Wisconsin Court Will Not Enforce Intentional Acts Exclusion For Intellectual Property Infringement Claim

In Boehm v. Zimprich, 2014 U.S. Dist. LEXIS 174330 (W.D. Wis. Dec. 17, 2014), the United States District Court for the Western District of Wisconsin held that American Family Mutual Insurance Company (“American Family”) had a duty to defend its insureds against a copyright infringement claim.  The plaintiffs filed suit against Dan and Ciara Zimprich, owners of sports memorabilia vendor “On 2 the Field”, alleging they made and sold prints and photo canvases of approximately two dozen of plaintiffs’ photographs without authorization.  The Zimpriches acknowledged receiving e-mails confirming the licenses, but stated they did not read the licenses and were unaware of the restrictions. The Zimpriches’ business insurance policy provide coverage for “personal and advertising injury,” i.e., injury arising out of “[i]nfringing upon another’s copyright, trade dress or slogan in your ‘advertisement.’”  However, the policy excluded coverage for injuries “caused by or at the direction of the insured with the knowledge that the action would violate the rights of another.” American Family argued, in pertinent part, that the exclusion barred coverage.  The district court disagreed, reasoning that intellectual property infringement is a strict liability tort, and consequently, the plaintiffs would not have to prove willfulness to recover.  So even though the complaint clearly alleged that the Zimpriches’ conduct was willful, the district court refused to enforce the exclusion because the plaintiffs were not required to actually prove up that willfulness allegation to succeed on their claim. This decision reminds insurers that although the allegations of a complaint may appear to trigger an exclusion, some courts may still imply facts and circumvent the exclusion.

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