A commercial general liability policy’s exclusion for violation of “intellectual property rights” precluded coverage for an insured’s alleged misappropriation of the claimant’s image and likeness. ( Aroa Marketing, Inc. v. Hartford Insurance Company of the Midwest (2011) WL 3672295)
Facts
Aroa Marketing, Inc. hired a model named Tara Radcliffe to film an exercise video for Aroa’s business. According to Radcliffe, Aroa was only authorized to use the video at the Consumer Electronics Show (CES) held in January 2007 and on CES’s internet site. Nevertheless, Aroa allegedly used Radcliffe’s image and likeness to market and sell products through media other than CES and its internet site. When Radcliffe discovered that Aroa was using Radcliffe’s image and likeness in media beyond what was allowed in their contract, Radcliffe requested that Aroa pay Radcliffe for such use. However, Aroa allegedly failed to pay Radcliffe and continued its unauthorized use of her image and likeness.
In response, Radcliffe sued Aroa for using her “likeness to sell and market products beyond that which was allowed under the contract.” According to Radcliffe, Aroa’s actions directly injured Radcliffe “in that her image and likeness was, and still is, being associated with and taken as an endorsement of the Aroa brand and its products such that it diminished her marketability and publicity value as a professional actor and model.” Radcliffe also claimed that as a direct and legal result of Aroa’s activities, Radcliffe was “deprived of her right to publicity.” Radcliffe’s complaint against Aroa contained causes of action for “statutory and common law misappropriation of likeness,” “breach of contract,” “unjust enrichment” and “unfair competition.”
Aroa tendered defense of the lawsuit to its general liability insurer, Hartford Insurance Company of the Midwest. The Hartford policy provided that Hartford would indemnify Aroa against damages because of “personal and advertising injury” not otherwise excluded. The policy further provided that Hartford would defend Aroa against any suit seeking covered damages. Hartford declined to defend Aroa against Radcliffe’s lawsuit, asserting that (1) Radcliffe was not seeking damages against Aroa because of “personal and advertising injury” as defined in the Hartford policy, and (2) in any event, Radcliffe’s claims against Aroa were barred from coverage by the policy’s exclusion for violation of “intellectual property rights.”
Following Hartford’s denial of coverage, Aroa settled Radcliffe’s lawsuit. Aroa then sued Hartford alleging that Hartford had breached its duty to defend and indemnify Aroa against Radcliffe’s claims. The trial court ruled that the Hartford policy did not potentially cover Aroa’s alleged liability to Radcliffe in the underlying action. Thus, the trial court dismissed Aroa’s lawsuit against Hartford. Aroa appealed.
Holding
The Court of Appeal affirmed the dismissal in favor of Hartford.
The appellate court began by holding that in the underlying action, Radcliffe had sought damages from Aroa because of “personal and advertising injury” as defined in the Hartford policy. The appellate court reasoned that Radcliffe’s “misappropriation of likeness” claim was a “right of publicity” claim, which has traditionally been categorized as a type of “right of privacy” claim. The court then noted that the Hartford policy defined “personal and advertising injury” so as to include “oral, written or electronic publication of material that violates a person’s right of privacy .” Thus, according to the appellate court, Radcliffe’s claim against Aroa did fall within the scope of the Hartford policy’s insuring agreement for “personal and advertising injury.”
Nevertheless, the appellate court held that Radcliffe’s claim against Aroa was barred from coverage by the Hartford policy’s “intellectual property rights” exclusion. That exclusion precluded coverage for personal 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.” According to the appellate court, the “right of publicity” is an “intellectual property right.” Thus, Radcliffe’s claim for right of publicity (i.e., misappropriation of likeness) against Aroa fell squarely within the broad language of Hartford’s intellectual property rights exclusion. The intellectual property rights exclusion did not have to specifically refer to the “right of publicity.”
Since Radcliffe’s underlying lawsuit against Aroa was not potentially covered by the Hartford policy, Hartford was under no duty to defend Aroa against Radcliffe’s lawsuit. As such, Aroa could not state a claim for breach of contact or bad faith against Hartford.
Comment
In a prior case, S.B.C.C., Inc. v. St. Paul Fire & Marine Ins. Co. (2010) 186 Cal.App.4th 383, another California state appellate court held that an intellectual property rights exclusion barred coverage for allegations that an insured misappropriated the claimant’s trade secrets. In the Aroacase discussed above, the appellate court held that the exclusion precluded coverage for allegations that an insured misappropriated the claimant’s likeness. It is thus evident that with a properly-worded exclusion, a general liability insurer can avoid having to provide coverage to insureds for claims arising out of alleged rights to “intellectual property” (i.e., creations of the mind).