Spitzer Eyes Some Online Advertisers

It now appears more clear that mainstream companies may be targeted in the newly-developing legal assault against so-called spyware or adware. We recently wrote about suits by private litigants and by New York Attorney General Eliot Spitzer’s office against spyware companies. Unlike the plaintiffs in the private litigation, Spitzer’s office didn’t name any advertisers in his suit.

But the Associated Press reports that Kenneth Dreifach, the head of the New York Attorney General’s Internet Bureau, says advertisers may also be targeted.

Dreifach is quoted by the AP as saying that his office does not consider advertisers to be immune and that companies might want to distance themselves from spyware and adware companies that install software onto computers without adequate disclosure to the computer user.

The Los Angeles Times names some well-known, mainstream companies that it says have done business with spyware/adware companies, sometimes inadvertently. The Times names Mercedes-Benz USA, Yahoo!, J.P. Morgan Chase , Disney and Travelocity as included among companies having direct or indirect relationships with spyware/adware companies.

Common causes of action in the cases to date include trespass and deceptive practices. While findings of intentional misconduct are not likely to be covered by any policy, insurance producers may wish to give some thought to the coverage lineup of their clients.

Typical GL policies may not be very helpful in this kind of case. Trespass generally is not covered by a general liability policy’s personal and advertising injury coverage. And the coverage for wrongful entry and invasion of the right of private occupancy appears designed to cover intrusion into a room, dwelling or premises occupied by someone – language that may not provide coverage for trespass by placing software on another person’s computer. The advertising portion of the general liability policy is directed to using another party’s advertising idea and to copyright, trade dress or slogan infringements by the insured in their advertisements.

Treatment of this kind of case under E&O policies varies widely and warrants closer inspection to determine whether or not coverage exists for an individual insured’s operations.