IS NAMING A SHOE AN ADVERTISEMENT?

Vibram’s named their running shoe “Bikila” after Abebe Bikila a famous barefooted runner. Bikila’s family sued Vibram for using the name without their permission. When Vibram’s CGL carrier, Holyoke Mutual, refused to defend the case due to an exclusion, Vibram argued that the case was not subject to the personal injury exclusion because of an advertisement-related exception. The trial court didn’t agree with Vibram’s argument so Vibram turned to a higher court.

Here is how the court ruled.

Vibram, USA, Inc. (Vibram) developed a minimalist running shoe and named it Bikila. The Bikila family sued Vibram arguing that Vibram used the name after Abebe Bikila who was a legendary barefooted runner. They argued, among other items, that Vibram was being unjustly enriched by using the name without authorization. Vibram sent the suit to its commercial general liability carrier, Holyoke Mutual Insurance Company in Salem (Holyoke) for coverage.

Holyoke denied coverage but offered to provide a defense under a reservation of rights letter. Holyoke and Vibram then turned to the trial court with both sides requesting summary judgment regarding the coverage issue.

The trial court ruled that the complaint was about a personality right. Personality rights are part of the broader term intellectual property rights. The policy did not cover intellectual property rights, so the court granted summary judgment to Holyoke. Vibram appealed.

Vibram argued that coverage was found in clause (f) in the definition of advertising injury that reads as follows:

“the use of another’s advertising idea in your “advertisement”

The term “advertisement is defined as:

A notice that is broadcast or published to the general public of specific market segments about your foods, products or services for the purpose of attracting customers or supporters.

The Bikila family demonstrated that they used the Bikila name to promote a variety of running-related ventures. The Supreme Court Judicial Court of Massachusetts ruled that because the Bikila family used the name for the same purpose as Vibram that it was arguing an advertising injury case that was tied to an advertising idea.

The supreme court reversed the trial court’s decision and granted summary judgment to Vibram.

Holyoke Mutual Insurance Company in Salem, v Vibram USA, Inc. Supreme Judicial Court of Massachusetts, Suffolk, September 12, 2018, 480 Mass. 480, 106 N.E. 3^rd 572

Taking exception

Personal and advertising injury liability is Coverage B in the ISO CGL. In prior editions of the CGL personal injury was separate from advertising injury. When the two were combined, the combined definition and the combined exclusions resulted in some important exceptions. The logic behind the argument in this particular court case becomes clear when the definition and the copyright exception are read side by side.

Read the PF&M analysis of the CGL Coverage B insuring agreement, exclusions and personal and advertising definition.

(April 2019)

SECTION I–COVERAGES

Coverage B–Personal and Advertising Injury Liability

1. Insuring Agreement
2. The insurance company agrees to pay amounts the insured is legally obligated to pay as damages because of personal and advertising injury that this insurance covers. The insurance company not only has the right, but it also has the duty to defend the insured against any suit that seeks those damages. However, this right and duty applies only for those suits seeking damages that this insurance covers. The company can investigate any loss or offense and settle any resulting claim or suit at its discretion. The amounts paid as damages is limited as described under Section III–Limits of Insurance.

The insurance company’s right and duty to defend ends when it uses up the limit of insurance that applies to pay judgments and settlements under Coverage A or Coverage B or medical expenses under Coverage C. The insurance company has no other obligation or liability to pay sums or perform acts or services other than those specifically listed and described under Supplementary Payments–Coverages A and B.

1. This coverage applies to personal and advertising injury caused by an offense that arises out of the named insured’s business. The offense must be committed in the coverage territory and during the policy period.

2. Exclusions

The insurance coverage provided does not apply to any of the following, except as noted:

1. Knowing Violation of Rights of Another

Coverage does not apply for personal and advertising injury that the insured causes or directs. This exclusion applies only if the insured knew that the act would violate the rights of another and result in personal and advertising injury.

1. Material Published with Knowledge of Falsity (04 13 change)

Coverage does not apply when personal and advertising injury is caused by material published by the insured or at its direction and the insured knew the information was false. The publication can be either oral or written. This exclusion applies regardless of the way the material is published. (04 13 addition)

1. Material Published Prior to Policy Period (04 13 change)

There is no coverage for personal and advertising injury when the material that caused the alleged injury was first published before the coverage inception date. The publication can be either oral or written. This exclusion applies regardless of the way the material is published. (04 13 addition)

Note: This exclusion does not specify the party that does the initial publication. The insured may publish the material during the policy period, but there is no coverage if the insurance company discovers that the material was published elsewhere prior to the policy period.

1. Criminal Acts

Insurance does not apply to personal and advertising injury when it arises out of a criminal act committed by the insured or at its direction.

1. Contractual Liability

There is no coverage for liability the insured assumes in a contract or agreement. There is one exception. This exclusion does not apply to liability the insured has without a contract or agreement.

1. Breach of Contract

Coverage does not apply to personal and advertising injury that arises out of breach of contract. There is an exception. Coverage applies if the contract was an implied contact and the injury is related to an advertising idea of another used in the named insured’s advertisement.

Note: An implied contract is much different than a written one. As a result, it is more difficult to prove that a breach occurred in an implied contract.

1. Quality or Performance of Goods–Failure to Conform to Statements

Personal and advertising injury that arises when goods, products, or services fail to meet the named insured’s advertised statements of quality or performance is excluded.

1. Wrong Description of Prices

The insurance company does not pay for personal and advertising injury when the named insured’s advertisement states the incorrect price for goods, products, or services.

1. i. Infringement of Copyright, Patent, Trademark, or Trade Secret

Coverage does not apply to personal and advertising injury that arises out of any infringement of copyright, patent, trademark, trade secret, or any other intellectual property rights.

Note: There is no requirement that the named insured, an insured, or even someone acting on behalf of either does the infringing. All infringement is excluded.

There are two exceptions. This exclusion does not apply:

• When the named insured’s advertisement infringes on copyright, trade dress, or slogan
• When use of another’s advertising idea in the named insured’s advertisement is considered infringement of intellectual property rights

Related Court Cases:

Insurer Is Obligated to Defend Copyright Infringement Claim

Hijacking the Hobbit

Joint Owner Alleges Misappropriation Of Work

Insurer and Manufacturer Dispute Meaning Of “Advertising Injury”

1. Insureds in Media and Internet Type Businesses

There is no coverage for personal and advertising injury committed by an insured that is in the businesses of advertising, broadcasting, publishing, or telecasting. There is also no coverage if the insured’s business designs or determines website content for others, or provides Internet search, access, content, or service.

There is an exception. This exclusion does not apply to the sections of the definition of personal and advertising injury that address false arrest, detention or imprisonment, malicious prosecution, or wrongful eviction, entry, or invasion of private occupancy.

This coverage form explains that placing frames, borders or links, or advertising on the Internet is not considered being in the business of advertising, broadcasting, publishing, or telecasting, even if the placement is provided to others.

1. Electronic Chatrooms or Bulletin Boards

Personal and advertising injury that arises out of an electronic chatroom or bulletin board the insured owns, hosts, or controls is excluded.

Note: It is important to note that coverage applies for personal and advertising injury related to posting on chatrooms and bulletin boards if the insured did not control, host, or own them.

1. Unauthorized Use of Another’s Name or Products

The insurance company does not pay for personal and advertising injury that arises when the named insured uses the Internet to try to mislead another’s customers or potential customers. This exclusion applies when the misleading is caused by unauthorized use of the name or product of another party in the named insured’s email address, domain or metatag.

1. Pollution

Coverage does not apply to personal and advertising injury that arises out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants at any time.

Note: This is an absolute exclusion. It does not have any exceptions.

1. Pollution Related

Coverage does not apply to any loss, cost, or expense that arises out of:

• Any request, demand, order, or statutory or regulatory requirement that any insured or others test for, clean up, treat, respond to, or assess the effects of pollutants in any way
• Any claim or suit by or on behalf of a governmental authority because of testing for, cleaning up, treating, responding to, or assessing the effects of pollutants in any way

Note: There have been numerous attempts to cover various types of pollution losses because of the personal injury liability coverage wording in older editions. These attempts were disguised as trespass, wrongful entry, or invasion of the right of private occupancy. Personal and advertising injury coverage was never intended to pay for any pollution damages or cleanup costs. This exclusion clarifies that there is no coverage for any pollution exposure that may arise out of this coverage form’s personal and advertising injury wording.

1. War

There is no coverage for bodily injury or property damage caused directly or indirectly in any way by war, undeclared war, and civil war, including warlike action by a military force. This exclusion also applies to actions a government takes to prevent or defend against an expected or actual attack by any government or other authority that uses military personnel or agents. It also applies to rebellion, revolution, insurrection, or unlawful seizure of power, and the action the government takes to prevent or defend against any of these.

1. Recording and Distribution of Material or Information in Violation of Law (04 13 change)

The 04 13 edition retitles this exclusion by adding the words “Recording and” preceding the rest of the title. The change in this exclusion incorporates CG 00 68–Recording and Distribution of Material or Information in Violation of Law Exclusion that was previously a mandatory endorsement.

Insurance coverage does not apply to personal and advertising injury that arises directly or indirectly out of any act or omission that violates or allegedly violates:

• The Telephone Consumer Protection Act (TCPA), including its amendments or additions
• The CAN-SPAM Act of 2003, including its amendments or additions
• The Fair Credit Reporting Act (FRCA). This includes any and all of its amendments plus related acts such as the Fair and Accurate Credit Transactions Act (FACTA) (04 13 change)
• Any other statute, ordinance or regulation that prohibits or limits sending, transmitting, communicating, printing, disseminating, disposing of, transmitting, or distributing material or information. (04 13 change)

Note: This exclusion does not state that the named insured or even an insured must be the violator. As a result, situations could arise where an insured or the named insured is not aware that its computers have been hacked to violate the act and coverage still does not apply.

Related Court Case: Commercial Liability Policy Obligated to Respond to TCPA Violations

Not lettered. Access or Disclosure of Confidential or Personal Information and Data-Related Liability (05 14 edition)

Note: CG 21 06–Exclusion – Access or Disclosure of Confidential or Personal Information and Data-Related Liability – With Limited Bodily Injury Exception was introduced as a mandatory endorsement with a 05 14 edition date. Because it is mandatory, we are adding the wording from the CG 21 06.

Coverage does not apply when personal and advertising injury arise from the disclosure of or access gained to confidential or personal nonpublic information belonging to any person or organization. Examples of such information are patents, trade secrets, customer lists, credit card information, health information, how to process, and financial information.

There are many types of damages and this exclusion applies to all of them even when limited to notification costs, credit monitoring expenses, forensic expenses, public relations expenses, and similar expenses.

SECTION V–DEFINITIONS

14. Personal and Advertising Injury

This is any injury that arises out of one or more of the following offenses.

1. False arrest, detention or imprisonment

Note: These offenses apply far beyond law enforcement activities. Impeding the progress of a shoplifter is an example of detention and imprisonment. Not allowing persons to leave an area, for whatever reason, is another example of imprisonment.

1. Malicious prosecution

Note: Repeated reports to authorities about a neighbor’s conduct can be considered malicious prosecution.

1. When an owner, landlord, or lessor of a premises wrongfully evicts, enters, or invades the rights of a person who occupies that premises. The owner, landlord, or lessor may actually commit the wrongful act(s) or someone who acts on behalf of the owner, landlord, or lessor may commit them.

Note: This offense focuses on the relationship between the landlord and the tenant. A landlord may believe that because he owns the property, he has the right of access to all of it at any time and can force tenants to leave at will. However, thanks to various state laws, tenants have protected rights of occupancy.

1. d. The publication of slandering or libeling a person or organization. Also, publication of material disparaging a person’s or organization’s goods, products, or services. The publication can be either written or oral and can take place using any form of communication, including the Internet and other electronic forms.
2. The publication of material that violates a person’s right of privacy. The publication can be either written or oral and can take place using any form of communication, including the Internet and other electronic forms.
3. Another party’s advertising idea being used in the named insured’s advertisement
4. The named insured’s advertisement that infringes on another party’s copyright, trade dress, or slogan

Insuring a shoe manufacturer

Manufacturing a shoe is complex. The shoe was developed to protect the foot but today it must meet many other expectations. For many, shoes are fashion statements. For other, they are essential tools that allow them to perform their jobs at maximum efficiency. A key though for any shoe manufacturer is advertising so that the right customer can find the shoe designed to match their expectation.

Are you interested in writing a shoe manufacturing account?

Below are two narratives from the Producer’s Commercial Lines Risk Evaluation System that could help you get started.

SHOES–LEATHER
Category: Manufacturing

SIC CODE: 3131 Boot and Shoe Cut Stock and Findings
3142 House Slippers

3143 Men’s Footwear, except Athletic

3144 Women’s Footwear, except Athletic

3149 Footwear, except Rubber, Not Elsewhere Classified

NAICS CODE:   316210 Footwear Manufacturing

Suggested ISO General Liability Code: 59005

Suggested Workers Compensation Code: 2651, 2660

Description of operations: Leather shoe manufacturers receive processed animal hides from tanneries and produce shoes and boots whose uppers include leather. The soles may be made of leather, rubber or man-made materials such as plastics. The process consists of designing the shoes or boots, cutting or punching the individual pieces, lacing or sewing the parts together, supplying trims or clasps, then attaching the uppers by adhesives to the soles. The shoes may be treated or given a finishing coat, then packaged for shipment. Although some automation may be possible in the cutting process, sewing of individual items is often a labor-intensive process.

Because of the varieties of materials and processes involved in production, the different phases of manufacture may be carried out in different locations or different countries.

Property exposures consist of an office, production plant, and warehouse for raw materials and finished goods. Ignition sources include electrical wiring, heating systems, and production machinery. Chemicals used in dyeing, finishing or tanning are often flammable and should be properly labeled, separated, and stored in approved containers. Cutting, punching, and buffing operations generate dust which can catch on fire. This hazard increases in the absence of well-maintained dust collection systems. Loose fibers and scraps from processing leather are combustible and will add to the fire load. Leather is susceptible to damage by fire, smoke, water and humidity. Poor housekeeping, such as failure to collect and dispose of scraps on a regular basis, could contribute significantly to a loss. Unless disposed of properly, greasy, oily rags (such as those used to clean machinery) can cause a fire without a separate ignition source. High-valued items may be targets for theft. In some areas, there may also be a vandalism exposure from PETA protesters. Appropriate security controls must be taken including physical barriers to prevent entrance to the premises after hours and an alarm system that reports directly to a central station or the police department.

Equipment breakdown exposures include malfunctioning production equipment, dust collection and ventilation systems, electrical control panels and other apparatus. These should be properly maintained and records kept in a central location.

Crime exposure comes from employee dishonesty and theft due to the relatively high street value of leather items. Employees may act alone or in collusion with outsiders in stealing money, raw materials or finished stock. Background checks should be conducted on all employees. There must be a separation of duties between persons handling deposits and disbursements and handling bank statements. There should be security methods in place to prevent theft.

Inland marine exposures include accounts receivable if the manufacturer offers credit, computers (which may include computer-run production equipment), exhibitions, goods in transit, and valuable papers and records for customers’ and suppliers’ information. Backup copies of all records should be made and stored off premises. Goods in transit may be damaged by fire, collision, overturn, theft, and water damage. Because of the high market value of leather goods, vehicles should be locked, fitted with alarms, and not left unattended once loaded or during transport.

Premises liability exposure is normally low due to limited access by visitors. If the manufacturer has a showroom or offers tours, visitors may be injured by slips, trips, or falls. Chemicals used in finishing may be corrosive and/or toxic. Fumes, spills or leaks may cause serious injury or property damage to neighboring premises.

Products liability exposure is normally moderate. The shoe may slip and contribute to slip and fall, which may cause sprains, strains, and fractures. The exposure increases if the manufacturer produces shoes based on prescriptions from podiatrists or other types of made-to-order or one-of-a-kind footwear.

Environmental impairment exposure is light unless the manufacturer performs any leather dyeing, finishing, or tanning. Fumes and improper disposal of scrap can result in air, ground, or water contamination. Disposal procedures must adhere to all EPA and other regulatory standards.

Automobile exposure may be high if the manufacturer transports raw materials or finished products. Manufacturers generally have private passenger fleets used by sales representatives. There should be written procedures regarding the private use of these vehicles by others. Drivers should have an appropriate license and an acceptable MVR. All vehicles must be well maintained with documentation kept in a central location.

Workers compensation exposures can be moderate to high. Injuries from production machinery are common, as are puncture wounds, burns, cuts, slips, trips, falls, foreign objects in the eye, hearing loss from machinery noise, and back injuries from lifting. Employees should be provided with safety training and protective equipment. Areas that generate dust require respiratory protection devices, as well as eye protection and eye wash stations. Flammable liquids and chemicals used for dyeing, finishing or tanning can cause skin irritation, eye irritation, and possible long-term occupational disease. The high volume required for production schedules may lead workers to remove guards on the machinery, or to postpone maintenance and repair. Repetitive motion injuries can result from the ongoing use of machinery. Workstations should be ergonomically designed. Safety consciousness and commitment of management, especially in the form of ongoing enforcement and awareness programs, are important considerations. A large amount of the piece work may be done by individuals whose status (employee or independent contractor) must be clear.

Minimum recommended coverage:

Building, Business Personal Property, Business Income with Extra Expense, Equipment Breakdown, Employee Dishonesty, Accounts Receivable, Computers, Goods in Transit, Valuable Papers and Records, General Liability, Employee Benefits Liability, Environmental Impairment Liability, Umbrella Liability, Hired and Nonownership Auto Liability, Workers Compensation

Other coverages to consider:

Earthquake, Flood, Exhibitions, Cyberliability, Employment-related Practices Liability, Business Auto Liability and Physical Damage, Stop Gap Liability

SHOES–PLASTIC OR RUBBER
Category: Manufacturing

SIC CODE: 3021 Rubber and Plastics Footwear

NAICS CODE: 316210 Footwear Manufacturing

Suggested ISO General Liability Code: 59005

Suggested Workers Compensation Code: 4410

Description of operations: Non-leather shoe manufacturers produce shoes and boots having uppers made of fabric or a man-made material. The soles are made of vulcanized rubber or of plastic. If made of rubber, raw latex is milled (chopped and mixed), combined with sulfur for vulcanization, and heated before being formed into soles by extrusion or molding. Plastics are heated and extruded or molded into soles.

The manufacturing of the uppers consists of designing the shoes or boots, cutting or punching the individual pieces, lacing or sewing the parts together, supplying trims or clasps, then attaching the uppers by adhesives to the soles. The item may be treated or given a finish, then packaged for shipment. Because of the varieties of materials and processes involved in production, the different phases of manufacture may be carried out in different locations or different countries.

Property exposures consist of an office, production plant, and warehouse for raw materials and finished goods. Ignition sources include electrical wiring, heating systems, and production machinery. Cutting, punching, and buffing operations generate dust which can catch on fire. This hazard increases in the absence of well maintained dust collection systems. Loose fibers and scraps from processing are combustible and will add to the fire load. Poor housekeeping, such as failure to collect and dispose of scraps on a regular basis, could contribute significantly to a loss. Unless disposed of properly, greasy, oily rags (such as those used to clean machinery) can cause a fire without a separate ignition source. Fire hazards are generally high due to the vulcanization chemicals and processes. If the stock catches fire, it can be very difficult to extinguish due to the heavy black smoke which results in a great deal of smoke damage. Machinery needs proper maintenance to prevent overheating and wear. Fuel sources to run machinery and the heat plant must be adequately controlled. High-valued items may be subject to theft. Appropriate security controls must be taken including physical barriers to prevent entrance to the premises after hours and an alarm system that reports directly to a central station or the police department.

Equipment breakdown exposures include malfunctioning production equipment, dust collection and ventilation systems, electrical control panels and other apparatus. These should be properly maintained and records kept in a central location.

Crime exposure comes from employee dishonesty and theft. Employees may act alone or in collusion with outsiders in stealing money, raw materials or finished stock. Background checks should be conducted on all employees. There must be a separation of duties between persons handling deposits and disbursements and handling bank statements. There should be security methods in place to prevent theft.

Inland marine exposures include accounts receivable if the manufacturer offers credit, computers (which may include computer-run production equipment), exhibitions, goods in transit, and valuable papers and records for customers’ and suppliers’ information. Backup copies of all records should be made and stored off premises. Goods in transit may be damaged by fire, collision, overturn, theft, and water damage. Because of the high market value of some shoes and boots, vehicles should be locked, fitted with alarms, and not left unattended once loaded or during transport.

Premises liability exposure is normally low due to limited access by visitors. If the manufacturer has a showroom or offers tours, visitors may be injured by slips, trips, or falls. Chemicals used in processing may be corrosive and/or toxic. Fumes, spills or leaks may cause serious injury or property damage to neighboring premises. In the event of a fire, the difficulty in extinguishing it could result in smoke damage to neighboring property. Evacuation plans should be on file with the fire department.

Products liability exposure is normally moderate. The shoe may slip and contribute to slip and fall, which may cause sprains, strains, and fractures. The exposure increases if the manufacturer produces shoes based on prescriptions from podiatrists or other types of made-to-order or one-of-a-kind footwear.

Environmental impairment exposure is high due to possible contamination of ground, air and water from raw chemicals in the rubber or plastics, plus the actual processing and the final products. The catalysts may be caustic, and the final product is usually not biodegradable. Disposal procedures must adhere to all EPA and other regulatory standards.

Automobile exposure may be high if the manufacturer transports raw materials or finished products. Manufacturers generally have private passenger fleets used by sales representatives. There should be written procedures regarding the private use of these vehicles by others. Drivers should have an appropriate license and an acceptable MVR. All vehicles must be well maintained with documentation kept in a central location.

Workers compensation exposure can be moderate to high. Injuries from production machinery are common, as are puncture wounds, burns, cuts, slips, trips, falls, foreign objects in the eye, hearing loss from machinery noise, and back injuries from lifting. Employees should be provided with safety training and protective equipment. Areas that generate dust require respiratory protection devices, as well as eye protection and eye wash stations. Flammable liquids and chemicals used for vulcanization or finishing can cause skin irritation, eye irritation and possible long-term occupational disease. The high volume required for production schedules may lead workers to remove guards on the machinery, or to postpone maintenance and repair. Repetitive motion injuries can result from ongoing use of machinery. Workstations should be ergonomically designed. If there is a fire on premises, the fumes in the smoke are very dangerous and can cause severe respiratory distress. Dense smoke makes egress from the premises difficult.

Safety consciousness and commitment of management, especially in the form of ongoing enforcement and awareness programs, are important considerations. A large amount of the piece work may be done by individuals whose status (employee or independent contractor) must be clear.

Minimum recommended coverages:

Building, Business Personal Property, Business Income with Extra Expense, Equipment Breakdown, Employee Dishonesty, Accounts Receivable, Computers, Goods in Transit, Valuable Papers and Records, General Liability, Employee Benefits Liability, Environmental Impairment Liability, Umbrella Liability, Hired and Nonownership Auto Liability, Workers Compensation

Other coverages to consider:

Earthquake, Flood, Exhibitions, Cyberliability, Employment-related Practices Liability, Business Auto Liability and Physical Damage, Stop Gap Liability

Addressing a known need

A shoe manufacturer has many exposures that could result in significant losses. Attempting to address all in a single letter would be overwhelming. A better approach could be to concentrate on a simple but very important exposure. A letter or email to a prospect offering to discuss products liability could be a way to begin developing a new client. Other letters could then follow that address another high-level topic.

Below is some wording you could use in your product liability prospect letter or email.

Dear [Name]:

In spite of every precaution taken, one of your products occasionally may cause injury to someone who buys it. This may be because of the following:

1. Something goes wrong with a single article
2. The instructions on the label are misinterpreted
3. The buyer uses the product improperly

Whatever the cause, if the purchaser suffers injury, you’ll likely hear about it in the form of a claim. In these days of consumer activism, this situation has increasingly confronted manufacturers and processors in every line of business. The cases you read about in the paper are just the tip of the iceberg. For each media reported case, there are ten others with attorney costs eating up thousands of dollars in business assets.

If your company manufactures or processes goods, your business is certainly at risk. Isn’t it time that you welcome the protection that product liability insurance can offer?

I will call you in the next couple of days to make an appointment. You’ll feel better after a brief discussion and review.

Sincerely,