eNotes: Liability – May 2023 – Virginia

SIGNIFICANT CASE SUMMARIES

Virginia Case Summaries

Covington Specialty Ins. Co. v. Omega Rest. & Bar, LLC
United States District Court for the Eastern District of Virginia
2023 U.S. Dist. LEXIS 55937, 2023 WL 2720805

Decided: March 30, 2023

An insurance company does not have a duty to defend their insured against a lawsuit claiming the insured misappropriated models’ images and likenesses.

Background

Omega Restaurant & Bar, LLC operates a nightclub in Virginia Beach, Virginia. In some of its advertisements, Omega used photos of professional models that it found on the internet. However, Omega did not hire these models nor did it pay them for the rights to use their images and likenesses. In 2020, a group of models whose photos had been used sued Omega, alleging four counts: unauthorized use of image and likeness (Count I), violation of the Virginia business conspiracy statute (Count II), and violation of the Lanham Act for false advertising and false association (Counts III and IV).

Omega had a general commercial liability insurance policy through Covington Specialty Insurance Company. Omega promptly notified Covington of the lawsuit, and Covington initially agreed to defend Omega under a reservation of rights. Though Omega’s policy offered coverage for advertising injury, it did so subject to certain terms and exclusions. Specifically, the policy would not apply to advertising injury that resulted from criminal acts, knowing violations of the rights of another, or infringement of intellectual property rights. The definition of “advertising injury” was also, itself, very narrow. Covington then filed this action seeking a declaratory judgment that it owed no duty to defend Omega in the underlying case, as all four counts fell under the policy exclusions.

Holding

Even though a Virginia insurer must defend their insured if there is any possibility of a judgment against the insured that would be covered by the policy, the Court ruled that Covington had no duty to defend Omega. Regarding Count I, the Court ruled there was no duty to defend as misappropriation of image and likeness is a violation of a person’s right of publicity: a form of intellectual property theft that was excluded by the policy. Count II similarly did not trigger the duty to defend as it alleges business conspiracy, which is a criminal act in Virginia that is excluded under the policy. Lastly, the Court ruled that Counts III and IV did not trigger the duty to defend because the Lanham Act claims were not included as a part of the definition of “advertising injury” in the policy.

Questions about this case can be directed to John Lyding at (571) 470-0395 or JLyding@tthlaw.com.

United Servs. Auto. Ass’n v. Estep
Virginia Court of Appeals
No. 0391-22-1

Decided: March 14, 2023

Auto insurance policyholder entitled to coverage for injuries sustained after being struck by luggage cart while loading luggage into vehicle.

Background

After checking out of a hotel in Fairfax County, Virginia, Bruce Estep was loading his luggage into his vehicle in a hotel parking lot. He used a rolling luggage cart to transport items from the hotel to his vehicle, an SUV. After loading several items into the vehicle’s rear seat, Estep packed the remaining luggage into the SUV’s trunk. Estep was leaning into the vehicle’s trunk when a gust of wind propelled the luggage cart into Estep’s right side, resulting in serious injuries and medical bills totaling $123,989.07. At the time of his injury, Estep was insured by a personal automobile policy issued by United Services Automobile Association (“USAA”). The policy included $30,000 of medical benefits coverage.

The USAA policy provides that it will pay “medical expense benefits to an insured who sustains bodily injury . . . [which] must be caused by an accident arising out of the ownership, maintenance or use of a motor vehicle as a motor vehicle.” The policy further defines an “insured” as “you or any family member who sustains bodily injury while occupying . . . a motor vehicle as a motor vehicle[.]” “Occupying” is defined as “in, upon, or getting in, on, out or off.” USAA denied Estep’s claim for medical benefits, arguing that the injuries did not fall within the policy’s coverage.

Holding

To recover for medical expense benefits under his USAA policy and Virginia Code §38.2-2201(A), Estep’s injuries must have (1) arisen out of the ownership, maintenance or use of a motor vehicle as a motor vehicle, and (2) occurred while he was in or upon, entering or alighting from or otherwise occupying his vehicle. The Court of Appeals held that Estep was loading the vehicle with the immediate intent to drive the vehicle. The vehicle was more than simply a situs where the incident occurred, as Estep’s physical location was not wholly independent of the transportation function of a vehicle. Additionally, Estep was in or upon or otherwise occupying the vehicle at the time of his injury. Estep’s physical presence halfway inside the vehicle while performing actions which allowed him to imminently occupy the vehicle was sufficient to trigger coverage under the policy. Estep was “upon” the vehicle as he put luggage into it, and he placed parts of his body within the vehicle. The Court of Appeals therefore affirmed the Circuit Court’s holding that Estep was entitled to coverage under the policy.

Questions about this case can be directed to Mackenzie Payne at (571) 470-1906 or mpayne@tthlaw.com.