GAUNTLETT AND ASSOCIATES REPRESENTS POLICYHOLDERS IN THREE SUCCESSFUL COVERAGE CASES POST COVID-19 ONSET

Policyholders Right To Reimbursement Of Its Independent Counsel’s Defense Fees Was An Obligation The Insurer Could Not Shirk Where Final Resolution Of Case Postdated Cash Payment And Settlement To Resolve All Business Issues In A Trademark Infringement Lawsuit

In 360Heros, Inc. v. Mainstreet Am. Assur. Co., 816 Fed. Appx. 555, 558 (2d Cir. (N.Y.) 2020), the Court reversed what it characterized as an “erroneous” ruling, the panel concluded that 360Heros was entitled to recover attorneys’ fees incurred in the defense of the Underlying Action following a settlement funded by the insurer, MSA. The fees incurred arose when many additional months of litigation was required to resolve business issues in the Underlying Action appropriate co-existence following the resolution of a trademark infringement dispute. The insurer’s monetary payment did not compensate defense counsel for its legal work to secure post-lawsuit determination resolution of pending business issues. 

“Under New York law, where an insured is represented by counsel of its own choosing, the insurance company’s duty to defend extends to the payment of reasonable fees and costs.” 

MSA could not require that the compulsory counterclaim for patent infringement be dismissed, so it continues on. 360Heros, Inc. v. GoPro, Inc., Civil Action No. 17-1302-LPS-CJB, 2020 U.S. Dist. LEXIS 90287

The policyholder can pursue reimbursement of defense fees owed to attorneys hired to defend a suit including prosecution of an affirmative compulsory counterclaim for patent infringement against plaintiff as a cross defendant at its insurers expense. This can include fees incurred to finally resolve a lawsuit even after the insurers payment of a settlement for the money and damages exposure part of the dispute.

Travelers’ Overly Aggressive Assertions That Its Intellectual Property Exclusion Applied To Even New Affirmed Claims For Relief Because They Were A Part Of The Same “Suit” Was Declared Unenforceable As This Aspect Of Their Exclusion Was Not Intelligible To A Layperson

In My Choice Software, Ltd. Liab. Co. v. Travelers Cas. Ins. Co. of Am., No. 19-56030, 2020 U.S. App. LEXIS 26328, *2-3 (9th Cir. Aug. 19, 2020, the Court stated,

“The relevant provision of the IP exclusion stated that coverage under the policy does not apply to ‘’Personal injury’ or ‘advertising injury’ arising out of any actual or alleged infringement or violation of any of the following rights or laws, or any other ‘personal injury’ or ‘advertising injury’ alleged in any claim or ‘suit’ that also alleges any such infringement or violation.’ … The district court stated that ‘My Choice’s First Amended Complaint against Trusted Tech asserted a trade secrets claim, which falls squarely within the IP Exception,’ and that ‘Trusted Tech’s counterclaims are thus in a ‘claim or ‘suit’ that also alleges’ IP claims.’’ The district court erred in concluding that the IP exclusion unambiguously barred coverage solely based on the allegations that MyChoice, as the insured under the policy, asserted against Trusted Tech. … While a lawyer might interpret the term ‘suit’ to pertain to the entirety of claims contained within a proceeding, irrespective of the party asserting such claims, that is not necessarily the understanding of the term from the perspective of a layperson.”

Travelers must be wary as policyholders nationwide could pursue its wrongful denial of policy benefits where based upon the mere assertion of affirmative claims relief as they are not claims that fall within the scope of its intellectual property exclusion. As it is a liability policy, claims against the insured for which coverage exist may be limited by such an exclusion but not those affirmatively pursued by an insured where that is the only intellectual property claims in the lawsuit.

Unnecessary To Preclude Recovery Of Fees Incurred In Distinct Arbitration Proceeding Where Counterclaim Fact Allegations Mirrored Those In The Stead Suit

In Legion Partners Asset Mgmt., LLC v. Underwriters at Lloyd's London, 2020 Del. Super. LEXIS 2804 *20-21, 23-24, 25 (Del. Super. Ct. September 25, 2020) Motion for re-argument denied October 29, 2020., the Court stated,

“Looking beyond Albert's characterization of his claims, the Court reasonably can infer from the Counterclaim that Legion, acting through White and Kiper, allegedly acted against its investors' interests and violated federal laws and regulations by leaking material, nonpublic information. Such acts fall within the scope of "Wrongful Acts" as contemplated by the Policy. … ‘Rather, Wrongful Acts encompasses a broad array of specifically enumerated conduct … [and] is not limited to a ‘breach of the duty.’ Any conduct that is an ‘act,’ or an ‘error,’ or a ‘misstatement,’ or a ‘misleading statement,’ or ‘neglect,’ or an ‘omission’ could be a ‘Wrongful Act.’’ … Albert’s makes factual allegations that Legion committed ‘Wrongful Acts’ in which controlling members, White and Kiper. Specifically, Albert alleges his counterclaim ‘stems from multiple breaches of fiduciary duty and violations of federal laws and regulations by two self-dealing hedge fund managers who abused their roles as fiduciaries to clients[.]’ … ‘The Insurer shall pay, on behalf of the Insured Organization for Loss which the Insured Organization pays as indemnification to any Insured Person arising from a Claim for a Wrongful Act.’”

The duty to defend can include other related lawsuits where the lawyering activities are “conducted against liability” in the suit for which coverage arose.