Advertising Injury Coverage

Advertising Injury Coverage

Investopedia / Paige McLaughlin

What Is Advertising Injury Coverage?

Advertising injury coverage is a component of commercial general liability insurance that protects the policyholder against claims of stolen ideas, invasion of privacy, libel, slander and copyright infringement related to advertising. Advertising injury coverage is a type of personal injury insurance, as opposed to physical injury insurance, and may also be called personal and advertising injury coverage.

Understanding Advertising Injury Coverage

Advertising injury coverage protects a business from claims of offenses allegedly committed in the course of advertising its goods, products or services. For example, suppose a team of disgruntled lawyers leaves the law firm they were employed by and decides to start their own firm. The new firm takes out a billboard, and the billboard uses font and color for its text that is nearly identical to those of the lawyers’ former employer. The former employer sues the disgruntled lawyers for advertising injury and demands that the billboard be taken down within 48 hours.

The lawyers’ new firm does not have the financial resources to defend itself against this claim or to pay a judgment if found guilty in court. Fortunately, they had the foresight to purchase a general liability insurance policy that contained advertising injury coverage, so they can use this insurance policy to fight the lawsuit. Unfortunately, because the unhappy lawyers intentionally violated their former employer’s trademark, their policy does not cover them and they have to defend themselves with their own resources or find a way to settle inexpensively.

Another scenario where advertising injury coverage would come into play is if a major car manufacturer, through its television ads, claimed that its competitors’ vehicles used faulty brake systems and the competitor sued for slander, saying that the claims about faulty brakes were false. The car manufacturer could rely on its advertising injury coverage to defend itself in court, assuming its claims were based on accurate information and were not excluded from the policy’s coverage in any way.

False Advertising and Advertising Injury Coverage

Many companies assume that their advertising injury coverage would logically protect them against false advertising claims as well. However, this is almost never the case. When a business knowingly engages in false advertising, advertising injury coverage is excluded in the most general liability policies.

Let’s return to the hypothetical scenario involving the disgruntled lawyers. If their new customers sued them because the lawyers’ billboard led customers to believe the new firm was somehow related to the old firm, the lawyers’ advertising injury coverage would not protect them, because it does not cover false advertising claims. Businesses that are especially concerned about false advertising insurance protection should discuss a separate policy with their insurance agent. Be forewarned, however, that of all the advertising injuries, false advertising coverage can be the hardest to come by.

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