By Donald S. Malecki, CPCU

Personal and advertising injury coverage has become increasingly important as the number of suits ... has grown precipitately with the growth of e-commerce.

Mention the word "trigger" and most people are likely to think of that word in terms of a gun. No small wonder. Webster's New World Dictionary defines that word as "a lever pulled to release a catch, etc., esp. one pressed to activate the firing mechanism on a firearm ..."

In insurance circles, most people are likely to think of a trigger in relation to an occurrence, which deals with bodily injury and property damage coverage. Since 1957, in relation to bodily injury, and 1966 with respect to property damage, the trigger of coverage--with respect to standard forms--has been with the policy in force at the time of the injury or damage. However, some insurance company product development personnel have been able to "muddle" the meaning of occurrence and its trigger. They have done this by drafting policies making the trigger at the time of the occurrence or event giving rise to injury or damage, instead of at the time of the injury or damage.

At the same time, all kinds of attempts have been made by insurers to keep from triggering the limits of more than one policy when there is a continuous or repeated exposure to substantially the same harmful conditions. The so-called "Montrose" provision, which currently forms a part of ISO CGL forms is an example. It is the latest addition to the insuring agreement and explains which policy may apply if an occurrence was known prior to the policy period, and it culminates in a claim during a subsequent policy period.

Trigger of intentional torts

While these triggers generally apply to Part A-Bodily Injury and Property Damage of the CGL policy, such is not the case with Coverage B-Personal and Advertising Injury. And this coverage has become increasingly important as the number of suits alleging libel, slander, defamation, infringement of trademark, trade dress, service mark and kindred offenses has exploded with the growth of e-commerce.

Personal and advertising injury coverage came automatically as part of the Broad Form CGL endorsement introduced in 1976 and became an automatic built-in coverage with ISO standard forms in 1986. It included an "offense-committed" trigger for both the occurrence and claims-made forms.

However, it turned out that this trigger was inconsistent with the claims-made trigger that applied to Coverage A-Bodily Injury and Property Damage. The matter has now been fixed so that the "offense-committed" trigger for the occurrence form operates like an occurrence trigger (i.e., coverage is triggered if the offense was committed during the policy period), whereas the trigger for a claims-made form operates like a claims-made trigger (i.e., coverage is triggered if the offense was not committed before the retroactive date and claim for damages is first made during the policy period or extended reporting period).

The big oversight

Unquestionably, understanding the differences in application of the occurrence and claims-made triggers is important. However, what requires a thorough understanding, but is commonly overlooked, is that there is another trigger to deal with regarding personal and advertising injury coverages.

Whether an occurrence or claims-made form is applicable, an exclusion is applicable precluding coverage for the personal injury or advertising injury arising out of an oral or written publication of material whose first publication took place before the beginning of the policy period. Part of this exclusion is emphasized, because it appears that many insurance buyers, particularly those who are being sued, do not understand its full ramifications, and this wording has been around since at least 1966.

Simply stated, if someone libels or slanders someone in 2003 and is sued in a later policy year, say 2004, it is the policy when the first publication took place that applies, regardless of whether the form is on an occurrence or claims-made basis. This also begs the question of how the policy applies if there is a continuing offensive injury that transgresses two or more policy periods. The answer is that, unlike coverage on an occurrence basis, only one policy applies and that is the policy when the first publication took place.

Saving grace?

Defendants confronted with suits alleging some type of personal or advertising injury and being informed by insurers about the above trigger may still have an argument for coverage. In some of these cases, the defendants have argued that the above trigger deals solely with an oral or written publication of material and not to offenses such as misappropriation of advertising ideas or style of doing business, because the latter omit reference to oral or written publication.

In other words, these defendants are saying that if the insurer had intended to apply the first publication trigger to all offenses, it could have had the opportunity. But failing do so, that trigger is limited solely to the offenses specifically referencing oral or written publication.

One of the cases is Adolpho House Distributing Corp. v. Travelers Property and Casualty Company, 165 F. Suppp. 2d 1332 (U.S.D.C. S.D. Fla. 2001). A couple of other cases in this category are Iron Homes Builders, Inc. v. Auto-Owners Insurance Company, 839 F.Supp. 1260 (U.S.D.C. E.D. Mich. 1993) and Atlantic Mutual Insurance Co. v. J. Lamb, Inc. et al., 123 Cal. Rptr. 2d 256 (Ct. App. 2d Dist. Div. 3 2002).

Although it may be worth a trial, as a last ditch stand, to argue that the first publication trigger does not apply for certain offenses being alleged, it is my opinion that even though, for example, misappropriation of advertising ideas or style, or infringement of copyright omit specific reference to oral or written publication, they both still involve a publication. In fact, a publication of some form is necessary to trigger coverage and, therefore, should be the subject of the prior publication exclusion.

How, for example, does a person infringe on a copyright, title, or slogan without some form of publication? Even if these offenses were to be committed by virtue of the use of wording contained in signs inside a store, are not the signs a form of publication intended to be read by potential customers?

Whatever the approach is for a defense, the important point to remember is that liability policies continue to contain the prior publication exclusion and it applies regardless of the CGL form being used. Therefore, it is necessary that businesses hold onto their liability policies because it may take years before a claim surfaces and the burden is on the policyholder to produce to the policy.