“BURIED TREASURE” – SECURING REIMBURSEMENT FOR MONIES EXPENDED IN PAST INTELLECTUAL PROPERTY LAWSUITS

 Part One of a Three-Part Series

Introduction

Companies looking for extra money in these tough economic times may have an answer from the past.  The vast majority of insurer denial letters for intellectual property lawsuits lack merit.  Therefore, companies who have litigated intellectual property cases and expended significant monies in defense and settlement may be overlooking ready sources of cash through pursuit of coverage claims.  

Five Reasons Why Insurer Denials of Intellectual Property Claims May Not Be Well Taken

First, insurers rarely consider all the potential bases for coverage factually implicated by the underlying lawsuits they address.  The distinctions necessary to identify pertinent policy provisions may not be possessed by the personnel charged with conducting that analysis.

Second, insurer’s distinctly narrow fact constructions of allegations leads to consistent under-assessment of potential coverage for fact-based claims under “offense” based coverage for “categories of wrongdoing” which often proceed under a bewildering variety of labeled causes of action.

Third, the insurer’s ability to appreciate a potential for coverage requires an ongoing and “neutral assessment” of developments in coverage case law.  Mechanisms to communicate this developing law to the claims handling personnel charged with evaluating coverage for such claims are often ineffective and inconsistent with the insurer’s institutional perspective on how coverage should be evaluated.

Fourth, further, when case law, favorable to policyholders arises, it is not disseminated with appropriate instruction to caution claims to personnel to its significance.

Fifth, claims personnel may be the victim of a collective “willful blindness” to case developments that are antithetical to coverage perspectives developed while protecting insurer interests. 

Conclusion

For companies seeking funding for ongoing litigation, a ready source of capital may be pursuit of coverage claims following past denials of insurers in previously pending suits.  Critically, insurance coverage litigation requires a matter of months, not years, since discovery is rarely necessary.  See ©David A. Gauntlett, Insurance 101 — Insight for Young Lawyers — No Discovery Is Appropriate in Addressing Coverage for Intellectual Property Disputes, Coverage, July/Aug. 2009.

Watch for the next installment, “Why Look for Buried Treasure – Part Two”