Your business' commercial liability policy has coverage you may not have realized was in the policy. This coverage is called "personal and advertising injury coverage" and may be set apart as separate coverage or "Coverage-B." The coverage can provide coverage for a variety of acts above and beyond typical physical damage claims. The purpose of this article is to provide a brief overview of the coverage.
What is an Advertising Injury?An advertising injury is an injury to a third-party brought about by the business' advertising its goods and services. This can occur by copyright or trademark infringement. It can also occur as a claim of libel, slander, or invasion of privacy. Typically, a competitor of your business complains that an act, advertisement, practice, or comment you or your staff has made has damaged their business. For example, in comparing products, your advertisement uses a photo of your competitor's product and makes a false claim about the competitor's product. The competitor sues your business for a variety of claims: defamation, trademark infringement, etc. Your commercial policy would provide a defense and indemnity for this kind of claim.
What Claims are Covered?
Your business is provided advertising injury coverage through your commercial general liability policy for claims such as:
- Invasion of Privacy
- Copyright Infringement
- Trademark or Trade Dress Claims
- Certain State Law Claims
- Certain Misappropriation Claims
- Unfair Competition Claims (older policies)
The typical commercial general liability defines advertising as:
A notice that is broadcast or published to the general public or specific market segment about your goods, products or services for the purpose of attracting customers or supporters.
The coverage provides your business a defense and indemnification for damages as long as the claim relates to a business advertising reason and is not an intentional non-advertising claim. However, the definition of "advertising" has been interpreted differently from state to state. Some courts require the activity to be wide ranging communication to a broad audience while other courts define the simple act of business promotion to be advertising without regard to the size of the audience.
There are exclusions from coverage in most standard CGL policies. Most of the exclusions look to whether the act causing the claim was an intentional act or knowing violation of the law. Typical exclusions from coverage include:
- Knowingly Publishing False Information - Coverage is meant to cover those instances where advertising or promotion unintentionally includes false or misleading information.
- Knowingly Violating the Rights of Another - As an example: If your business knows it has no permission to use a child's image in its advertising, and does so anyways, coverage will be excluded.
- Criminal Acts - Criminal copyright and trademark infringement, or other criminal acts are not covered.
- Breach of Contract and Contractual Liability - Your business cannot assume advertising liability by contract. For example, if your business rents a hall as part of a trade organization, and your business signs a hold harmless agreement with the organization and hall, if a visitor sues the trade organization or hall and your business becomes liable as a result of the hold harmless agreement - there is no coverage.
- Price, Quality, and Performance Claims - Generally damages incurred because of erroneous price, quality, or performance claims are not covered. If owing to a printer error you advertise a $10,000 used car for $1,000, and actually sell the car at the advertised price of $1,000, the insurer will not reimburse the other $9,000.
What About Websites, Bulletin Boards, and Forums?
First, understand that certain businesses are excluded from most advertising injury coverage:
- Internet Service Providers
- Web Site Designers and Publishers
- Advertising Companies
However, this coverage is being limited each year as insurers begin to recognize the risk of advertising claims related to internet activities. Today, most Standard CGL policies exclude coverage for electronic forums or bulletin boards hosted by the insured. CGL policies also now exclude from coverage claims related to "spam" or mass electronic advertising. Again, this is an area where you will want to speak with your insurance professional.