Any business that advertises its products and services should have advertising insurance. Most commercial liability policies define advertising as the broadcasting or publishing of a company’s products and services to the general public to attract business.
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Advertising insurance protects companies against lawsuits arising from advertising injury. Advertising injury occurs when a third party claims damages as a result of a company’s advertising efforts.
Generally, third parties who sue for advertising injury are business competitors who claim that a company’s advertisements have negatively impacted their business. Depending on the case, advertising lawsuits can cost businesses thousands and sometimes millions of dollars in legal fees and settlements.
Examples of advertising injury to a third party includes copyright or trademark infringement, invasion of privacy, libel and slander, and misappropriation of advertising ideas and style of doing business
Copyright or Trademark Infringement
Copyright and trademark infringement occurs when an individual or business uses material that is protected under copyright and trademark law without permission from the owner of the trademark or copyright. For example, a violation would occur if a company uses another business’s copyrighted logo in its newspaper ad.
Violations can occur unintentionally if the business owner did not conduct proper research to verify if the content is protected under copyright and trademark laws prior to releasing their advertisement. However, whether unintentional or not, businesses that are responsible for violating copyright and trademark laws can be fined as much as $20,000 in statutory damages.
Invasion of Privacy
A third party can sue a business if they claim the company used private or unauthorized information in its advertisements.
Libel and Slander
This occurs when a business makes false statements or references of another business in its advertisements.
Misappropriation of Advertising Ideas and Style of Doing Business
This type of advertising injury occurs if a third party claims that a business took its style, idea, or manner in which it solicits customers.
Advertising Injury Insurance Exclusions
Advertising injury insurance generally excludes intentional acts that causes damage to a third party. Each advertising injury insurance policy is different and business owners should review their coverage with their insurance agent to understand what is covered and excluded in their specific policy.
Common policy exclusions include:
Intentional Inclusion of False Information - If a company intentionally publishes or broadcasts false and misleading content in its advertisements, then advertising insurance will not cover the claim.
Criminal Acts - Any criminal acts that violate copyright and trademark laws are not covered under an advertising injury policy.
Willfully Violating the Rights of Another - An example of this can occur if a company knowingly uses a prohibited logo, slogan, or photograph of a third party without permission.
Even though most commercial liability policies written after 1973 include coverage for advertising injury, some do not. Business owners should review their business insurance policy to ensure they are covered in case a third party claims damages as a result of their advertisements. If advertising injury is not included in a company’s commercial liability policy, usually the policy can be endorsed to add the coverage for additional premium.
The popularity of advertising on the Internet has increased the number of advertising injury claims. In addition to using copyrighted and trademarked material, business owners may be unaware of other ways they could cause advertising damage to a third party. Examples of situations that could cause advertising injury claims from Internet marketing are:
- Using clips or sound recordings of another’s within an ad on the Internet or on a website.
- Registering a domain name that closely resembles another company’s trademarked domain name.
- Allowing website visitors to view another company’s website without leaving the first company’s website.
- The use of certain meta-tags.
- Hyper-linking to another company’s website.
- Including information about another company or person on a company website without authorization.
- For information on a company’s website to be considered advertising injury, the company would have to use the website for advertising purposes to attract customers and not just for informational purposes.
Price of Advertising Injury Insurance
The cost of advertising injury insurance varies depending on the insurance carrier, size, and industry of the business. Insurance carriers will evaluate the specific risk for the business and price the premium accordingly. Insurance carriers will also consider the number of past advertising injury claims a business has had while determining the policy premium.
While business owners should take caution when broadcasting and publishing their advertisements, there is still no way to be certain that another business or competitor will not file suit or make a claim of advertising injury. Having an advertising injury insurance policy will protect businesses from having to spend time and money on litigation in case a third party claims damages.
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