Inconsistent Policy Provisions Render Policy Ambiguous as to Coverage for Attorney Advertising
The United States District Court for the Eastern District of Missouri, applying Missouri law, has held that a policy was ambiguous because its definition of personal injury provided coverage for the advertising activities of a law firm, but its definition of wrongful act excluded injury arising out of the law firm’s advertising. Hullverson Law Firm, P.C. v. Liberty Ins. Underwriters, Inc., 2014 WL 2611814 (E.D. Mo. June 11, 2014). The court also held that recovery of the law firm’s profits for a statutory violation did not constitute restitution as excluded by the policy’s definition of damages because the claimant was not seeking the return or restitution of fees he paid to the law firm.
An attorney sued his former law firm for advertising that he and another attorney were practicing attorneys at the firm many years after the two attorneys had left the state and were practicing elsewhere. The lawsuit alleged that the law firm violated the Lanham Act and various Missouri Supreme Court Rules of Professional Conduct by presenting false and misleading advertising in phone directories, on the Internet, and on office signage. The insurer denied coverage, and the insured filed a declaratory judgment action. The insurer argued that the underlying claim was not an advertising injury covered under the policy because it did not arise out of the rendering of professional legal services. Alternatively, the insurer argued that the damages sought in the lawsuit were not damages as defined by the policy.
The policy covered damages caused by a wrongful act, which it defined as an “act, error, omission, or ‘personal injury’ arising out of the rendering of ‘professional legal services.’” Personal injury was defined to include “‘injury arising out of an offense occurring in the course of the named insured’s advertising activities, including but not limited to infringement of copyright, title[,] slogan, patent, trademark, trade dress, service mark or service number.’” The court concluded that a “law firm’s advertising will never arise out of the rendering of professional legal services” because advertising activities are neither legal services nor activities performed for others as lawyers. Thus, the court concluded, the “policy’s definition of personal injury appear[ed] to provide coverage for the [law firm’s] advertising activities, but the definition of wrongful act then t[ook] that coverage away.” The court determined that “reading the policy as a whole, the definition of ‘personal injury,’ which include[d] injury in the course of the named insured’s advertising activities . . . is rendered illusory by the policy’s requirement that the personal injury must arise out of the rendering of professional legal service.” Construing the ambiguity in favor of the insured, the court found that the lawsuit triggered coverage.
Next, the insurer argued that the damages sought in the lawsuit—equitable relief, the return or restitution of legal fees, and statutory damages including treble damages—did not constitute damages as defined under the policy because the policy excluded from its definition of damages the return or restitution of legal fees. The court disagreed, determining that damages sought by the claimant did not meet the dictionary definition of restitution because the claimant was seeking to recover all profits and advantages gained by the firm and its attorneys from using the claimant’s name in its advertising, and not the return or restitution of any fees the claimant paid to the firm.
