The Commercial General Liability policy is used by virtually every Minnesota business that can afford insurance. Yet the policy is a mystery to many Minnesota attorneys.

Lawyers want to understand this important policy. Whether we represent insurers or businesses, we need to discuss CGL coverages with our clients. However, at first glance, the policy looks hopelessly complex. The current version of the CGL has 16 single-spaced pages, not including endorsements and declarations pages. Fortunately, the main concepts of the policy are readily understood.

The CGL policy is essentially a fusion of three different business policies. The first, "Coverage A," provides liability insurance1 for accidental bodily injury and property damage. The second, "Coverage B," provides liability insurance for specific personal-injury and advertising-injury torts. The third, "Coverage C," is first-party insurance for medical expenses. This article provides a general overview of all three, under the most recent (2001) CGL policy, under Minnesota law.2

COVERAGE A

Coverage A provides broad liability insurance for an "occurrence" producing either "bodily injury" or "property damage." This broad coverage is subject to many exclusions.

Occurrence. An "occurrence" is an "accident." It is an "unexpected, unforeseen or undesigned happening or consequence."3

The focus is on accidental injury, not accident conduct. All conduct is on some level intentional. If intentional conduct produces an accidental injury, there is an occurrence. If intentional conduct produces intentional injury, though, there is no occurrence.4

In some inherent-damage cases, the courts will impute intent to injure as a matter of law. Thus, in Franklin v. Western National Mutual Ins. Co.,5 the Supreme Court denied coverage for a trespass. There was no occurrence, because the resulting damage was "highly predictable."

Bodily Injury. "Bodily injury" covers claims for physical harm to the body, including sickness or disease. This can include the physical effects of unwanted touching or battery, such as in a sexual harassment case.6

Coverage will extend to emotional distress, if the emotional distress produces "appreciable physical manifestations."7 However, there is no coverage for pure emotional distress.8

Property Damage. "Property damage" covers (1) injury to tangible property, or (2) loss of use of tangible property.

"Tangible property" includes real property. Thus, there can be coverage for pollution damage to neighboring land, if the pollution exclusion does not apply.9

There is no coverage for purely intangible property. Although "intangible property" has not been clearly defined by Minnesota insurance case law, it probably includes four categories of property: intellectual property (copyrights, trademarks, etc.); documents representing value (stock, promissory notes, etc.); intangible rights (good will and reputation); and economic interests (profits, productivity, etc.).10

There can be coverage for mixed tangible/intangible claims. For example, coverage extends to loss of data, if the data was destroyed along with the tangible storage medium. Thus, in Retail Systems, Inc. v. CNA Ins. Co.,11 when computer tape was destroyed, there was coverage both for the damaged tape and for the loss of data on the tape.12

"Loss of use" includes loss of access to the property. For example, it includes having to move out of a building, or deprival of use of a building due to defects and repairs.13

Exclusions. The broad Coverage A insurance is subject to many exclusions. In general, these fall into two categories.

First, there are exclusions which correspond to other common liability policies. These can include the workers compensation exclusion (workers compensation policies), the employment-related practices exclusion (employment practices liability policies), the motor vehicle exclusion (automobile policies), and the professional services exclusion (malpractice and errors and omissions policies).

Second, there are exclusions for extraordinary risks -- extraordinary either because of their large size or because they are within the insured's control. These include the contractual liability exclusion, the pollution exclusion, the work-product exclusion, and the assault and battery exclusion.

COVERAGE B

As previously noted, Coverages B and A are analytically distinct. Coverage A is for tangible damages; Coverage B is primarily for intangible damages. Coverage A is a broad-based insurance, triggered by almost any form of negligence; Coverage B is limited to specific enumerated torts. Coverage A has many exclusions; Coverage B has few exclusions.

The Court of Appeals made similar distinctions in Hamlin v. Western National Mutual Ins. Co.,14 focusing in particular on personal injury coverage. Personal injury coverage is narrower than Coverage A because it is limited expressly to damages arising out of "a variety of listed torts."15 However, it is also broader than Coverage A, because it can include "an affront to one's reputation, such as defamation."16

In the 2001 policy, there are seven "personal and advertising injury" torts:

1. False arrest, detention or imprisonment;
2. Malicious prosecution;
3. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor;
4. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organizations' goods, products or services;
5. Oral or written publication of material that violates a person's right of privacy;
6. The use of another's advertising idea in your "advertisement";
7. Infringing upon another's copyright, trade dress or slogan in your "advertisement".

Each of the seven is briefly examined below.

False Arrest, Detention or Imprisonment. These coverages are primarily for claims against police, private security services, and businesses employing security guards. Covered claims can include statutory civil rights actions against police and common-law claims for false arrest and detention.

Malicious Prosecution. Malicious prosecution is a companion coverage to false arrest, detention or imprisonment. Both cover claims that the insured abused the legal system. However, malicious prosecution concerns litigation, not imprisonment.

Malicious prosecution requires that the underlying suit be groundless.17 Thus, the coverage is not as broad as the tort of "abuse of process," which includes meritorious but harassing litigation.18

Wrongful Entry, Eviction or Invasion of Private Occupancy. These coverages are used most often in tenant claims against landlords for trespass and wrongful-eviction.

In Garvis v. Employers Mutual Casualty Co.,19 the Supreme Court discussed the scope of "wrongful entry." In some respects, it is narrower than the tort of trespass: trespass encompasses "any unlawful interference with one's person, property or rights," while wrongful entry is the insured's "invasion of an interest in real property."20 In other respects, the coverage is broader than the tort of trespass: wrongful entry includes unintentional conduct, while trespass often must be intentional.21

In contrast to wrongful entry, "invasion of the right of private occupancy" does not require physical entry onto the property. Constructive entry is sufficient.22

Libel, Slander and Disparagement. Coverage for libel and slander is basically the same as for common-law defamation. Thus, in Meadowbrook v. Tower Insurance Co.,23 Tower Insurance Company did not deny coverage for the defamation count in a sexual harassment lawsuit.

Sales efforts that falsely disparage a competitor or a competitor's product can trigger coverage. For example, there is coverage for claims that the insured made false statements about the plaintiffs and their products to their licensees and prospective licensees.24

Coverage is excluded for defamation when the insured has "knowledge of its falsity." Although this normally requires an express allegation of knowledge in the underlying complaint, the 8th Circuit has held that knowledge can be implied when logically necessary to the underlying claim.25

Publication Violating Privacy. Minnesota recently recognized three categories of tort for invasion of privacy: intrusion upon seclusion, appropriation, and publication of private facts.26 A tort in the third privacy category, "publication of private facts," occurs when the defendant publicizes private information that is "highly offensive" and "not of legitimate concern to the public."27 Insureds sued for invasion of privacy, especially torts in the third category, will be invoking this CGL policy coverage.
Privacy coverage is similar to the coverage for defamation. Both concern the publication of harmful information. The main difference: defamation coverage is limited to false statements, while privacy coverage extends to accurate information.

There is no coverage for invasion of privacy unless the private information is "published." Thus, there will be no coverage for offensive remarks made privately to the plaintiff.

Theft of Advertising Ideas. This covers most claims for theft of a competitor's advertising strategies and concepts. It is the taking of "another's manner of advertising."28

Infringement of Copyright, Trade Dress or Slogan. This coverage is not as broad as it first appears. It does not cover all intellectual property claims. In particular, there is generally no coverage for patent infringement. For example, in Flouroware v. Chubb Group of Ins. Cos.,29 the insured alleged sought "trade dress" coverage for a patent-infringement claim. Trade dress is the total image of a product or business, and "may include features such as size, shape, color or color combinations, texture, graphics, or even particular sales techniques."30 However, coverage requires proof of a "likelihood of confusion."31 In Flouroware, because there was no claim of confusion by consumers in distinguishing between the two companies' packages, there was no trade-dress coverage.

This coverage does not extend to all infringement in the course of the insured's business. Instead, the infringement must occur in the insured's "advertisement." Coverage is limited to "injuries from advertising rather than injuries arising out of other activities that coincidentally were advertised."32

COVERAGE C

Unlike Coverages A and B, which provide liability insurance, Coverage C provides first-party indemnity insurance. Specifically, this coverage provides medical payments for nonemployees injured on the business premises or at off-premises business operations. Coverage applies whether or not the insured was at fault.33

The coverage is subject to eight exclusions, which are essentially a simplified version of the standard Coverage A and Coverage B exclusions.

Although medical-payments coverage is not liability insurance, its inclusion in the CGL policy is not as arbitrary as it first appears. The coverage is promptly payable, regardless of fault. Thus, it can avoid a costlier lawsuit against the insured business.

CONCLUSION

With careful study, the mystery surrounding the CGL policy largely evaporates. A lawsuit for accidental bodily injury or property damage may be insured under Coverage A. A lawsuit for intangible torts may be insured under Coverage B. A premises claim for medical payments may be insured under Coverage C.

NOTES
1. Liability insurance, also called third-party insurance, covers lawsuits against the insured. It pays the insured's attorneys fees and other defense costs, plus indemnifies the insured for a judgment or settlement. By contrast, first-party insurance covers the insured's non-litigation losses.
2. For a more detailed analysis, see Chapter 5 of 22 Weimer, Hagglund and Whitman, Minnesota Practice: Insurance Law and Practice (West 2001).
3. Hauenstein v. St. Paul-Mercury Indemnity Co., 65 N.W.2d 122, 126 (Minn. 1954).
4. American Family Ins. Co. v. Walser, 628 N.W.2d 605, 611 (Minn. 2001).
5. 574 N.W.2d 405, 408 (Minn. 1998).
6. Meadowbrook v. Tower Ins. Co., 559 N.W.2d 411, 419 (Minn. 1997).
7. Garvis v. Employers Mut. Cas. Co., 497 N.W.2d 254, 257 (Minn. 1993).
8. Hamlin v. Western National Mutual Ins. Co., 461 N.W.2d 395, 397 (Minn. App. 1990).
9. See Minnesota Mining & Mfg. Co. v. Travelers Indemnity Co., 457 N.W.2d 175 (Minn. 1990).
10. See Note, "Liability Coverage for "Damages Because of Property Damage" under the Comprehensive General Liability Policy," 68 Minn. L. Rev. 795, 802-03 (1984).
11. 469 N.W.2d 735 (Minn. App. 1991).
12. The 2001 CGL policy changed the definition of "tangible property," expressly stating that it excludes electronic data. This clarification appears consistent with the rationale of Retail Systems.
13. See Grinnell Mutual Reins. Co. v. Wasmuth, 432 N.W.2d 495, 500-01 (Minn. App. 1988); Board of Regents v. Royal Ins. Co., 517 N.W.2d 888 (Minn. 1994); Hauenstein v. St. Paul Mercury Indem. Co., 65 N.W.2d 122, 125 (Minn. 1954).
14. 461 N.W.2d 395 (Minn. App. 1990).
15. Id. at 398.
16. Id. n.2.
17. See Williamson v. Guentzel, 584 N.W.2d 20, 23 (Minn. App. 1998).
18. Pow-Bel Constr. Corp. v. Gondek, 192 N.W.2d 812, 814 (Minn. 1972).
19. 497 N.W.2d 254 (Minn. 1993).
20. Id. at 259, citing Cincinnati Ins. Cos. v. Davis, 265 S.E.2d 102, 105 (Ga. App. 1980).
21. Id.
22. Id., citing Titan Holdings Syndicate v. City of Keene, 898 F.2d 265 (1st Cir. 1990); Western Cas. & Sur. Co. v. City of Palmyra, 650 F. Supp. 981 (E.D. Mo. 1987).
23. 559 N.W.2d 411 (Minn. 1997).
24. Home Ins. Co. v. Waycrosse, 990 F. Supp. 720, 729-30 (D. Minn. 1996), aff'd 131 F.3d 143 (8th Cir. 1997).
25. See Callas Enterprises, Inc. v. Travelers Indem. Co. of America, 193 F.3d 952, 957 n.5 (8th Cir. 1999) (Minnesota law).
26. See Lake v. Wal-Mart Stores, Inc., 582 N.W.2d 231, 233-35 (Minn. 1998).
27. Id., quoting Restatement (Second) of Torts ¤ 652D.
28. Flouroware v. Chubb Group of Ins. Cos., 545 N.W.2d 678, 682 (Minn. App. 1996), citing J.A. Brundage Plumbing & Roto-Rooter, Inc. v. Massachusetts Bay Ins. Co., 818 F. Supp. 553, 557 (W.D.N.Y. 1993), vacated on other grounds, 153 F.R.D. 36 (W.D.N.Y. 1994); Merchants Co. v. American Motorists Ins. Co., 794 F. Supp. 611, 619 (S.D. Miss. 1992).
29. 545 N.W.2d 678 (Minn. App. 1996).
30. Id. at 683, quoting Two Pesos, Inc. v. Taco Cabana, Inc., 112 S. Ct. 2753, 2755 n.1 (1992).
31. Id.
32. Polaris Indus. v. Continental Ins. Co., 539 N.W.2d 619, 622 (Minn. App. 1995), citing Bank of the West v. Superior Court, 833 P.2d 545, 559-60 (Cal. 1992).
33. Medical, Inc. v. Atlantic Mut. Ins. Co., 566 N.W.2d 74, 77-79 (Minn. 1997).

BRITTON WEIMER is a partner with Hagglund, Weimer & Speidel. His practice emphasizes insurance coverage and insurance defense, trial and appellate. He coauthored Volume 22 of West's Minnesota Practice series, Insurance Law and Practice.