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Ninth Circuit Affirms No Coverage under Coverage B for Installation of Spyware and Capturing of Private Information

Blogs, Insurance Coverage

American Economy Ins. Co. v. Aspen Way Enterprises, Inc., Case No. 16-35059hy (9th Cir. May 26, 2017). In an opinion marked “Not for Publication,” the Ninth Circuit addressed whether a duty to defend existed where there were allegations that the insured installed spyware on rented laptops that allowed access to keystrokes and screenshots. The insured sought coverage for “bodily injury” and “personal and advertising injury” under CGL Coverage B.

There were two underlying causes, one by consumers and one by the State of Washington. Applying Montana law, the court held that coverage for the Washington action was precluded because of the failure to allege publication, and in both cases by an exclusion for Recording and Distribution of Material in Violation of Law. The court held that the insurers were entitled to recoupment of defense costs which had been advanced because the insured “implicitly accepted” their defenses under a reservation of rights.