One of the most effective ways to protect your property, whether it be for your house or your car, is through choosing the best insurance policy to fit your needs. Additionally, insurance can be used to protect your business’ assets, cover hospital costs for personal injury situations, and even protect your pets! So, with the plethora of insurance options out there in the world, what’s to stop insurance from being able to cover injuries arising out of intellectual property infringement? A recent opinion authored by Chief Judge Conner from the United States District Court for the Middle District of Pennsylvania touches on this very issue.
In Hershey Creamery Co. v. Liberty Mutual Fire Ins. Co.,Case No. 1:18-cv-00694 (M.D. Penn. May 6, 2019), plaintiff Hershey filed suit seeking declaratory judgment and alleging breach of contract by defendants, claiming that “defendants [had] a duty to defend and indemnify [them] in a pending lawsuit in the District of Delaware and they breached certain insurance policies by claiming they had no such duties.” What does any of this have to do with intellectual property law, you may ask? The insurance policy provision at issue in the case stated, “We will pay those sums that the insured becomes legally obligated to pay as damages because of ‘personal and advertising injury’ to which this insurance applies.” However the “personal and advertising injury” provision was subject to exclusions, one of which includes exclusion for “advertising injury arising out of the infringement of copyright, patent, trademark, trade secret, or other intellectual property rights,” except for “the use of another’s advertising idea in [the insured’s] advertisement.” Although Judge Conner did not explicitly hold that Liberty had a duty to defend Hershey, the judge did state that the claims from the Delaware suit may potentially come within the coverage of the policy, and that “until the claims are confined to a recovery that the policy does not cover, Liberty Mutual [had] a duty to defend Hershey in the Delaware Action.”
The biggest takeaway from the Hershey case is this: if you want it to be covered for an infringement lawsuit, make sure it is included in the policy! Judge Conner did not state that the IP injury could not be covered, just that it needs to be included if that is your intention. Thus, intellectual property injury has the potential to be covered, which people, especially large businesses, should consider adding into their umbrella coverage. However, everyone should be ready for the possibility that the insurance carriers will create new policy language to tighten up and close out their responsibility to provide a defense and indemnity for businesses that are served with infringement suits. Only time will tell.
Authors are Samuel Cooley and Ashley Rhoads