In National Fire Insurance Company v. E. Mishan & Sons, Inc., Emson was sued in two class action lawsuits that claimed Emson worked with two other companies to to deceptively trap customers into recurring credit card charges. The underlying lawsuits asserted that Emson acted as a purveyor of data, facilitating “data passes” and transferring private customer information for profit. Emson was insured by National Fire and others under several commercial general liability policies. The Policies provided coverage for “those sums that the insured becomes legally obligated to pay as damages because of ‘personal and advertising injury’ to which this insurance applies.” The Policies defined “personal and advertising injury” to include the “[o]ral or written publication, in any manner, of material that violates a person’s right of privacy.” In addition, the Policies included an exclusion to coverage for personal and advertising injuries for knowing violations of another’s rights, defined as “ ‘[p]ersonal and advertising injury’ caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict ‘personal and advertising injury.’
The district court found the insurers had no duty to defend the lawsuits because “all of the allegations” against Emson in the underlying lawsuits fall into the coverage exclusion for “personal and advertising injury” caused by knowing violations of another’s rights. The Second Circuit reversed. The Court considered both the causes of action and the accompanying factual allegations against Emson and concluded that the knowing violation exclusion alone did not absolve the Insurers of their duty to defend. The Court could not conclude with certainty that the policy does not provide coverage, because the conduct triggering the knowing violation policy exclusion is not an element of each cause of action. Therefore, Emson could be liable to plaintiffs even absent evidence that it knowingly violated its customers’ right to privacy. Furthermore, while the underlying plaintiffs allege generally that Emson acted knowingly and intentionally, the actual conduct described does not rule out the possibility that Emson acted without intent to harm.
The underlying lawsuits both assert claims against Emson for breach of contract and unjust enrichment, neither of which require a showing of knowledge or intent.
The summary judgment was reversed.