Written Reasons by:
The Honourable Madam Justice Huddart

Concurred in by:
The Honourable Mr. Justice Lambert

The Honourable Mr. Justice Donald

[1] This appeal is about the construction of a standard form commercial general liability insurance policy. More particularly it asks whether the respondent insurer has a duty to defend a defamation action under the personal injury or advertising injury coverage it sold to the appellant.

[2] In July 1998, Senator E.M. Lawson sued the appellant for defamation he alleged occurred in an article on the scandals.html page located on the senate_reform.org website during the late spring of that year. The appellant's main website was reform.ca. It contained a link to the senate_reform site and to the page headed "Senate Scandals" where the allegedly defamatory comments were posted. The appellant takes responsibility for having created the senate_reform website and the Senate Scandals page. The senate_reform website was designed to promote the appellant's policy favouring the appointment of elected senators.

[3] The issue before the chambers judge in this case was whether the insurer was under a duty to defend the insured. It is important to note the distinction between the insurer's duty to indemnify and their duty to defend the insurer. The duty to defend is broader than and independent of the duty to indemnify in the sense that the duty to defend arises where the claim alleges acts or omissions falling within the policy coverage, while the duty to indemnify arises only where such allegations are proven at trial. See Non-Marine Underwriters, Lloyd's of London v. Scalera (2000), 185 D.L.R. (4^th) 1 and Nichols v. American Home Assurance Co. (1990), 68 D.L.R. (4^th) 321.

[4] On this appeal, the question is whether the insurer's duty to defend is triggered by Senator Lawson's allegations as pleaded. Senator Lawson claimed damages for the false and malicious publication of defamatory words "on the Internet at www.senate_reform.org/ scandals. html."

[5] By the terms of the commercial general liability insurance policy, the insurer agreed to:

[6] The facts including the other relevant provisions of the insurance policy and the allegedly defamatory statements are set out in the reasons of Loo J. They can be found at (1999), 16 C.C.L.I. (3d) 282, 3 C.P.R. (4^th) 289, and [1999] B.C.J. No. 2794. Justice Loo agreed with the insurer that the pleadings in the defamation action do not disclose any claim that could possibly fall within the coverage the appellant had purchased.

[7] The appellant considered Senator Lawson's claim comes within coverage for either "personal injury" or "advertising injury." These terms are defined in the policy as follows:

[8] Exclusions in Section IV of the policy provide that the advertising injury coverage does not apply, inter alia, "(s) (9) with respect to advertising injury, to any claim or suit arising out of comparative advertising by or on behalf of the Insured." Under the heading Additional Definitions, the policy defines "comparative advertising" to mean:

[9] In Scalera, supra, Mr. Justice Iacobucci discussed the principle that the pleadings govern the duty to defend at para. 84:

[10] The merit or lack of merit of Senator Lawson's claim plays no part in this case. Neither party suggested Senator Lawson's claim was bound to fail. Counsel agree the pleaded allegations sound in defamation. The uncertainty is whether the alleged offence, if proven, would come within coverage.

[11] The theme of the appellant's submission is that the insurer sold advertising injury coverage to a political party and then denied it that coverage because it was not a commercial organization. The essence of its complaint is that the trial judge construed the exclusion from personal injury coverage for publishing activities so broadly and the advertising injury coverage so narrowly as to negative the entire purpose of the coverage for advertising by a political party or other non-commercial organization. It submits the accepted principles for interpreting an insurance contract require the converse, a broad interpretation of coverage provisions and a narrow interpretation of exclusion clauses.

[12] That is one of the settled principles to which Justice Iacobucci referred as "interpretive aids that cannot decide any issues by themselves" in Scalera, supra, at para. 67. Courts have adopted these general principles because insurance contracts are viewed as contracts of adhesion. The insurer offers coverage under a pre-printed form that typically allows little, if any, negotiation between the parties. As an adhesion contract, an insurance policy is interpreted so the reasonable expectations of the insured may be realized. See too the discussion of the appropriate approach to be taken in resolving coverage issues in Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., [1993] 1 S.C.R. 252 at 269 and Dawson Creek (City) v. Zurich Insurance Co. (2000), 75 B.C.L.R. (3d) 131. In my analysis, I am also mindful of Justice Iacobucci's caution in Scalera, supra, at para. 76 that indemnity insurance must not be converted into litigation insurance.

[13] I turn now to the task at hand and begin by stating that I agree with the learned chambers judge as to the personal injury coverage. She held that the web page containing the comments about Senator Lawson came within the exception to personal injury coverage for publishing activities. I agree that the posting of comments on a page of the World Wide Web in the circumstances of this case was part of a publishing activity carried on by the appellant in May and June 1998. Although only 173 hits were recorded during the relevant period, the page is posted on the World Wide Web for any member of the public to locate and read. The page was an integral part of a communication project designed to inform the public generally by way of the Internet about the appellant and its policies. The dissemination of an idea is at the core of publishing activities as The New Shorter Oxford English Dictionary on CD-ROM (Oxford University Press, 1973, 1993, 1996) indicates by its definitions.

[14] This is a different situation from that in P.C.S. Investments Ltd. v. Dominion of Canada General Insurance Co. (1994), 18 Alta. L.R. (3d) 270 (Q.B.). There the alleged defamatory comments were contained in a letter sent to about 130 members of the insurance industry. Mr. Justice Medhurst found this audience insufficiently broad to exceed the personal injury coverage afforded by the policy. In his view, the publication of a message in 130 letters delivered to specific recipients was not communication in the sense of "advertising," "broadcasting", and "telecasting." These words give meaning and context to the word "publishing" in the definition of "personal injury". All denoted delivery of the message to a broad audience. Posting on the World Wide Web is publication to a potentially broad audience of unknown recipients.

[15] In one sense it matters not whether the information is seen as being made generally available by way of "publishing" or "broadcasting." The chambers judge found the appellant's website to constitute both activities. However, it is important to note that broadcasting and telecasting are regulated industries. I would be adverse to extending the meaning of "broadcasting activities" in an insurance contract to include the posting of a message on the World Wide Web, when the regulatory statutes do not do so. On this point, regard might be had to the useful discussion on the difficulties of establishing a principled legal and regulatory framework for internet communication by J.B. Festinger in his article "Mapping the Electronic Highway: A Survey of Domestic and International Law Issues" (1995), U.B.C. L. Rev. 199.

[16] The alleged defamation also falls outside personal injury coverage if it occurred "in the course of or related to advertising activities." But then it would come within the coverage for "advertising injury." That is why the real issue on this appeal is whether the webpage is part of the appellant's advertising activities and thus within the advertising injury coverage. The parties agree a point of view may be advertised like a product or service. The crux of their disagreement is about what constitutes an advertising activity. In particular, they disagree upon whether the insured's posting on their senate_reform site constitutes an advertising activity and on the criteria a court should examine to determine whether a particular communication of a message is an advertising activity.

[17] The Reform Party requested insurance coverage for advertising liability and the insurer responded by providing them with a commercial general liability policy containing the most commonly used advertising injury provision. Steve Winder in an article entitled "Insurance Coverage for Intellectual Property Claims: Understanding "Advertising Injury" Provisions in Liability Policies", [1998] 12 I.P.J. 127 at 129-130 traces the history of this provision. It was developed in the United States by the Insurance Services Offices ("ISO") and subsequently adopted by the Insurance Bureau of Canada ("IBC"). Before 1986, the provision was normally inserted into U.S. policies as a "broad form endorsement." Since 1986, the ISO has incorporated advertising injury coverage into the main body of the policy, as did the insurer in the policy we are considering. Given that the standard form provision under consideration is the same as its American counterpart, American jurisprudence on the scope of coverage afforded to this advertising injury provision is helpful as will be discussed below.

[18] The only relevant Canadian authority to which we were referred is an oral decision by Mr. Justice McIntyre in Reform Fund of Canada v. Western Union Insurance Company (February 11, 2000), Calgary Registry 9901-15884 (Q.B.). There, allegedly defamatory comments about Senator Ghitter were the subject of the underlying action. The comments were included in a fundraising letter the plaintiffs circulated to more than 31,000 people, all or most in Alberta. Included in the materials alleged to be defamatory were three statements about the letter to representatives of two newspapers and further comments published on the Reform Fund's website. The decisive issue was whether the authors of the letter were Named Insureds. Mr. Justice McIntyre, in a brief oral decision given on an urgent basis, found they were not. He also concluded the materials were an advertising activity within the meaning of a similarly worded coverage. He did so by way of obiter without reasons. His decision was not appealed. The respondent acknowledges that the circulation of the promotional letter defaming Senator Ghitter was part of the insured's advertising activity and thus rightly fell within coverage.

[19] Counsel also referred us to the decision of this Court in Grayson v. Wellington Insurance Co. (1997), 37 B.C.A.C. 103. It is not helpful in our circumstances. Madam Justice Newbury was considering a different question, what is the required nexus between the alleged injury and the insured's advertising activity. The question before us is what constitutes "advertising activities," when the term is not defined in the policy. The question is not as easy as one's intuitive first impression might suggest.

[20] In the appellant's view, all promotional activities on its website were advertising activities. What matters is whether the message is designed to promote the appellant and its policies to a significant number of recipients. The significant number will vary according to the particular message and its context. To the appellant, a message is promotional if it is designed to advocate a product or service or point of view and is actually communicated to a significant number of recipients. It also considers the promotion of a political party means the promotion of an idea or a bundle of ideas constituting a political doctrine. Ideas are in this sense its product; the power to implement those ideas its goal.

[21] Thus, the appellant would focus on the particular message in the context of its publication to determine if it is "advertising." The appellant sees the comment about Senator Lawson as part of an advertising activity because its purpose in publishing the comment was to promote its policy favouring elected senators to the public attracted to its website. In support of its view that the creation of the senate_reform website and the Senate Scandals page was an advertising activity, it points to Reform Fund of Canada, supra. In the appellant's view the posting of a promotional message on a website is analogous to the wide circulation of a fundraising letter. At their core, both seek support for a political party's point of view from the public.

[22] This is a very broad understanding of "advertising activity". From that perspective any publication of a point of view by a political party would be considered an effort to solicit support for its policies by way of labour, donations, or votes at the next election. For a political party "promotional" must mean designed for these purposes. Indeed, promotion of a political doctrine is the regular course of a political party's business. At least theoretically, everything a political party does is designed to obtain support for its policies, from the holding of a meeting of its members in a constituency to a speech by its leader. The reach of this promotional activity could sweep very broadly given that local riding associations or individual members may promote the party's ideas more or less independently of the national or provincial leadership. As P.C.S., supra, illustrates, funds may be sought by related groups or individuals, all acting to promote the party's doctrine.

[23] Some support for such a broad interpretation of "advertising" can be found in Committee for the Commonwealth of Canada v. Canada, [1991] 1 S.C.R. 139. A political group distributed leaflets at Dorval Airport seeking new members to support a new constitutional structure for Canada. Both Justice L'Heureux-Dubé and Justice McLachlin considered the activity came within "advertising" as that word was used in the Government Airport Concession Operations Regulations, SOR/79-373.

[24] Nevertheless, the appellant does not suggest all publications by political parties are promotional, or that all publications on its website are promotional. It sees some as purely informational. Its counsel gave us as an example of non-promotional, factually informative activities a web page containing a factual report of a leadership convention or biographies of Members of Parliament. Yet, most people would consider the publication of such information through the medium of a newspaper, radio, or TV, if paid, to be advertising designed to promote the political party whose convention or members were the subject matter.

[25] I agree that not all publishing activities of a political party are promotional, either of the party or of its ideas. One of the fundamental roles of a political party is to develop policies by which a community may be governed. In the thrust of debate compromises are reached and coalitions form around specific ideas. Much of the publishing effort of a political party is designed to instigate or foster such debate among members, adherents, and others. Only in the broadest sense could such activities be considered "promotional" of the party as an institution, the parties' policies in general, or a particular policy or approach to governance. These activities might be called "policy development activities."

[26] Advertising may also be understood by the ordinary notion of calling public attention to the merits of a product or service, as Wong P.C.J. (as he then was) suggested in R. v. Stewart (1981), 26 B.C.L.R. 134. He looked to the Oxford and Webster dictionaries to find that "advertising-matter" in section 319(d) of the Vancouver Charter could not be confined to commerce or commercial ventures. Those dictionaries defined advertising as "to give notice of; to make generally known; to turn the attention of others to, especially by public notice." This approach was also favoured in Smartfoods, Inc. v. Northbrook Property & Casualty Company (1993), 628 N.E. (2d) 1365 (Mass. App. Ct.). Advertising also includes institutional advertising, where attention is called to the institution rather than to its product or service, and competitive advertising, where little if any information is conveyed about a product or service or point of view. Black's Law Dictionary (7th ed.) adds "informative advertising" which it defines as advertising that gives information about the suitability and quality of a product.

[27] Moreover, the purpose of calling attention to oneself or one's product may vary. Entrepreneurs will usually be seeking to sell (or rent) their product or to increase the value of their product by adding value to their trademark. Charitable organizations will usually be seeking donations, but may also be seeking to make their services or the qualities of products they wish to sell known to potential beneficiaries or purchasers. Political parties do both. They seek to obtain support for their organizational efforts by way of gift of labour or resources, and to obtain votes for their policies from members in legislative assemblies and Parliament, and, of course, most importantly from the public at election time.

[28] Still, this ordinary notion cannot be applied to mean that every public statement authorized by a political party is "advertising." Many public statements by a company's president call attention to that company's products, but the ordinary person would be unlikely to describe such a statement as "advertising." Nor for that matter would a written version of a speech distributed to those hearing it generally be considered advertising. However, the ordinary person might well consider the publication of a speech extolling a company's virtues to be advertising, if the company paid for its publication in a newspaper or for its broadcast on TV or radio. And that view would probably extend to a paid republication on a website that publishes material in return for payment.

[29] It all depends. But on what?

[30] It is not enough for a court called upon to interpret the standard wording of a commercial general liability policy covering personal injury and advertising injury to say that it knows advertising when it (or the ordinary person) sees it. The difficult task is to establish criteria for determining when the publication of a statement falls within the subclass of published statements that constitute "advertising."

[31] The respondent does not seek to support the emphasis on the commercial nature of the message in the chambers judge's construction of "advertising injury" coverage. It acknowledges political parties and other non-commercial organizations may and do advertise and may inflict advertising injury. Presumably, it would not otherwise have sold coverage for such injury to a political party. It agrees with the appellant that a promotional message is a necessary element of an advertising activity. But, for the respondent, a promotional purpose is not enough to qualify a public message as an advertising activity. In its view, the content of the message should be considered to ascertain not only whether the message is promotional, but also whether the advertiser is clearly identified, there is promotion of the advertiser's product, service, concept or idea, and the message invites, suggests, or inspires acquisition or donation by the recipient. As well, the context of the message is to be examined. It should have a commercial aspect (such as purchasing advertising space or erecting a sign), be delivered by a person who expects to benefit from its delivery, and be directed to an audience in a position to act upon the advertiser's suggestion.

[32] In the respondent's view, the appellant has not met two of these criteria. It was not clearly identified as the sponsor of the web page on which the comments about Senator Lawson were posted and the message was not designed to elicit support for the appellant. In its view, the Senate Scandals page is simply putting forward an idea, in which the public should be interested.

[33] The respondent points out the webpage in question does not qualify as advertising under the Canada Elections Act, R.S.C. 1985, c. E-2 because the sponsor is not identified. However, it might be argued the commentary about Senator Lawson and the web page as a whole comes within the definition of "advertising" in s. 259 of the Canada Elections Act which states, in part, that:

[34] This definition is influenced by the purpose of the Canada Elections Act, which is to govern activities of registered political parties during an election, including expenditures on advertising. It reflects the difficulty in finding one ordinary meaning for the word "advertising" and the broad use to which the word is put in ordinary parlance.

[35] The criteria suggested by the respondent evoke that applied in Erie Insurance Group v. Sear Corporation, 102 F.3d 889 (7^th Circ., 1996), with its emphasis on "active solicitation of business." In that case, the United States Court of Appeals was considering the meaning of "in the course of advertising" in a similarly worded policy under Indiana law. At issue was a one-on-one badmouthing of a competitor to a client. The court held (at para. 8) that to come within the scope of advertising injury coverage, "actions must involve actual, affirmative self-promotion of the actor's goods and services." Negative statements made against competitors would qualify as advertising only if they were made in the context of directly soliciting business. Not all marketing efforts are "advertising activities" within the policy.

[36] The court also noted that its holding did not turn "on whether the statements were made to the public at large." That had been the holding of the same court when considering the meaning of "in the course of advertising activities" in similarly worded personal injury coverage in Playboy Enterprises Inc. v. St. Paul Fire & Marine Insurance Company 769 F. 2d 425 (7^th Circ. 1985). There Flaum J. (at para. 5), applying Illinois law, interpreted what he saw as an ambiguous exclusionary provision narrowly to favour the insured. The court construed "advertising" as not including a letter a Playboy regional advertising manager had written to 11 of its advertisers in which it allegedly defamed Penthouse, a competing magazine, although arguably it was "related to" Playboy's advertising activities.

[37] In effect, Circuit Judge Flaum construed the exception to the personal injury coverage as earlier authorities had the advertising injury coverage. Those authorities established that actions "in the course of advertising activities" referred only to the widespread distribution of promotional material to the public at large. To similar effect is Smartfoods, Inc., supra.

[38] I am attracted to the common sense approach taken to the interpretation of commercial general liability policies by the American courts, and by Justice Medhurst in Reform Fund, supra. I too would read the advertising injury coverage to accord with the interpretation of the exception for publications or utterances in the course of advertising activities in the personal injury coverage.

[39] It is important to emphasize that the personal injury coverage is independent of the advertising injury coverage. Advertising activities are excluded from personal injury coverage. That is why an insured must seek specific coverage for advertising injury. In these circumstances, an insured would reasonably expect that if it bought specific coverage for an activity excluded from the more general coverage for personal injury because it was part of its advertising activities, a minor difference in wording would not result in a gap in the specific coverage for advertising activities

[40] Reading the provisions together requires that the construction of "advertising activities" be informed by the use of "publishing," "broadcasting," and "telecasting." As Justice Medhurst noted, these words all suggest a broad distribution of a message as opposed to a one-on-one oral statement or a letter directed to only one person. Defamation in such a one on one situation is unlikely to be excluded from personal injury coverage.

[41] For this particular policy, the construction of "advertising" must also be informed by the definition of "comparative advertising." The terms of this exclusion suggest that an insured may carry on advertising activities directly or by another person, but that both it and its product must be identified. For the exclusion to apply, a comparison between the product and the product of a competitor must be made sufficiently clearly for the recipient of the message to be able to identify both the advertiser and the competitor.

[42] If the Senate Scandals webpage qualifies as an advertising activity, it would best be described by the epithet, "negative advertising" because the page contained no positive statement about anything. However, it is not clear that negative advertising is synonymous with comparative advertising, because negative advertising may denigrate a competitor without identifying the advertiser or drawing any comparison between products or services or policies.

[43] From this discussion, it must be apparent that the words of the policy are not easily applied to some factual circumstances, including those before us. While it might be possible to develop a primitive guideline for structuring a decision about advertising injury coverage, given the inherent ambiguities of the terms, it would be better were the insurer to develop a meaning for the words "advertising" and "advertising activities" to accord with the risks it is prepared to cover. Otherwise, the courts will continue to apply a broad common sense idea of what constitutes advertising and an advertising activity on the particular facts of each case. In practice, a common sense approach and the rules for interpreting policies are likely to favour coverage, at least so far as the duty to defend is concerned, wherever the provision is ambiguous in its application to the alleged facts.

[44] The comments about Senator Lawson were included in a web page under the heading "Senate Scandals" that attracted 173 "hits." The webpage was part of a larger communication project, the senate_reform website. That website could be accessed by a link from the appellant's main website, but for the purpose of this case, I consider the senate_reform website as the context within which the question of coverage must be determined. That site is a stand-alone activity designed to call attention to the appellant's policy in favour of the appointment of elected Senators. Its default.html page urged change and listed 11 links. Of those we were given, one was devoted to statements of various politicians from different parties expressing support for an elected Senate. Another listed the vacancies and retirement dates of sitting senators.

[45] Nothing about the website suggests discussion, policy refinement or compromise. It cannot be seen as informational or as instigation to public debate of an idea. Its purpose is to sell the idea of elected Senators, albeit without mention of the constitutional changes a policy in favour of an elected Senate might require. The potential market is thus all Canadians who care to participate in political life. The website makes the message available to all Canadians who can access the Internet. It follows that the website that constitutes the project is promotional and designed to reach a broad segment of the relevant public.

[46] The Senate Scandals page was made up entirely of negative comments about several senators. No statement called attention to the merits of the appellant's elected Senate policy or even mentioned it. The immediate purpose of the page was to discredit the Senate as it is presently constituted and indirectly those who support the status quo, if only by inaction. At most the page, including the comments about Senator Lawson, would assist in creating an atmosphere where the appellant's policy favouring elected Senators would be well received. As such, the comments would fit comfortably within what is popularly known as "negative advertising." While no inference was suggested on the Senate Scandals page itself that would tie the comments to the appellant's policy favouring elected Senators, the link to it from the senate_reform website made that inference irresistible. Included on the website's default page is the exhortation to "Contact your Premier in order to ensure that Senate Vacancies in your Province are filled by an Elected Senator."

[47] It follows that I am persuaded the Senate Scandals web page is (at least arguably) part of a promotional website actively seeking public support for an elected Senate. It is important to recall that the test for the provision of a defence under a commercial general liability policy is that affirmed in Scalera, supra, and Grayson, supra. Is the claim possibly within advertising injury coverage? In my view, the answer to that question, on the facts of this case, must be yes. The Senate Scandals page reinforces the positive comments about an elected Senate policy contained on another page of its website by denigrating those who benefit from the existing policy.

[48] However, that conclusion does not mean the Senate Scandals page may come within the coverage and that the insurer has a duty to defend. It may be excluded from coverage as "comparative advertising" by the insured. The senate_reform default page refers to the Prime Minister and by implication the Liberal Party of Canada and its policy of doing nothing about promised Senate reform. As McLachlin J. noted in Nichols, supra, at 327, "[w]here it is clear from the pleadings that the suit falls outside of the coverage of the policy by reason of an exclusion clause, the duty to defend has been held not to arise."

[49] The comparative advertising exclusion can be viewed as an attempt by the insurer to limit its exposure to risk. This makes some commercial sense. The exclusion can also be read as rendering the advertising injury coverage nugatory for this insured and thus, a windfall for the insurer in this case. This is because it is difficult to imagine political advertising without some point of comparison with a political competitor. The inability to compare yourself with another party would lead to an unrealistic result. As Mr. Justice Estey explained in Consolidated Bathurst Export Ltd. v. Mutual Boiler Machinery & Insurance Co., [1980] 1 S.C.R. 888 at 901-902:

[50] Applying that principle, it cannot be said Senator Lawson's suit is clearly outside coverage by reason of the exclusion clause. It follows the duty to defend arises from the reasonable possibility the alleged defamation falls within the coverage for advertising injury.

[51] I would allow the appeal and remit the matter to the Supreme Court for determination of the entitlement flowing from this decision. The appellant is entitled to its costs in this Court.

"The Honourable Madam Justice Huddart"

I AGREE: "The Honourable Mr. Justice Lambert"

I AGREE: "The Honourable Mr. Justice Donald"