Topics covered:

Insuring agreement

Exclusions

Insuring Agreement

a.     We will pay those sums that the insured becomes legally obligated to pay as damages because of “personal and advertising injury” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “personal and advertising injury” to which this insurance does not apply. We may, at our discretion, investigate any offense and settle any claim or “suit” that may result. But:

(1)     The amount we will pay for damages is limited as described in Section III—Limits of Insurance; and

(2)     Our right and duty to defend end when we have used up the applicable limit of insurance in the payment of judgments or settlements under Coverages A or B or medical expenses under Coverage C.

No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Supplementary Payments—Coverages A AND B.

b.     This insurance applies to “personal and advertising injury caused by an offense arising out of your business, but only if the offense was committed in the “coverage territory” during the policy period.

Analysis

The coverage B insuring agreement expresses the insurer's promise to pay those sums that the insured becomes legally obligated to pay as damages because of “personal and advertising injury” to which the insurance applies.

The all-important definition of “personal and advertising injury” is discussed in other pages of this tab; see Commercial General Liability Definitions; Public Liability A.2 pages. But, in brief, the terms include a wide range of offenses that often result in neither bodily injury nor damage to tangible property and consequently are not insured under coverage A of the CGL coverage form.

Personal injury offenses are covered if they arise out of the conduct of the named insured's business, other than advertising, publishing, broadcasting, or telecasting done by or for the named insured. So, if the named insured is itself in the business of advertising, publishing, broadcasting, or telecasting—for example, an advertising agency, a newspaper, or a radio or television station—it will need to have a more specialized form of coverage designed for firms in those businesses.

Advertising injury offenses are covered if they arise in the course of advertising the named insured's goods, products, or services; conversely; if the insured's advertising activity is not the direct or proximate cause of the alleged injury, there is no legal liability and the insuring agreement will not apply. When the named insured (who is not in the advertising, etc. business) is merely advertising its own business, however, it will be protected by coverage B of the CGL forms against the advertising injury offenses as defined. A grocery that distributes flyers in its neighborhood is an example of this point.

Note that the insurance applies only if the offense was committed in the coverage territory. Offense is not a defined term in the CGL forms (as is occurrence under coverage A), but it is used in the personal and advertising injury insuring agreement instead of occurrence because this insuring agreement is meant to apply to intended actions of the insured. Occurrence, of course, means an accident, but if the insured commits an act for which personal injury or advertising injury coverage is applicable, that act is not an accident. For example, if the insured detains someone or writes an article that libels a person, those acts of detention and writing are intentional (not accidental), and the insured needs protection for such intentional acts. Occurrence-as-an-accident coverage will not do the job.

It is interesting to note that the Montrose provisions that are in the coverage A insuring agreement are not part of the coverage B insuring agreement. It could be that the particular nature of coverage B—personal and advertising injury caused by an offense (intended actions as opposed to accident)—does not warrant Montrose provisions. Or, perhaps since the Montrose case itself dealt with property damage and with an occurrence, there was no perceived threat to personal and advertising injury coverage. For whatever reason, coverage B does not have the Montrose clauses.