In September, we discussed in a Florida district court that an insurance company must defend a strip club in Miami in a lawsuit filed by 17 models alleging that the club used its images to market its business without permission. Recently, a federal judge in Illinois ruled similarly, ordering the First Mercury Insurance Company to defend its insured, Triple Location, against a similar lawsuit.
I First Mercury Insurance Co. v. Triple Location LLC three models sued the insured strip club after it allegedly published its images without consent. The models claimed that unauthorized posts created a false impression that they had agreed to market the insured business, Club O, which damaged their image, brand and marketability. The models also claimed that the club failed to adopt and implement policies and procedures to prevent the misuse of images.
The insured tendered the defense of the model's lawsuit to First Mercury, which had issued a general liability policy under which the insurer agreed to defend the club against all rights claiming damages for "personal and advertising damage." First Mercury denied coverage and sued the federal court in Illinois, trying to erase all obligations to defend. The insurer cited many exceptions in support of its denial, including the insurance's exclusion of "personal and advertising damage" caused by "the insured with the knowledge that the act would violate the rights of others" and cause damage. According to First Mercury, although the complaint alleged negligence, when read in its entirety, it revealed that the plaintiff's allegations ultimately concerned the policyholder's intentional conduct, which was excluded from coverage. on the club's alleged negligence. The court concluded "since the conduct alleged in the underlying complaint probably falls within at least one of the categories of errors" covered by the policy and "not clearly excluded from the coverage", First Mercury must defend the entire underlying suit. Triple Location decision highlights the value of personal injury and advertising damage coverage to protect companies in obscure or often overlooked situations, such as litigation of intellectual property infringement. Coverage for personal injury and advertising damage applies not only to allegations of false arrest, damaging prosecution and libel, but also libel, copyright infringement and invasion of privacy. This contradicts the common misconception that all claims that are tangentially related to intellectual property are in any way excluded from coverage, a mistake that we discussed in a previous post. Furthermore, Triple Location is another decision that reinforces the value of broad defense coverage under general liability policy, where the insurer is obliged to defend whether there is even potential for coverage for a single alleged claim (such as negligence) and also if there are also allegations of potentially precluded behavior (such as intentional crime). Experienced coverage advice can help maximize the value of these insurance assets and, if a claim arises, determine if an insurer is required to defend claims arising from personal and advertising damages.