Renovation at the Deli, the Return of Coverage B
The last time that we thought about Frank and Jimmy, Jimmy had just finished his work in Frank’s deli. You don’t remember Frank and Jimmy? You didn’t read those posts, you say? That’s no problem. Here’s Part 1 & Part 2 of their story so far.
In the spirit of this week’s class at Insurance Journal’s Academy of Insurance, we’re expanding Frank and Jimmy’s story. When we last saw them, Frank was really happy with the work that Jimmy did and he left some great feedback for him online.
The problems didn’t show up for a few weeks. Frank started to receive some complaints about the upstairs dining area. It seemed that the quality of the work wasn’t exactly what it appeared to be at the first. Frank tried to call Jimmy and get him to take a look and repair the issues. Over about a month, Frank had an increasingly difficult time reaching Jimmy. Eventually, he gave up on the phone and email. Frank took a different tactic. He took this conversation to social media.
Frank edited his original 5-star review to a 2-star review and changed his comment accordingly. “I hired Jimmy to build out a second-floor dining area for my restaurant. Everything seemed fine for a couple of weeks. Cracks started to appear in the floor… I tried to call, but I can’t ever reach Jimmy. He doesn’t stand by his work. He’s too busy drumming up new customers to worry about the customers he has already made promises to. Do not use this contractor! He uses substandard materials and once he cashes the check he’s gone.”
It wasn’t long before Jimmy heard about that 2-star review. Eventually, Jimmy’s business started to suffer from this online review. Jimmy filed a suit against Frank for libel. Frank knows that he has a CGL policy and figures that this might be liability because the agent explained that this policy was in case he was sued. Frank immediately calls his insurance agent, brings in the notice and asks the agent if he has coverage for this suit. Let’s see if he does.
Is this a covered suit?
As the sole proprietor of the deli, the deli and Frank are considered an insured on the policy. So far, so good. Looking now at the insuring agreements on the policy, we find that this is not a covered suit for Coverage A. Why? Jimmy isn’t claiming damages because of “bodily injury” or “property damage”.
What about Coverage B? That insuring agreement provides coverage for damages because of “personal and advertising injury” to which this insurance applies. This may work. We need to make sure that this suit, alleging libel, falls under the definition of “personal and advertising injury”.
The definition of “personal and advertising injury” includes the following: oral or written publication, in any manner, or material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services. So far, it still looks like this may be a covered suit.
Do any exclusions apply?
This is usually when things get tricky. Don’t worry, we aren’t going through all the exclusions, we’ll pick a few that might be likely to apply.
- Material published with knowledge of falsity. This exclusion requires that Frank knows that what he’s writing is not true. Since Frank believed that what he wrote was the truth, it doesn’t appear that this exclusion applies.
- Material published prior to policy period. The policy was in force when Frank published his reviews so this exclusion doesn’t apply.
- Electronic chatrooms or bulletin boards. This exclusion only applies to site that the insured has some control over. The policy is pretty specific: electronic chatroom or bulletin board the insured hosts, owns, or over which the insured exercises control. Frank doesn’t own or control the sites that he posted his reviews on. It doesn’t look like this exclusion applies.
As we look at this case, you might get the idea that we’ve left out an exclusion that might apply. You’re right. This exclusion requires more than a sentence or two to deal with. It’s not as simple as some of the other exclusions. It’s the knowing violation of rights exclusion. This one is a little harder to deal with. The problem comes in the language: that the act would violate the rights of another and would inflict “personal and advertising injury”. In this case, it is unlikely that the exclusion applies, but it still needs to be addressed.
The word ‘and’ in the middle of the exclusion means that Frank must have known that the act violated Jimmy’s rights AND that the violation would inflict P&AI. In this particular case, we can’t be sure that Frank knew that has statements violated Jimmy’s rights (if they did). We also can’t be sure that Frank knew that his reviews would be considered libelous. Many people have a mistaken understanding of libel. They think that a statement has to be damaging and false to be libelous. According to Black’s Law Dictionary online, libel is: defamatory statement published through any manner or media.
With our quick look at Coverage B on Frank’s CGL policy, it looks like he will probably find some coverage for the suit that Jimmy brought. What do you think? Is there something that I missed in my understanding here or a detail that you think needs to be brought out? I look forward to hearing from you.