An exclusion of intangible property in an insurance policy for Travelers Cos. Inc. was ambiguous, a federal appeals court said Wednesday when overturning a court ruling in Travelers' favor in a coverage dispute.
9th U.S. Circuit Court of Appeals in San Francisco held My Choice Software LLC et al. v. Travelers Casualty Insurance Co. of America that it did not appear from the language of the exclusion that it also applied to IP-related allegations that had only been insured by the insured, contrary to claims made against the insured.
According to the complaint in the case, David Mumme, CEO of Laguna Hills, California-based My Choice Software, had sent "disappointing and harmful" communications to a competitor's salespeople and / or business partners.
The competitor filed a lawsuit against My Choice and Mr. Mum, and the dispute was eventually settled for an unclear amount. Travelers, who had issued the company a commercial general liability policy, initially agreed to defend the case subject to rights, but then withdrew, citing its coverage of the exclusion of intellectual property rights.
My Choice and Mr. Mumme filed a lawsuit against travelers in the U.S. District Court in Pasadena, which granted the travelers a summary judgment dismissing the case.
The verdict was overturned by a unanimous three-judge appellate court panel.
“The cases relied on by the district court and those cited by travelers in this appeal do not address the question of whether the language of the IP exclusion unambiguously prevents coverage of IP-related allegations that are only insured by the insured, contrary to claims made against the insured, "the decision said.
"The district court erred in concluding that the IP exclusion unequivocally" does so, it said. It is "reasonable for an insured person under the insurance to interpret the exception that applies only to allegations made against him in the absence of express language that states otherwise," it said.
Pointing to another decision, the decision says, "which under the exemption provision in that case, Travelers could have added additional language that would have clearly and unequivocally applied to accusations solely insured by the insured, but failed to do so.
"In light of this omission, we apply the contract law principle in California that" ambiguities are generally interpreted against the party who caused the uncertainty to exist (ie, the insurer) to protect the insured's reasonable expectations of coverage, "the decision said, citing to a previous case and reverse the decision of the court. The case was remanded in custody for further proceedings.
Lawyers in the case had no comment or could not be reached.
Earlier this week, a federal appeals court reversed a lower court decision and ruled in favor of a Travelers Cos. Inc unit in a dispute over damages in connection with an underground fuel storage tank.