Advising a Client to Not Request a Defense From Its Insurers Is Fraught With Peril

In a recent case IP defense counsel determined that no potential coverage could arise for claims of “implicit disparagement.”  Defense counsel found no potential coverage arose despite trademark dilution claims alleged injury to reputation flowing from alleged “tarnishment” activity, leading potential consumers to think less of the leading brand’s products.  Defense counsel did not consider that: (1) facts rather than labels of causes of action determine a duty to defend; (2) the potential for amendment of the claims must be asserted; and (3) that inferences from the facts asserted that evidence potential coverage may give rise to a defense.

Although the policy included an IP exclusion, it did not mention trademark dilution claims.  Nor did it have a “catch-all” provision that encompassed “other intellectual property claims.”

Where defense counsel leaves the decision of whether coverage arises up to the client, they may lack internal resources to make a proper assessment.  Nor is reliance on an insurance broker’s opinion of coverage proper, as they are not licensed to render such opinions, nor typically knowledgeable about recent potential coverage case law.

Under California law, pre-tender fees are not recoverable because they precede notice of a claim of injury or suit. Loss of pre-tender fees could have been avoided if notice had been promptly provided to all insurers on risk.

The client lost policy benefits because it followed his recommendation and did not provide notice to client’s insurers.  Defense counsel’s representation raised the specter of legal malpractice.

For more information on case law addressing these issues, click here.

 

 

When Does a "Cease and Desist" Letter Create an Insurer Obligation to Fund Pursuit of a Responsive Declaratory Relief Action?

Policy Forms Recognize That Fees Incurred to Pursue a Declaration Relief Action May Be “Defense Related”

Hiscox’s MPM-1 10040 07/12 policy form, issued through a specific syndicate of underwriters at Lloyd’s of London, triggers Hiscox’s obligation to fund Declaratory Relief action in response to a “cease and desist” letter:

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The "Breach of Contract" Exclusion That Swallowed Chicago

GK Skaggs, Inc. v. Hartford Cas. Ins. Co., No. 12-56501, 2014 U.S. App. LEXIS 11161, at *4 (9th Cir. Cal. June 16, 2014) 

The court cites Travelers Prop. Cas. Co. of Am. v. Charlotte Russe Holding, Inc., 144 Cal. Rptr. 3d 12, 20-21 (Cal. Ct. App. 2012) for authority as to why there was no potential disparagement liability, despite the fact that that case had been previously vacated by the prior June 12, 2014 California Supreme Court ruling in Swift.

>read more (scroll to page 3).

A Case For All Seasons

Hartford Cas. Ins. Co. v. Swift Distribution, Inc., 59 Cal. 4th 277 (2014) arguably includes legal analysis for every persuasion.  For insurers, it emphasizes the “of and concerning” element for establishing liability within the scope of the common law torts that include injurious falsehood and trade libel.  Policyholders appreciate its recognition of coverage for implicit disparagement and recognition of the role of inferences and extrinsic evidence in revealing coverage albeit not on the facts of this case.  >read more

Judge Posner and the Internet

A Tale Of Two Cases Analyzing Coverage for Claims Asserted in Antitrust Lawsuits Under Indiana Law


In two published insurance coverage decisions, Judge Posner, writing for unanimous panels, applying Indiana law, relied upon extrinsic evidence not provided by any party and concluded that the applicable “personal and advertising injury” offense asserted could not be satisfied based on selective reference to facts that were not legally relevant to the issues posed.

Careful analysis of the coverage issues in light of the extrinsic evidence properly before the court, under applicable Indiana law, clarifies why potential coverage arose that the court’s Internet-based analysis avoided.  While the internet may be a legitimate resource when used, much like a dictionary to elucidate the commonly understood meaning of language, it should not be a vehicle to introduce extrinsic evidence never addressed by either party to support an opinion, especially once that is published and precedential, at least within the federal courts.  >read more

The Second Circuit Narrowly Construes “Personal and Advertising” Injury Coverage

The Second Circuit Narrowly Construes “Personal and Advertising” Injury Coverage to Limit Its Scope for Claims of “Infringement of Slogan” But Affirms Duty to Defend for “Infringement of Title” Claims

In CGS Indus., Inc. v. Charter Oak Fire Ins. Co., 720 F.3d 71 (2d Cir. 2013), the Second Circuit concluded that an insurance policy’s Coverage B did not cover liability alleged in a trademark infringement suit but concluded that a duty to defend because there “sufficient legal uncertainty about the coverage issue” at the time the tender was made. A copy of the decision can be found here.  >read more