Transcript IP LITIGATOR'S GUIDE TO INSURANCE COVERAGE

Insurance for Internet Sale
and Marketing Risks
©
Marty Myers
Law Seminars International
November 14, 2006
INSURANCE
July 17, 2015
OVERVIEW
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Insurance Fundamentals
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Insurance Market Options (CGL and E&O)
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Exotic and Unusual Coverages
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FAQ
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What to require/what to carry?
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Can that boilerplate haunt you?
Tips and Tricks
July 17, 2015
Insurance Fundamentals - Types
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General Categories of Insurance:
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Third Party Liability Coverages
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CGL, E&O, D&O, EPLI, IP,
Excess/Umbrella, Specialty Coverages
(e.g., warranty)
First Party Property Coverages
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July 17, 2015
Property, Fire, Inland Marine, Business
Interruption/Income, IP, Fidelity/Crime
Other Specialty Coverages
Insurance Fundamentals - Policy
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What is an Insurance Policy?
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Insurance Services Office (ISO) and Forms
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Standard Forms - CGL, Property
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Manuscript
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Endorsements
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Declarations
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Deductibles, Retentions (SIRs)
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Binders, Riders
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Certificates
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When does one get the Policy?
July 17, 2015
Insurance Fundamentals - Phrases
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Limits - Aggregate, Per occurrence/Per claim
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Combined single limit
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Deductibles
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Self-Insured Retention ("SIR")
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Cumis Counsel
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Loss Payee, (Lender) Loss Payable Endorsement
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Products-completed operations
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(Blanket) contractual liability coverage
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Premises and operations
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Tail and Run-off
July 17, 2015
Insurance Market Overview
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Property/Casualty Market Snapshot
July 17, 2015
Insurance Market Overview
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Property/Casualty Market Snapshot
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SOFTENING AND CONTINUED SOFT
July 17, 2015
Insurance Fundamentals -- CGL
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CGL Insurance: What Liabilities Are Covered?:
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ONLY Bodily Injury (BI), Property Damage (PD), Personal
Injury (PIL) and Advertising Injury (AI)
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Commonly explicitly excludes IP Claims
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But significant exceptions may exist
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Occurrence (trigger is when injury/damage occurs)
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2 Main Duties: Defense/Indemnity
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Differing Standards/Defense Outside Limits
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Possibility of Coverage triggers DTD
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Investigation is part of Defense
July 17, 2015
CGL Coverage for Internet Sales
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Generally excludes intellectual property claims
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BI or PD claims present?
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AOL v. St. Paul, 347 F.3d 89 (4th Cir. 2003) district court opinion
located at 207 F.Supp.2d 459 (2002); Anthem v. Pacific Employers,
302 F.3d 1049 (9th Cir. 2002)
“Junk Fax” Cases. E.g., Park University Ent. v. American Cas. Co.
of Reading, PA, 314 F. Supp. 2d. 1094 (D. Kan. 2004); TIG v.
Dallas Basketball, 129 S.W.2d at 237 (Tex.App. 2003)
History: AI and PIL applicable to many advertising situations;
forms would have extended easily to internet sales:
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Not available prior to 1973; via “broad form endmt” after 1973
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1986 standard ISO form included separate AI and PIL coverages
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post 1998 ISO forms combine/modify AI/PIL (e.g. CG 01 12 04)
July 17, 2015
CGL Coverage for Internet Sales
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AI on the decline - can cover trademark, copyright, trade secret
allegations; requires "nexus" to insured's advertising:
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July 17, 2015
"misappropriation of advertising ideas or style of doing business"
on wane) But Lebas (CA) Advance Watch (6th Cir)
Hameid v. National Fire Ins. – AI requires "widespread promotional
activity" such as television (no mention internet - market segment?)
CGL Coverage for Internet Sales
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Current ISO “Personal and Advertising Injury” includes,
among other things:
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July 17, 2015
“Oral or written publication, in any manner, of material that
slanders or libels a person or organization or disparages a
person’s or organization’s goods, products or services”
“Oral or written publication, in any manner, of material that violates
a person’s rights to privacy”
“The use of another’s ‘advertising idea’ in your advertisement” and
“infringing upon another’s copyright, trade dress or slogan in your
‘advertisement’”
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“Advertisement” is “notice broadcast to general public or specific market
segments about your goods, products or services for the purpose of attracting
customers or supporters”
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“include material placed on the internet or on similar electronic means of
communication”
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“only that part of a website that is about your goods, products or services . . .”
CGL Coverage for Internet Sales
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Defamation, disparagement and invasion of privacy also are
frequently present in patent and other IP disputes:
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J. Lamb Co. v. Atlantic Mutual Ins. Co. 100 Cal.App.4th 1017 (2002)
(defamation tail wagging the patent dog)
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Intuit/Doubleclick (privacy and ECPA violations)
Commonly found Personal and Advertising Injury exclusions:
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knowing violations of rights of others (embodies preconceived design to
inflict injury standard of Shell Oil Co. v. Winterthur Swiss Ins. Co., 12
Cal.App.4th 715 (Cal.App. 1993)
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first publication/prior publication (Ringler Assocs., Inc. v. Maryland Cas.
Co., 80 Cal.App.4th 1165 (2000).

infringement of copyright, patent, trademark or trade secret, or other IP
right (carves back copyright, trade dress and slogan in advertising)
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P&AI by an insured whose business is advertising, broadcasting, publishing
or telecasting, designing websites or serving as ISP (but carves back
certain primarily non-media types of coverage)
July 17, 2015
E&O and Media Liability Coverages
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Covers third party liability for “Errors” or “Wrongful Acts”
(negligent acts, errors, omissions, etc.)
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Economic Loss/Breach of K may be included
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If excluded, concurrent tort liability is not
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No standard forms between carriers
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Claims Made (and reported) - trigger is when claim is made,
not when injury or damage occurs
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Defense usually within limits (depleting or "burning")
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Usually higher per claim SIR or deductible
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Not limited to “suits” as is CGL – “claim” usually includes written
demands for relief, monetary or otherwise
July 17, 2015
E&O and Media Liability Coverages
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Media Liability Frequently Contains two separate parts:
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Media Wrongful Acts; and
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Professional Services Wrongful Acts
Media Wrongful Acts:
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“invasion or infringement of the right of privacy or publicity, including the torts of intrusion upon
seclusion, publication or private facts, false light or misappropriation of name or likeness;
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“wrongful entry or eviction, trespass, eavesdropping . . .;
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“libel, slander, disparagement, or any other form of defamation or harm to the character or reputation
of any person or entity;
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“outrage, infliction of emotional distress or prima facie tort;
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infringement or dilution of trademark, trade name, trade dress, title, slogan, service mark or service
name;
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copyright infringement, plagiarism, piracy, breach of implied contract or misappropriation of property
rights, information or ideas;
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breach of a promise of confidentiality or anonymity;
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error or omission in content;
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breach of an indemnification or hold harmless agreement . . . .”
July 17, 2015
Insurance Fundamentals -- IP
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History -- specialized IP cover rare until mid-90s
explosion -- then post bust millennial retrenchment
July 17, 2015
Insurance Fundamentals -- IP
July 17, 2015
Insurance Fundamentals -- IP

History -- specialized IP cover rare until mid-90s
explosion -- followed by post bust millennial retrenchment
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Now -- higher limit, higher retention coverage, mostly
purchased by large telecommunications, consumer
electronics and media companies
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Usually covers third party copyright, trademark, privacy,
false advertising and misappropriation claims -- still
usually excludes patent, antitrust and unfair competition
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Market for first party/hybrid coverage developing (esp.
Hiscox) and some forms have gone "modular"
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Specialized policies (e.g., Digital Cert. Mgmt) available
July 17, 2015
Insurance Fundamentals -- IP
July 17, 2015
Insurance in Agreements - Key Issues
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1. Leverage and reliance on brokers
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2. Know the indemnity/limitation of liability provisions
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3. Decide what insurance may be important:
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E.g., service oriented -- frequently add E&O
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How much insurance (i.e. limits) usually for broker
4. Decide on (or not to raise) primacy of coverage:
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Whose insurance is primary and first to respond
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Competition for limits
5. Period for and duration of coverage obligations
July 17, 2015
Insurance in Agreements - Key Issues
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What Type of Insurance Should Counter-Parties
Be Required to Carry? What Are Best Practices?
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CGL - if risk of bodily injury, property damage,
advertising injury or personal injury is present
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E&O - if concern about counter-party's ability to
withstand or pay for economic loss is present
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Patent/IP Cover -- where substantial infringement
concern is present; allocation/cost issues control
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Auto, Workers Comp/Employers Liab, Transit,
Inland Marine -- rarely necessary to specify in IP Lic.
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First Party Property/Business Income - rarely
necessary, unless client is loss payee or special circ.
July 17, 2015
Insurance in Agreements - Key Issues
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What Type of Insurance Should Your Client or
Company Carry? What Are Best Practices?
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CGL - products/completed operations for bodily
injury, property damage, advertising & personal injury
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E&O - risk transfer for economic loss on higher risk,
non-routine licenses; particularly service-oriented
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First Party Property/Business Income - important
and often overlooked; may require property damage
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Fidelity and Crime -- important and often overlooked
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Patent/IP Cover -- if affordable for high exposure
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Auto, Workers Comp/Employers Liab, Transit,
Inland Marine -- rarely necessary to specify in IP Lic.
July 17, 2015
Insurance Issue Greatest Hits - Tricks
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Additional Insureds:
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Effect: Gives virtually all rights and coverage of other
insureds; Opponent's insurer cannot subrogate
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Sharing of limits, but generally not defense!
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Cost ordinarily negligible or zero (industry
dependent); may carry blanket AI (no notice needed)
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Generally No Additional Insureds on E&O
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Know what to ask for (e.g., ISO CG 20 14 11 85)
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Users of teams, draft or saddle animals
July 17, 2015
Insurance Issue Greatest Hits - Tricks
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Certificates:
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DO NOT RELY ON CERTIFICATES IF COVERAGE
IS CRITICAL: certificate is merely broker's
statement that client has insurance listed;
insurance company is not generally bound
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Common to request certificate + key endorsement
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Preserve right to obtain policy or key provisions
Best's Ratings: frequently seen; no longer
generally useless -- try "acceptable to [client]."
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Notices: of cancellation, material modification.
July 17, 2015
Insurance Issue Greatest Hits - Tricks
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Self Insurance: force self-insured/high SIR opponent to
cover liabilities covered by standard form
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Waivers of Subrogation:
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May or may not require insurer's approval
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May be waived if and to the extent claims are covered
by insurance
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Deal Coverage: new products intended to smooth M&A
(e.g., rep and warranty, LMU, tax loss, endangered
species)
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Open Source Coverage: OSRM for enterprise Linux
users http://www.linuxinsider.com/story/35854.html
July 17, 2015