The IP Exclusion: The Elephant in the Room

So-called Intellectual Property (“IP”) exclusions in commercial general liability (“GL”) insurance policies have received relatively little attention from the courts. However, the ubiquity of new advertising technologies, recent appellate decisions confirming GL “personal and advertising injury” coverage for patent claims, and new claims that policyholders are facing for alleged electronic invasions of privacy may well turn the IP exclusion into the proverbial “elephant in the room.” Many courts have found GL coverage for a broad variety of IP claims. Even though a recent California Court of Appeal decision found that a form of IP exclusion barred coverage for certain “infringement of likeness” claims under a GL policy, that decision confirms that IP exclusions must be narrowly construed, are highly dependent on specific wording used, and will not routinely bar coverage in a broad variety of cases that insurance companies will argue are focused on or arise from IP claims. In other words, the denial of claims based upon the IP exclusion can be successfully challenged.