IP Owners As Defendants/Counterdefendants

Posted on July 17, 2008 by David Gauntlett
Issues to Confront in Assessing the Potential for Insurance Coverage

In assessing the impact of coverage on litigation strategy, the following questions must be considered:

(1) What are the goals of the plaintiff or counterclaimants in monetary versus nonmonetary relief?

(2) Will your company’s carriers contribute to a settlement if nonmonetary issues can be resolved?

(3) Can you procure full reimbursement for the attorneys’ fees you incur in defense of IP/antitrust litigation, even if you are also a plaintiff?

(4) Is there an issue of allocation re recovery of attorneys’ fees in such a situation or simply where there are some claims that are covered and others that are not – again, depending upon the forum whose coverage law will apply? (5) What if you do not have first dollar coverage and the catastrophic loss provisions of your self-insured retention do not permit the attachment of any right to reimbursement of attorneys’ fees until the threshold level is met (i.e., $5M-$50M) is not uncommon for major corporations?

(6) What goals of the plaintiff or counterclaimants are monetary versus non-monetary?

(7) Can your carriers contribute to a settlement if non-monetary issues can be resolved?

(8) Can you procure full reimbursement for attorneys’ fees incurred in defense of IP litigation, even if you are also a plaintiff?

(9) Is there an issue of allocation re recovery of attorneys’ fees?

(10) What if you do not have first dollar coverage – catastrophic loss that exceeds SIR for attorneys’ fees incurred or for damage exposure ($5M, $10M, $15M, $20M, $25M)?

In answering these questions, you may well recognize opportunities for involvement of insurer proceeds in either limiting defense costs or avoiding them entirely.
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Reimbursement

Posted on June 5, 2008 by David Gauntlett

General Star Indem. Co. v. Virgin Islands Port Authority, No. 2001-188, 2008 WL 2235338 (D. V.I. May 29, 2008)

 

A district court in the Virgin Islands, St. Croix Division, joins the plethora of decisions which appears now to be a majority

and clearly represents the modern trend, finding that a declaration of reservation of rights does not entitle the insurer to reimbursement, even though it seeks unilateral recovery.

 

The court found that if there is no right to reimbursement in the policy it should not be implicated by a court following decisions such as General Agents Ins. Co. of America, Inc. v. Midwest Sporting Goods Co., 828 N.E.2d 1092, 1103 (Ill. 2005); First Insurance Co. of Hawaii v. State, by Minami, 665 P.2d 648, 654 (Haw. 1983); Perdue Farms, Inc. v. Travelers Cas. and Surety Co. of Am., 448 F.3d 252, 258 (4th Cir. (Md.) 2006); Terra Nova Ins. Co. Ltd. v. 900 Bar, Inc., 887 F.2d 1213, 1219 (3d Cir. (Pa.) 1989); Shoshone First Bank v. Pacific Employers Ins. Co., 2 P.3d 510, 514 (Wy. 2000); Liberty Mut. Ins. Co. v. FAG Bearings Corp., 153 F.3d 919, 924 (8th Cir. (Minn.) 1998); Westchester Fire Ins. Co. v. Wallerich, 527 F. Supp. 2d 896, 908 (D. Minn. 2007).

 

The Virgin Islands court relied on

 

title 22, section 819 of the Virgin Islands Code (“Section 819”) [which] provides that “[n]o agreement in conflict with, modifying, or extending any contract of insurance shall be valid unless in writing and made a part of the policy.”  V.I.Code Ann. tit. 22, § 819 (1968). Pursuant to Section 819, General Star was prohibited from constructively amending the Policies by reserving the right to reimbursement of defense costs in a subsequent letter.

 

Notably, a number of jurisdictions have similar statutory provisions which would support, by the same logic, the limitation of policies to their actual language.

 

Medical Liability Mut. Ins. Co. v. Alan Curtis Enterprises, Inc., ___S.W.3d ___, 2008 WL 2205868 (Ark. 2008)

 

In another contemporaneous case, the Arkansas Supreme Court joined a growing number of jurisdictions including Illinois and Texas who found that absent a contract provision in the policy permitting reimbursement of attorneys’ fees for a carrier who either agreed to defend or was adjudicated to owe a defense could not seek recoupment of monies expended for a defense.

 

In reaching that conclusion the court presumed that it was following the minority rule.  It did not observe how many jurisdictions had in fact articulated it.  Instead the court cited United Nat’l Ins. Co. v. SST Fitness Corp., 309 F.3d 914 (6th Cir. (Ohio) 2002); Cincinnati Ins. Co. v. Grand Pointe LLC, 501 F.Supp.2d 1145 (D.Tenn.2007); Buss v. Superior Court, 16 Cal.4th 35, 65 Cal.Rptr. 2d 366, 939 P.2d 766 (1997).

 

Neither of Arkansas’ statutory schemes supported an award of attorneys’ fees under the reimbursement fact pattern before the court.  Since Arkansas’ public policy was best evidenced by its statutes and they did not provide such remedy, there was no need to imply one.  See, e.g., State Farm Mut. Auto Ins. Co. v. Henderson, 356 Ark. 335, 342, 150 S.W.3d 276, 280 (2004).
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