All actions detailed within Coverage B (“Personal and Advertising Injury") of Insurance Services Office's (ISO's) Commercial General Liability (CGL) policy are intentional acts or “offenses." But even though the actions leading to charges of libel, slander, invasion of privacy, copyright infringement, false arrest, defamation, and other listed “offenses" defined in this section are intentional, the results must be unintentional for Coverage B to respond, defend, and/or pay the defined third-party injury.
Coverage Trigger
Coverage B, unlike Coverage A (covering bodily injury and property damage), is triggered by an “offense" rather than an “occurrence." Personal and Advertising Injury responds only when a listed offense takes place during the policy period. While “offense" is not a specifically defined term in the policy, what constitutes a covered offense is derived from the policy's definition of “personal and advertising injury."
Offenses found in Coverage B are generally definite in time, but sometimes subject to legal interpretation. The policy in effect when the “offense" takes place responds to the claim.
Claims-Made Form Differences
The preceding coverage trigger discussion assumes coverage written on an “occurrence basis." When written on an “occurrence" form, the insured is subject only to any applicable statute of limitations or repose regarding Personal and Advertising Injury Coverage. If the offense took place during the policy period, that policy responds regardless of when the claim is brought. However, if the insured is written on a “claims-made" form, the offense must take place during the policy period AND be committed after the listed retroactive date (if any).
Breadth of Coverage
Liability protection extended from Coverage B is created, or maybe limited, by definition. Coverage B extends coverage based mainly on the definitions of “personal and advertising injury" and “advertisement."
Personal and Advertising Injury (Coverage B) is functionally equivalent to a “named perils" property Policy; that is, unless the offense causing the loss is specifically named/listed in the definition, there is no coverage. An earlier paragraph noted that an “offense" – the act that triggers coverage – is not a defined term and must take its lead from the definition that shares its name with this coverage part. “Personal and advertising injury" is defined as and coverage is extended to:
a) False arrest, detention, or imprisonment;
b) Malicious prosecution;
c) 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, committed by or on behalf of its owner, landlord or lessor;
d) Oral or 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;
e) Oral or written publication, in any manner, of material that violates a person's right of privacy;
f) The use of another's advertising idea in your “advertisement"; or
g) Infringing upon another's copyright, trade dress or slogan in your “advertisement."
If the insured commits an offense not contained within the coverage form's definition, there is no coverage. And like named perils property coverage, it is up to the insured to prove the offense is covered by the definition.
If the offense being claimed is within this definition, then the insured must hope that none of the 16 Coverage B exclusions apply.
Examples of “Personal and Advertising Injury" Offenses
Personal and Advertising Injury, as previously stated, is a named perils-type coverage. If the injury is not caused by one of the defined causes of loss, listed as “offenses," there is no coverage. The covered offenses were listed previously, following are simple examples of these offenses.
Some “Offensive" Examples
Retail stores, auto repair shops, restaurants or any operation where customers are likely to congregate all have an exposure to false arrest, detention, or imprisonment. Consider a retail shop that suspects a customer shoplifted. If they detain the suspect and then discover they have the wrong person, the insured may be guilty of false detention (unless there is an individual allowed to effect arrest – then it is factually false arrest). If an auto repair shop refuses to replace a tire so the customer can leave, specific circumstances may cause the garage to be charged with false detention. Although many more examples could be provided, the basis of these charges is that anytime the insured holds someone against his or her will and without “cause," the insured may be guilty of these listed offenses.
Charges of malicious prosecution can be leveled against any insured that brings a civil or criminal suit against another without merit. For the “injured" party to charge malicious prosecution, there must be malice on the part of the insured and the trial must be found in favor of the injured person. Any insured charged with suing another person or entity to harass or for revenge is covered by the Personal and Advertising Injury protection, subject to exclusions (detailed in another section).
Insureds providing long-term or short-term living quarters are subject to charges of wrongful eviction from, wrongful entry into or invasion of right of private occupancy. This is not limited to lessors and landlords. Such charges can also be leveled against hotels and motels. The invasion of a person's right to inhabit any living area is a covered offense.
Libel, slander and defamation can be charged against nearly any insured. For example, in an effort to sway a new account, suppose an agent makes a false statement about his competitor; or during a jobsite argument, the plumbing contractor yells at the top of his longs that the HVAC contractor is a “lying, cheating scumbag" with several people are within earshot. Any written or oral statement that disparages another person, organization or product (true or not) could lead to charges of libel, slander, or defamation.
Privacy rights have taken center stage in recent years. Insureds may have in their possession incredible amounts of private information: Social Security numbers, medical information, driving history, etc. If any of this information is “published," thus making it available to an unintended party, the insured could be sued. It's the “publication" of this information that triggers Coverage B. However, “publication" is not defined in the policy, but its everyday meaning connotes that act of making information public.
One question often arises when such personal information is stored on a computer system. If the system is hacked, is such loss (theft) of private information covered under the Personal and Advertising Injury Coverage part? It is not likely that Coverage B would respond to this loss. Merely having the information stolen is not contemplated in the idea or definition of “publication." To have coverage for losing or having the information stolen requires a different type of coverage.
Beyond personal data, violating a person's right of privacy may include the use of their pictures or likeness in an advertisement, posting their picture without consent, or maybe even the posting of insufficient-fund checks (subject to state laws). Everyone has the right to manage the use of their own information and image – any violation of that right can lead to changes of violating privacy rights.
Insurance agents, lawyers, and doctors are prime examples of businesses with this exposure. Each has large amounts of personal client-specific information in their possession.
The last two Personal and Advertising Injury offenses relate to advertising: using another person's or entity's advertising idea, or infringing on another copyright, trade dress or slogan in an advertisement. A hotel advertises, “We'll leave the lights on for you" or a cell phone network ad claims, “So quiet you can hear a pin drop." Lifting another corporation's slogans is one example of the coverage provided to this part of the definition. Using a logo, theme, or any other element of advertising in an attempt to confuse those seeing the advertisement are other examples of this covered offense.
Coverage B Exclusions
If the committed “offense" falls within the definition of “Personal and Advertising Injury," the offense must be compared against the 16 exclusions applicable to the coverage. Each exclusion is discussed individually in the following paragraphs – with a particular emphasis on the embedded exceptions (giving some coverage back).
Knowing Violation of Rights to Another (exclusion 2.a.) - Individuals and entities have certain rights: privacy, truth (not being unjustly defamed), occupancy, personal safety, freedom of movement, use of ideas or innovation, property rights and others. Not all “rights," however defined, are covered within the definition of “personal and advertising injury."
Two important conditions must be met for this exclusion to apply: 1) the insured must knowingly violate another's rights and 2) such violation must be by or at the direction of the insured. If the insured is unaware that the action violated or might violate the person's or entity's rights, the offense is not excluded. Likewise, an employee acting outside the acceptable and expected scope of employment does not preclude coverage for any other insured. Vicarious liability protection is extended to the insured entity as the exclusion only applies if the action was done by or at the direction of the insured. The first incarnation of this exclusion was in the 1998 edition of the form.
Material Published with Knowledge of Falsity (exclusion 2.b) – Published, as used in this exclusion, constitutes any oral or written communication. The exclusion applies if: 1) the insured knows the information is false; and 2) the publication is by or at the direction of the insured. Coverage for misplaced trust in information provided by a usually good source and vicarious employer liability is preserved by the wording.
Material Published Prior to Policy Period (exclusion 2.c.) – No coverage exists for any oral or written publication first broadcast or published before the current policy period. Limiting coverage to the policy in effect when the “offense" took place is the goal of this exclusion. Doing so avoids the possibility that several policies will be called upon to pay for one specific offense or claim. This also avoids the stacking of limits.
Criminal Acts (exclusion 2.d.) – Unlike exclusion 2.a., which excludes intentional violation of civil (individual) rights, this excludes criminal acts (against the public). Current policy language (which first appeared in the 2001 edition) excludes criminal acts only if committed by or at the direction of the insured. Vicarious liability for criminal acts not known or directed by the insured may not be excluded. Criminal acts can range from misdemeanor offenses to felony actions leading to a defined “personal and advertising injury." To illustrate: if a landlord incorrectly evicts and individual, he may be charged with breaking and entering, a criminal act, in addition to wrongful eviction (a civil act with the “personal and advertising injury" definition). The insurance carrier will not defend the criminal charges even though it may defend the civil charges (two separate courts/cases).
Contractual Liability (exclusion 2.e.) – Coverage A (Bodily Injury and Property Damage) and Coverage B (Personal and Advertising Injury) both exclude liability assumed in and arising solely from a contract (if liability would exist in the absence of the contract, the policy will pay – regardless of the presence of a contract). But unlike Coverage A, Personal and Advertising Injury Coverage contains no contractual liability exceptions. Coverage A excepts “insured contracts" from the exclusion, Coverage B does not contain such an exception. Any insured assuming another's personal or advertising injury liability by contract does so at their own risk as there is no protection extended from the policy.
Contracts can present a unique challenge in the presence of this exclusion, especially construction contracts. The legal profession lumps several injury types into one term – “personal injury." In contrast, the insurance industry applies two terms to describe different “injuries" – “bodily injury" and “personal injury." Because of this difference, agents may find contracts requesting the insured to indemnify and hold a party harmless for “personal injury." Likely, the attorney intends the meaning to be “bodily injury," but since the terms do not agree with policy language, a gap could arise (for both Coverage A and Coverage B).
Contractual risk transfer and negotiating/correcting contract provisions is outside the intended scope of this article, but agents need to be aware of this contractual exclusion. There are only two possible solutions: 1) convince the underwriter to remove the exclusion (not likely to happen), 2) or attach the Limited Contractual Liability Coverage for Personal and Advertising Injury endorsement (CG 22 74). Unfortunately, the CG 22 74 extends contractual liability protection under “personal and advertising injury" to only the offenses of false arrest, detention or imprisonment (the first defined offense).
Breach of Contract (exclusion 2.f.) – A breach of contract arises when one party to the contract is deprived of certain promised benefits or protection due to the other party's unintentional or intentional failure to comply with the contractual agreement. The exclusion's exception may offer a clue regarding its application in relation to “personal and advertising injury" coverage. Violation of “an implied contract to use another's advertising in your advertisement" is excepted from the breach of contract exclusion. Comparing the breach of contract exception with the “named peril" coverage offered in the “personal and advertising injury" definition, it appears that the exclusion's primary focus is the misappropriation of another's advertising in violation of a specific contract. Consider this example: An insurance carrier gives an agency contractual permission to distribute advertising or promotional materials containing the company logo, but only in the agent's state of domicile. The campaign proves so successful that the agent distributes the material in two surrounding states. Distribution outside the contractually permitted area is a breach of contract and is not covered by the policy. If, however, the agent calls the carrier's marketing department and asks if he can distribute material with its logo, and the carrier says it's acceptable (with no explicit instructions), any suit that arises because the agent distributed outside the state of domicile is covered as there was an implied (oral) contract of use in any manner desired.
Quality or Performance of Goods – Failure to Conform to statements (exclusion 2.g.) – This is not a “products liability" exclusion. “Personal and Advertising Injury" coverage is not concerned with the product itself. It's the effect on an individual's or entity's reputation caused by false or “faulty" advertising that is excluded. A local hardware store, for example, in an attempt to sell its inventory of Acme edgers and trimmers, runs an ad that reads, “Acme edgers and trimmers are guaranteed to make your yard green and weed-free." An edger or trimmer is not purposed to make the user's yard green and weed-free. Therefore, the product will not live up to its advertising. Any customer demands for money or suits against the manufacturer or hardware store will be denied under Coverage B, as will Acme's suit against the hardware store for damaging its reputation by improper use of its product and trademark in an advertisement.
Wrong Description of Prices (exclusion 2.h.) – There are two reasons for this exclusion: 1) “bait and switch" – the practice of deliberately advertising artificially low prices or artificially high inventories to entice shoppers to visit the store, then attempting to sell them high priced articles using spurious tactics – is considered false advertising and is illegal, and 2) advertising goods is a business decision, and incorrectly printed pricing is a business risk not covered by insurance.
Infringement of Copyright, Patent, Trademark or Trade Secret (exclusion 2.i.) – Created and added to clarify the insurance industry's intent to not provide coverage for violating the intellectual property (IP) rights of another. Using and taking credit for someone else's IP amounts to an intentional act and is also a business risk. Plus, specialized policies are available to defend the insured against these charges.
However, an insured's use of and infringement upon another's IP in its “advertising" is not excluded in the current policy wording. Copying the look and feel of another entity's ad is not excluded. For example, running an ad featuring two actors dressed like cavemen talking about your insurance agency, even though the agency is not related to GEICO, would be an infringement of a trade dress character, but would still be covered under the CGL. However, calling the agency GEICO would be excluded.
There is an important distinction in terminology between the exclusion title and the exception to the exclusion. The form excludes violation of a trademark but gives back coverage for use of another's “trade dress" in the insured's advertising. A trademark is a name or slogan specific and identifiable as pertaining to a particular product. Use of a trademarked product or name in an advertisement is not protected by the policy (this is why ads use the term “facial tissue" rather than “Kleenex®"). Conversely, use of a trade dress in an advertisement is protected. Trade dress has to do with the overall, distinctive image of the product; and it must be something that is nonfunctional. Therefore, use of the cavemen by another agency is protected: they are associated with the GEICO brand and definitely distinctive, but they are not a functional part of the name or operation of GEICO the company.
An interesting fact about a trademark, a trademark and its protection arises out of use, not necessarily or exclusively registration. Food Lion, a large grocery store chain located in 10 states, was known as Food Town until it tried to enter the town of Clayton in Johnston County, North Carolina. The town already had a long-existing local grocery store known as Food Town. The smaller, one-location store sued the larger chain and forced the name change because it had rights to the use of the name, even though it was not large and the name was not “registered" with anyone other than the North Carolina Secretary of State.
Insureds in Media and Internet Type Businesses (exclusion 2.j.) – The exclusion's title says it all, there is no “personal or advertising injury" protection for any entity in the publishing, web, or internet business. One reason is the “named peril" type of coverage extended by this coverage part is inadequate to cover these businesses' exposures; second, the exposure for entities engaged in these types of businesses has moved from one of general liability to the level of media and professional liability. A media professional liability policy is the appropriate method to protect entities engaged in media and internet operations.
Four exceptions to the 2.j. exclusion require mention. The first three, found in Section V – Definitions, provide coverage for: false arrest, detention, or imprisonment (14.a.); malicious prosecution (14.b.); and wrongful eviction, entry or invasion of private occupancy (14.c.). The final exception found within the exclusion itself states that “the placing of frames, borders or links, or advertising, for you or others anywhere on the Internet, is not by itself, considered the business of advertising, broadcasting, publishing or telecasting." Such work must be the major source of income to be considered “in the business of…."
Electronic Chatrooms or Bulletin Boards (exclusion 2.k.) – A chat room is a “real-time" group of people using instant messaging to communicate; the “rooms" are usually divided or arranged by topic. A bulletin board is better thought of as a forum or message board; users generally post to or answer existing questions or answers on their own schedule without having to be there the same time other people are posting. Any “personal or advertising injury" resulting from or arising out of these “facilities" is excluded if the insured hosts, owns or controls the rooms or forums. Merely posting to or being a part of a conversation is not grounds for exclusion; the insured must, in some way, control the “facility."
Unauthorized Use of Another's Name or Product (exclusion 2.l.) – Specifically, this exclusion eliminates coverage should the insured use another entity's name or product name in its e-mail address, domain name, or metatag, or any other tactics meant to mislead buyers. A copy machine retailer, for example, can't use “Xerox" in its web address, e-mail address, or in any other such manner (unless specifically licensed and contractually permitted to by the subject company). The purpose of such use is generally to bring the customer to the insured's site (real or virtual) by false pretense.
Pollution (exclusion 2.m.): and Pollution-Related (exclusion 2.n.) – ISO divided these into two separate exclusions in the 2001 CGL edition. Prior to this division, both were part of the same exclusion. Essentially, any “personal or advertising injury" related to any type of release, clean up, or testing related to pollution is excluded.
War (exclusion 2.o.) – Specifically excludes any “personal and advertising injury" arising out of war whether declared, undeclared or simply war-like. While this seems like an odd “personal and advertising injury" exclusion, it is important to note when it was introduced, after 9/11/2001. After 9/11, false arrest, detention, or imprisonment of individuals meeting certain visual profiles became very possible. Entities that perform background checks, surveillance, or investigation may also be subject to charges of violation of a person's right of privacy (discussed previously). How that will play out in the “war on terrorism" is yet unknown—especially if the individual is a “person of interest."
Distribution of Materials in Violation of Statutes (exclusion 2.p.) – This last exclusion was created in response to the CAN- SPAM Act of 2003 and somewhat to the Telephone Consumer Protection Act (TCPA) which limited access to consumers by solicitors trying to sell them goods, products, or services. These laws gave rise to the no-call requirements on telemarketers and really to any cold-call-to-consumer-operations in business today.
CAN-SPAM was signed into law on December 16, 2003. It's an acronym that stands for: Controlling the Assault of Non-Solicited Pornography And Marketing Act of 2003. The TCPA was first signed into law in 1991 (amending the Communications Act of 1934) and was modified by the CAN-SPAM Act. Portions of the TCPA dealt with unsolicited fax advertising. On July 9, 2005, the Junk Fax Prevention Act of 2005 was signed. This act can impose hefty fines on violators of the law (up to $500 per page). Violation of these laws can be rather expensive, and the costs are not covered by insurance.
Prior to the addition of exclusion 2.p. in the CGL, insurers attached the CG 00 67, Exclusion—Violation of Statutes That Govern E-Mails, Fax, Phone Calls or Other Methods of Sending Material or Information.
Key Questions Triggering and Excluding Personal and Advertising Injury Coverage
- Is the “offense" included within the definition of “personal and advertising injury?"
- Did the offense take place during the policy period?
- Do any of the 16 exclusions apply to the offense?
- Are there any exceptions to the exclusions giving back coverage?
Last Updated: March 25, 2022