I don't understand if accidental IP theft would generally be covered by E&O or D&O. I have conflicting information.

[prodie53]

If a company unintentionally uses another company's IP and gets sued, I'm trying to understand which insurance would cover this. I've been told D&O, but the lawsuit would be against the company, not individuals and the use of the IP may not have been a decision made at the top of the command chain. That to me suggests it's E&O that would cover this, as a mistake was made by the company by deciding to use this specific "thing" that's patented by another company.

Maybe this varies from policy to policy, but what's the general rule of thumb here?

Thanks!

 

[bfastpool]

@prodie53 It depends on the exact circumstances but the personal and advertising injuries section on a general liability policy might cover this. YMMV

 

[prodie53]

@bfastpool Exact scenario I want to protect myself from. It’s a consulting business and my model requires 3rd party vendors that will undoubtedly take market share from other vendors. I’m concerned a vendor who I may take market share from could conjure up a claim, legitimate or not, that our solution infringes on some proprietary solutions concoction they have. In my industry, larger companies suing smaller ones to stifle competition isn’t uncommon. I want to make sure I’m protected against this.

 

[madkingthesinner]

@prodie53 D&O covers the directors and officers as individuals
E&O covers the company. D&O and profesional are both way too complicated to answer these sort of questions in a subreddit. You need to talk to someone who does a lot of D&O. See if you can find recommendations from a business association. There are a lot of insurance professionals that dont have a good understanding of the D&O or E&O. Both policies could apply here. GL could possibly cover it but it's excluded on a lot of policies.

Here's a high level explanation of D&O.

 

[prodie53]

@madkingthesinner Thanks for sharing. I just read that explanation, which does lend some context but introduces another question:

Other distinctive features of D&O policies are that they... usually contain no explicit duty to defend the insureds (when covering for-profit businesses),

What does this mean? This seems like it would fall to the exclusions, but no duty to defend the insured seems like an exclusion that defeats the entire purpose of the policy.

 

[madkingthesinner]

@prodie53 Most policies will pay defense on a reimbursement basis. It is usually within the policy limit. Many D&O policies have a high self insured retention, especially for large for profit companies. If you have a $500k retention, you'd want to control the defense. Especially since large entities have in house council and/or a firm on retainer.

IRMI has standard form wording not market standards which changes. I'm seeing a lot of policies which include duty to defend right now. I don't focus on D&O though.

 

[dmk]

@prodie53 I am going to guess D&O, without all the facts and circumstances. D&O is referred to as "You took my stuff; you took my people" insurance by the head of a major D&O company's CEO. He was explaining to me why everyone needs it and used IP theft and hiring an employee with a non-compete as examples of claims they have covered.

Again, facts and circumstances will determine.

 

[prodie53]

@dmk Thanks! That quote is somewhat helpful. This suggests that D&O coverage extends beyond D&O and to the entity itself. Is this always the case with D&O because if not, wouldn't another policy be needed to cover IP infringement claims?

 

[dmk]

@prodie53 I just cannot answer that without a lot more info about your situation. It sounds like it would be worth it for you to find a real insurance attorney and pay him to review the situation.

Most attorney's have no idea about insurance language and case law. Find one with a deep background in insurance language. You might be helped by calling the counsel for an insurance organization like your local "The Big I" organization. Not referring them or endorsing them, only giving that as an example.