, 1076 (2003) (“[A]n opinion is only authority for those issues actually considered or decided.”)

[7] For a survey of case law from all states addressing the scope of “advertising,” see David A. Gauntlett, Insurance Coverage of Intellectual Property Assets, 2d ed., Appendix Q (2023).

[8] Virtual Business Enters., LLC v. Maryland Cas. Co., No. 07C-12-070 MMJ, 2010 WL 1427409 (Del. Super. Ct. Apr. 9, 2010).

[9] Id. at *5–6.

[10] LensCrafters, Inc. v. Liberty Mut. Fire Ins. Co., No. C 04-1001 SBA, 2005 WL 146896, *10 (N.D. Cal. Jan. 20, 2005) (“ ‘Publication’ is not defined in the Liberty Policies.  Black’s Law Dictionary defines ‘publication’ as ‘[g]enerally, the act of declaring or announcing to the public.’  However, under certain legal doctrines, ‘publication’ does not require that the information-at-issue be widely disseminated.  For example, for purposes of defamation law, ‘the definition of “publication” is not restricted to widely disseminated materials such as magazines and newspapers.’  ‘It is not necessary that the defamatory matter be communicated to a large or even a substantial group of persons.  It is enough that it is communicated to a single individual other than the one defamed.’  Id., citing, Rest.2d Torts, § 577, com. b, p. 202.  Reading the term in context, as the law requires, supports a finding that ‘publication of material that violates a person’s right of privacy’ does not require widespread disclosure.” (citations and footnote omitted)).

[11] Bank of the W. v. Superior Ct., 2 Cal. 4th 1254, 1276 (1992).

[12] MGA Ent., Inc. v. Hartford Ins. Grp., No. EDCV080457DOCRNBX, 2012 WL 12893399, *8 (C.D. Cal. Jan. 27, 2012).

[13] Id. (“Bank of the West is inapposite because there the court analyzed only whether the language of a settlement agreement created a duty to indemnify the insured—not, as here, the duty to defend. . . . Precisely because the duty to defend may exist where there is absolutely no duty to indemnify, the court in Bank of the West dismissed cases that analyzed the duty to defend, stating that such analysis was ‘of no assistance’ to an analysis of the duty to indemnify.”)

[14] Id.

[15] Owens-Brockway Glass Container, Inc. v. International Insurance Co., 884 F. Supp. 363, 368, n.8 (E.D. Cal. 1995), aff’d, 94 F.3d 652 (9th Cir. (Cal.) 1996).

[16] R.C. Bigelow, Inc. v. Liberty Mut. Ins. Co., 287 F.3d 242, 248 (2d. Cir. (Conn.) 2002).