South Texas College of Law Texas Insurance Law Symposium

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					Cutting Edge Insurance Litigation
   Issues: Chinese Drywall to
         Privacy Claims

           Nicholas E. Zito

           South Texas College of Law
       14 Annual Insurance Law Symposium
              January 21-22, 2010
       Chinese Drywall

   Drywall Manufacturing

 Mined with gypsum with additives (USA)
 Synthetic gypsum (Chinese)
Chinese Synthetic Gypsum
  Synthetic Gypsum is a by product of coal-fired power plants (fly
   ash), residue from coal combustion (sulfur dioxide) is scrubbed to
   create calcium sulfate (gypsum)
  Synthetics made in the USA are gathered from smokestacks after
   scrubbing resulting in a cleaner product
  Chinese synthetics contain impurities such as strontium sulfide –
   reacts with heat and moisture (humidity) to form hydrogen sulfide
  LA Times reports Chinese drywall also contains phosphogypsum,
   a radioactive substance banned for use in construction in the U.S.
   since 1989
  Imports began as a result of shortages caused by construction
   boom earlier in decade and reconstruction of homes in Gulf Coast
   following hurricanes in 2004-2005
Chinese Drywall Related
  Problems began in 2008 with the following
  complaints most likely due to off-gassing of
  hydrogen sulfide:
 Rotten egg smell;
 Corrosion: copper wire, AC evaporators,
  appliances, fire & sprinkler systems and
  various electronic systems
 Claimed illnesses and physical symptoms.
The back-side of this drywall (not normally
visible to the resident) is labeled as "MADE IN
The smaller sample (slightly gray in color) was
taken from drywall which was removed from the
home and replaced with new wallboard (white in
The ground wire connected to the green screw
is blackened and corroded. This wire should be
This bathroom fixture is pitted and
The copper coils on this air
conditioner unit are blackened and
This copper pipe is blackened
  Magnitude of Problem
 Product shortages following several hurricanes
  resulted in 500 million pounds or 7 million
  sheets being imported
 Installed in an estimated 100,000 homes per
  the Wall Street Journal
 Estimated cost of remediation at $100,000 per
  2400 sq. ft. home
 Per CPSC as of December 22, 2009 2,360
  incident reports from homeowners in 35 states
   CPSC Investigation
 Investigating adverse health affects (levels of
  formaldehyde from other building materials and
  hydrogen sulfide detected-synergistic affect?)
 Methods of identifying presence of Chinese
 November and December interim reports
 Contact with importers-companies have been
  ordered to contact CPSC before distributing
  any Chinese manufactured drywall from their
 Chinese drywall CPSC website
    Congressional and
   Governmental Action
 Several bills introduced into Senate by Florida and
  Louisiana Senators
    Drywall Safety Act of 2009;
    Mortgage Reform and Anti-Predatory Lending Act
       Involves study of property insurance for allegedly contaminated
    The Foreign Manufacturers Legal Accountability Act of 2009
       Easing joinder of foreign company in U.S. Courts;
       Requiring foreign manufacturers to retain business representative
        in state where it does significant business for purpose of service
        of process
       Foreign manufacturers to agree to be held accountable by U.S.
        courts when sued.
   Congressional and
  Governmental Action
 HUD Action
   Community Development Bloc Grant
   FHA insured homes – lenders instructed on
    December 22, 2009 to operate under FHA
    Type 1 Special Forebearance rules.
        Potential Parties
 Builders
 Sub-contractors
 Real Estate Developers
 US Distributors/or retailers
 Importers
 Manufacturer/related controlling entities
 US Manufacturers using synthetics
 Possibility U.S. manufacturers recycled Chinese
  drywall to make domestic drywall
 Numerous Chinese manufacturers identified in MDL
  action – 36 different variations of Chinese drywall
    Potential Legal Claims

   Negligence
   Strict Liability
   Breach of Contract
   Breach of Warranty
   DTPA
   Magnuson-Moss Warranty
      Damages Alleged
 Testing costs
   Air
   Tearing our of walls to identify Chinese product
 Replacement of walls/ceilings
 Replacement of wiring, corroded pipes,
  appliances, AC unites, fixtures, smoke
  detectors and sprinkler systems
 Loss of use
 Diminution of property value (stigma)
 Bodily injury (irritant effects)
 Legal Actions Pending
 MDL-2047 Chinese Drywall Litigation pending
  in New Orleans

 MDL website

 Knauf Plasterboard (Tianjin) Co. (KPT) entered
  into a pre-trial order accepting service as to
  homeowner Plaintiffs named in Omnibus Class
  Action Complaint by 12/2/09. Complaint
  cannot be amended to add new plaintiffs –
  avoid Hague Convention service problems
  Legal Actions Pending
 Class action suit filed in Federal court in December in
  New Orleans, lead Plaintiff is Sean Payton, head coach
  of the New Orleans Saints

 Lead Class counsel, Russ Herman, says additional 600
  plaintiffs who did not join first class action will be joined
  in new class action to be filed overseas.

 First bench trials on property damage involving Virginia
  Plaintiffs in MDL 2047 are to begin January 25, 2010
  against Taishan Gypsum Co.
  Legal Actions Pending
 Default judgment entered September 25, 2009 against Taishan
  Gypsum Co. in MDL action.

 LA Attorney General Buddy Caldwell filed suit in Orleans Parish
  on January 13, 2010 against multiple entities associated with
  Knauf Plasterboard (Tianjin), the primary manufacturer of Chinese
  drywall making its way into Louisiana. Other defendants are
  international and domestic manufacturers, distributors, importers
  and builders. Claims economic loss to state due to Chinese

 WCI Chinese Drywall Trust sues 14 insurers in Eastern District,
  Louisiana in January, 2010 asserting a declaratory judgment
  action and breach of contract claims.
  Legal Actions Pending
 Pro-active suit filed by Lennar Homes in Florida
      Common law indemnity
      Negligence
      Product liability theory
      Implied warranty
      Express warranty
      Breach of contract

 Lennar set aside 39.8 million to remediate at least 400
  homes: homeowner out up to 6 months – sign waiver
  of liability except as to BI claims
Legal Actions Pending

  Dec action on coverage; Builders Mutual Ins.
   Co. v. Dragas, et al in US Dist. Ct. in Virginia

  Actions vs. US Manufacturers: Swindler v.
   Georgia Pacific Gypsum, LLC filed in Florida
   alleges Magnuson-Moss Warranty claim for
   synthetic gypsum. GP says it has used
   synthetic gypsum for years without complaint.
First Party Coverage
Issues – HO Policies
  When did the loss occur? (Trigger coverage test that
   will be applied)
  Has there been direct physical loss to property?
  Is the loss due to inherent vice or latent defect?
  Is the loss due to corrosion?
  Is the loss caused by a pollutant?
  Is the loss due to faulty, negligent, inadequate or
     Design, specifications, workmanship, repair, construction,
      renovation or remodeling?
     Materials used in repair, construction, renovation or
Trigger of Coverage – HO
  Liability claims – “injury – in fact” trigger applied Don’s
  Building Supply, Inc. v. One Beacon Insurance Co.,267
  S.W.3d 20 (Tex. 2008)

  Pre – Don’s case law on trigger issue: Allstate
  Insurance Co. v. Hunter, 242 S.W.3d 137 (Tex. App.
  Ft. Worth, 2007) applied manifestation trigger

  Don’s probably trumps Hunter See: Injury-In –Fact
  Coverage-HO Policy View, October 2008 By
  R. Brent Cooper and Katie McClelland
    Direct Physical Loss
 “We insure against risk of direct physical loss to
 “property damage means physical damage or
  destruction of tangible property”
 Has the drywall sustained physical damage before
  manifestation of damage?
 Property must sustain damage from an external source
  to qualify as “direct physical loss or damage” – builders
  risk policy, Trinity Industries, Inc. v. INA, 916 F. 2d 267
  (5th Cir. 1990)
 Has there been property damage to other property?
 Damage from hydrogen sulfide to ac system
  evaporator or electrical systems
   Inherent Vice or Latent
 „We do not insure loss:
  3. caused by or consisting of
      a. wear and tear
      b. Inherent vice, latent defect or
         mechanical breakdown”
  Insuring agreement will most likely not cover
  the cost of removal or repair of “Chinese
  Drywall” due to the internal defect/sulfur
  Is there coverage for the corrosive effect of the
  hydrogen sulfide off-gassed by the Chinese

It is “property damage”

But policy does not insure loss:
  3. “caused by or consisting of:
     c. Smog, rust, or other corrosion”
Faulty or Defective Design
      or Materials
 “We do not insure against loss consisting of any of the
 c.  Faulty, negligent, inadequate or defective:
     2. design, specification, workmanship, repair,
     construction, renovation, remodeling……
     3. materials used in repair, construction, renovation or

 No coverage for repair or replacement of Chinese Drywall.

 But….. “ensuing loss” coverage?

      How about the damage to other property: black soot,
      electrical systems; HVAC coils?
The Pollution Exclusion

“We do not insure loss:
3. Caused by or consisting of:
   e. Discharge, dispersal, seepage, migration,
   release or escape of pollutants
   Pollutants means any solid, liquid, gaseous,
   or thermal irritant or contaminant, including,
   smoke, vapor, soot, fumes, acids, alkalis,
   chemicals and waste.”
Exclusion held not to be ambiguous: Noble Energy, Inc.
  v. Bituminous Cas. Co., 529 F. 3d 642 (5th cir. 2008).

 Under Texas law reasonable expectations of insured
 are not considered where policy exclusion is

  Pollution exclusion applied to preclude coverage for
  liability claim arising out of carbon monoxide exposure
  claim by apartment dweller which was caused by a
  blocked furnace vent. See Nautilus Insurance
  Company v. County Oaks Apartments, Ltd., 566 F. 3d
  452 (5th Cir. 2009). (Exclusion applied to contained
  pollutants as well, i.e. even if stayed within the
Q. Did the loss occur because of alleged
    “discharge or release”?
“To release-set free from confinement”

Q. Is Carbon monoxide a pollutant? It can be
   since it can be an irritant and in certain
   exposures can be fatal.

   Hydrogen Sulfide can be an irritant; it can
   cause damage.

How about Phosphogypsum?
  GL Coverage Issues

1. Is there an occurrence?

  Lamar Homes, Inc. v. Mid-Continent
 Cas. Co., 242 S.W.3d 1 (Tex. 2007)
 Allegedly defectively built foundation
 resulted in sheet rock and stone veneer
 cracks. Held: Damage to contractors
 work can be an occurrence.
     CGL Coverage Issues
2.   Is there property damage?

     Lessons from Lennar Corp. Great Amer. Ins. Co.,
     200 S.W.3d 651 (Tex.App. [14th] 2006, Pet. Denied) -
     “EFIS already in an unsatisfactory state when applied
     to homes because it is inherently defective.
     Therefore defective EFIS does not constitute
     property damage.”

     No coverage for removal of EFIS by Lennar.

     Coverage could exist for water damage to other
  CGL Coverage Issues

3. How many occurrences?

  Since Lennar was not a designer or
  manufacturer, each home it built and
  sold was a separate occurrence.
  ($250,000.00 SIR per occurrence
  equates with no insurance coverage)
  CGL Coverage Issues

4. Will the pollution exclusion apply?

   Most likely, yes. Typical policy
   language is unambiguous.

   Absolute pollution exclusion is pretty
   much “absolute”.
  CGL Coverage Issues

5. Your work exclusion/subcontractor

   Most small builders policies now have
   modified insuring agreement exempts
   coverage for property damage arising
   out of subcontractors work.
  CGL Coverage Issues

6. What about exclusion M, property
   damage to “impaired property” or
   property not physically injured?

   Lennar said this exclusion might apply
   to replacement of EFIS but not to the
   repair of the water damage to homes.
     CGL Coverage Issues
7.   What about the “sistership” exclusion?

     The recall or removal exclusion.

     Might apply to preventative measures – removal and
     replacement (there has been no formal government
     action yet, although it is expected)

     Exclusion would not apply to cost to repair other
     (water) damaged property per Lennar
Product Liability and DTPA
Indemnity Claims
  Section 82, TCRCP
    Innocent seller/retailer can claim indemnity from
    Sheet rock will be deemed a product – see K-2, Inc.
     v. Fresh Coat, Inc., 253 S.W.3d 386
     (Tex.App.Beaumont, 2008) EFIS applied by
     subcontractor was a product-they sold services and
    No indemnity for “independent liability” of seller
    (If sub pays GC based upon contractual liability
     claim – Section 82 independent liability exemption
     applies, See K-2
    No indemnity where manufacturer cannot be joined
     (if you can‟t get the Chinese manufacturer served)
Product Liability and DTPA
Indemnity Claims
  Section 17.555 Tex. Bus & Comm. Code
    Statutory indemnity may be claimed by
     contractor or sub against
     distributor/manufacturer where homeowner
     brings action under the DTPA.
Recommended Reading on
Chinese Drywall Claims
  Christopher Beltner and Joseph Hanna, “The
   Gathering Storm of Chinese Drywall Defect Claims”
   For the Defense, (June 2009) p. 36
  Caryn L. Daum, “The Emergence of Chinese Drywall
   Claims: A Look at First Party Coverage Issues” DRI
   Covered Events, Vol. 1 Issue 25
  Brian S. Martin and Rodrigo Garcia, Jr., “The Coverage
   Conundrum in Chinese Drywall Claims” Insurance
   Journal, (September 29, 2009)
  H. Lockwood Miller, III “Chinese Drywall: A Building
   Problem” DRI-The Voice, Vol. 8, Issue 43
Meet the „EDGE” – Not
  the Guy from U2
Nanotechnology: An Emerging Risk
 Nanotechnology: Things built on a molecular
 Already appears in numerous products
 Evidence of EHS (environmental health &
  safety risks)
 EPA is conducting a study
 Touted as the next “asbestos” tort as “nano
  tubes” are claimed to be similar to asbestos
  particles – airborne and skin exposure

 Major carriers issued CGL exclusions in

     Continental Western
     Firemen‟s Insurance of Washington, D.C.
     Union Insurance Company
     Acadia Insurance Company

 This “endorsement excludes bodily injury,
  property damage, and personal and advertising
  injury related to the exposure of nanotubes and
  nanotechnology in any form. This includes the
  use of, contact with, existence of, presence of,
  proliferation of, discharge of, dispersal of,
  seepage of, migration of, release of, escape of,
  or exposure to nanotubes or nanotechnology.”

 There are already ads and website for
  “carbon nano tube attorneys”

 For more see
 BPA Suits

Insureds Left Out in the Cold?
           BPA Suits

 Bisphenol A: MDL No. 1967 U.S. Dist.
  Court Kansas
   No bodily injury alleged to avoid denial of
    class action
   No coverage per Federal Court ruling in
    Chicago as no “bodily injury” alleged
   Potential mass tort due to wide spread
             BPA Suits

   Carriers adding BPA policy exclusions
   Pending Congressional bills in both houses
   Potential “BI” claims
   See Dwyer, “Endocrine Disruption Injury
    Claims” For the Defense (January 2010) p.
Mr. Rico Gets Introduced
to Mr. Worker‟s Comp
Brown v. Cassens Transport,
Co., 546 F.3d 347 (6th Cir. 2008)
  U.S. Supreme Court ordered 6th Circuit to
   reconsider whether Plaintiffs could proceed
   with RICO claim arising out of handling of
   worker‟s comp claim
  6th Circuit said yes and that state WC statute
   did not preempt the RICO claims
  Suit will decide whether the employer, the TPA
   and the doctor acted in collusion to produce
   “fraudulent medical opinions that would support
   the denial of worker‟s comp claims
 Worker‟s comp cases on their own would not
  make it to Federal Court
 Exposure to treble damages and attorney‟s
 Incentive to claimants and their counsel to
  challenge the parameters of the state worker‟s
  compensation system
 Practice point: be careful with your choice of
  IME physicians
“It‟s Not Easy Being
Green” – Get Ready for
Another Type of Green

Kermit had it wrong – we are
heading “green” and insurers are
getting ready
 Massive growth in commercial and residential
  green construction forecasted
 Growth in rebuilding green
 LEED certification: Leadership in Energy and
  Environmental Design program sponsored by
  U.S. Green Building Council
 Insurers began writing “green coverage” in
 Policies cover re-certification of formerly
  “green” buildings
 Homeowner policies that allow for rebuilding to
  meet green building standards
 Green Reputation Coverage – see AIG
  endorsement (greenwashing coverage?)
 Coverage for an “adverse green publicity
  event” – negative media reporting
 AIG pays for your “reputation crisis
  consultant” (but AIG designates who that
 Defense of an “adverse green claim” –
  civil suit demanding monetary or non-
  monetary relief alleging your failure to
  comply with “green building” standards
 Protection from the Sierra Club?
Types of “Green” Claims
 Indoor Air Environment Claims: pollution exclusion
  would apply but not if you purchased the new “Indoor
  Environment Coverage” (also offered by AIG and
  perhaps others)
 New Product Liability claims from new and untested
    Use of recycled materials – concrete made from blast furnace
     slag i.e. “fly ash” – isn‟t this what is in Chinese drywall?
    Products that fail to live up to the touted “green standard” –
     warranty claims, DTPA claims, Magnuson-Moss warranty
    Product degradation due to green useage – cork board flooring
     near moisture sources such as water fountains/office kitchens
     resulting in water damage or mold growth
Types of “Green” Claims
 Design defect and installation claims
   Altering construction processes to go green-
    adverse performance
      Martin and Polk County courthouses in Florida-
       increased outdoor air influx caused massive
       mold damage
     Remember what happened with EFIS!
   Return of the “sick building” claims – use of
    untested materials or using traditional
    materials in non-traditional ways
Types of “Green” Claims

 Problems arising from a lack of qualified
 Professional liability of engineers and
  architects for certifying a building as
  being “green” – potential exclusion from
  coverage due to exclusion of claims for
  breach of warranty
For more see:

  Industry report by Marsh, “The Green
   Built Environment in the United States:
   The State of the Insurance Marketplace”
  T. Sky Woodard and Erin C. Miller,
   “Green Expectations: New Risks for
   Manufacturers Take Root” For the
   Defense, (December 2009) p. 44
An Inconvenient Truth:
Global Warming Lawsuits are Here

  Fifth Circuit remands “global warming” case for
   enhanced Katrina damages following dismissal
   see Ned Comer, et al v. Murphy Oil USA et al,
   (5th Cir. 10-16-2009)
  Suit alleges defendants activities caused
   emission of greenhouse gases that contributed
   to global warming that in turn made Katrina
   more ferocious causing private and public
   property damage
An Inconvenient Truth:
Global Warming Lawsuits are Here

  5th Circuit holds Plaintiffs have standing to sue

  Court relied upon U.S. Supreme Court decision
   in Massachusetts v. EPA, 549 U.S. 497 (2007)
   – suit brought against EPA for failure to
   regulate greenhouse gas emissions allegedly
   leading to rising strength of hurricanes. The
   high 9 also recognized the impact of Katrina is
   arguably a result of this causal link.
An Inconvenient Truth:
Global Warming Lawsuits are Here

  Note these are standing cases and Plaintiffs
   must still overcome the Daubert or “scientific
   evidence” issues on causation that exist.

  The EPA officially ruled that greenhouse gases
   are a public health threat under the Clean Air
   Act on December 7th – what will come next??
An Inconvenient Truth:
Global Warming Lawsuits are Here

  Coverage Issues are Abundant:

    Not an occurrence-expected/intended

    Loss in progress rule

    Pollution exclusion
For More See:

  Max H. Stern and Jessica E. La Londe,
   “Keep it Cool: Potential Coverage
   Defenses to “Global Warming” Lawsuits,
   Coverage” ABA Litigation Section Vol.
   19, Number 4, p3, (July/August 2009)
        Internet Liability

 Privacy Liability
     Publication of personal information
     No right through employment?
     Failure to keep data secure
     Potential Exposure for Lawyers

 Network Security Liability
Internet Liability

  Defamation
    Outing the Bloggers
  Bloggers Liability for Endorsing Products
   or Services (New FTC Rules)
  Technology E&O Claims
  Traditional Coverage: Personal Injury
  Web Liability Coverage
Invasion of Privacy Claims

  Intrusion of seclusion
  Name or likeness appropriation
  Publication of private facts (traditional cause of
   See Cain v. Hearst Corporation, 878 S.W.2d
   577,578 (Tex. 1994)

  Placing private information on the internet is
  enough to satisfy the publication element of the
  cause of action
Invasion of Privacy Claims

  Is there an internet exception to the publication
  (6 views) – Minnesota “Rotten Candy” case –
   3rd person sets up myspace profile with
   Plaintiff‟s photo and personal information
  Restatement Torts (Second) Sec. 652D
   Comment a: “it is not an invasion of privacy to
   communicate a fact…to a single person, or
   even to a small group of people.”
Invasion of Privacy Claims

  Defendant emailed photos he took of his
   ex-girlfriend (from a threesome) to her
   mother, ex-husband and ex-in laws as
   well as her employer. Held – half dozen
   or so emails was enough to be
   considered a publication
    Peterson v. Moldofksy, 2009 WL 3126229
     (D. Kan. September 29, 2009)
Invasion of Privacy Claims

  Intrusion upon seclusion: Steinbach v.
   Village of Forest Park, 2009 WL 2605283
   (N.D. Ill. Aug. 25, 2009)

  Accessing another persons emails and
   forwarding to others (suit included as
   defendant an IT professional employed
   by the employer)
Invasion of Privacy Claims

  Unauthorized prying into plaintiff‟s
  Intrusion would be highly offensive to
   reasonable person
  Matter intruded upon was private
  Intrusion caused Plaintiff to suffer
Invasion of Privacy Claims

  Federal Wiretap Act and Stored
   Communications Act – employer not
   exempt where the actual internet provider
   was an outside entity
  Cloud computing rather than in house
   hosting of email service opens employers
   to potential liability – loss of “no
   expectation of privacy” defense
Invasion of Privacy Claims

  Electronic Communication Privacy Act
   (18 U..S.C. 2511) Brahmana v. Lembo,
   2009 WL 1424438 (N.D. Cal. May 20,

    Suit alleging employer violated the act using
     a keylogger to intercept username and
     password for Plaintiff‟s personal email
Invasion of Privacy Claims

  Divorce Spywear: Becker v. Toca, 2008
   WL 4443050 (E.D. La. Sept. 2008)

    Plaintiff‟s ex-wife installed a Trojan Horse on
     home computer and office computers that
     could steal passwords and send to a remote
Invasion of Privacy Claims

  Are IP addresses private?

  State of New Jersey v. Shirley Reid (N.J.
   Sup. 2008)
    ISP violated internet users‟ right to privacy
     by turning over user account information
     based upon an invalid subpoena
Liability for Loss of Client‟s
Personal information
  Randolph, et al v. ING Life Insurance and Ann.
   Co., 2009 D.C. App. LEXIS 23 (2009).

    Laptop stolen from ING employee‟s home which
     had personal information of 13,000 perople in an
     employer‟s 401k plan on it. Held – no standing on
     invasion of privacy and negligence claims as fear of
     future harm was not an “injury”.
Red Flags Privacy Rule
  Lawyers dodge a bullet

    New regulations adopted by FTC under Fair and
     Accurate Credit Transactions Act of 2003 requires
     implementing programs to identify, detect and
     respond to warning signs of identity theft.

    FTC interpreted to include lawyers and law firms

     ABA brings suit and successfully challenged FTC‟s
     authority to include lawyers
Bloggers Beware!
     Defamation
         Eric Albritton v. Cisco Systems, Inc., et al (E.D. Tex. Tyler Div.)
         Patent Toll Tracker blogger sued for defamation by Plaintiff‟s
          counsel in IP case. Blog was only open to invited users

  Trial Court: “posts are capable of both innocent
   hyperbole and defamatory insinuation” therefore, jury is
   to decide

  Result: confidential settlement after 4 days of trial
   beginning September 15, 2009 in Tyler
Deceptive Practices

  FTC to regulate bloggers touting
   products and services through new

  Bloggers must disclose any freebies or
   payments they receive for reviewing a
   company‟s products
       Outing Bloggers

 See – Brendan L. Smith, “Meet John
  Doe: Internet Defamation Plaintiff‟s are
  Itching for the Chance” ABA Journal,
  (January, 2010) p15

 Battle over protection of anonymous
  speech under First Amendment
  Coverage for Internet
 Homeowner‟s Policies
 Personal Injury Liability Coverage
   “Personal Injury” means:
        Libel
        Slander
        Defmation of character
        Invasion of rights of privacy
        humiliation
   “Occurrence” means:
      An event of series of events…. Which results in personal
       injury, not expected or intended from the standpoint of the
Coverage for Internet
Liability - Exclusions
  Coverage for Personal Liability does not apply
  Injury “expected or intended by the insured”

   Question: If invasion of privacy is an intentional tort,
    does the policy exclusion make the policy
    Bailer v. Erie Ins. Exch., 687 A.2d 1375 (Md. 1997);
    Lineberry v. State Farm Fire & Cas. Co., 885 F.
    Supp. 1095, 1099 (M.D. Tenn. 1995).
Coverage for Internet
Liability - Exclusions
  Trinity Universal Ins Co. V. Cowan, 945 S.W.2d
   819 (Tex. 1997) –
   Gage‟s conduct was not an accident because
   the injury to Cowan, the invasion of her
   privacy, is of a type that “ordinarily follows”

  “Nor did Gage negligently invade Cowan‟s
  privacy, he intentionally made copies of the
  photographs and showed them to his friends”
  Id at 828
Coverage for Internet
Liability - Exclusions
  Tanner v. Nationwide, 289 S.W.3d 828 –
   fact that insured engages in intentional
   conduct will not preclude coverage where
   there was no intent to injure
   Commercial Liability
 „Personal and advertising injury” means
  injury…. Arising out of one or more of the
  following offenses:
   d. Oral or written publication of material that
    slanders or libels a person or organization or
    their good, products or services;
   e. Oral or written publication of material that
    violates a person‟s right of privacy
Commercial Liability
Policies- Exclusions
  A. Knowing Violation of Rights of Another–
   caused by or at the direction of the insured with
   the knowledge that the act would violate the
   rights of another and would inflict “personal
   and advertising injury.”
  B. Material Published With Knowledge of
   Falsity – publication of material, if done by or
   at the direction of the insured with knowledge
   of its falsity
Commercial Liability
Policies- Exclusions
  J. Insureds in Media and Internet
   Type Businesses
    No coverage if you are in the business of:
      Advertising, broadcasting, publishing or
      Designing or determining website content for
       others, or
      Internet search, access, content or service
Commercial Liability
Policies- Exclusions
  K. Electronic Chatrooms or Bulletin
    Arising out of chatroom or bulletin board
     you host, own or exercise control.

    No coverage for intrusion upon seclusion-
    eavesdropping, intercepting private
    communication – there has most likely
    been no publication
   Web Xtend Liability
   Endorsement to CGL
 “Web site injury” caused by an offense
  committed in course of visual or audio
  presentation of material on your “web
  site” or in the numerical expression of
  computer code used to enable your “web
Web Xtend Liability
Endorsement to CGL
  Adds replacement definition of personal injury:
    Injury arising out of:
       e. Oral, written or electronic publication of material that
        appropriates a persons likeliness, unreasonably places a
        person in a false light or gives unreasonable publicity to a
        person‟s private life.
       “Your web site” means all computer files and data which
        may be accessed via the internet using a Universal
        Resource Locator that includes any domain name owned
        or assigned by you.

Thank you!

            Nicholas E. Zito
       750 Bering Drive, Suite 600
          Houston, Texas 77057
             (713) 266-0074

A copy of this presentation maybe accessed
              from our website

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