May 14.2013
California Supreme Court to Decide Scope of Implied Disparagement; Implications for Coverage in IP and False Advertising Cases
The California Supreme Court has granted review of the Court of Appeal’s decision in Hartford Casualty Insurance Company v. Swift Distribution, Inc., 210 Cal. App. 4th 915 (2d Dist. Ct. App. Oct. 29, 2012), review granted 152 Cal. Rptr. 3d 420 (Feb. 13, 2013). Swift will resolve a hot debate about the scope of implied disparagement liability under California law. The result likely will determine whether insurers must defend a variety of lawsuits involving allegations of intellectual property infringement, unfair competition and false advertising.
The Court of Appeal in Swift held that an insurer did not have a duty to defend its insured against allegations that it had infringed a competitor’s trademark and patents by producing and selling a similar looking music equipment cart with a very similar name (“Multi-Cart” vs. “Ulti-Cart”). 210 Cal. App. 4th at 923-929. The appeals court rejected the insured’s argument that the allegations triggered a duty to defend under its general liability policy’s “personal and advertising injury” coverage for liability arising from “disparage[ment] [of] a person’s or organization’s goods, products or services . . . .” Id. The court found no potential for liability based on disparagement, either express or implied, reasoning that the insured was not alleged to have identified the competitor or its product, or to have suggested that the insured’s product was superior to that of the competitor. Id.
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Posted in Intellectual Property Claims
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May 03.2013
Kaiser Opinion May Affect Ability to Stack Policies Issued by Single Carrier
Policyholders should continue to assert that limits can be stacked in situations where there is continuing damage, despite the California Court of Appeals’ latest decision in Kaiser Cement & Gypsum Corp. v. Insurance Company of the State of Pennsylvania, 2013 Cal. App. LEXIS 29 (2nd Dist. April 8, 2013). In its most recent encounter with asbestos bodily injury claims, and following its earlier decision in London Market Insurers v. Superior Court, 146 Cal. App. 648 (2007), the Court of Appeals in Kaiser Cement considered whether horizontal or vertical exhaustion of insurance coverage is required when determining how to allocate for continuing damage cases. Unfortunately, the opinion makes little practical sense, and is unlikely the last word on this subject.
From 1944 to the 1970s, Kaiser Cement (“Kaiser”) manufactured products containing asbestos. By 2004, more than 24,000 claimants had filed products liability suits against Kaiser alleging that they had suffered bodily injury, including asbestosis and various cancers, as a result of their exposure to Kaiser's asbestos products. Four insurers, including Truck Insurance (“Truck”), provided primary insurance to Kaiser from 1947 to 1987.
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Posted in General Liability Policies
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April 30.2013
IACC 2.0 - “General Counsel As Risk Manager: For This I Went to Law School?”
Farella Partners Mary McCutcheon and Erica Villanueva will be joined by Sachin Adarkar, General Counsel Prosper Market Place to discuss, “General Counsel As Risk Manager: For This I Went to Law School?” at the 2nd Annual Institute for Advanced Corporate Counsel (IACC 2.0).
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Posted in Speaking Engagements
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March 08.2013
Protect Your Business With Cyber Liability Coverage
Many insurers are now offering “cyber liability” or “cyber risk” policies designed to protect policyholders against electronic injuries that policyholders may either suffer themselves or cause to others. Most of these policies focus on protecting policyholders in the event of a data breach. According to a recent report, the finance and insurance industries experienced the largest percentage of data breaches followed closely by information technology, retail trade, manufacturing, public administration, transportation and warehousing as well as education, government, and healthcare. Virtually no company is immune from this type of risk.
It is worth looking at purchasing cyber liability coverage because insurers have argued that “traditional policies” do not protect against this type of harm. For example, insurers have argued that there is no advertising injury coverage where there is no “publication” of the data. Today, many policies also have language excluding from the definition of “property damage” loss of or damage to electronic information and/or data. Finally, policyholders should keep in mind that CGL policies do not cover the insured’s own first-party losses, while a cyber liability policy typically does provide this type of coverage.
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Posted in General Liability Policies
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February 12.2013
General Liability Policies May Cover Antitrust, Patent and Other Business Litigation - Part 2
by John Green
In a prior post, we explained how a general liability policy may cover antitrust, patent, trade secret and other business litigation claims, if there are allegations that insured made negative comments about the other party’s product or business conduct. Claims that the insured engaged in improper use of the litigation process may also lead to coverage in such cases.
The standard general liability policy covers “malicious prosecution.” The term “malicious prosecution” has been construed broadly to include other similar torts, including abuse of process. See, e.g., Lunsford v. Am. Guarantee & Liab. Ins. Co., 18 F.3d 653, 654-56 (9th Cir. 1994). Thus, coverage is not limited to claims involving the strict elements of malicious prosecution, such as “favorable termination.” This opens the door to coverage for counter-claims by a defendant that allege that plaintiff’s lawsuit is being brought for improper purposes.
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Posted in General Liability Policies
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February 07.2013
General Liability Policies May Cover Antitrust, Patent, and Other Business Litigation – Part 1
by John Green
General liability insurance is frequently overlooked in business litigation. These policies, however, include coverage for “disparagement” and “malicious prosecution.” Both terms are construed broadly and may provide coverage for a variety of lawsuits, including antitrust claims, patent disputes, trade secret claims, as well as other commercial litigation between competitors, or suppliers and their customers.
What should clients and counsel look for? There are two types of allegations in particular which should immediately raise a red flag regarding the potential for insurance: 1) any allegation that the insured made unfavorable comments about the plaintiff or its products, or 2) any allegation that the insured filed improper lawsuits or otherwise misused the litigation process. Today’s post will examine coverage for “disparagement”-type claims; Part 2 will examine claims for the misuse of legal process.
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Posted in General Liability Policies
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November 28.2012
Mary McCutcheon a Founding Board Member of the American College of Coverage and Extracontractual Counsel
by David Bruns
Mary McCutcheon, a partner at Farella Braun + Martel LLP, was selected to be a founding member of the Board of Regents of the American College of Coverage and Extracontractual Counsel. The newly formed organization was created by leading lawyers in the U.S. and Canada to improve the quality of the practice of insurance law.
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Posted in News
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November 19.2012
Superstorm Sandy: Financial Loss May Be Covered Even Without Property Damage
We hope your business did not sustain any direct property damage. Even if that’s the case, do not fail to consider that you may have insurance coverage for financial losses caused by the storm.
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Posted in Financial Crisis, General Liability Policies, Property Insurance, Risk Management
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November 01.2012
New Developments in the Recoverability of Consequential Damages
Two seminal New York cases have brought that state, along with potentially many more, into line with California’s position on the recovery of consequential damages.
The effects of Bi-Economy Market v. Harleysville, 886 N. E. 2d 127 (N.Y. 2008) and Panasia Estates v. Hudson Insurance Company, 886 N. E. 2d 134 (N.Y. 2008) are beginning to take shape in New York and beyond. The court in both cases allowed for the recovery of consequential damages for the insurers’ breach of their respective contracts even without bad faith conduct, holding that consequential damages beyond policy proceeds were foreseeable as a matter of law. Courts in many states have taken notice, and at least nine states have followed suit. California courts, however, have long recognized such recovery – the infamous Hadley v. Baxendale rule states that if the damages are within the reasonable expectation of the parties at the time of contracting they are recoverable.
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Posted in Bad Faith, General Liability Policies, Property Insurance
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October 03.2012
When Do “Duty to Defend” Principles Apply to a “Duty to Pay” Policy?
If an insurer promises to advance “claim expenses” (including attorneys fees) arising from covered claims, does California’s broad duty to defend principles apply, such that the insured need only show the potential for coverage or must the insured show that the expenses were actually incurred defending a covered claim? Many policyholder-side attorneys may have assumed that – at least in the Ninth Circuit – the law is clear: the same principles typically apply to both “duty to pay” and “duty to defend” policies. A court in the central district, however, recently refused to apply the broader duty to defend “potentiality” test to a duty to pay policy. As a result, policyholders need to be ready to explain why this holding should not apply to their particular case.
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