Insurance Litigation Lawyer & Attorney : National Insurance Law Forum : Insurance Coverage, Bad Faith Litigation

As to the media E&O policy issued by AISLIC, the court rejected Sony argument that the AISLIC Multimedia Professional Liability Policy’s coverage for “negligent publication” could be construed to extend to a communication of information to the public lacking or exhibiting proper care or concern so as to encompass the underlying allegations of false advertising or negligent misrepresentations. The court ruled 2-1 that the dictionary definitions pasted together by Sony conflicted with the context in which “negligent publication” was used in the AISLIC policy where the term appears in juxtaposition to incitement and defective advice and that the definition proposed by Sony would be broad enough to subsume virtually all of the other wrongful acts that receive specific definitions in the policy such as defamation, misappropriation, etc.

The court also took note of the fact that a media liability policy is intended to strictly limit coverage to the types of claims normally faced by publishers such as defamation or copyright infringement.  The Ninth Circuit reviewed various tort cases in which publishes had been held liable for the negligent publication of material that had prompted third parties to commit harmful acts and found this constructioni of the term was consistent with the context of coverage.

As to the American Home CGL policy, the Ninth Circuit refused to find that problems that Playstation II owners experienced with skipping and freezing CDs and DVDs accompanied by “banging or clicking noises” set forth a claim for “loss of use” within the policy’s definition of “property damage.” The cour t distinguished its opinion in Anthem Electronics, noting that although t that although the plaintiffs alleged that CDs and DVDs had not properly played on the PlayStation 2, there was no suggestion that they did not function properly on other devices.

In any event, the court ruled that any finding of property damage reflecting a loss of use would be subject to Exclusion M as involving impaired property that had not suffered physical injury. The court rejected Sony’s suggestion that because the complaints alleged that the freezing and locking of the disks can happen at any time, there was the possibility that this loss of use had resulted from a “sudden and accidental” physical injury to the Playstation IIs. Rather, the court found that these allegations suggested that the devices deteriorated over time.

Writing in dissent, Judge Bybee argued that the majority had given an unduly narrow construction to AiSLIC’s “negligent publication” coverage and that a broader scope was warranted by looking at separate dictionary definitions of “negligent” and “publication.”

In Acuity, A Mutual Ins. Co. v. Bagadia, 2008 WI 62 (Wis. June 18, 2008), Symantec sued the insured software company for infringing various copyrights and trademarks by selling knock off copies of Symantec’s security software through advertisements that featured the copyrights and trademarks.  The court held that this was not only "advertisiing" but  that the trademark infringement were covered as involving the infringement of a “title.    The Supreme Court reached this conclusion by comparing the dictionary definitions of "title" and "trademark" and noting that both involve descriptiions concluded that they must have the same meaning (yes, and "mud" and :"paint" both involve elements in a liquid solution, so your 3 year old daughters' class project must be a Rembrandt).

Although we have learned to expect surprising things from the Wisconsin Supreme Court of late, this new AI opinion is disappointing, as the meaning of "title" has seemed relatively settled for the last 10 years or so or at least since the California Supreme Court ruled in Palmer v. Truck Ins. Exch., 21 Cal.4th 1109, 988 P.2d 568 (1999) that coverage for “infringement of copyright or of title or of slogan” only extends to claims for infringement of the names of literary or artistic works or names that are “slogans,” not to other names. In rejecting the insured’s contention that coverage extend to unfair competition claims that the insured had wrongfully utilized colored flags, signs and slogans that the plaintiff was using for a competing real estate development. The court held that the term “title,” read in the broader context of the policy, can only mean the name of a literary or artistic work, and did not extend to any claim based on “formal right of ownership of property.” Further, although the underlying suit alleged that the insured had used a slogan in its own marketing, the Supreme Court declared that there was no indemnity obligation as the jury’s award had been based upon the insured’s infringing use of a trademark. “The infringing use of a trademark that is merely a word and a phrase used as a slogan is not the same as the infringing use of a slogan which would give rise to coverage under the policy.”

As an interesting footnote for those of you waiting for the Supreme Court to rule on allocation issues, the court ducked the issue of set-offs here.  Despite the fact that the insured had earlier settled similar claims against Continental Casualty for a payment of $165,964, the court refused to order that Acuity receive an off-set for this payment due to factual questions with respect to what CNA had paid for and why.