by Brad Fawley
If you have been sued on an intellectual property claim, many people, including your insurance broker, may assume that the insurance policy that might protect you against IP claims is your current policy. Think again! Operating on that assumption can be a costly mistake because many recently issued liability policies attempt to exclude coverage for IP claims.
Under a typical General Liability “occurrence” policy, the coverage that applies is the coverage in effect when the first alleged “offense” occurred. Thus, if you are sued in 2012 for copyright or trademark infringement, trade secret violations or false advertising that allegedly first occurred in 2006, for example, the coverage that is triggered is your 2006 policy, not your 2012 policy. Your current policy is irrelevant.
Unfortunately, many professionals in the insurance field – such as agents or brokers and some lawyers – do not understand this distinction and may conclude that you have no coverage since there is none under your current policy. They can be technically right and also very wrong at the same time.
Takeaway: Keep ALL of your old policies. If a problem arises, review the policy that was in effect at the time of the first alleged offense.
If you have a “claims made” policy, these rules likely do not apply. You will need to read your “claims made” policy very closely. If it provides any coverage for IP claims, the coverage may be limited to coverage for “claims made” during the policy period – even if the alleged offense took place several years earlier. Moreover, if you purchased “occurrence” coverage during the date the offense first took place, you may have coverage under both your old “occurrence policy” as well as your current “claims made” policy.
Finally, if you (or your broker) failed to pursue the correct policy, all may not be lost. Most states, such as New York, allow late notice of claims if the insurance company has not been prejudiced by the late notice. (The question of which state’s law applies will be the subject of a future post – but don’t assume it is the state where you do business or are incorporated). If you have responsibly defended against the claim, it may be very hard for the insurance company to show prejudice.
And don’t be embarrassed if you can’t untangle your policies. They can be difficult to understand. Consulting a lawyer who represents policyholders and properly interpreting your coverage may pay huge dividends in the end.
Stay tuned for more blogs on “the duty to defend vs. the duty to indemnify,” “which state’s law applies to your policy” and “how to avoid the dreaded ‘late notice.’”