IPO Owners As Beneficiaries of Coverage Available to Their Co-Venturers or Those of Acquired Companies
Coverage Opportunities Under Policies Issued to Affiliated Companies May Be Broader Than Those Available to the Company
While major corporations may find that access to insurance is limited by their self-insured retention, there are nevertheless many situations where a major corporation having acquired a smaller corporation otherwise succeeded to its legal rights, including those to pursue insurance under its policies, may provide broader and lower attachment point coverage than the corporation. The following questions should be asked to assess whether this opportunity exists in any litigation matter, where a corporation is sued along with its recently acquired subsidiary or new subsidiaries as co-defendants.
These scenarios should be reviewed:
● Umbrella policies may define a policy term (joint venturer) so as to include the acquiring company in a suit where both parties are named as a defendant.
● “Occurrence” coverage under policies of acquired companies; this coverage may be broader than that available to the acquiring company.
● (International Insurance Policies)
A number of insurers, including Cigna and Chubb, have issued policies through the mid-1990s that define the scope of coverage in a way that would render these policies as broad as a domestic policy providing CGL coverage.
A Case Study -- How Cigna’s International Coverage Required it to Defend Antitrust Counterclaims in a U.S. Lawsuit
In Hewlett-Packard Co. v. CIGNA Property and Casualty Ins. Co., No. 99-20207 SW, 1999 U.S. Dist. LEXIS 20655 (N.D. Cal. Aug. 24, 1999), the court analyzed an international policy whose territory was defined as “worldwide for claim or suit resulting from an occurrence outside the United States of America . . . .” The court found that a claim for damages which emanated from conduct outside the United States for an action pending within the United States triggered a defense.
As Judge Williams found:
HP argues that the Nu-kote Counterclaim alleges activities that fall within the territorial limitations of the Policy because HP distributed in foreign markets package inserts intimating that the HP cartridges are not refillable.
. . . .
CIGNA contends that any [fear, uncertainty and doubt] allegedly suffered by consumers and distributors in foreign markets is irrelevant because there is no allegation or evidence that Nu-kote sold inkjet refill products outside of the United States during the Policy period.
. . . .
However, in the realm of advertising injury, the locus of the misrepresentation and the site of the resulting injury could easily be disjointed. For example, it is conceivable that a false statement in Maine could diminish a competitor’s sales in Florida. . . . The territorial limitation in the Cigna Policy emphasizes the location of the occurrence, not the location of the resulting damages. . . . Because Nu-kote could possibly claim damages to domestic business based, at least in part, on HP’s extraterritorial acts, the Court finds that the Policy Territory requirement is satisfied.
Id. at *10-13.
This follows because as long as an advertising activity occurs outside the United States which could create liability, it matters not whether the lawsuit itself was within the U.S. It takes little imagination to conceive of a number of IP litigation matters where advertising conduct which may be identical to that within the U.S. but takes place in a number of foreign countries, often in translated versions of the same advertisements emanating from U.S. sources, creates potential coverage.
On May 14, 2008 a judgment of over $51,000,000 was entered in HP’s favor, including nearly all of its post-tender defense fees at rates of up to $600 per hour plus in-house counsel fees and pre-judgment interest at 10% per annum from date of invoice.
While major corporations may find that access to insurance is limited by their self-insured retention, there are nevertheless many situations where a major corporation having acquired a smaller corporation otherwise succeeded to its legal rights, including those to pursue insurance under its policies, may provide broader and lower attachment point coverage than the corporation. The following questions should be asked to assess whether this opportunity exists in any litigation matter, where a corporation is sued along with its recently acquired subsidiary or new subsidiaries as co-defendants.
These scenarios should be reviewed:
● Umbrella policies may define a policy term (joint venturer) so as to include the acquiring company in a suit where both parties are named as a defendant.
● “Occurrence” coverage under policies of acquired companies; this coverage may be broader than that available to the acquiring company.
● (International Insurance Policies)
A number of insurers, including Cigna and Chubb, have issued policies through the mid-1990s that define the scope of coverage in a way that would render these policies as broad as a domestic policy providing CGL coverage.
A Case Study -- How Cigna’s International Coverage Required it to Defend Antitrust Counterclaims in a U.S. Lawsuit
In Hewlett-Packard Co. v. CIGNA Property and Casualty Ins. Co., No. 99-20207 SW, 1999 U.S. Dist. LEXIS 20655 (N.D. Cal. Aug. 24, 1999), the court analyzed an international policy whose territory was defined as “worldwide for claim or suit resulting from an occurrence outside the United States of America . . . .” The court found that a claim for damages which emanated from conduct outside the United States for an action pending within the United States triggered a defense.
As Judge Williams found:
HP argues that the Nu-kote Counterclaim alleges activities that fall within the territorial limitations of the Policy because HP distributed in foreign markets package inserts intimating that the HP cartridges are not refillable.
. . . .
CIGNA contends that any [fear, uncertainty and doubt] allegedly suffered by consumers and distributors in foreign markets is irrelevant because there is no allegation or evidence that Nu-kote sold inkjet refill products outside of the United States during the Policy period.
. . . .
However, in the realm of advertising injury, the locus of the misrepresentation and the site of the resulting injury could easily be disjointed. For example, it is conceivable that a false statement in Maine could diminish a competitor’s sales in Florida. . . . The territorial limitation in the Cigna Policy emphasizes the location of the occurrence, not the location of the resulting damages. . . . Because Nu-kote could possibly claim damages to domestic business based, at least in part, on HP’s extraterritorial acts, the Court finds that the Policy Territory requirement is satisfied.
Id. at *10-13.
This follows because as long as an advertising activity occurs outside the United States which could create liability, it matters not whether the lawsuit itself was within the U.S. It takes little imagination to conceive of a number of IP litigation matters where advertising conduct which may be identical to that within the U.S. but takes place in a number of foreign countries, often in translated versions of the same advertisements emanating from U.S. sources, creates potential coverage.
On May 14, 2008 a judgment of over $51,000,000 was entered in HP’s favor, including nearly all of its post-tender defense fees at rates of up to $600 per hour plus in-house counsel fees and pre-judgment interest at 10% per annum from date of invoice.
