Litigation and the terms of a contract

Businesses are always concerned about litigation. It can be expensive and time-consuming, and when prolonged, it can be very distracting to the operation of your business. But, litigation involving other entities may be instructive for your business. It may provide examples of conduct to avoid or provide a warning of transactions that can lead to business disputes that lead to court.

Or they may not. Take for instance an insurance case involving a commercial general liability (CGL) policy. Virtually every business has some form of this policy, which provides insurance liability coverage for much that occurs within a business.

In this case, a healthcare company suffered a data breach. They argued that the CGL provided coverage for that "electronic publication of material that... gives unreasonable publicity to a person's private life" or ...discloses information about a person's private life."

This was covered by the "personal and advertising injury" portion of the CGL, and the Fourth Circuit Court of Appeals agreed with them. The healthcare company lacked specific coverage for cyber issues.

Many of CGL policies have explicit exclusions for this type of coverage. This case highlights the needs for both insurers and policyholders to fully understand the terms of their coverage and the potential risks they face.

While it could cause some issues for a few insurers, cases like this also clarify potential problems and if you have a CGL that may cover such a problem, you may want to discuss the issue with your insurance company and obtain additional coverage that unambiguously provides coverage, and avoids the need for litigation to sort matters out.

Source:, "Fallout from Travelers CGL Cyber Ruling: Insurance Buyers and Sellers Beware," Andrew G. Simpson, April 25, 2016

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