Aside from insurance policies secured by a larger corporation that directly address antitrust litigation exposure, there is no express coverage for “antitrust litigation” in Commercial General Liability (“CGL”), Umbrella, Excess, Errors and Omissions (“E&O”), or Directors and Officers (“D&O”) policies. Rather, coverage extends to “categories of wrongdoing,” which includes a list of offenses under “personal and advertising injury” coverage. This offense-based coverage is often implicated by the allegations accompanying business tort claims. It is of no moment that the conduct alleged is intentional as the offenses covered in such CGL policies expressly include intentional conduct such as malicious prosecution, disparagement, and defamation.

The vast majority of civil litigation in America ends with a settlement rather than a judgment. As the most likely endgame for any given claim, policyholders should understand their rights during the settlement process. It is almost important to know how those rights are affected both by an insurer’s acceptance of its duty to defend and by a denial of coverage.

Three distinct approaches are implicated in determining what the facts are for purposes of insurance coverage analysis:  the “complaint allegations,” “facts known to the insurer,” or “facts available to the insurer” rules.  Forum selection, which will require adoption of one rule over another, may be result-determinative in a coverage dispute where facts beyond the pleadings are essential to either establish or eviscerate potential coverage.

Upon signing an insurance agreement, insurers take on a duty to investigate claims reported to them. In the case of first-party claims (i.e., claims in which the policyholder suffers injury), that duty requires the insurer to investigate the factual circumstances of the claim. For third-party claims (i.e., claims in which the policyholder caused another party to suffer injury), the duty extends to investigating the latest legal authorities to determine whether the insurer has a duty to defend or indemnify its insured. Many insurers, however, fail in this duty, relying on outdated or inapplicable case law to support to denials. This is especially true in the context of “advertising injury” policies, which turn many of the general rules for coverage law on their head.

In most states, an arbitrator’s conclusions can be used by insurers as the basis of a coverage denial. California, however, represents an exception to that general rule. In Vandenberg v. Superior Court, 21 Cal. 4th 815, 836–37 (1999), the California Supreme Court determined that arbitration results should not be usable by non-parties unless both arbitrating parties specifically agree otherwise. The impact of this decision should not be underestimated, particularly in the context of Employment Practices Liability Insurance (“EPLI”) coverage where employer-employee disputes so often turn to arbitration as a first option for a resolution.

Policyholders are generally eager to include a bad faith count along with breach of contract whenever a dispute with an insurer rises to the level of litigation. This is understandable as a successful bad faith claim can open the door to much greater recovery, including some forms not otherwise obtainable for simple breach of contract. The most viable for opportunity for recovery is typically limited to Brandt fees, which cover only the portion of fees incurred by counsel to establish the insurer’s obligations under the contract.

Many cases address some claims that are potentially covered by insurance and some that are clearly outside coverage. The rule in California (and generally throughout the country) is that these “mixed actions” must be defended in their entirety. Some jurisdictions allow the insurer to recover defense expenses associated with the non-covered claims. In order to avoid these obligations, however, some insurers incorporated expansive exclusions that eliminate any coverage for an entire suit if any claims asserted fall within a stated exclusion.

In our previous blog, we discussed how policyholders can potentially weaponize poorly drafted policies. This tactic of course relies upon an underlying complaint with sufficient fact allegations to trigger potential coverage, which occurs more often than insurers are prepared to admit. Complaints, however, can be amended. So what would happen if an insurer were to conspire with the plaintiff to remove all allegations triggering potential coverage, thereby leaving the policyholder stranded without a defense?

Insurance policies are notoriously difficult to understand. Many policyholders fail to realize that this applies to insurance brokers and adjusters as much as it does to anyone else. Even on the rare occasions that an insurance worker is fully informed of all the legal contours of a policy’s coverage provisions, they obviously have a bias clouding their view of how it would apply to a costly claim.

ChatGPT has made frequent appearances in headlines lately for its ability to quickly draft lucid responses that feel much less “artificial” than the content normally associated with artificial intelligence programs. The answers it provides are so good that many have begun wondering how they might take advantage of the tool for promoting themselves or their businesses. As is so often the case for insurance lawyers, this is the part where we have to advise caution and consider the potential liability that might stem from proposed activity.

When considering mergers and acquisitions (“M&A’s”), a company must assess the potential liability it could be taking on. Whether such liability transfers as part of the process is an entire topic of its own, but let’s skip past that and assume that potential liability has developed into a lawsuit. Who’s going to pay for it? Luckily, the answer doesn’t have to be “you.” With the right insurance policy, M&A liability can be an insurer’s problem instead.

Businesses beyond obvious multimedia categories, such as advertisers, producers, publishers, or others like them, may need to acquire media liability coverage to protect against the rising use of and threats associated with integrating social media and online business operations. Social media is becoming a key aspect of business operations for advertising and making virtual connections to consumers and partners which calls for more attention for the need to secure coverage of media risks.

IP claims are misunderstood even by most people in the insurance industry, so it’s no surprise that policyholders also struggle with them. This blog addresses the most common mistakes I’ve seen clients make and tries to offer some advice on how to avoid them.

The First Circuit’s recent Lionbridge decision followed the recent trend of federal appellate cases correcting district courts improperly rejecting policyholders’ arguments of potential coverage. Much like the Ninth Circuit in My Choice, the First Circuit ruled that an exclusion had been interpreted too broadly by the district court. The court’s statements suggested that this error stemmed from looking too closely at the labels given to the causes of action in the underlying complaint rather than the factual allegations therein.

Our previous blog focused on the California approach to this issue, which stems from the California Supreme Court case Montrose Chemical Corp. v. Superior Court. The Montrose ruling permits policyholders to avoid the complications that would arise if the merits of the claims against them were litigated. Coverage benefits are not impaired by requiring the policyholder to forfeit its rights to protect its defense to the claims asserted against it in the underlying action.

Several states have adopted similar policies. Others have taken the exact opposite stance. They opt instead to grant stays in the underlying action, allowing the coverage suit to be resolved first. Additional factors are also implicated in the common scenario where a coverage suit for Declaratory Relief brought in federal court to address the insurer’s obligations to defend a policyholder in an underlying state court action.

California courts have recognized that where the underlying action and coverage action both address the same “substantive issues,” a duty to defend, delaying the adjudication of the coverage issues by issuing a stay is appropriate. In the case of Aspen American Insurance Co. v. Harry William Ou, the court employed this doctrine to stay the coverage case addressing the plaintiff’s right to independent counsel due to the overlap of facts that could prove the plaintiff’s liability with those that might prove the applicability of a policy exclusion.

Exclusionary provisions in insurance contracts must be narrowly constructed to provide coverage for policyholders. So what happens when “arising out of” is included in an exclusion? The issue came to a head in the Texas case SXSW, LLC v. Fed. Ins. Co., No. 1:21-CV-900-RP, 2022 U.S. Dist. LEXIS 183423 (W.D. Tex. Sep. 29, 2022).

Insurers’ often combat policyholders’ quests for potential coverage of lawsuits by asserting exclusions that bar a defense based on the “gravamen” of the suit. The principal focus of a lawsuit characterized by insurers as “what the suit is about” or equivalent phrasing purportedly bars a defense because of various exclusions. Courts, which typically look to the tort claims asserted to discern what the lawsuit is about, believe that determining if potential coverage exists requires no more than a common sense view of what the lawsuit is about. That approach, however, is not the legal test in evaluating the duty to defend. It is therefore not uncommon for appellate courts to routinely reverse district court decisions that fail to apply the proper legal analysis called for in addressing whether there is any possibility that coverage will arise.

Many intellectual property lawyers routinely litigate copyright lawsuits and immediately provide notice to a Commercial General Liability (“CGL”) insurer. Thereby, they secure defense fees for “Personal and Advertising Injury – offense (g)” “infringement of copyright, trade dress or slogan in your ‘advertisement,’” which broadly defines the term “advertisement.” But what if the covered claim is inchoate such as fact allegations that evidence trade dress claims not labeled as such?