Insurer Must Defend Suit Over Unauthorized Use of Images in Social Media Ads
The U.S. District Court for the District of Minnesota, applying Minnesota law, has held that an insurer had a duty to defend a lawsuit alleging personal and advertising injury under both a policy’s general liability coverage and cyber protection endorsement, determining that three different exclusions did not apply. Illinois Cas., Co. v. Kladek, Inc., 2025 WL 2071043 (D. Minn. July 23, 2025).
Several models sued the insured, a gentleman’s club, alleging that their images were used in advertisements on the insured’s social media accounts without their consent. The insured sought coverage for the suit under two sections of its businessowners policy: the cyber protection endorsement and the businessowners general liability coverage. The insurer denied coverage under both coverages. The cyber endorsement required arbitration of any coverage dispute, and, on July 31, 2023, an arbitration panel determined that the insurer had a duty to defend under the cyber endorsement. The litigated dispute concerned whether the insurer also had a duty to defend under the businessowners liability coverage. The insurer contended that three exclusions applied under the businessowners liability coverage.
First, the insurer argued, the “Law Exclusion,” which barred coverage for liability arising out of any action alleged to violate “[a]ny federal, state, county, municipal or local consumer fraud protection law, regulation, ordinance, order, or directive barring fraud, unfair competition, and/ or deceptive business practices,” precluded coverage for the models’ Lanham Act and Minnesota Deceptive Trade Practices Act claims. The court disagreed, holding that the exclusion did not apply to statutory claims insofar as those claims did not implicate fraudulent conduct directed at consumers. Because the models’ claims were not “consumer fraud” claims “at their core,” but rather were commercial claims involving advertising injury, the court refused to apply the exclusion to bar coverage.
Second, the insurer argued that the “Electronic Chatroom Exclusion,” which barred coverage for claims “[a]rising out of any electronic chat room, bulletin board, or blog the insured hosts, owns, or . . . control[s],” barred coverage for the suit. The court rejected this argument as well, determining that Facebook, Instagram, and Twitter are not chatrooms or bulletin boards as those terms are commonly understood, and the insured did not host or control those platforms.
Finally, the insurer argued that the models’ claims were barred by the “Multimedia Exclusion,” which precluded coverage for “multimedia perils” unless covered by the cyber endorsement. The insurer did not dispute that the underlying suit alleged a “multimedia peril” (which was defined to include the display of electronic media on the insured’s internet site resulting in misappropriation of likeness) but asserted that, because there was coverage under the cyber endorsement, there was no coverage under the businessowners liability coverage. The court disagreed on two bases. First, it observed that the arbitration panel only held that the duty to defend was triggered by the cyber endorsement and made no findings regarding the duty to indemnify under the endorsement. The arbitration panel did not determine which claims triggered the duty to defend under the cyber endorsement, and given that the arbitration was limited to the application of the cyber endorsement, the court reasoned that the parties “presumably acknowledged that there were claims that fell outside the Cyber Endorsement.”
Second, “and perhaps more importantly,” the court determined that the cyber endorsement was ambiguous, including because it was “unclear with respect to its relationship with the main liability policy” and, unlike the main occurrence-based liability form, provided coverage on a claims-made basis. Because it was, in the court’s view, unclear whether the cyber endorsement afforded “standalone coverage” or modified the businessowners liability coverage, the court concluded that the ambiguities must be construed against the insurer and the Multimedia Exclusion did not apply.
