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Insurer not covering "advertising injury" in IP case could be a case of insurance "bad faith"

Posted by Steve Vondran | Oct 31, 2019

Will insurance cover my intellectual property infringement case as a "advertising injury?"  Call us for policy review in copyright and trademark infringement cases, or where counterfeit goods are alleged.  For any bad faith insurance claim call us at (877) 276-5084.

advertising injury


Many times during an intellectual property infringement case (whether in a demand letter or after a federal court copyright case is filed), Defendants and potential defendants trying to settle their cases will look to their insurance policies to see if they have coverage (ex. a general liability insurance policy) or a "cyber" insurance policy.  Usually, whether coverage will be provided by your insurance company depends on the actual language of the policy and how "advertising injury" is defined and what the EXCLUSIONS are.  If an insurer has a "Duty to Defend" their failure to defend can lead to a lawsuit for bad faith insurance.  We can help persons and companies analyze their policies and see if a "tender" letter should be sent to the insurance company.  If they fail to defend when required, we can sue them for insurance bad faith if within our jurisdiction if we feel it is an appropriate case.  Here is sample language from one policy I recently review.  I have highlighted and added a question or two.

Sample "Advertising Injury" Insurance Language


1. Insuring Agreement

  1. 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.

  2. 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.

Watch Attorney Steve® explain California Insurance Bad Faith Intellectual Property

advertising injury insurance CA

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This insurance does not apply to:

a. Knowing Violation Of Rights Of Another

"Personal and advertising injury" caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict "personal and advertising injury".

b. Material Published With Knowledge Of Falsity

"Personal and advertising injury" arising out of oral or written publication, in any manner, of material, if done by or at the direction of the insured with knowledge of its falsity.

c. Material Published Prior To Policy Period

"Personal and advertising injury" arising out of oral or written publication, in any manner, of material whose first publication took place before the beginning of the policy period.

d. Criminal Acts

"Personal and advertising injury" arising out of a criminal act committed by or at the direction of the insured.

e. Contractual Liability

"Personal and advertising injury" for which the insured has assumed liability in a contract or agreement. This exclusion does not apply to liability for damages that the insured would have in the absence of the contract or agreement.

f. Breach Of Contract

"Personal and advertising injury" arising out of a breach of contract, except an implied contract to use another's advertising idea in your "advertisement".

g. Quality Or Performance Of Goods – Failure To Conform To Statements

"Personal and advertising injury" arising out of the failure of goods, products or services to conform with any statement of quality or performance made in your "advertisement".  (query - were there any statements of quality such as "this is an iPhone" when in fact it is not, it is a counterfeit)

h. Wrong Description Of Prices

"Personal and advertising injury" arising out of the wrong description of the price of goods, products or services stated in your "advertisement".

i. Infringement Of Copyright, Patent, Trademark Or Trade Secret

"Personal and advertising injury" arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. Under this exclusion, such other intellectual property rights do not include the use of another's advertising idea in your "advertisement".

However, this exclusion does not apply to infringement, in your "advertisement", of copyright, trade dress or slogan.

  1. Insureds In Media And Internet Type Businesses

    "Personal and advertising injury" committed by an insured whose business is:

    1. (1)  Advertising, broadcasting, publishing or telecasting;

    2. (2)  Designing or determining content of web sites for others; or

    3. (3)  An Internet search, access, content or service provider.

  1. However, this exclusion does not apply to Paragraphs 14.a., b. and c. of "personal and advertising injury" under the Definitions section.

    For the purposes of this exclusion, the placing of frames, borders or links, or advertising, for you or others anywhere on the Internet, is not by itself, considered the business of advertising, broadcasting, publishing or telecasting.

  2. Electronic Chatrooms Or Bulletin Boards

    "Personal and advertising injury" arising out of an electronic chatroom or bulletin board the insured hosts, owns, or over which the insured exercises control.

  3. Unauthorized Use Of Another's Name Or Product

    "Personal and advertising injury" arising out of the unauthorized use of another's name or product in your e-mail address, domain name or metatag, or any other similar tactics to mislead another's potential customers.

  1. Pollution

    "Personal and advertising injury" arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of "pollutants" at any time.

n. Pollution-related

Any loss, cost or expense arising out of any:

  1. (1)  Request, demand, order or statutory or regulatory requirement that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of, "pollutants"; or

  2. (2)  Claim or suit by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning

up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to, or assessing the effects of, "pollutants".

o. War

CG 00 01 04 13 © Insurance Services Office, Inc., 2012 Page 7 of 16


"Personal and advertising injury", however, caused, arising, directly or indirectly, out of:

  1. (1)  War, including undeclared or civil war;

  2. (2)  Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents; or

  3. (3)  Insurrection, rebellion, revolution, usurped power, or action taken by a governmental authority in hindering or defending against any of these.

Recording And Distribution Of Material Or Information In Violation Of Law

"Personal and advertising injury" arising directly or indirectly out of any action or omission that violates or is alleged to violate:

  1. (1)  The Telephone Consumer Protection Act (TCPA), including any amendment of or addition to such law (ex engaging in robocalling);

  2. (2)  The CAN-SPAM Act of 2003, including any amendment of or addition to such law (i.e. sending SPAM);

  3. (3)  The Fair Credit Reporting Act (FCRA), and any amendment of or addition to such law, including the Fair and Accurate Credit Transactions Act (FACTA); or

  4. (4)  Any federal, state or local statute, ordinance or regulation, other than the TCPA, CAN-SPAM Act of 2003 or FCRA and their amendments and additions, that addresses, prohibits, or limits the printing, dissemination, disposal, collecting, recording, sending, transmitting, communicating or distribution of material or information.

 As you can see, these are pretty broad exclusions and a case alleging willful infringement of copyrights (ex, unlicensed software installation allegations by Autodesk or the Business Software Alliance) or allegations of counterfeit (illegal activity) could raise problems with getting coverage.  Another class of cases that could invoke "advertising injury" are the Joe Hand Promotions, G&G Closed Circuit Events and Joe Hand Promotions illegal broadcasting piracy cases.  In these cases, typically there is a Facebook advertising post that triggers the investigation from firms like the Riley firm (Pasadena California) and Lonstein Law Office, P.C. (New York) or Jekielek & Janis, LLP.

Click here for more information about Boxing Piracy cases.

Advertising Injury Caselaw

In one case from the 9th Circuit, the Court discussed the definition of advertising injury

"The district court correctly determined Reliance's duty to defend was triggered by Valkyrie's complaint. The duty to defend under California law is a broad duty, encompassing not only covered claims but also claims that are "merely potentially covered." Buss v. Superior Court, 16 Cal. 4th 35, 939 P.2d 766, 773 (Cal. 1997).

An insured is entitled to a defense "if the complaint might be amended to give rise to a liability that would be covered under the policy." Reese v. Travelers Ins. Co., 129 F.3d 1056, 1060 (9th Cir. 1997) (quoting Montrose Chem. Corp. v. Superior Court, 6 Cal. 4th 287, 861 P.2d 1153, 1160 (Cal. 1993)). To determine whether the duty to defend was triggered, we must compare the allegations in the complaint with the terms of the policy. Valkyrie's complaint contained a specific claim for copyright infringement. Because the policy at issue covers "infringement of copyright, title, or slogan; arising out of advertising activities," the only question is whether the alleged infringement "arose out of advertising activities."

The policy does not define "advertising activities." The term should therefore [*3]  be assigned its commonly understood meaning within the context of the policy. See Foster-Gardner, Inc. v. National Union Fire Ins. Co., 18 Cal. 4th 857, 959 P.2d 265, 280 (Cal. 1998). "Advertising" is defined as "the action of calling something (as a commodity for sale, a service offered or desired) to the attention of the public especially by means of printed or broadcast paid announcements."

Webster's Third New International Dictionary (1986). Valkyrie alleged J.I.P. "infringed said copyright by causing manufacture, importing, distributing, displaying, selling and placing upon the market apparel items with artwork copied from the [Bear Logo]." Distributing, displaying, and selling involve calling a product to the attention of the public and therefore fall within the commonly understood meaning of "advertising activities."

Thus, Valkyrie's complaint alleged at least one potentially covered claim, particularly in light of California's requirement that "any doubt as to whether there is a duty to defend must be resolved in favor of the insured." 

J.I.P., Inc. v. Reliance Ins. Co., Nos. 97-55385, 97-55422, 1998 U.S. App. LEXIS 27538, at *2-3 (9th Cir. Oct. 23, 1998)

Other things insurance companies can do that may constitute BAD FAITH INSURANCE:

A. A person shall not commit or perform with such a frequency to indicate as a general business practice any of the following:

1. Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue.

2. Failing to acknowledge and act reasonably and promptly upon communications with respect to claims arising under an insurance policy.

3. Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under an insurance policy.

4. Refusing to pay claims without conducting a reasonable investigation based upon all available information.

5. Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed.

6. Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear.

7. As a property or casualty insurer, failing to recognize a valid assignment of a claim.  The property or casualty insurer shall have the rights consistent with the provisions of its insurance policy to receive notice of loss or claim and to all defenses it may have to the loss or claim, but not otherwise to restrict an assignment of a loss or claim after a loss has occurred.

8. Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by the insureds.

9. Attempting to settle a claim for less than the amount to which a reasonable person would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application.

10. Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of, the insured.

11. Making claims payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which the payments are being made.

12. Making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration.

13. Delaying the investigation or payment of claims by requiring an insured, a claimant or the physician of either to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information.

14. Failing to promptly settle claims if liability has become reasonably clear under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.

15. Failing to promptly provide a reasonable explanation of the basis in the insurance policy relative to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.

16. Attempting to settle claims for the replacement of any nonmechanical sheet metal or plastic part which generally constitutes the exterior of a motor vehicle, including inner and outer panels, with an aftermarket crash part which is not made by or for the manufacturer of an insured's motor vehicle unless the part meets the specifications of section 44-1292 and unless the consumer is advised in a written notice attached to or printed on a repair estimate which:

Contact an IP Litigation Attorney

We can help you review to see if you have coverage in your dispute.  If we determine coverage is required we can tender the claim to the carrier.  If they refuse to cover as required by law, a lawsuit for bad faith insurance lawsuit may be possible.  We can be reached at (877) 276-5084.  Our firm has previously represented a very large insurance carrier in subrogation matters so "we know a thing or two about insurance" as they say.  You can also fill out our contact form.


About the Author

Steve Vondran

Thank you for viewing our blogs, videos and podcasts. As noted, all information on this website is Attorney Advertising. Decisions to hire an attorney should never be based on advertising alone. Any past results discussed herein do not guarantee or predict any future results. All blogs are written by Steve Vondran, Esq. unless otherwise indicated. Our firm handles a wide variety of intellectual property and entertainment law cases from music and video law, Youtube disputes, DMCA litigation, copyright infringement cases involving software licensing disputes (ex. BSA, SIIA, Siemens, Autodesk, Vero, CNC, VB Conversion and others), torrent internet file-sharing (Strike 3 and Malibu Media), California right of publicity, TV Signal Piracy, and many other types of IP, piracy, technology, and social media disputes. Call us at (877) 276-5084. AZ Bar Lic. #025911 CA. Bar Lic. #232337

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