Navigating the Insurance Maze World

November 14, 2016 David A. Gauntlett

Duty to Defend Advertising Injuries

Courts typically evaluate an insurer's duty to defend advertising injury claims using a three-part test. Coverage exists where the insured demonstrates advertising activity, a claim alleging one of the policy's enumerated advertising injury offenses or a causal nexus between the advertising activity and the advertising injury offense.

However, each prong of this test raises issues. With regard to the first, whether there is advertising activity which could establish potential coverage depends on:

the definition of "advertising," if any, in the relevant policy;
how courts in the relevant jurisdiction interpret the policy terms; or
the definition of "advertising" when this is not set out in the policy.

Meanwhile, to determine whether a claim asserts an advertising injury offense, courts look to the policy language. For example, under the 2001 ISO commercial general liability policy, "advertising injury offenses" include where the insured's ad uses another's advertising idea and infringes copyright, trade dress or a slogan.

For offenses which are defined as torts outside the insurance context (e.g., copyright infringement), courts may evaluate coverage by referencing broader statute and case law. Assessing potential coverage can be more challenging for offenses which use generic and lay language that does not limit the scope to any singular recognized tort (e.g., infringement of a slogan). Finally, under the three-part test, potential coverage exists only if there is a causal nexus between the advertising activity and the advertising injury offense under the policy (i.e., the advertising activity must be the cause of liability for an asserted advertising injury offense). Determining whether there is a causal nexus is fairly straightforward for claims of trademark, trade dress and slogan infringement, and trade dress infringement based on an active display or distribution on a website.

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David A. Gauntlett is the principal of Gauntlett & Associates in Irvine, California.

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