On November 19, 2020, a judge in Delaware ruled in Indian Harbor Ins. Co. v. SharkNinja Operating LLC, et al. that the insurer Indian Harbor must defend SharkNinja against underlying patent infringement and false advertising claims despite a patent infringement exclusion.
In 2019, iRobot, best known for its Roomba robot vacuum cleaner, sued SharkNinja in federal court. SharkNinja designs and distributes home appliances and appliances, including vacuum cleaners. In its complaint, iRobot claimed that SharkNinja had infringed several patents and incorrectly advertised the capacity of its "Shark IQ" vacuum cleaner to the detriment of iRobot's products and goodwill. compensation for any settlement or negative assessment under two commercial general liability policies. The policies provided primary coverage for "personal and advertising damage" liability, including claims arising out of defamation, libel and copyright infringement. Indian Harbor denied coverage and refused to defend. The insurer stated that the false advertising language did not lead to a covered "personal and advertising damage" because it did not claim "downgrading" of iRobot's products. Alternatively, Indian Harbor argued that the exclusion of "failure to comply" and "IP intrusion" clearly hindered coverage.
An insurer's obligation to defend is broader than its obligation to reimburse and is generally triggered when the claims of the underlying complaint increase the potential for coverage. Here, the court applied Massachusetts law to determine whether the underlying iRobot action was "reasonably susceptible to an interpretation that sets forth or roughly outlines a statement that is subject to the policy terms." The court found that the allegations could reasonably be interpreted as derogatory of iRobot, especially since SharkNinja's statements apparently sought to downgrade iRobot's products in rank and rating.
The court also found that Indian Harbor failed to meet its burden of proving these specific types of damage. was excluded. The insurer claimed that the exclusion "failure to comply" was applied because the allegations concerned SharkNinja's own products and the exclusion prevents a defense when the insured incorrectly advertises its own products. In order to resolve any uncertainty in favor of the policyholder, the court rejected this argument as some of the allegations concerned iRobot's competing products. Second, Indian Harbor argued that the exclusion of "IP infringement" clearly precludes patent infringement claims. However, the judge stated that in view of the broad defense obligation of the policy, "Indian Harbor must defend itself against patent infringement bills ̵
Indian Harbor Ins. Co. v. SharkNinja serves as a reminder of the broad nature of the duty to defend. An insurer is obliged to defend an entire measure when there is potential for coverage. This is true even if some of the allegations may fall outside the scope, which may be the case in matters relating to infringement of intellectual property rights, which are often mixed with allegations of implication of advertising and / or personal injury. Here, however, the court saw correctly through the insurer's comprehensive denial of coverage and held the insurer to its contractual obligation. Policyholders should remember that insurers are obliged to defend themselves against the entire measure wherever there is potential for coverage.