“Knowingly False Publication" Insurance Exclusion

Commercial general liability insurance policies for businesses are necessary. They provide businesses with protection of their property in case of damages or if they are ever sued. However, there are a number of exclusions in a lot of commercial general liability policies. One of those exclusions is the Knowingly False Publication Exclusion. Coverage is excluded for a “personal and advertising injury” arising out of oral or written publication of material.

When there is a personal and advertising injury there is an exclusion that prevents coverage if the publication at issue was false and the business, or insured, knew that it was false when it was published. The reason that this exclusion exists is because insurance companies want to prevent insureds from shifting liability to an insurance company for any lawsuit that arises out of intentionally publishing false material. An example of the exclusion would read that the coverage is excluded for “personal and advertising injuries arising out of oral or written publication of material, if done by or at the direction of the insured with knowledge of its falsity.” In an unpublished Minnesota decision General Cas. Co. of Ill. v. Four Seasons Greetings, 2004 WL 2987796 (Minn. App. 2004), the Minnesota Court of Appeals held that the advertising exclusion did not apply because the actions of the insured were not false. In that case, Four Seasons Greetings was sued for allegedly infringing the copyright of Taylor Corporation by copying manufacturing, producing, publishing, selling, promoting, and/or advertising greeting cards that were substantially similar to Taylor’s works. When the insurance company denied a defense and coverage, a declaratory action was commenced. In holding that the knowingly false publication exclusion did not apply, the court quoted from the 11th circuit and said

[W]e recognize of course that a court could construe the term false to encompass conduct or statements arguably giving rise to a false or misleading impression. Such a definition however, is significantly broader than one including only direct assertions of untrue facts and we find it no more plausible. As we’ve discussed the most common use of the term false is to mean untrue or failing to correspond to a set of known facts not creating a false impression or maybe only customer confusion. According the term the broadest definition would undermine the clear directive…that ambiguous insurance policy exclusions are construed against the drafter and in favor of the insurer. In fact exclusionary clauses are construed even more strictly against the insurer than coverage clauses.

In other words, because the infringing advertising was not published with a knowing falsity, then it was arguably within the scope of the insurance policy.