June 19, 2018 Articles

Is There Insurance Coverage for Trade Secrets Litigation?

Maybe.

By Brian Esler and Seth Row

Trade secrets litigation can be expensive. Insurance can help defray that expense. But will insurance cover a claim of trade secret misappropriation? Maybe.

Coverage is driven by state law, which means unique state law variations. However, most states have adopted some form of two guiding principles: (1) Policies are to be construed against the insurer and in favor of coverage, and (2) the insurance company’s duty to provide a defense for its insured against a potentially covered claim is broader than its duty to indemnify (i.e., actually pay the claim).

With insurance coverage issues, the devil is always in the details of the specific applicable policy and the specific allegations of the complaint. That said, there are generally two sources of potential coverage for claims of trade secret misappropriation: the “advertising injury” rider provided in most commercial general liability (CGL) policies and various provisions offered in most directors’ and officers’ (D&O) policies.

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