Sportsfield Specialties, Inc. (Sportsfield) was a sports equipment company located in Delaware County, New York. In the fall of 2009, it hired a competitor's employee. The employee in question was subject to a non-compete agreement and an electronic rights agreement that imposed various restrictions on his use/dissemination of the competitor's proprietary information. In November 2009, the employee’s former employer, a North Carolina corporation, commenced an action against Sportsfield alleging tortious interference with contract and business relations, unfair and deceptive trade practices, and misappropriation of trade secrets.

At all relevant times, Sportsfield was covered under the following two insurance policies:

Shortly after it received the underlying complaint, Sportsfield notified Harding Brooks Associates LLC (Harding Brooks), the insurance agency that had arranged for issuance of the policies. Harding Brooks then filed a notice of occurrence/claim with Twin City. In February 2010, Twin City declined to defend and/or indemnify Sportsfield in the underlying action.

The North Carolina action proceeded to trial and the jury returned a verdict in favor of Sportsfield’s competitor in July 2011. One month later, counsel for Sportsfield contacted Twin City and CastlePoint, requesting that they defend and indemnify Sportsfield with respect to the underlying judgment (ultimately calculated to be over $3.2 million). According to CastlePoint, the August 2011 letter from counsel that it received almost two years after the underlying action was commenced and after a judgment against its insured had been entered was the first notice it received of Sportsfield’s request for defense and/or indemnification. Both Twin City and CastlePoint denied coverage under their respective policies.

In November 2011, Sportsfield filed suit against Twin City and CastlePoint, seeking a declaration that they had a duty to defend and indemnify it with respect to the North Carolina action and resulting judgment. Sportsfield moved for summary judgment and both insurers cross-moved for summary judgment to dismiss the complaint. The Supreme Court of New York, Delaware County denied Sportsfield’s motion and granted the respective cross motions. It declared that Twin City and CastlePoint did not have a duty to defend or indemnify Sportsfield in the underlying action. Sportsfield appealed.

On appeal, the Supreme Court of New York, Appellate Division, noted that Sportsfield had sought coverage under the “personal and advertising injury” portions of the two policies.

The policy that Twin City had issued defined “personal and advertising injury” as an injury, other than a bodily injury, that arose out of both the insured's business and one or more of the enumerated offenses set forth therein, including the “[o]ral or written publication of material that violates a person's right of privacy.” CastlePoint adopted the same definitions that were in the Twin City policy with respect to losses encompassed by coverage A and also defined “advertising injury” under coverage B of the policy as the “[o]ral or written publication of material that violates a person's right of privacy.” Sportsfield argued that the term “person” connoted both individuals and corporations and also that the misdeeds alleged in the underlying complaint broadly implicated its competitor's “right of privacy.”

The appellate court concluded that Twin City’s policy could not reasonably be construed to mean that the term “person” included a corporate entity. The court then addressed the allegations against Sportsfield of tortious interference with contract and business relations, unfair and deceptive trade practices, and misappropriation of trade secrets. It determined that these did not constitute a violation of “a person’s right of privacy” in either the Twin City policy or the CastlePoint policy.

The court noted that the Twin City policy contained the following three exclusions to the personal and advertising injury coverage:

The court concluded that all of the allegations against Sportsfield fell within at least one of the exclusions. The appellate court upheld the lower court’s judgment that neither Twin City nor CastlePoint had a duty to defend and/or indemnify Sportsfield in the underlying action.

Sportsfield Specialties, Inc., v. Twin City Fire Ins. Co. Supreme Court of New York, Appellate Division. April 17, 2014. 2014 WL 1491514