Comma Wars: NY Case Illustrates the Importance of Punctuation and Grammar in an Insurance Policy


By: Justin Boron

In the insurance coverage world, hundreds of thousands of dollars—and sometimes even millions—often come down to a comma.

On such case came before the Second Circuit on oral arguments last Thursday. In an IP coverage dispute with Hartford Fire Insurance Co.,[1] Spandex House has hung its claim for coverage on a pair of commas in an exception to the Hartford policy’s intellectual property exclusion. The underlying action arises from Rex Fabric’s copyright infringement suit against Spandex House, and Spandex House is seeking coverage for its defense in the suit. 

On Thursday, a Second Circuit panel heard on the coverage dispute on appeal from a New York federal judge’s decision holding that an exception to an expansively phrased intellectual-property exclusion did not apply because the alleged infringement did not stem exclusively from acts “in [Spandex House’s] advertising or on [its] website.” In her decision, U.S. District Judge Valerie Caproni reasoned that, while the underlying action alleged Spandex House infringed Rex’s copyrights by advertising the alleged copycat attire, it also claimed the company committed infringement through its sale and distribution of the garments.

The parties’ oral arguments were notable for the extensive parsing of grammar and punctuation that occurred on both sides. For Spandex House’s part, its counsel asserted that the phrase “in your advertising or on your website” is separated from the rest of the provision by commas on either side:

The IP Exclusion “does not apply if the only allegation in the claim or ‘suit’ involving any intellectual property right is limited to: (1) Infringement, in your ‘advertisement’ or on ‘your web site’, of: (a) Copyright….”

As a result, Spandex counsel argued, the exception is not restrictive and restores coverage where the underlying action solely concerns the company’s alleged infringement, even if the alleged infringement stemmed from a source other than advertising or the web site.

In response, Hartford’s counsel argued that New York law requires courts to consider punctuation or grammar only “if the words themselves are already ambiguous.” He contended that it was not and that the underlying action “is full of garden-variety copyright infringement allegations: copying fabric patterns, making fabrics with those patterns, and selling and distributing those fabrics. It is not limited to ads or websites.”

The panel took the case under submission. 

[1] The case is Spandex House Inc. v. Hartford Fire Insurance Company et al., case number 19-2784, in the U.S. Court of Appeals for the Second Circuit