Hunton Insurance Recovery Blog

In September, we discussed a Florida district court’s finding that an insurer must defend a Miami strip club in a lawsuit filed by 17 models who alleged the club used their images to promote its business without authorization. Recently, an Illinois federal judge ruled similarly, ordering that First Mercury Insurance Company defend its insured, Triple Location, against a similar lawsuit.

In First Mercury Insurance Co. v. Triple Location LLC, three models sued the insured strip club after it allegedly published their images without consent. The models claimed the unauthorized postings created the false impression that they had agreed to promote the insured business, Club O, which harmed their image, brand, and marketability. The models also alleged that the club was negligent in failing to adopt and implement policies and procedures to prevent the misappropriation of images.

The insured tendered defense of the models’ lawsuit to First Mercury, which had issued a general liability policy under which the insurer agreed to defend the club against any suit seeking damages for “personal and advertising injury.” First Mercury denied coverage and filed suit in Illinois federal court seeking to extinguish any duty to defend. The insurer cited numerous exclusions in support of its denial, including the policy’s exclusion for “personal and advertising injury” caused by “the insured with the knowledge that the act would violate the rights of another” and cause injury. According to First Mercury, even though the complaint alleged negligence, when read as a whole, it revealed that the plaintiffs’ claims ultimately concerned the insured’s intentional misconduct, which was excluded from coverage.

The court disagreed and resolved the dispute based solely on the club’s alleged negligence. The court concluded “because conduct alleged in the underlying complaint arguably falls within at least one of the categories of wrongdoing” covered under the policies and is “not clearly excluded from coverage,” First Mercury must defend the entire underlying suit.

The Triple Location decision highlights the value of personal and advertising injury coverage to protect businesses in obscure or often-overlooked situations, such as lawsuits alleging intellectual property infringements. Personal and advertising injury coverage applies not only to claims of false arrest, malicious prosecution, and slander, but also to defamation, copyright infringement, and invasions of privacy. This is contrary to the common misconception that any claim tangentially related to intellectual property is somehow excluded from coverage, a fallacy we discussed in a prior post. Further, Triple Location is another decision that reinforces the value of broad defense coverage under general liability policies, where the insurer is required to defend if there is even the potential of coverage for a single claim alleged (such as negligence) and even if there are also allegations of potentially excluded conduct (such as intentional misconduct). Experienced coverage counsel can help maximize the value of these insurance assets and, if a claim arises, determine whether an insurer is required to defend claims arising from personal and advertising injuries.