To Tender or Not to Tender?
By David A. Gauntlett*
Introduction
In an article recently published in Law360,[1] the author offers some insight into why immediate tender of a trademark lawsuit to your insurer may not be advisable. Here, we wanted to continue that discussion by providing perspective on the benefits of immediate tender and addressing some of the risks inherent in any delay. First, however, we will summarize the main points of the article because (1) the advice is worth considering and (2) the article is only available behind a paywall.
Reasons to Withhold Tender
The article uses a trademark lawsuit filed by Buc-ee’s against an Ohio convenience store chain to highlight a broader problem: companies often treat trademark litigation as a routine insurance matter when it carries significant strategic risk. General counsel may instinctively tender the claim to a Commercial General Liability (“CGL”) insurer, but this approach can expose the company to serious long-term consequences.
Trademark cases differ from typical liability disputes because the stakes extend beyond legal costs. Companies face risks such as injunctions, forced rebranding, and limits on future market activity, which can outweigh the cost of litigation. Despite this, insurers typically select defense counsel based on efficiency and cost, not expertise in trademark law. As a result, appointed lawyers may miss key early strategies, such as challenging the strength of the plaintiff’s mark, disputing evidence of consumer confusion, or raising defenses like fair use at critical stages. These missed opportunities can weaken the defense and increase exposure.
Insurance coverage itself is also uncertain. Modern CGL policies often include intellectual property exclusions, with only narrow carvebacks tied to advertising-related claims. Whether coverage applies can depend on how facts are developed during litigation. Because insurer-appointed counsel shapes that record—often under tight budgets—their decisions can directly affect whether coverage is ultimately granted.
A key issue is the misalignment between insurer and company incentives. Insurers prioritize minimizing short-term costs and may push for quick settlements. While these resolutions reduce immediate expenses, they can include admissions, territorial restrictions, or consent judgments that damage the company’s brand and competitive position. The insurer closes the file, but the company lives with the long-term impact.
This tension becomes more serious when a defense is provided under a reservation of rights. In such cases, the insurer reserves the ability to deny coverage later based on issues like willful infringement or knowing violations. These issues often overlap with the core facts of the case, creating a conflict of interest. The insurer controls the defense while having an incentive to develop facts that could eliminate coverage. Courts in many jurisdictions recognize this conflict and may allow the company to select independent counsel at the insurer’s expense.[2]
There are also practical limitations to insurer-controlled defenses. Budget restrictions and billing guidelines can limit the use of expert witnesses, consumer surveys, and other tools essential to trademark litigation. Insurers may also require preapproval for major steps, slowing or constraining strategic decisions. This cost-control model, effective in routine cases, is poorly suited to complex intellectual property disputes.
The article argues that companies should take a more proactive approach. Before litigation arises, general counsel should review insurance policies carefully, focusing on coverage limits, exclusions, and definitions. For businesses where trademarks are central assets, specialized intellectual property or media liability insurance may be necessary. Companies should also seek to preapprove experienced trademark counsel with their insurers.
When a claim is filed, it should be tendered promptly and precisely, with all relevant policies notified. Reservation-of-rights letters should be analyzed closely to identify conflicts that may justify independent counsel. If insurer-appointed lawyers lack expertise, companies should push for replacement or a co-counsel structure involving specialists.
During litigation, companies should demand an early case assessment and a strategy tailored to trademark issues, including evidence of consumer perception and intent. They should also retain control over settlement decisions, especially those involving admissions or restrictions on future business.
The central point is that insured trademark litigation is not routine. It is a strategic moment that can shape a company’s brand and market position. Companies that rely entirely on insurers risk losing control over critical decisions, while those that actively manage the defense can better protect both their coverage and their long-term business interests.
Delayed Tender May Be Fatal
In Basalite Concrete Products, LLC v. Natl. Union Fire Ins. Co. of Pittsburgh, PA.,[3] the underlying suit included factual allegations that plaintiffs improperly used Keystone's trademarks and patents after breaching licensing agreements which granted plaintiffs the “the right and license to utilize the Know–How, Molds, Patent Rights, and Trademarks to manufacture, market and sell the Products.”[4]
The policyholder first tendered its defense of the underlying matter on November 18, 2011, resolving via settlement on August 13, 2022.[5] It did not, however, send supporting documents that evidenced potential coverage under the policy until August 22, 2012.[6] The court refused to impose any obligation on the insurer since the action concluded before the insurer had access to any evidence that it should be defending the policyholder.
Even assuming that the extrinsic material offered by plaintiffs in support of their tender could give rise to the duty to defend, plaintiffs provided the material after the Keystone Matter terminated. Since the Keystone pleadings did not, on their face, give rise to a duty to defend, and any such duty expired at the conclusion of the Keystone litigation, plaintiffs' tender of extrinsic material after the conclusion of the lawsuit did not trigger a duty to defend.[7]
Although the Basalite court uses language consistent with a “facts known” standard, the imprecise phrasing simply addressed the absence of facts beyond the complaint since the relevant documents were not publicly available.[8] As the insurer had no means of reviewing these facts prior to the policyholder’s second tender, the conclusion was consistent with California’s “facts available” standard.
Counsel That Delays Tender Risks a Malpractice Claim
Many defense counsel wait to retain insurance coverage counsel to assess available coverage options under a client’s policies until the underlying action is resolved. Their singular focus on resolving the underlying action (aided by Mediators who once they learn of an insurer denial of a defense do not think of bringing them to the table again) are can be problematic.
Defense counsel’s focus on securing a prompt resolution of the underlying action with their Client’s resources at stake to avoid greater defense fee and indemnity exposure (while an appropriate concern) is best coordinated with revisitation of the opportunity to clarify the existing claims that evidence a potential for coverage.[9] Clarifications developed after an insurer’s denial of a defense would enhance the prospects for achieving a global settlement in many disputes where viable paths to securing a defense exist.
Furthermore, failure to advise clients to timely tender a claim exposes defense counsel to malpractice liability. In Nichols v. Keller,[10] one court rejected a worker’s compensation attorney’s argument that it had no duty to advise its client that the client possessed a valid third-party claim arising from an accident. The statute of limitations barred recovery. A prompt demand for relief would have created a right to recovery which was lost in that claim. The court concluded that, at minimum, the plaintiff should have been advised to consult another attorney re its rights against third parties.[11]
Conclusion
While the Lexis360 article raises valid points that should be considered by general counsel and any business owner facing a trademark lawsuit, it is equally important to understand the risks inherent in delaying tender. For an executive, the delay could result in a loss of coverage, which could leave the company paying for the full cost of litigation. That can easily eclipse $1M for a trademark lawsuit. And for a general counsel, failure to tender appropriately could open the possibility of a malpractice claim.
*David A. Gauntlett is a principal of Gauntlett Law and represents policyholders in insurance coverage disputes regarding intellectual property, antitrust, and business tort claims, as well as in the underlying actions. Mr. Gauntlett can be reached at (949) 514-5662 or dag@gauntlettlaw.com. For more information, visit Gauntlett Law at www.gauntlettlaw.com.
[1] Bill Wagner, What GCs Should Consider Before Tendering TM Lawsuits, Law360, https://plus.lexis.com/newsstand/law360-us/article/2466536/read/?crid=50945d6b-7624-4e10-b2cb-e013b9769b6f (April 17, 2026).
[2] For a more thorough discussion of independent counsel and the facts that trigger an insured’s right to same, see David A. Gauntlett, Independent Counsel Triggers and Requirements, https://www.gauntlettlaw.com/blogs/independent-counsel-triggers-and-requirements (April 10, 2025).
[3] Basalite Concrete Products, LLC v. Natl. Union Fire Ins. Co. of Pittsburgh, PA., No. CIV. 2:12-02814 WBS, 2013 WL 2156582 (E.D. Cal. May 17, 2013), aff'd, 615 F. App’x 894 (9th Cir. (Cal.) 2015).
[4] Id. at *2.
[5] Id. at *9.
[6] Id.
[7] Id.
[8] Id.
[9] David A. Gauntlett, Arbitrator Rules Delay in Paying Defense Fees Constitutes Bad Faith, https://www.gauntlettlaw.com/news/arbitrator-rules-delay-in-paying-defense-fees-constitutes-bad-faith (Mar. 25, 2022).
[10] Nichols v. Keller, 15 Cal. App. 4th 1672 (1993).
[11] Id. at 1685.