By Brad Fawley
Given the risks and costs of intellectual property (IP) infringement claims (even when your company isn’t found liable), most companies ideally want coverage of perceived infringement of the products they sell or the services they provide (advertisements, apps, access to websites, software, etc.). While I have been involved in cases where courts have interpreted general liability insurance policies to cover copyright, trademark and trade dress infringement, trade secret violations and, in certain situations, even patent infringement, insurance companies are more routinely excluding this coverage. Moreover, some insurers have changed the language of their standard general liability policies in an attempt to exclude any IP coverage. Instead, to fill the gap left by the absence of coverage under the standard general liability policies, insurers now promote and sell specialized policies that may appear, on a quick read, to cover insureds against IP claims.
Invariably, the policies I have reviewed do not provide nearly the coverage my clients desire. Under these policies, copyright, trademark, and patent infringement claims are rarely, if ever, covered. At best, some purport to provide protection if the claim against the policyholder involves infringement that occurs in the course of providing “professional services.” But even then, “professional services” is narrowly defined and, within the definition, circularly excludes coverage for certain infringement claims. The limited coverage begs the questions: How many policyholders are going to infringe a copyright or trademark in the course of providing “professional services” to a client? And, even if they do, is the exposure significant enough to warrant the usually high insurance premiums?
As such, your purchase of one of these policies may be a pig in a poke (actually, you may be buying an empty poke)—on the surface you may think you are covered, and your broker may say you are covered, but don’t just accept it without reading the policy yourself, carefully — if you can untangle the web of language regarding IP claims. Certainly, if you think you are protected by your policy, you’ll want to make certain – before you need it. (Feel free to share language from your liability policy discussing IP infringing claims in the comments—I’d be interested to see more variations on the theme).