The CGL Intellectual Property Exclusion Gets a Workout and Beats a Right of Publicity Claim Without Breaking a Sweat

October 12, 2011

In a recent decision, (Aroa Marketing, Inc. v. Hartford Ins. Co. of Midwest, 198 Cal. App. 4th 781 (2011)), the California Court of Appeals upheld a trial court dismissal (without leave to amend) of an insured’s suit for breach of the duties of defense and indemnity against its CGL insurer regarding underlying claims by an exercise video model of unauthorized uses of her image. The insured, Aroa Marketing, argued that the CGL insurer’s Personal and Advertising Injury coverage applied to the underlying claim. Specifically, the coverage applied to:

“personal and advertising injury” arising out of [o]ral, written or electronic publication of material that violates a person’s right of privacy.

The model alleged that her image was to be used only at the January 2007 consumer electronics show. However, in breach of contract with Aroa, she claimed that her image was used to sell and market other products including products unrelated to the equipment featured in the video, and demanded compensation for the unauthorized use. The model’s suit against Aroa included causes of action for statutory and common law misappropriation of likeness, breach of contract, unjust enrichment and unfair competition. She claimed that Aroa’s alleged unauthorized use diminished her marketability and her publicity value, and that she was “deprived of her right to publicity. Aroa supra at *1.

After receiving notice of the underlying suit, the insurer, Hartford Insurance Company of the Midwest (Hartford of Midwest) issued a denial letter based on the intellectual property exclusion in its policy. Aroa eventually settled the underlying suit, and then sued Hartford of Midwest which responded with a demurrer (seeking dismissal of the claim) on the grounds that the model’s underlying claims did not fall within the scope of the Personal and Advertising Injury coverage of its policy, and that such claims were expressly excluded by the policy’s intellectual property rights exclusion. The trial court dismissed Aroa’s complaint against the insurer without leave to amend, and Aroa appealed.

The California Court of Appeals sided with Aroa on the preliminary question of whether the underlying claims were within the basic scope of the Personal and Advertising Injury section of the policy. This coverage section provides coverage for certain enumerated offenses, including “[o]ral, written or electronic publication of material that violates a person’s right of privacy.” Aroa supra at *3. The court, citing the California Supreme Court’s decision in Comedy III Production v. Gary Sanderup, Inc., 25 Cal. 4th 387 (2001), traced the origin of the common law right of publicity to individual privacy rights recognized in the law.

The insured’s success in placing the claim within the scope of the insuring agreement was short-lived, however, because the court also found the underlying claims to be squarely within the scope of the policy’s intellectual property exclusion.

This provision (added to most standard CGL policies in 2001) excludes:

[p]ersonal and advertising 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.

Aroa argued that the exclusion was inapplicable because it failed to specifically mention rights of publicity. The court properly dispatched this argument noting that the use of the words “such as” before the specific examples of “copyright” etc. in the exclusion was “expressly non-exclusive” and that the California Supreme Court had previously determined that the right of publicity was an intellectual property right. Aroa, supra at *4. Noting that California law had settled the question of whether the right of publicity was an intellectual property right, the court found that the trial court did not abuse its discretion in refusing Aroa’s request for leave to amend. “[T]there is no reasonable possibility that Aroa can amend the complaint to allege the necessary facts to state a valid cause of action against Hartford of Midwest for failure to defend or indemnify it in the [underlying] lawsuit.” Id. at *5.

While the decision does not break new ground, it does provide an important scope check regarding the relatively recent addition of an intellectual property exclusion to the CGL policy. This result may also provide a boon to media liability insurers who expressly insure the content of the insured’s advertising in areas involving privacy rights and some, but not all, intellectual property rights. That is not to say that such content coverage policies would automatically respond to claims like those against Aroa. At its essence, the model’s underlying claims alleged the breach of an express contract between the model and the insured. Most content coverages expressly exclude such core business risks of the insured.

If you have questions, please contact Joseph S. Sano, a partner in Prince Lobel’s Insurance and Reinsurance Practice. You can reach Joe at 617 456 8000 or

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