Insurance Policyholder Advocate & Attorney David Gauntlett : Gauntlett Law Firm : Insurance Recovery, Policy Interpretation : Irvine, Orange County, California

Issues to Confront in Assessing the Potential for Insurance Coverage

In assessing the impact of coverage on litigation strategy, the following questions must be considered:

(1) What are the goals of the plaintiff or counterclaimants in monetary versus nonmonetary relief?

(2) Will your company’s carriers contribute to a settlement if nonmonetary issues can be resolved?

(3) Can you procure full reimbursement for the attorneys’ fees you incur in defense of IP/antitrust litigation, even if you are also a plaintiff?

(4) Is there an issue of allocation re recovery of attorneys’ fees in such a situation or simply where there are some claims that are covered and others that are not – again, depending upon the forum whose coverage law will apply?

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Discover What Insurance Your Litigation Opponent Possesses

Insurance coverage is a two-way street. Where you are litigating against a competitor of similar size and economic resources, it is likely that its insurance portfolio will mirror yours because of market conditions. Pursuant to Federal Rule of Civil Procedure 26(c), you can readily ascertain policies issued to it which may respond to claims asserted in your lawsuit. Parties that contend there is no coverage because their own review of their policies reveals no coverage or due to their receipt of a denial letter from their insurer must be tested. Your opponent’s views on the scope of its coverage can be tested in litigation.

It is important, in this effort, to not limit analysis to Commercial General Liability policies but to pursue umbrella and excess coverage, Errors and Omissions policies, Directors and Officers policies, as well as new forms of multimedia, cyberspace, and net security policies. While your opponent may object that this information is privileged, some level of inquiry is required to clarify whether a Rule 26(c) disclosure has been properly made.

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How to Get an Insurer to Pursue Patent Infringers with Attorneys You Choose at Its Expense – The Advent of Patent Pursuit Policies

As the cost of patent infringement litigation escalates, the average case will require more than $1,000,000 to pursue through trial according to a 1999 AIPLA (American Intellectual Property Law Association) survey. Many patent holders have been successful in procuring damages, principally via reasonable royalty awards, that make such lawsuits financially worthwhile. Lawsuits that do settle between major corporations are typically resolved through cross-licensing of patents possessed by each corporation. The net effect of these cases is to generate new marketing alliances.

For companies that do not have a significant patent portfolio that they can exchange with a competitor to resolve infringement disputes, the inability to afford costly patent litigation may mean the abandonment of a key market advantage, central to the company’s strategy. For such companies, the ability to afford patent infringement is a matter of economic survival.

Some years ago, creative patent attorneys appreciated the insurance industry seeking solutions to this issue. Persuaded that an advance of monies to fund such lawsuits could often be paid back from the proceeds realized through successful litigation, some select insurers began underwriting a new form of insurance – pursuit coverage that placed insurers and companies with patent rights into partnership in their efforts to realize the full benefit of the patents the companies had procured.

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While some counsel may object that there is less predictability associated with the active pursuit of intellectual property interests, then true of product launches that create liability exposure, the differences are simply matters of degree. New product launches that create exposure are driven by a company’s marketing programs, as are core advertisements that create liability for intellectual property and antitrust risks. While some companies may elect to self-insure at high levels to reduce premium expense in this area, before that decision is made, it makes sense to look at what benefits might have already been available under existing policies for previously litigated antitrust and intellectual property claims.

Most major corporations have procedures, either through existing personnel or through the aid of consultants, that:

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The following seven propositions illustrate important issues which intellectual property owners need to be aware of to maximize the value of those assets. They include:

1. What claims you assert in litigation your opponents right to a defense and indemnity under their insurance coverage.

2. What insurance coverage will litigation against your company trigger that benefits its interests?

3. What new forms of insurance coverage are available to IPOs that will expand opportunities to transfer litigation costs to its insurers?

4. Can an insurance coverage audit reveal hidden opportunities to recapture monies paid for defense fees/settlements and/or judgments under existing insurance policies and, given the exposure revealed by a review of past coverage opportunities, is the present insurance portfolio properly attuned to risks your company now confronts.

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Royal Indem. Co. v. Hartford Ins. Co. of the Midwest, No. B196406, 2008 WL 2009747 (Cal. Ct. App. (2d. Dist.) May 12, 2008

Two carriers.  Both agreed to defend disparagement claims in a trademark/unfair competition lawsuit brought against the insured.  Royal permitted the insured to choose independent counsel, Sheppard Mullin, while Hartford contended that it was entitled to appoint counsel, Sedgwick.  Hartford decided that no conflict of interest arose precluding it from choosing counsel as it wished. 

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North Plainfield Bd. of Educ. v. Zurich American Ins. Co., No. 05-4398 (MLC), 2008 WL 2074013 (D.N.J. May 15, 2008)

Few courts have found what one court recently mischaracterized as the “knowing violation of rights of another” exclusion bars even a defense for otherwise potentially covered claims.  The court found this exclusion evidenced an additional reason for not finding a defense due.

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Penn’s Market I, L.P. v. Harleysville Mutual Ins. Co., No. 1442 EDA 2006, 2007 WL 5124011 (Pa. Super. Ct. April 3, 2007)

Constructive eviction of a tenant was found to fall within the “invasion of right of private occupancy” “personal injury” coverage. The policy defined “personal injury” to include the “wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies . . . .”

The occupant was Chanda Enterprises, Inc., which appears to have been a dba for a tenant operating in a shopping center. The dispute arose when the name “Pertucci’s Dairy Barn,” an ice cream store in a shopping center, was changed to “Planet Ice Cream.” Chanda complained that it was disfavored as a franchisee in favor of a Dairy Queen. The court concluded:

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Two recent trademark cases analyzing trademark infringement coverage properly found a duty to defend.

Capitol Indem. Corp. v. Elston Self Service Wholesale Groceries, Inc., No. 04 C 6536, 2008 WL 696919 (N.D. Ill. March 13, 2008)

Analyzing the meaning of “infringement of title” under Illinios law, the court found that “infringement of title” can include improper use of a business name, citing Charter Oak Fire Ins. Co. v. Hedeen & Cos., 280 F.3d 730, 736 (7th Cir. 2002). At issue were allegations of advertising falsely labeled counterfeit cigarettes under the Newport brand. The court found that affirmative self-promotion of the actor’s goods or services was implicated by labeling of the cigarettes with the Newport mark characterizing earlier Michigan precedent from the 6th Circuit in the Advanced Watch case as anomalous. See Peterson Tractor Co. v. Travelers Indem. Co., 156 Fed. Appx. 21, 23 (9th Cir.2005). Id. at *9. It also rejected application of two exclusions, the first for “knowledge of falsity” which it mixed characterized as an intentional conduct exclusion noting that Trademark Infringement claims did not depend on either intentional or knowingly false conduct.

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