By Greg Schultz, partner at Taylor English Duma, LLP
Every business needs insurance to protect against potential loss or damage. Typical business coverage includes property and casualty, commercial general liability insurance (“CGL”), workers’ compensation, professional liability (“E&O”) and commercial automobile insurance. More specialized insurance available includes employment practices liability insurance (“EPLI”) and insurance against patent and trademark infringement. These policies are intended to apply to either basic, known business risks (such as loss of a commercial building or liability from a car accident) or are tailored to specific risks (such as EPLI). But what if your business lacks specialized insurance and is faced with a business tort claim? Since most companies carry liability insurance, it is important to identify those business torts potentially covered under a CGL policy.
There are two types of coverage under a CGL policy: Part A and Part B. Coverage Part A provides insurance against two types of injuries: “bodily injury” and “property damage,” but only if arising from an “accident” or “occurrence.” CGL policies protect against claims arising from accidental or fortuitous events called “occurrences.” In Georgia, an “occurrence” for insurance coverage purposes is defined as an accident or event which takes place without the insured’s foresight, expectation or design. An “occurrence” does not include bodily injury or property damage any time that damage is intentionally inflicted.
The term “bodily injury,” as used in an insurance policy, only includes physical injury to the body. Insurance coverage does not apply to non-physical emotional or mental harm caused by the insured. A CGL policy also covers physical damage caused to the property of third parties by the insured. In an insurance context, Georgia courts do not interpret the phrase “property damage” to include non-physical, “economic” losses such as lost profits, lost goodwill, damage to reputation, or other “intangible” damage.
Since the scope of Coverage Part A only encompasses actions involving “accidents” or “occurrences,” business torts based on a negligence theory are potentially coverable. Business torts based on intentional conduct, however, are typically not covered. Under Georgia law, insurance coverage may exist for negligent misrepresentation, negligently performed faulty workmanship, employment actions sounding in negligence (negligent hiring, negligent retention, negligent supervision) and other negligence causes of action (failure to warn, unsafe premises and negligent procedure).
Unlike Coverage Part A, Coverage Part B does not depend on the existence of an “accident” or “occurrence,” so it may cover damages arising from intentional conduct not otherwise excluded. While the insuring clause of Coverage Part A is expressed in general terms, Coverage Part B covers only certain enumerated offenses committed by the insured. A typical list of enumerated offenses might include false imprisonment, malicious prosecution, wrongful eviction, defamation, invasion of the right to privacy and copyright and trademark infringement.
Coverage may also exist under Coverage Part B for liability arising from the insured’s “advertising activity.” “Advertising activity” has been found in cases of TV, radio, newspaper and magazine advertising; however, not all marketing activities constitute “advertising.” There must be a causal connection between the advertising activity and the injury. Simply selling an infringing product is not sufficient to satisfy the causal connection requirement. The infringement must be committed in the advertisement itself, rather than in the sale of a product or some other activity, in order to be covered.
Every business should review its insurance program with its broker and attorney to determine whether it has sufficient coverage not only for the typical risks that the company may face, but also for the unexpected, and often unpleasant, claims for business torts that sometimes arise.
Greg Schultz is a partner at Taylor English Duma, LLP, a full-service business law firm of more than 100 attorneys located just east of the Galleria in Cobb County. For more information, contact Greg Schultz at gschultz@taylorenglish.com or at (770) 434-7394.
