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Insurer Must Bare All and Defend Strip Club Against Infringement Claims

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.

Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.National Law Review, Volume XI, Number 131

About this Author

Michael S. Levine Insurance Lawyer Hunton Andrews Kurth

Mike has more than 20 years of experience litigating insurance disputes and advising clients on insurance coverage matters.

Mike Levine is a partner in the firm’s Washington, DC office and a member of the firm’s Insurance Recovery team. Mike’s policyholder representation focuses on:

  • Property damage and business interruption claims, including COVID-19 losses
  • Event cancellation insurance counseling
  • Representations and warranties coverage
  • ...
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Geoffrey B. Fehling Associate Washington, DC Insurance Coverage Litigation

Geoff dedicates his practice to advising corporate policyholders and their directors and officers in complex insurance coverage matters, from placement of sophisticated insurance programs and policy reviews to claim advocacy through arbitration, litigation, trials, and appeals. As part of Hunton Andrews Kurth’s full-service insurance coverage practice, he works with clients to maximize insurance recoveries through policy analysis and audits, claims presentation and negotiation, alternative dispute resolution, and litigation.

Geoff regularly...

Casey Coffey Insurance Lawyer Hunton AK

Casey’s practice focuses on complex insurance litigation and advising policyholders in insurance coverage matters.

As an associate on the insurance coverage team, Casey represents commercial policyholders in all types of insurance matters from property coverage to bad faith claims. She is also a contributor to the firm’s Insurance Recovery Blog.

During law school, Casey interned for Justice Labarga on the Florida Supreme Court and the Honorable Dave Lee Brannon of the Southern District of Florida. She also served on...

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