—David A. Gauntlett, Gauntlett & Associates

Companies looking for extra money in these tough economic times may have an answer from the past. The vast majority of insurer denial letters for intellectual property lawsuits lack merit. Therefore, companies who have litigated intellectual property cases and expended significant monies in defense and settlement may be overlooking ready sources of cash through pursuit of coverage claims.

Five Reasons Why Insurer Denials of Intellectual Property Claims May Not Be Well Taken

First, insurers rarely consider all the potential bases for coverage factually implicated by the underlying lawsuits they address. The distinctions necessary to identify pertinent policy provisions may not be possessed by the personnel charged with conducting that analysis.

Second, insurer’s distinctly narrow fact constructions of allegations leads to consistent under-assessment of potential coverage for fact-based claims under “offense” based coverage for “categories of wrongdoing” which often proceed under a bewildering variety of labeled causes of action.

Third, the insurer’s ability to appreciate a potential for coverage requires an ongoing and “neutral assessment” of developments in coverage case law. Mechanisms to communicate this developing law to the claims handling personnel charged with evaluating coverage for such claims are often ineffective and inconsistent with the insurer’s institutional perspective on how coverage should be evaluated.

Fourth, further, when case law, favorable to policyholders arises, it is not disseminated with appropriate instruction to caution claims to personnel to its significance.

Fifth, claims personnel may be the victim of a collective “willful blindness” to case developments that are antithetical to coverage perspectives developed while protecting insurer interests.

Intellectual Property Lawsuits Are Expensive

It is not uncommon, pursuant to AIPLA surveys for companies to expend $500,000 to $1,000,000 for defense of trademark and copyright infringement lawsuits. More than five times that sum may be expended for patent infringement lawsuits. Where insurer denial letters assert erroneous grounds for denial, a distinct opportunity for pursuit of coverage arises.

Ascertaining Whether Buried Treasure Exists Requires a Five-Part Analysis

These issues include:

1.         Did the company give notice to the insurers on risk as of the date of the first alleged “wrongful act” as well as all subsequent carriers and those at higher levels who may have a duty to pay any settlement reached.

2.         If not, was the insurer on constructive notice of the lawsuit and/or settlement.

3.         Has the statute of limitations run on their complaint.

4.         Are facts beyond the complaint available to clarify potential coverage where the law applicable permits reference to such evidence.

5.         Were the insurer or insurers notified of any settlement prior to its consummation where the insurer agreed to defend under a reservation of rights. Continue Reading “Buried Treasure” – Securing Reimbursement for Monies Expended in Past Intellectual Property Lawsuits