Intellectual Property Exclusions Barred a Defense Claims

In My Choice Software, Ltd. Liab. Co. v. Travlers Cas. Ins. Co. of Am. Travelers asserted that its Intellectual Property exclusion barred a defense claims of trade secret misappropriation prosecuted in an amended complaint were soundly rejected by the Ninth Circuit which stated that:

The relevant provision of the IP exclusion stated that coverage under the policy does not apply to ‘Personal injury’ or ‘advertising injury’ arising out of any actual or alleged infringement or violation of any of the following rights or laws, or any other ‘personal injury’ or ‘advertising injury’ alleged in any claim or ‘suit’ that also alleges any such infringement or violation.’ . . . The district court stated that ‘My Choice’s First Amended Complaint against Trusted Tech asserted a trade secrets claim, which falls squarely within the IP Exception,’ and that ‘Trusted Tech’s counterclaims are thus in a ‘claim or “suit” that also alleges’ IP claims. Id at 512.

It observed that none of the cases Travelers cited or relied upon addressed circumstances like those here where the only asserted claim was by the insured, MyChoice, when it amended its complaint to charge Trusted Tech, the defendant, and the cross-complaint whose defamation claims triggered a defense under Travelers policy.