February 28, 2020 by Georgia G. Coats Coverage, Insurance 0 comments
Second Circuit Applies IP Exclusions to Bar Coverage for Fashion DesignerIn Nannette Lepore v. Hartford Fire Insurance the Second Circuit held that Hartford was under no obligation to defend or indemnify its fashion designer insureds in an underlying lawsuit alleging violations of intellectual property rights. Hartford issued commercial general liability and umbrella policies to its insureds, Nanette Lepore, Robert Savage, Robespierre, Inc. and NLHE LLC. In 2016, the insureds were sued in state court by NL Brand Holdings for claims arising out of the sale of the core assets of Lepore’s business. The underlying complaint asserted 17 causes of action, including breach of contract and tortious interference with advantageous business relationship, and alleged that the insureds violated their licensing agreement by “flouting all contractual requirements governing use of the Purchased IP, failing to adhere to non‐compete and non‐disparagement obligations and public‐statement prohibitions, and wrongfully co‐mingling the Licensed Marks with the products and marks of third‐party collaboration partners.ʺ The insureds sought coverage in the underlying lawsuit from Hartford, who disclaimed coverage on the basis of a two-part intellectual property exclusion in the policies. The first part excluded coverage for “personal and advertising injury” “arising out of any actual or alleged infringement or violation of any intellectual property right,” including copyright, patent, and trademark rights. The second part barred coverage for any injury or damage in any lawsuit that “also alleges an infringement of any intellectual property right. The Second Circuit upheld the District Court and found that the IP exclusions barred coverage for the entire lawsuit. First, the court noted that, even though there were no direct claims for IP relief, there are several allegations that the insureds violated NL Brand’s IP rights. Because the underlying lawsuit alleged “an infringement or violation of any intellectual property right,” the court straight-forwardly applied the exclusion and held that the insureds were not entitled to coverage. Thanks to Douglas Giombarrese for his contribution to this post. Please email Georgia Coats with any questions.