Virginia Lawyers Weekly//April 24, 2023
Virginia Lawyers Weekly//April 24, 2023//
Where a restaurant was sued by a group of models who alleged the restaurant had misappropriated their images on its website and social media accounts to promote its business, the insurance carrier had no duty to defend the restaurant. The claims were either outside coverage or excluded by policy exclusions.
Omega Restaurant & Bar LLC is a restaurant and bar located in Virginia Beach. In September 2020, Omega was sued in Virginia state court by a group of models who alleged that Omega had misappropriated their images on Omega’s website and social media accounts to promote its business.
In this lawsuit, Covington Specialty Insurance Company, seeks a declaration that its policy does not provide Omega with insurance coverage and that it has no duty to defend or indemnify Omega in the underlying lawsuit. Pending before the court are the parties’ cross-motions for summary judgment.
Count One of the underlying complaint alleges that Omega violated Virginia Code § 8.01-40 when it misappropriated the Geiger plaintiffs’ images and published them on Omega’s website and social media accounts to attract clientele and generate business. Covington argues this claim arises out of the infringement of an intellectual property right and is therefore excluded by the intellectual property exclusion.
The court finds that Count One essentially alleges Omega violated the Geiger plaintiffs’ right of publicity. It follows that Count One also alleges that Omega infringed upon the Geiger plaintiffs’ intellectual property rights. Therefore, the intellectual property exclusion bars coverage for Count One of the underlying complaint.
Count Two alleges that Omega violated Virginia’s business conspiracy statute. As a threshold matter, the policy does not provide personal and advertising injury coverage for injury arising out of the offense of conspiracy. Further the policy excludes coverage for personal and advertising injury “caused by or at the direction of the insured with the knowledge that the act would violate the rights of another” or “arising out of a criminal act committed by or at the direction of the insured.”
To establish civil liability for business conspiracy, a plaintiff must meet the elements of the criminal business conspiracy statute. The Geiger plaintiffs thus allege unlawful acts committed by or at Omega’s direction. Therefore, the criminal acts exclusion applies, and Covington does not owe Omega a duty to defend the statutory business conspiracy claim.
Lanham Act claims
In Counts Three and Four, the Geiger plaintiffs allege that Omega violated § 43(a) of the Lanham Act. The court finds that the underlying complaint sufficiently alleges facts to support a claim for false advertising under the Lanham Act.
However, false advertising must be included in the definition of “personal and advertising injury” under the policy for coverage to apply. The policy does not explicitly provide coverage for false advertising, and none of the enumerated offenses can be interpreted as including false advertising. Based on its plain terms, there is no coverage under the policy for false advertising claims.
Covington additionally argues that even if the policy included false advertising as a covered offense, the intellectual property exclusion excludes coverage. Because none of the elements of the false advertising offense require proof of an intellectual property right or its infringement, however, the intellectual property exclusion does not apply.
The same analysis applies to plaintiffs’ false association claim: plaintiffs adequately allege a potential claim for false association, but the policy does not provide coverage for this claim. The intellectual property exclusion does not preclude coverage for false association in this instance because the claim does not arise out of the infringement of an intellectual property right.
Omega contends that coverage exists because “use of another’s advertising idea” is an enumerated offense and an exception to the intellectual property exclusion, and the Geiger plaintiffs “allege the use of their advertising ideas in Omega’s advertisement as a basis for their claims.” But Virginia does not recognize a cause of action for common law misappropriation.
Omega also asserts that Covington owes it a duty to defend the underlying lawsuit because the underlying complaint contains “factual allegations which, if true, would establish actionable defamation,” a covered offense under the policy. The court finds that the Geiger plaintiffs do not allege any fact that would give rise to a defamatory implication.
Plaintiff’s motion for summary judgment denied. Defendant’s motion for summary judgment granted.
Covington Specialty Insurance Company v. Omega Restaurant and Bar LLC, Case No. 2:21-cv-247, March 30, 2023. EDVA at Norfolk (Hanes). VLW 023-3-170. 25 pp.