Coverage Analysis
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BROAD FORM COVERAGES

“Personal injury” coverage, as used in an insurance policy, has a “highly specialized meaning.”   3 California Insurance Law and Practice (Bender edition 1988), Section 49.403 at Page 46-49.  “It does not mean physical damage to a person; rather it means injury arising out of one or more specified offenses.”  Id.

The California Court of Appeal has ruled that “advertising” requires evidence that the claim against the insured is based on the “widespread distribution of promotional material to the public at large trade.”  In Peerless Lighting Corporation v. American Motorists Insurance Company, No. A082975 (1st Dist. August 4, 2000), the First District declared that “advertising injury” coverage was not triggered by the insured’s showing a tailor-made product to a single customer in the course of a competitive bidding process.  Accord, Zurich Ins. Co. v. Amcor Sunclipse North America, No. 00-1455 (7th Cir. February 23, 2001)(person to person solicitation deemed not to be “advertising” under California law).

The California Court of Appeals ruled in Ziman v. Firemans Fund Ins. Co., 73 Cal. App.4th 1382, 87 Cal. Rptr.2d 397 (1999) that allegations that the insured hung a paintings in his hotel lobby without authorization was not “advertising.”  The hanging of the plaintiff’s painting did not convey information and was merely intended to make the lobby more attractive.

n the most important “advertising injury” case to be decided by the court since Bank of the West, the California Supreme Court ruled in Palmer v. Truck Insurance Exchange, 21 Cal.4th 1109, 988 P.2d 568 (1999) that coverage for “infringement of copyright or of title or of slogan” only extends to claims for infringement of the names of literary or artistic works or names that are “slogans,” not to other names.  In rejecting the insured’s contention that coverage extend to unfair competition claims that the insured had wrongfully utilized colored flags, signs and slogans that the plaintiff was using for a competing real estate development.  The court held that the term “title,” read in the broader context of the policy, can only mean the name of a literary or artistic work, and did  not extend to any claim based on “formal right of ownership of property.”  Further, although the underlying suit alleged that the insured had used a slogan in its own marketing, the Supreme Court declared that there was no indemnity obligation as the jury’s award had been based upon the insured’s infringing use of a trademark.  “The infringing use of a trademark that is merely a word and a phrase used as a slogan is not the same as the infringing use of a slogan which would give rise to coverage under the policy.”  

Whether “advertising injury” coverage extends to trade dress claims is an issue now pending before the California Supreme Court in Aloha Pacific, Inc. v. California Insurance Guaranty Association, No. S087186 (Cal. 2000).

Coverage for “wrongful entry” has been held to encompass trespass claims even if those claims do not involve a specific intent to dispossess the plaintiff of the underlying property.  In Kazi v. State Farm Fire & Casualty Co., B089804 (Cal. App. March 29, 1999), rev’d on other grounds 2001 Cal. LEXIS 22 (Cal. January 18, 2001), the Court of Appeal declared that “wrongful entry” was ambiguous and should be interpreted in favor of coverage for allegations that the insured had trespassed upon a plaintiff’s property by building a driveway through a disputed parcel.

Earlier, the California Court of Appeals ruled in Titan Corp. v. Aetna Cas. & Sur. Co., 22 Cal. App. 4th 457, 27 Cal. Rptr 2d. 476 (1994) and Legarra v. Federated Mutual Insurance Company, 35 Cal. App.4th 1472, 42 Cal. Rptr.2d 101 (3d Dist. 1995) that claims for trespass and nuisance in environmental liability suits were not a claim for "personal injury."  See also Union Oil Co. of California v. International Ins. Co., 37 Cal. App.4th 930, 44 Cal. Rptr.2d 4 (Cal. App. 1995), review denied, S048683 (Cal. October 18, 1995)(no coverage for clean up of leaking gas tanks); W. H. Breshears, Inc. v. Federated Ins. Co., 38 F.3d 1219 (9th Cir. 1994)(full text at 1994 U.S. App. LEXIS 29245); East Quincy Services District v. Continental Ins. Co., 864 F.Supp. 976 (E.D. Cal. 1994)(such arguments would turn pollution exclusion into a "dead appendage").  

Earlier federal cases had split on this issue.  See Hirschberg v. Lumbermen's Mutual Cas. Co., 798 F.Supp. 600 (M.D. Cal. 1992)(finding coverage for trespass claims) and Houston General Ins. Co. v. AG Production Co., 840 F.Supp. 138 (E.D. Cal. 1993)(no coverage).

However, the Court of Appeal ruled in Martin Marietta Corp. v. Ins. Co. of North America, 40 Cal. App. 4th 1113, 47 Cal. Rptr.2d 670 (2d Dist. 1995) that the analysis of these cases was based on the fact that the policies contained an unambiguous pollution exclusion.  Where the policies pre-date 1970 or otherwise lack such an exclusion, the court held that the underlying claims against Martin Marietta potentially alleged a claim for "wrongful entry of eviction or other invasion of the right of private occupancy."  Since the government's claims at these various Superfund sites included allegations based on nuisance statutes and common law theory of liability for trespass nuisance, the court held that INA had not met its burden of establishing that the underlying claims were outside the scope of this "personal injury" coverage.  Further, the court rejected INA's contention that the EPA did not own or occupy the polluted property, finding that the CERCLA claims were also intended to protect the property of individuals and businesses whose well water and land had become polluted by contaminants escaping from the subject sites.  

Despite this broad holding, the Second District has since ruled in Interstate Truck Insurance Exchange v. Interstate Brands Corp., No. B087522 (Cal. App. October 2, 1996) that its holding in Martin Marietta is restricted to situations in which the policy lacked a pollution exclusion and only insured "personal injury," not "property damage."  More recently, the Ninth Circuit has distinguished Martin Marietta.   In Lakeside Non-Ferrous Metals, Inc. v. Hanover Ins. Co.,172 F.3d 702 (9th Cir. 1999), the Ninth Circuit declared that “California courts refuse to write a pollution exclusion out of an insurance policy by recasting a property damage claim as a personal injury claim unburdened by a pollution exclusion clause.”

In a more recent case, the Second District has further found that allegations that the plaintiff suffered economic loss due to its inability to construct a dock because of the insured's failure to obtain the necessary permits, including environmental permits, have been found not to allege a claim for "personal injury" coverage.  In Wilmington Liquid Bulk Terminals, Inc. v. Somerset Marine, Inc., 53 Cal. App.4th 186 (2d Dist. 1997), the Second Appellate District ruled that the claims were based on the insured's claimed failure to comply with its contractual obligations and did not allege any tort theory of liability for which liability insurance should respond.  Further, the court declared that the claims did not in any event allege an "invasion of the right of private occupancy" as the plaintiff never alleged that there had been an interference with the use of real property which it had never occupied or possessed.  Rather, the claim was merely based on an alleged interference with an expectancy of future use of the terminal under an executory contract which did not convey and interest in real property.  In the absence of existing ownership interest that had been interfered with, the court refused to find coverage.  The court refused to find that the plaintiff's constituted a demand for "loss of use" of the marine terminal as the plaintiff was only intended to require a license to use the premises, not a lease.  Since the claim was based upon a loss of use, if at all, of the insured's own property, not the property of others, the court held that there was no property damage.

The Court of Appeal has pointed out that coverage for “wrongful entry, eviction or other invasion of the right of private occupancy“denotes disruptions of an ability of a landowner to actually occupy his property, not mere injuries to property.”   Stein-Brief Group, Inc.  v.  Home Indemnity Co., 65 Cal. App. 4th 364 (1998)( no coverage for claims involving pre-development problems with building lots since plaintiffs had not yet “occupied” the affected property.

More recently, however, the Court of Appeal ruled in Kazi v. State Farm Fire & Casualty Co., B089804 (2nd Dist. March 29, 1999), reversed on other grounds, 2001 Cal. LEXIS 22 (Cal. January 18, 2001) that allegations that the insured trespassed on the plaintiff’s property by building a driveway through an area to which the plaintiff had an easement alleged a claim for “wrongful entry” under the policies’ “personal injury” coverage.  The court refused to also find coverage under certain policies that only afforded coverage for “wrongful eviction,” however.

Where an employee was detained and interrogated before being fired for statements made during the interrogation, a federal court has found "personal injury" coverage despite a policy exclusion for "wrongful termination, harassment or coercion related to employment, or arising out of any other act or omission related to employment."   Magistrate Judge Chapman ruled in Zurich Ins. Co. v. Smart and Final, Inc., 996 F.Supp. 979 (C.D. Cal.  1998), that the exclusion was not "plain and clear" and refused to find that the "catch all" clause in the exclusion should be read to bar coverage for separate claims for false arrest or imprisonment that are otherwise specifically covered.

The Court of Appeals ruled in Tinseltown Video, Inc. v. Transportation Ins. Co.,  61 Cal. App. 4th 184, 71 Cal. Rpt. 2d. 371 (1998) that "wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises" is limited to interests in realty and did not extend to personalty claims.  The court also ruled in Sterling Builders, Inc. v. United National Insurance Company, G021514 (Cal. App. March 17, 2000) that allegations that the insured failed to make payments in return for easement rights did not give rise to “personal injury” coverage.  The Fourth Appellate District declared that in order to trigger coverage, the plaintiff must actually have trespassed or gone onto the plaintiff’s land and physically interfered with his rights of occupancy.

The Court of Appeal has refused to find coverage for patent or trademark infringement on the grounds that the specific reference in current policy forms to “copyright, title or slogan” make clear that the insurers did not mean to provide coverage for infringement of patents or trademarks.  Mez Industries, Inc. v. Pacific National Ins. Co., 76 Cal. App.4th 856, 90 Cal. Rptr.2d 721 (1999).

Sexual harassment claims were also held to be outside the scope of "personal injury" coverage in Lindsey v. Admiral Ins. Co., 804 F.Supp. 47 (N.D. Cal 1992).

The Ninth Circuit ruled in an unpublished disposition, that allegations of intentional and negligent interference with contract and prospective economic advantage would not be construed as a claim for defamation within the scope of a policy's "personal injury" coverage.  "Without additional context in the complaint, we will not read a defamation claim into a simple contract case."  CDM/I v. Reliance Ins. Co., 1996 U.S. App. LEXIS 2545 (9th Cir. February 1, 1996).

The California Court of Appeal has recognized that 1996 amendments to 35 U.S.C., § 271(a) expanded the scope of acts for which a claim for patent infringement might lie to include an offer to sell a patented device, which previously had been declared not to be an “infringement.”  The effect of the amendment was to render a patent infringement based on an offer to sell a coverable advertising injury.  Maxconn, Inc. v. Truck Insurance Exchange, 74 Cal. App.4th 1267, 88 Cal. Rptr. 2d 750, 754 (1999).  Earlier cases had universally ruled that patent infringement claims were not a covered advertising injury under the “copyright, slogan or title” provisions.  See Microtech Research, Inc. v. Nationwide Mutual Insurance Company, 40 F.3d 1968 (9th Cir. 1994) and National Union Fire Insurance Company of Pittsburgh v. Siliconix, Inc. 729 F. Supp. 77 (N.D. Cal. 1989).

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