Does Electronic Aggression constitute an “Occurrence” under the insurance contract?

In my last blog, I focused on a recent trend of insurance coverage cases that found that the time when the statute of limitations begins to run for a negligent procurement or misrepresentation claim against an insurance agent was when the insured received of the insurance policy in question.  In one recently decided case, American Family v. Krop, the Illinois Supreme Court dismissed a claim as untimely where the insureds sought coverage for a cyberbullying claim.  The Court found that the claim was untimely as a matter of law and never addressed the issue of whether such a claim was covered under the subject homeowner’s policy.  Given the frequency that cyberbullying is in the news, I thought it useful to point out some of the insurance coverage issues that may have arisen if the Krop case had been allowed to proceed.

A good place to start is that cyberbullying, also known as electronic aggression, has been defined by the Centers for Disease Control (CDC) as persons threatening, harassing, degrading, and/or humiliating others through digital media (websites, bogs, emails, texts, and chat rooms).  Electronic aggression lawsuits include allegation of emotional distress, anxiety, insecurity, fear and wrongful death.  A vast majority of the litigation has involved minors and cyberbullying usually is used when talking about acts by minor (whereas claims involving adults are referred to as cyberstalking).

It remains unclear as to whether personal insurance such as homeowner’s policies will respond to such claims since the insuring agreement and exclusions are far from uniform with ambiguous or outdated language.  While some insurers have made cyberbullying coverage available (often as a sub-limit) or have been specifically excluded by others, I suspect insurance agents will be blamed for failing to advise or obtain such coverage for their clients when the policies fail to provide defense and/or indemnity coverage in the face of such electronic aggression claims.  Under such a circumstance, insurance coverage cases not specifically providing or otherwise excluding electronic aggression claims will undoubtedly focus on several issues.

The threshold question is likely whether the electronic aggression constitutes an “occurrence”.  Many jurisdictions do not consider an insured’s acts that are voluntary and intentional, even if the resultant injury may have been unexpected, unforeseen, or unintended, to be accidental and therefore not an “occurrence”.

To the extent there is an “occurrence”, a coverage analysis will then look at whether the victim of cyberbullying sustained “bodily injury” or “personal injury”. The Courts in many states have held that purely mental anguish or emotional injury, without any physical manifestation, is not “bodily injury” under the liability section of a homeowner’s policy. This would apply to wrongful death claims, but many cyberbullying claim allegations are without physical injury.  A source of coverage may be “personal injury” coverage which is oral or written publication of material, including electronically, that libels, slanders, or violates a person’s right of privacy.

However, even if it is determined that the act in question constitutes an occurrence, resulting in “bodily injury” or “personal injury”, the question then is whether electronic aggression claims could be excluded by the application of exclusionary language including intentional conduct.  As to “personal injury”, there is typically an exclusion for the publication of material that is done by or at the direction of an insured with knowledge of its falsity.  Not surprisingly, many claims in cyberbullying lawsuits will including allegations that are not intentional in nature such as negligent supervision claims against parents, which could arguably require an insurer to at least defend such claims.  There are jurisdictions that have concluded, however, that allegations of negligence that arise out of otherwise uncovered acts do not invoke a defense obligation.

Finally, as noted above, some insurers have started offering at least limited electronic aggression coverage or using a specific exclusion to such claims.  I also suspect that the industry as a whole will continue to introduce policy terms that more closely fit the exposure.  Until then, insurance professionals need to cognizant of the E&O exposure faced when dealing with personal lines clients.