The issue in this case is whether a motor vehicle liability insurance policy must provide personal injury protection (PIP) coverage to all persons that use an insured motor vehicle with the consent of the named insured. This case is Sheptow v. GEICO General Insurance Company, 2011 WL 4820484 (Or.App.).

The plaintiff (Sheptow) was injured in a motor vehicle accident in which he was driving his mother's car with her permission. The accident was caused by the negligence of another driver. At the time of the accident, the car that the plaintiff was driving was covered by a liability insurance policy that GEICO had issued under which Sheptow's mother was the sole named insured. Sheptow was not living with his mother at the time of the accident.

Sheptow sought PIP benefits under the policy for accident-related medical expenses and wage loss. GEICO denied the claim on the ground that Sheptow was not entitled to PIP benefits because he was not living in his mother's household at the time of the accident.

Sheptow then filed this action against GEICO.

The trial court ruled in favor of Sheptow and GEICO appealed.

Sheptow argued that the policy afforded him coverage because he was a permissive user. The insurer countered that state law establishes PIP benefit eligibility requirements and Sheptow did not fall within the ambit of covered persons under that law. Moreover, the insurer said, state law only requires coverage for permissive users for purposes of motor vehicle liability coverage, not PIP benefits.

The appeals court said that the statute requires every motor vehicle liability policy issued in the state to provide PIP benefits to the person insured thereunder. The word “thereunder” refers to the antecedent subject, “every motor vehicle liability policy”. It follows that, to qualify for PIP benefits under the policy in this case, Shepow must be “the person insured” under the policy. In the insurer's view, the latter phrase must refer to the named insured. The court disagreed.

The court said that persons insured under a motor vehicle insurance policy are not limited to the named insured. The statute requires all liability insurance policies to insure the named insured and all other persons insured under the terms of the policy against loss. As pertinent in this case, included among such insured persons are all persons who, with the consent of the named insured, use the motor vehicle insured under the policy. Thus the law leads to the conclusion that, because he is a person insured under the liability provisions of the policy, Sheptow is also an insured for purposes of PIP benefits under the policy.

The court concluded that because Sheptow was injured while operating an insured auto with the consent of the named insured, he was insured under the liability section of the policy and thus, was entitled to PIP benefits in accordance with the law. The ruling of the trial court was affirmed.

Editor's Note: This was simply a case of the court comparing the state law with the language of the policy and finding in favor of coverage. An insurer can offer its own interpretation of state statutes as they apply to policy coverage, but the courts will have the final say.

FACTA Ruling

The insured restaurant operator filed a lawsuit seeking a declaratory judgment that the insurer owed a duty to defend the insured against consumers' underlying state court class action claiming violation of the Fair and Accurate Transaction Act (FACTA). This case is Creative Hospitality Ventures, Inc. v. United States Liability Insurance Company, 2011 WL 4509919 USCA, 11th. Note that only the Westlaw citation is currently available.

The insured operates a restaurant and has a general liability policy issued by Essex Insurance. In 2008, the insured was sued in a class action complaint alleging violations of FACTA by issuing receipts revealing more than five digits of consumers' credit card number or the card's expiration date. The complaint charged that the insured willfully violated FACTA and failed to protect cardholders against identity theft and credit and debit card fraud. The complaint sought actual damages or statutory damages, punitive damages, costs and attorney fees.

The insurer denied coverage and a lawsuit was brought. The district court granted summary judgment to the insurer and this appeal followed.

The circuit court noted that the district court concluded that there was no duty to defend because the issuance of a credit card receipt does not constitute a publication as required under the liability policy coverage for personal and advertising injury. The insured argued that the policy language “publication in any manner” is ambiguous. The appeals court looked to the dictionary definition of publication since the policy did not define the term, and said it means communication to the public, a public announcement, or the act or process of issuing copies for general distribution to the public.

In this case, the court said, the insured allegedly violated FACTA by issuing credit card receipts that contained more than five digits of the credit card numbers or the expiration dates. The receipt, the court noted, is a contemporaneous record of a private transaction between the insured and the customer, and the insured neither broadcasted nor disseminated the receipt or the credit card information to the general public; indeed, the insured provided the receipt only to the individual customer. This does not involve publication to the general public and does not constitute publication within the meaning of the general liability policy.

The ruling of the district court was affirmed.

Editor's Note: Coverage B in the CGL form applies to personal and advertising injury claims and part of the definition of personal and advertising injury includes oral or written publication in any manner that violates a person's right to privacy. The insured tried to expand the definition of publication to include the providing of a written receipt, but both the district court and the circuit court ruled that providing a customer with a contemporaneous record of a retail transaction does not involve the dissemination of information to the general public and that is what is required in a “publication.”

Misappropriation of Likeness Claim and Intellectual Property Rights Exclusion

The insured business brought an action against its insurer alleging that the insurer breached its duty to defend or indemnify the insured in an underlying lawsuit regarding the insured's unauthorized use of a model's image. This case is Aroa Marketing, Inc. v. Hartford Insurance Company of the Midwest, 198 Cal.App.4th 781 (2011).

While the Hartford policy was in effect, Aroa hired a model named Tara Radcliffe to film an exercise video for Aroa's business. According to Radcliffe's subsequent lawsuit against Aroa, the video was to be used at the consumer electronics show and on the show's internet site. However, Aroa allegedly also used Radcliffe's image and likeness to sell and market products, including products unrelated to the exercise equipment featured in the video. When Radcliff demanded compensation for this use, Aria failed to pay and continued to use her likeness. Radcliff sued and Aroa forwarded the complaint to Hartford . The insurer declined coverage.

The insured filed a lawsuit seeking coverage and the trial court ruled in favor of the insurer. This appeal followed.

On appeal, Aroa contended that the trial court erred in ruling for the insurer because the statutory and common law misappropriation of likeness claims in Radcliffe's lawsuit fall within the scope of the policy's coverage for the right to privacy claims. The insured also claimed that the policy exclusion for privacy claims arising out of intellectual property rights was inapplicable. The insurer argued that Radcliffe's claims are distinct from any right of privacy and thus, fall outside the scope of coverage.

The appeals court noted that the policy provided that it would cover damages for personal and advertising injury arising out of oral, written, or electronic publication of material that violates a person's right of privacy. And, the court continued, Radcliffe's claims were right of publicity claims and such claims have been identified as falling within the rubric of right of privacy claims. The court recognized state law that treated right of publicity claims as a subset of privacy claims and so, it found that the claims asserted by Radcliffe fell within the insurance policy's coverage for right of privacy claims.

However, the insurer contended that the intellectual property rights exclusion in the policy applied in this case. This exclusion applied to coverage for injury arising out of any violation of any intellectual property rights such as copyright, patent, trademark, trade name, trade secret, service mark, or other designation of origin or authenticity. The insured said that the exclusion did not apply because the right of publicity is not specifically listed in the exclusion. The appeals court agreed with the insurer.

The court said that the exclusion applies when the injury arises out of any violation of any intellectual property rights. Even if this language is interpreted narrowly against the insurer, the court said, it clearly applies to bar claims based on the right of publicity, as that right has been held to be an intellectual property right. The fact that the right of publicity is not specifically listed after the phrase “any intellectual property rights” did not suggest to the court that the exclusion was not applicable.

The finding of the trial court was affirmed.

Editor's Note: The appeals court equated the right of publicity with intellectual property based on previous court rulings that the right of publicity, like copyright, protects a form of intellectual property that society deems to have some social utility. Holding that the right of publicity is an intellectual property right, the court found that the intellectual property rights exclusion in the policy clearly applied.

Trade Dress Infringement and Unfair Competition Claims

The insured company and two of its officers brought an action against the insurer seeking a declaration that the insurer was required to reimburse the insureds for costs and expenses incurred in defending two lawsuits. This case is Bridge Metal Industries, L.L.C. v. The Travelers Indemnity Company, 2011 WL 3962581 ( USDC, S.D. NY).

Bridge Metal began to manufacture and assemble lighting fixtures exclusively for National Lighting Company. Pursuant to a confidentiality agreement, National provided Bridge Metal with confidential information to enable Bridge Metal to manufacture National's products. National later learned that Bridge Metal was using the information to manufacture, market, and sell products apparently identical to National's. According to National, Bridge Metal's lighting fixtures were so similar in appearance to National's and infringed on National's distinct trade dress such that there is a substantial likelihood the general consuming public will be confused as to the identity and origin of Bridge Metal's fixtures. National sued Bridge for trade dress infringement, trade dress dilution, false advertising unfair competition, breach of contract deceptive trade practices and other items.

After receiving tender of the complaint against its insured, the insurer declined coverage on the grounds that the complaint did not allege either property damage or advertising injury as defined in the liability policy. The insured brought this action for declaratory judgment.

The district court found that the only issue was whether the insurer had a duty to defend the insured and thus, is required to reimburse the insured for the cost and expenses incurred in defending the underlying actions. In order to trigger the duty to defend, the court said that National must have alleged in its complaint an injury that constitutes one of the offenses enumerated in the policy's definition of advertising injury, and an injury that was caused by an offense committed by Bridge Metal in the course of advertising its goods, products, or services.

The policy definition of advertising injury included an injury arising out of infringement of copyright, title or slogan. The insured said that National's trade dress infringement and unfair competition claims allege title infringement. The insurer said that an endorsement specifically deleted any coverage for trade dress infringement by replacing “trade dress” in the definition with “title”. The court found that the meaning of “title” is not clearly established by either New York or federal case law. However, Black's Law Dictionary and other courts that have addressed trademark claims show that “title” can cover the designation by which something is known. In this instance, National clearly asserted that Bridge Metal injured it by copying the distinct trade dress by which National claims its products are widely known. Accordingly, since there was uncertainty as to whether National's claims of trade dress infringement could be considered an infringement of title, the insurer had an obligation to defend the insured.

The court next addressed the issue of whether the offense was committed in the course of advertising. Bridge Metal alleged that the complaint claimed injuries because Bride Metal marketed the products to customers. Travelers countered that the complaints do not allege that the offense was committed in the course of advertising because the alleged infringement was the manufacturing and sale of the lighting fixtures as opposed to any advertising of Bridge Metal's products. The court said that, based on case law, the insurer was correct that the causal connection has been found lacking where the complaint alleges injury solely from the manufacturing and selling of infringing goods. And the court said that the insurer was correct in that some courts have found allegations that the insured advertised the infringing goods insufficient to trigger coverage absent allegations that the advertisements themselves caused some injury. However, in this case, the complaint alleged harm due to the marketing and portrayal of the goods to the public based on the infringing trade dress and this put the complaint in the advertising activity area.

The district court dismissed the potential exclusions offered by Travelers by saying that the insurer had not shown that all of the claims in the complaint are solely and entirely within the policy exclusions. Accordingly, the insurer was required to defend the insured in the entire action.

The insurer's motion to dismiss was denied and the insured's motion for summary judgment was granted.

Editor's Note: Applying New York law, the U.S. District Court found that uncertainty as to whether claims of trade dress infringement and unfair competition constituted infringement of title triggered the insurer's duty to defend the insureds where the claims were based on alleged copying of distinct trade dress. Moreover, even though the court found much confusion in case law concerning when an advertising injury is caused by advertising within the meaning of standard general liability policies, it found that the harm in this case was allegedly due to the marketing and portrayal of the insured's goods to the public, and this met the common, everyday meaning of advertising.