The 2001 ISO version of the General Liability form includes a new exclusion that eliminates coverage for “injury arising out of the infringement of copyright, patent, trademark, trade secret, or other intellectual property rights.” However, the new exclusion excepts “ infringement in your ‘advertisement’ of copyright, trade dress, or slogan.” Therefore, coverage is now specifically excluded for all trademark and trade secret claims. In addition, coverage for the three remaining types of intellectual property claims (copyright, trade dress, or slogan) is dependent upon such offenses arising out of an ‘advertisement’.

As regards the definition of ‘advertisement’, only infringements that occur in the advertisement itself are covered. The new 2001 edition includes the following new restrictions on Internet activity:

 *  Advertisement with respect to a website means only “that part” of the website that is about “your products, goods or services for the purposes of attracting customers or supporters.”

 *  Coverage is eliminated for claims “rising out of an electronic chat room or bulletin board that the (insured) hosts, owns, or over which the (insured) exercises control.” It is likely that the use of blogs, Facebook, Twitter, and other social media fall under this exclusion.

 *  Coverage is also eliminated for “unauthorized use of another’s name or product in the (insured’s) e-mail address, domain name or meta-tag, or any other similar tactics to mislead another’s potential customers.” One area of concern that has not yet been clarified by the courts is use of trademarked terms in meta-tags.

To follow are some common situations where the above mentioned restrictions can eliminate coverage for non-media companies:

 *  Claims for copyright infringement arising out of text, photographs or other content that are not part of an online advertisement. The use generic photos on company on company websites in areas that are not actually part of a specific product advertisement is a common source of litigation. Providers of stock photos are using watermarking technology to search the internet for instances of the unauthorized use of their photographs and many law firms are specializing in providing representation in this area.

 *  Trade dress claims arising out the look and feel of a website, blog, social media, etc. that is not part of an online advertisement. These involve navigation (ex: buttons, bars), color schemes, hyper links, menus, etc.

 *  Online comparative advertising where your product is represented as being bigger, better, faster, etc. as compared to the competition. These representations may result in claims for false or misleading advertising and unfair competition under the Lanham Act or various state statutes. However, if these representations are directed at a specific competitor, they may be covered under advertising injury.

 *  Product packaging that too closely resembles a competitor may result in liability for trade dress infringement. These claims may be excluded because the courts may not consider the product packaging to be part of an advertisement.

If any of these instances of potential uncovered claims are a concern, a business should strongly consider adding Media Liability (offline) or Cyber Liability policies (online).

Source: Elizabeth C. Kock and Jay Ward Brown, Levine Sullivan Koch & Shultz, LLP; Risk & Insurance; December 2011.

 In this case, a class action lawsuit was filed against Nextel (or its agent) for sending unsolicited fax blasts in violation of the TCPA. The TCPA is a federal law making it unlawful to use a fax, computer, or other device to send an unsolicited advertisement to a fax machine. Each fax sent in violation can result in the greater of actual damages or $500.

 Transportation Insurance Company argued that the “advertising injury” coverage under its General Liability must be for “oral or written publication of material that violates a person’s right of privacy”. And, in the present case, no private content was communicated in the advertisement.

 However, the court opined that the “right of seclusion” is a right of privacy that is provided for under the TCPA. Therefore, the “advertising injury” coverage under the General Liability form does provide coverage for sending unsolicited fax advertisements in violation of the TCPA.

 In the Penzer case, the fax blast violation occurred in 2003. Since that time, the insurance industry has adopted form CG 00 67 03 05 entitled “Exclusion-Violation Of Statutes That Govern E-Mails, Fax, Phone Calls Or Other Methods Of Sending Material Or Information”. This policy endorsement should preclude coverage in the majority of these cases.

Source: John Sadler

Why do tech firms need coverage for “personal injury”? First of all “personal injury” coverage may be needed to protect a tech firm against an allegation of slander, libel, or oral or written publication that violates a person’s right of privacy. It is not too difficult to see how a tech firm could get sued under these circumstances.

In addition, coverage may also needed for “advertising injury” in the event of an allegation of the taking of another’s idea in your advertisement or infringement of copyright, trade dress, or slogan in your advertisement.

The key word is “advertisement”. There is no coverage for infringement of copyright, trade mark, trade dress, or slogan unless they occur in your advertisement.

An exclusion in the policy form eliminates coverage for injury arising out of electronic chat rooms or bulletin boards that the insured hosts, owns, or excercises control over. In addition, there is another exclusion arising out of the unauthorized use of another’s name or product in your email address, domain name, meta tag, or similar tactic used to mislead the potential customers of another.

It is obvious that the standard General Liability form does not adequately protect tech companies or IT professionals against these imporant exposures. As a result, coverage can be sought as part of a Professional Liability or Errors & Omissions policy form.

These policies can add back essential coverages such as for those tech firms in the business of advertising or publishing, violation of a person’s right of privacy or undue publicity, intellectual property infringements, etc.

It is strongly recommended that tech companies or IT professionals deal with a tech insurance specialist to make sure that their coverage needs are addressed.