Failure to credit isn't disparagement for purposes of insurance policy

Hoffman, LLC v. Community Living Solutions, LLC, 2010 WL 5304610 (Wis. App.)

This is a rare duty to indemnify case based on an advertising injury policy. Community sued Acuity, its insurer, arguing that Acuity was obliged to indemnify it for a settlement with Hoffman. Community, a construction firm, was founded by several former Hoffman employees. Hoffman sued Community and five of its employees for deceptive advertising, unfair competition, unfair trade practices, and tortious interference with business relationships.

The key fact was that Hoffman alleged that the "Staff Experience" page of Community's website listed a number of projects Community employees had worked on but deceptively did not specify that those projects were completed while the employees worked at Hoffman.

Acuity’s advertising injury policy, in relevant part, covered “Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services.”

The duty to indemnify is narrower than the duty to defend: it must be supported by fully developed facts, not the allegations in the complaint. The only evidence of an act during the policy period that allegedly slandered, libeled, or disparaged Hoffman was the website list of projects. But the representations on the website weren’t false; during the policy period, Community added asterisks to indicate that the experience on the projects was acquired prior to joining Community. Thus, the website accurately described the relationship between Community, its employees, and the listed projects; it simply omitted the fact that the employees were working at Hoffman at the relevant times. These statements didn’t harm Hoffman’s reputation, just failed to give it credit. Because the website didn’t reference Hoffman, there was no libel, slander, or disparagement.

Community argued that coverage also came from oral statements made by Community employees. But the evidence showed that any such statements weren’t during the policy period.