Insurance Policyholder Advocate & Attorney David Gauntlett : Gauntlett Law Firm : Insurance Recovery, Policy Interpretation : Irvine, Orange County, California

HP’s counsel, Gauntlett & Associates, now seeks bad faith damages from ACE

San Jose, CA – (Business Wire)—Federal District Court Judge James Ware found ACE Insurance Company owed Hewlett-Packard more than fifty-one million dollars in defense expenses, prejudgment interest and costs for defending an antitrust counterclaim under “advertisers’ injury” coverage. The judge then credited ACE with a partial payment during the suit of $11.7 million. Gauntlett & Associates’ David Gauntlett and James Lowe represented HP in the federal suit in San Jose.

David Gauntlett noted that HP was not only awarded 100% of its requested litigation expenses paid to outside counsel including the expenses of prosecuting HP’s affirmative claims because they were shown to be necessary for the defense of the antitrust claims, but HP also recovered the expense of its in-house counsel time based on reasonable market rates.

HP had initiated suit against Nu-kote for patent infringement, trademark infringement, and false advertising claims arising from Nu-kote’s infringement of cartridge and ink technology and use of deceptive packaging mimicking HP’s trade dress for inkjet printer cartridges. Gauntlett successfully argued that the costs incurred in prosecuting the patent and trademark infringement claims were “reasonable and necessary” as defense costs to respond to Nu-kote’s antitrust counterclaims related to advertising.

HP plans to appeal a court ruling that it could not recover defense expenses of the counterclaim that occurred before the defense was tendered to the insurer. Gauntlett & Associates partner James Lowe stated, “Because ACE refused to decide in the succeeding years whether to defend and never did defend HP, any delay by HP in giving notice should be irrelevant to the recovery of defense expenses. Additionally ACE sold an insurance policy with a provision expressly waiving any insurer defenses based on failure to comply with technical policy terms such as giving early notice of a suit.”

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The Ohio Casualty Insurance Company v. Biotech Pharmacy, Inc. et al. adv.
U.S.D.C., District of Nevada, Case No. 2:05-CV-1214, RLH-PAL (D. NEV. 4-2-2008)

In the first decision nationally to expressly address an issue of Texas law, the Court predicted that the Texas Supreme Court would, consistent with its prior precedent, find that “a unilateral reservation of rights letter cannot create rights not contained in the insurance policy which include the right to seek reimbursement of defense fees where there was no potential for coverage”. In previous cases, the Texas Supreme Court, following Shoshone First Bank v. Pacific Employers Ins. Co., 2 P.3d 510, 515-16 (Wyo. 2000) found that a unilateral reservation of rights letter cannot create a right for an right for an insurer to seek reimbursement of settlement costs based on the logic of the Shoshone case which had expressly found that right extended to seek reimbursement of defense costs.

The Texas Supreme Court reaffirmed its earlier ruling in Matagorda finding in Excess Underwriters at Lloyd’s, London v. Frank’s Casing Crew & Rental Tools, Inc., No. 02-0730, ___S.W.3d___ ,2008 WL 274878, (Tex., Feb., 2008) that in Texas the same rule applied in a excess policy context.

The court denied a concurrent motion for reconsideration under FRCP rule 69 as moot in light of its finding vis-à-vis reimbursement. It had previously concluded that a 56(f) right to conduct discovery arose in determining whether a copyright infringement claim was based sufficiently on advertising to fall within the pertinent “advertising injury” coverage. 

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