When State Farm Fire and Casualty Co. issued a business liability insurance policy to the Franklin Center for Government and Public Integrity, it thought it would be a good idea to include a personal and advertising injury exclusion for claims brought against insureds in the publishing business.  That’s because the Franklin Center is a non-profit organization dedicating to exposing government corruption by using its team of journalists to publish stories online.

After the Franklin Center was sued for $85 million in a defamation action arising out of two articles posted on its Watchdog.org website, State Farm filed a declaratory judgment action to relieve itself of its duty to defend or indemnify its insured.  The policy provided coverage for claims arising out of the “oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.”  But, the policy also contained an exclusion for an insured whose business was “advertising, broadcasting, publishing, or telecasting.”

In an April 4, 2014 decision, Judge Anthony J. Trenga of the Eastern District of Virginia ruled that the exclusion was ambiguous and that State Farm was obligated to defend the Franklin Center.  Judge Trenga reasoned that the Franklin Center’s publishing activities “appear to be no different than that of any organization that posts informational content on a website it maintains to promote or accomplish its underlying organizational purposes of objectives.”  That reasoning, the policy’s other references to specific internet-related activities, and the disparity between the broadly-worded grant of coverage for publication of material “in any manner” led Judge Trenga to the conclusion that the exclusion was ambiguous.

Insurers often rely on the plain meaning of words to support policy exclusions.  While the meaning of words may often seem clear, State Farm v. Franklin Center demonstrates that the meaning of a word can always be clarified even further.  Perhaps that is what State Farm is trying to do with its motion for reconsideration.  In that motion, State Farm relies on a series of cases holding that the exclusion applies to those primarily engaged in the business of publishing.  That motion is scheduled to be heard on May 23, 2014.

Thanks to Michael Gauvin for his contribution to this post.  For more information, please email Dennis Wade at .