Copyright 2004 ADVERTISING INJURY: A NEW FRONTIER IN PROFESSIONAL LIABILITY
Copyright 2004 ADVERTISING INJURY: A NEW FRONTIER IN PROFESSIONAL LIABILITY Karen Callanan NIF Group Paul White Tressler, Soderstrom, Maloney & Evans Leib Dodell Axis Pro Insurance Chad Milton Marsh Inc. Mike Donovan Beazley Group plc
Copyright 2004 Why Are We Here? Fundamental Change in the way this critical coverage is delivered to commercial marketplace GL-based platform has not worked -- this is now a professional liability issue
Copyright 2004 Evolution of Advertising Injury (AI & PI) Libel, slander, defamation... disparages goods, products, services Privacy PiracyEliminated Unfair CompetitionEliminatedadds “use of advertising idea” Infringement of copyright, title or slogan Adds— misappropriation of advertising idea or style of doing business Deletes “title,” “ad idea,” and “style of business”
Copyright 2004 E volution of Advertising Injury 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; Oral or written publication, in any manner, of material that violates a person's right of privacy; The use of another's advertising idea in your "advertisement"; or Infringing upon another's copyright, trade dress or slogan in your "advertisement."
Copyright 2004 “In Your ‘Advertisement’” Means “a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters” Note: Entire Web Page As NOT Ad: “[O]nly that part of a web- site that is about your goods, products or services...” What does this mean for: Entertainment content? News, information? Links? Third-party advertising?
Copyright 2004 Advertising Injury Exclusions (AI & PI) Known FalsityKnowledge of AI violation / known falsity Willful violation First Publication Assumed in / breach contract Fail to Conform Wrong Description Business of... Trademark, trade name, malice EliminatesAdds “pollution”
Copyright 2004 Advertising Injury Exclusions—Added 2001 Infringement of copyright, patent, trademark, trade secret, or other IP rights (except infringement of copyright, trade dress or slogan in “advertisement”) Insureds in “Media and Internet Type” Businesses Electronic chatrooms or bulletin boards Unauthorized use of another’s name or product in , domain name or metatag, or other tactics meant to mislead customers
Copyright 2004 Potentially Uncovered Exposures Include: Copyright infringement (when not in “advertising”) Trademark, trade secret (regardless of whether or not in “advertising”) Use of name/product that misleads consumers Privacy not involving “publication” Bulletin boards/chatrooms Claims Limited To Injunctive Relief
Copyright 2004 Why Is This a Problem? Libel... Publications Web page Bulletin board Chat Room Privacy... Private affairs False light Misappropriation of image Data collection Advertising Idea... Publication Web Page Copyright, trademark/ trade dress.. Meta Tags Images Product design Content
Copyright 2004 More Reasons Why This Is a Problem Copyright...“Media Businesses” Chatroom and electronic bulletin board Unauthorized use of name or product meant to mislead
Copyright 2004 Trademark Abuse Is Huge Concern Survey of 75,000 internet web pages containing pornographic material: 19,000 pages contained one or more of the world's 120 most popular brand names, including Disney and Nintendo
Copyright 2004 Cyber Sleuths Are Watching! Many Claims Are Not Covered
Copyright 2004 Why Restrictions In AI Coverage? Dramatic exposure increase –Internet activities, in-house publishing/advertising –4,200 private trademark suits in 2000 (over 100% increase) Massive coverage litigation –Plaintiffs’ efforts to make AI offense a “catch-all” –341 published opinions on AI coverage litigation from Lack of underwriting/pricing expertise Lack of claims handling expertise Adverse loss experience –As much as 29% of total GL loss in some PYs attributable to AI
Copyright 2004 What’s the Client’s Take on All This? Everyone’s a Publisher –2003 average corporate spending on custom publishing is $715,000 Corporate Use of “Media” Is Expanding Internal Controls Don’t Keep Up Increasing Recognition that GL Not the Answer
Copyright 2004 Case Study Schwarzenegger Sues California Toy and Doll For Misappropriation
Copyright 2004 What To Do? Legal Review? GL Coverage? Other Specialty Coverage Alternatives? Underwriting questions ? Premiums?
Copyright 2004 Current Market Options Supplements to CGL Coverage Cyberliabilty Policies Media Policies “Modular” Professional Liability Policies
Copyright 2004 “Cyberliability” Policies Initial response to need for additional advertising and related coverage during the Internet boom Provides good coverage for Internet exposures, particularly network security Most forms provide limited coverage for non-online exposures
Copyright 2004 Media Policies Traditional source of coverage for many content risks Can be a good solution for companies with media related exposures in addition to advertising liability Often not economically practical for companies without extensive exposures Normally does not include privacy coverage related to data security
Copyright 2004 Professional Liability Available as multimedia and network security modules or coverage sections to professional liability policies For large risks, this can often provide a complete solution, especially with manuscript endorsements For smaller to middle market risks, most available wordings do not provide full advertising coverage
Copyright 2004 Buyer Beware Does your “traditional” policy cover: Product trademark/trade dress? Online and off line coverage? Privacy breaches related to data disclosure? Coverage for non-advertising exposures? Trade secret? Injunctive relief defense?
Copyright 2004 Emerging New “Media” Product New type of policy needed to replace/ supplement GL-based AI? New policy might cover company’s “expressive” conduct: –Media/IP claims arising out of content – advertising, catalogues/brochures, website content, etc. –Media/IP claims arising out of company’s business activities – software, , internal communications, etc. –IP claims arising out of products – product design, labeling, trademarks, etc. Coverage underwritten and priced “to the risk” by Professional Liability u/ws, rather than added as “throw-in” to the GL
Copyright 2004 Critical Factors in Development of New Coverage Educating broker/buyer communities on: –Limitations of GL coverage –Likelihood of coverage litigation –Lack of claims handling expertise –Reality of media/IP exposures Developing appropriate pricing models –GL has created unrealistic price expectations –Lack of actuarial data –Individualized underwriting/pricing required
Copyright 2004 Questions Or Comments?