Question from an IIABNY member: My client has a commercial general liability policy covering his construction business. Question comes up as he, along with other sponsors, is putting his company name on a race car. My gut reply was that he is covered under the personal and advertising limit of his CGL. Do you agree or disagree?
Answer: The ISO CGL policy provides limited coverage for injuries arising out of advertising. Coverage B, Personal and Advertising Injury Liability, paragraph 1.a. states:
We will pay those sums that the insured becomes legally obligated to pay as damages because of "personal and advertising injury" to which this insurance applies.
The policy defines “personal and advertising injury” as:
…injury, including consequential "bodily injury", arising out of one or more of the following offenses:
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".
Therefore, the policy covers injury resulting from an advertisement if the injury arises out of the use of someone else’s idea in the insured’s ad or violating someone else’s copyright in the ad. Your insured has coverage if someone sues him because they claim that he put their advertising idea on the side of the race car.
Coverage A., Bodily Injury & Property Damage Liability, excludes coverage for:
"Bodily injury" or "property damage" arising out of the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and "loading or unloading."
Since this exclusion applies only to autos owned or operated by or rented or loaned to any insured, and your insured does not own, operate, rent or borrow the race car, it is conceivable that the insurance would cover him if he were sued by someone who was injured by the race car. At the very least, I think the policy should provide defense coverage. The New York State Court of Appeals (the state’s highest court) held in Fitzpatrick v. American Honda Motor Co., Inc. that:
…an insurer's duty to defend is called into play whenever the pleadings allege an act or omission within the policy's coverage. Even where there exist extrinsic facts suggesting that the claim may ultimately prove meritless or outside the policy's coverage, the insurer cannot avoid its commitment to provide a defense, since "[a] complaint subject to defeat because of debatable theories …must [nevertheless] be defended by the insured."
I’m not a lawyer, but it’s hard for me to see how an injured person could prove that your insured was negligent and therefore responsible for his injuries. I suspect that a good lawyer could get the suit thrown out, meaning that the insurer would pay only defense costs.
As a side note, Randy Maniloff and Jeffrey Stempel's book General Liability Insurance Coverage: Key Issues in Every State, which I wrote about last summer, was a big help when I was answering this question. It's how I found the New York court decision that I cited. Proof again that underwriters and claim adjusters need to keep this book handy.
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