October 16, 2011
Insurance, Intellectual Property Alerts

Intellectual Property Exclusion in CGL Policy Applies to Right of Publicity Claims
by Cyrus Wadia

An insurance policy provision excluding coverage for "personal and advertising injury" arising out of "any violation of any intellectual property rights" was found to preclude coverage for a model's lawsuit alleging misappropriation of likeness, ruled California's Second Appellate District Court.  Aroa Marketing, Inc. v. Hartford Insurance Company of the Midwest, Case No. B228051 (Cal.App.4th 2011). 

Aroa Marketing hired Tara Radcliffe to model in an exercise video for Aroa’s business. Ms. Radcliffe claimed that the exercise video was only supposed to be used at the 2007 consumer electronics show (CES) and CES’s website, but that Aroa also used her image to sell and market additional equipment in different media outlets. Radcliffe alleged that Aroa refused to pay her compensation for the unauthorized use, and sued Aroa for “statutory and common law misappropriat[ion] of likeness, breach of contract, unjust enrichment and unfair competition.”
During the period, Aroa held a Hartford Insurance Company of the Midwest commercial general liability insurance policy covering "personal and advertising injury," but excluding coverage for injury arising out of "any violation of intellectual property rights, such as copyright, patent, trademark, trade name, trade secret, service mark, or other destination of origin or authenticity." Aroa sought indemnification but Hartford denied the claim on the grounds that a model’s right of publicity was an intellectual property right excluded from coverage. Aroa then sued Hartford for indemnity.
The trial court sustained Hartford’s demurrer to the claim, and the Court of Appeal affirmed.  The Court noted that "coverage clauses are interpreted broadly so as to afford the greatest possible protection to the insured, whereas exclusionary clauses are interpreted narrowly against the insurer."  Here, the court found common law right of publicity derives from right of privacy, and as such, fell within the scope of coverage language.  However, right of publicity is also an intellectual property right (under California public policy) and thus was excluded from coverage under Hartford non-exhausive list of exclusions.  The Court also took the more extreme step of denying Aroa’s request for leave to amend the complaint finding "no reasonable possibility that Aroa can amend the complaint to allege the necessary facts to state a valid cause of action against Harford for failure to defend or indemnity it in the Radcliffe lawsuit."

 *** Mr. Wadia recognizes Jong Cho's assistance in the preparation of this alert.

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