A recent declaratory judgment action in the Southern District Court of Florida seeks to apply a unique policy exclusion applicable to personal and advertising injury coverage under a CGL policy. The question for the court is how far may an insurer go in curtailing coverage through an exclusion before coverage becomes illusory? In <em><a href="http://blog.wcmlaw.com/wp-content/uploads/2016/02/complaint-princeton-v.-dm-ventures.pdf" rel="">Princeton v. DM Ventures</a></em><a href="http://blog.wcmlaw.com/wp-content/uploads/2016/02/Princeton-Excess-v.-DM-Ventures-Mot-on-Pleadings-2.pdf" rel=""><em>,</em> </a>the insurer seeks a declaration that it owes no coverage in connection with a complaint that, on its face, would seem to trigger advertising injury coverage. At issue is an exclusion to advertising injury coverage, styled ” Field of Entertainment exclusion,” which purports to curtail the scope of coverage for personal and advertising injuries.
The underlying lawsuit was brought against the insured nightclub by eight models, including several Playboy Playmates, alleging that the nightclub infringed on their intellectual property rights by using their images in advertisements. The complaint also alleges the nightclub’s use of the images constitutes an invasion of privacy and, moreover, defamed the models by implying a working relationship that did not exist.
Most CGL policies have carve outs for pure claims of infringement (copyright, trademark, trade dress, and the like)--but give back coverage when the IP offense appears in an advertisement published by the insured. But here, Princeton’s Field of Entertainment exclusion deletes the givebacks, and completely precludes coverage for any “actual or alleged activity which is claimed to be: an intellectual property infringement, invasion of privacy, libel, slander, any form of defamation, and unauthorized use of titles/names.”
<a href="http://blog.wcmlaw.com/wp-content/uploads/2016/02/Princeton-Excess-v.-DM-Ventures-Mot-on-Pleadings.pdf" rel="">Princeton moved for judgment on the pleadings</a> based on this specific exclusion. The models counter that the Field of Entertainment Exclusion makes coverage under the Princeton policy illusory because it removes any coverage for “advertising injury.” Moreover, the women argue that their claims for defamation do not arise out of intellectual property rights infringement, but rather from the advertisements’ improper association between the models and the nightclub.
Based on a reading of the DJ complaint and the motion for judgment on the pleadings, the court now has to weigh whether it should refuse to apply an unambiguous exclusion because it renders coverage illusory under the policy. The Field of Entertainment Exclusion effectively removes any “advertising injury” from the “personal and advertising injury” coverage grant of the CGL policy. It will be interesting to see how the court rules because it is an issue of first impression in Florida. We’ll be paying close attention to the outcome because this ruling may prove to be a “centerfold” case, prompting insurers, as Princeton did, to limit the scope of Advertising Injury coverage.
Thanks to Dan Beatty for his contribution to this post. If you have any questions about this post, please call or email <a href="mailto:email@example.com">Dennis Wade</a> for additional information.