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2 Insurance Coverage for Marketing and Advertising Risks July 24, 2013 Presented By: Shaun H. Crosner Fiona Chaney Dickstein Shapiro LLP 2 #112269

3 Introductions Shaun H. Crosner Associate, Insurance Coverage Group Shaun Crosner is an attorney in Dickstein Shapiro s Insurance Coverage Group. He is the leader of Dickstein Shapiro s Sports Insurance Practice, and he has written and spoken on a variety of topics related to entertainment and sports insurance. Mr. Crosner represents policyholders, including Fortune 500 companies and clients in the entertainment and sports industries, in disputes with their insurers and in a variety of other insurance coverage matters. He is also an editor and a primary author of the New Appleman Sports and Entertainment Insurance Law & Practice Guide. He was named a 2013 Southern California Rising Star in the area of insurance coverage by Super Lawyers Magazine. Fiona Chaney Counsel, Insurance Coverage Group Fiona Chaney is an attorney in Dickstein Shapiro s Insurance Coverage Group. She is the leader of its Entertainment Insurance Practice and a member of the Directors & Officers / Errors & Omissions and General Liability Practices. Ms. Chaney represents policyholders in disputes with insurers for a wide variety of policies, including commercial liability, (D&O), property, employment practices, business interruption, and media liability. 3

4 What Can Go Wrong with Marketing and Advertising Campaigns? Potential for Liability E.g., lawsuits alleging false advertising, misappropriation of advertising ideas, misappropriation of likeness, defamation, copyright infringement Death of an athlete or celebrity spokesperson Public scandal involving an athlete or celebrity spokesperson Damage to props, sets, wardrobe, or equipment used for filming, lighting, and sound Large contest payouts for prizes and promotions 4

5 Where to Look for Coverage Commercial General Liability Policies Media Liability Policies (E&O) Death and Disgrace Coverage Production Policies Prize Indemnity Insurance 5

6 Overview of Marketing and Advertising Liabilities False Advertising Misappropriation of Name/Likeness Infringing Upon Another s Slogan, Copyright, or Trademark Plagiarism, piracy, and other unauthorized use 6

7 Overview of Marketing and Advertising Liabilities Libel, Slander, and Defamation Disparagement Misappropriation of Advertising Ideas Breach of Contract Claims Scope of License Idea Submission 7

8 Duty to Defend Broader than the Duty to Indemnify Duty attaches if there is the potential for coverage Not necessarily limited to allegations in complaint Potential even if implied Applies even to meritless lawsuits Duty to defend is immediate and continuing Duty applies to entire lawsuit or claim Insurer bears burden of proving applicability of policy exclusions If conflict with the insurer, it must pay for independent counsel as part of the Duty to Defend Defense may be within or outside of limits Duty to Defend Duty to Indemnify 8

9 Duty to Indemnify Encompasses judgments and settlements falling within coverage Insurer s duty to settle Duty to Defend Duty to Indemnify Duty to fund reasonable settlement within policy limits 9

10 CGL Policies Advertising Injury Personal or advertising injury arising out of: Oral or written material that slanders or libels a person or organization or disparages another s goods, products, or services Oral or written publication of material that violates a person s right or privacy Note: this coverage is deleted in the ISO 2013 Form Misappropriation of another s advertising ideas or style of doing business Infringing upon another s copyright, trade dress, or slogan in an advertisement 10

11 CGL Policies Advertisement Standard ISO Form Definition: 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. For the purpose of this definition: notices that are published include material placed on the Internet or on similar electronic means of communication; and regarding web-sites, only that part of a web-site that is about your goods, products, or services for the purposes of attracting customers or supporters is considered an advertisement. 11

12 Key Advertising Injury Exclusions Intentional Conduct Exclusions Knowing Violation of Rights of Another Material Published with Knowledge of Falsity California Insurance Code section 533 Interpreted narrowly, and only apply in limited circumstances May not impact defense duty May not apply to vicarious liabilities 12

13 Key Advertising Injury Exclusions Material Published Prior to Policy Period Quality or Performance of Goods Wrong Description of Prices Unauthorized Use of Another s Name or Product Distribution of Material in Violation of Statutes Telephone Consumer Protection Act CAN-SPAM Act of 2003 Statutes prohibiting or limiting the sending, transmitting, communicating, or distribution of material or information 13

14 Key Advertising Injury Exclusions Infringement of Copyright, Patent, Trademark, or Trade Secret Some policies expand this list and include or other intellectual property rights Exclusion does not apply to infringement in your advertisement, copyright, trade dress, or slogan. Insureds in Entertainment, Media, and Internet Type Businesses Should be interpreted narrowly 14

15 Media Liability (E&O) Occurrence Cover losses that occur during the policy period Example: complaint alleges defamatory statements in 2011, which would implicate the insured s 2011 occurrence based policy Claims-Made Cover claims that are filed or otherwise asserted during the policy period Providing notice is key 15

16 Media Liability (E&O) Non-standard coverage tailored policy forms Includes defense and indemnity coverage Applies to Scheduled Media Defined as the vehicle through which matter is published, broadcast, or transmitted (e.g., newspaper, magazines, television, radio, or Internet) Also may cover subsidiaries and independent contractors performing services on behalf of the insured or any subsidiary of the insured 16

17 Media Liability (E&O) Coverage is similar to CGL but may provide broader coverage Defamation, libel, or slander Disparagement (including product disparagement) Invasion of rights of privacy/ publicity Copyright and trademark infringement 17

18 Media Liability (E&O) Idea submission and misappropriation of ideas under implied contract Breach of license agreement (relating to scope) Breach of agreement relating to product placement 18

19 Death and Disgrace Coverage What happens when your spokesperson dies or is the subject of a public scandal? 19

20 Triggering Event What triggers a loss under a death and disgrace policy? Cancellation or modification of advertising campaign because of: death or disability of insured spokesperson; or disgrace of insured spokesperson 20

21 What is Meant by Disgrace? Sample definition: Any criminal act or offense against public taste or decency committed by the insured person, or any situation or occurrence directly involving the insured person which degrades or brings that person into disrepute or provokes insult or shock to the community and reflects unfavorably upon the insured campaign or the insured, their principals, or their products 21

22 What Losses Are Covered? Depends on policy terms (non-standard forms) Potential forms of loss: Cost of reproducing advertising material with substitute spokesperson Cost of paying substitute spokesperson Sunk costs of media space already purchased but no longer usable Money paid to former spokesperson Cost of removing former spokesperson from product packaging 22

23 Application for Coverage When to start the process Coordination with insurance broker Warranties from insured spokesperson Lifestyle, consumption of alcohol, and drug use Medical Evaluation Some insurers require examination Price 23

24 The Claims Process Notice of Claim Look to policy for precise requirements Coordination and communication with broker and insurer Document all aspects of loss as incurred Checks, contracts, invoices, and receipts Be prepared to submit a proof of loss Limitations Period 24

25 Production Insurance 25

26 Production Insurance: Extra Expense Extra Expense Coverage typically provides: We agree to pay to you such loss (defined in [the policy]), not including loss of earnings or profit, as you shall sustain by reason of such extra expense as you necessarily incur in the event of the interruption, postponement, or cancellation of an insured production as a direct result of damage to or destruction of property or facilities caused by the perils insured against, used by you in connection with an insured production and occurring during the term of coverage

27 Production Insurance: Extra Expense What this typically covers: Losses from breakdown or malfunction of Generators Camera equipment Sound equipment Lighting equipment Computerized systems relating to these types of equipment 27

28 Prize Indemnity Insurance Low-cost promotion Provides indemnity coverage Typically requires verification of claim Examples Hole-in-one Half-court basketball shots Lotteries Coupon redemption 28

29 Questions? 29

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