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

Sony Computer Entm’t Am., Inc. v. American Home Assur. Co., ___ F.3d ___, 2008 WL 2736012 (9th Cir. (Cal.) 2008) (Hall, Schroeder; dissent by Bybee)

Affirming district court Judge Hamilton, the court found no duty to defend arising out of negligent misrepresentation, false advertising under BPC § 17500, unfair business practices under BPC § 17200, and other related claims.

The pertinent policy, issued through an AIG entity, American Home Assurance Co., provided multimedia professional liability coverage and supplemented a policy, also issued by the same insurer, for commercial general liability coverage. The court appears to have assumed applicable law to be that the insurer’s construction of policy terms must be reasonable as opposed to a viable potential definition, in direct contrast to the Supreme Court of California’s recent analysis in MacKinnon. Thus, it stated:
 

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New Insurance Policies Covering Cyberspace Torts

Insurers now issue so-called cyberspace policies and also provide for net security coverage that addresses a host of exposures emanating from a company’s greater dependence on information services. Coverage for cyberspace intellectual property defense risks and prosecution opportunities, especially of patent and trade secret claims, is available only through policies specifically covering IP risks. You should carefully evaluate the wide array of available policies to maximize coverage for your company’s needs. The larger your client’s revenues and, hence, its premium payments, the greater your ability to negotiate favorable coverage terms.

Traditional offense-based advertising injury/personal injury CGL policies have a better track record than non-CGL policies in covering internet- and cyberspace-related torts. But the definitions of claims specified by the various ISO forms sometimes are murky and could require a case to proceed to trial to clarify whether coverage will arise. Common exclusions and questions about causal nexus also may apply to bar coverage. Errors and Omissions and Directors and Officers policies typically cover wrongful acts and require particularized conduct, either by a professional or a director/officer, to trigger coverage.

Cyberspace, Net Secure, and Intellectual Property Defense as well as pursuit policies offer a rich variety of solutions for addressing common e-commerce problems. As an adjunct to traditional Continue Reading...

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Opportunities in Procuring Cyberspace Coverage

So how can you protect your company from cyberspace risks? How can you ensure that your company has the insurance coverage it needs to negotiate confidently in e-commerce? In order to select the coverage that best suits your company, you must consider its stage of growth and its potential for experiencing dangers unique to the e-commerce landscape. Once you have made this assessment, you should weigh some basic practical factors before making a final decision.

Stage of Growth

The type of coverage you advise your company to obtain depends on its stage of growth. Insurance consultants vary in their recommendations. For example, one group suggests that companies should wait until a mature phase before purchasing intellectual property defense coverage. This group advises you to acquire multimedia/cyberspace liability; professional liability/E&O insurance, including coverage for software and hardware errors and omissions; and D&O and umbrella liability, during your company’s growth phase. See William Gallagher & Assoc., Insurance Milestones for High Technology Companies, www.hightechinsurance.com. Other consultants suggest intellectual property, infringement, and E&O coverage in the startup phase, deferring computer software and media property coverage and D&O liability insurance to the growth phase. See www.insurernewmedia.com.

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