Steven Plitt, Expert Witness Steven Plitt, Expert Witness
Insurance Bad Faith Claim Handling Expert Serving Clients Nationwide

Breach of Contract Exclusion Trumps Advertising and Personal Injury Coverage According to a California Court

In James River Insurance Co. v. Medolac Laboratories, 290 F.Supp.3d 956 (C.D. Cal. 2018) the court held that a CGL policy's breach of contract exclusion precluded personal and advertising injury coverage in a situation where the insured promised not to commit any personal and advertising injury offenses after being terminated from her prior relationship with the claimant.

In this case the insured, Elena Medo, founded a company called Prolacta, which was a biomedical company. Upon leaving Prolacta to become the CEO of Medolac Laboratories, the insured signed a termination and nondisclosure agreement, promising not to use confidential information or to disparage Prolacta. However, after leaving Prolacta and becoming the CEO of Medolac, it was alleged that the insured utilized Prolacta's proprietary confidential information, as well as disparaged Prolacta, in an attempt to solicit customers and/or employees of Prolacta. The insured sought coverage under the personal and advertising injury provisions of Prolacta's policy. The insurance company disclaimed coverage, arguing that the policy's breach of contract exclusion precluded personal and advertising injury coverage. The court granted summary judgment in favor of the insurance company, finding that all of the alleged claims in the Prolacta lawsuit arose out of the same conduct which was alleged to constitute a breach of contract.

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