A federal district court applying Massachusetts law determined that an exclusion for the “misappropriation” or “improper use” of other property could not be read to bar coverage for an underlying copyright infringement lawsuit. Nichole Sliney Realty Team, Inc. v. Mount Vernon Fire Ins. Co., 2026 WL 371144 (D. Mass. Feb. 10, 2026).
The insured, a real estate agency, was sued for copyright infringement based upon its use of an architect’s drawing in its marketing materials. The insurer ultimately denied coverage for the underlying lawsuit pursuant to an exclusion for “disputes involving . . . conversion, misappropriation, commingling, improper use, theft, embezzlement or defalcation of funds, account information or other property.” The insured then filed a declaratory judgment action and moved for judgment on the pleadings on the issue of the insurer’s duty to defend the underlying lawsuit.
In granting the insured’s motion and ruling that the insurer owed a duty to defend, the court rejected the insurer’s argument that the exclusion barred coverage for the underlying litigation because the copyright infringement claim involved the “misappropriation” or “improper use” of “other property.” The court determined that the insurer’s interpretation was incorrect for multiple reasons. First, the court noted that, under the canons of construction of ejusdem generis and noscitur a sociis, the terms of an insurance policy should be read within the context of the words surrounding it. As such, the court concluded that, based on the exclusion’s inclusion of the terms “funds” and “account information,” the term “other property” should be interpreted to refer only to other types of financial property—and not to intellectual property. Second, the court found that the terms “misappropriation” and “improper use” could not be construed to apply to claims arising out of negligent conduct or statutory violations because the other terms surrounding it referred to intentionally tortious conduct, such as “conversion,” “commingling,” “theft,” and “embezzlement.” Third, the court noted that the exclusion did not include the word “infringement,” the “normal term” generally associated with copyright violations. Finally, the court read the exclusion in the context of the likely business risks that a reasonable insured would expect to be covered by the policy and concluded that the exclusion could not bar coverage for copyright infringement claims stemming from the images used in a real estate agent’s marketing materials, as doing so would eliminate a “substantial portion of the risks that the insured would expect to be covered.”
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