On remand, the California Supreme Court ordered a hearing on petitioner insurer’s writs of mandate regarding the insurer’s potential liability under a general liability policy to defend its insured in an underlying action alleging patent infringement.
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Overview
Petitioner issued a general liability insurance policy to the insured, providing coverage for advertising injury. The insured’s competitor brought suit against the insured alleging patent infringement. Petitioner refused to defend the insured claiming that patent infringement was not a covered advertising injury. After the insured settled the patent infringement action, the insured brought suit, alleging that petitioner had breached its duty to defend. The trial court held that petitioner owed insured a duty to defend because there had been a potential for coverage under the policy. The appeals court denied petitioner’s writs of mandate, but on appeal the state supreme court ordered the appeals court to hear the writs. The appeals court reversed the trial court and held that the insured’s acts of patent infringement were outside the scope of a covered advertising injury and that any other potential liability against the insured would require proof that the insured acted knowingly and intentionally, which is non-insurable. Therefore, petitioner’s duty to defend was not triggered.
Outcome
The appellate court reversed the trial court and that petitioner did not breach a duty to defend the insured because there was no potential recovery for the insured’s acts of patent infringement under the policy’s advertising injury coverage, and any other potential liability would require proof that the insured acted knowingly and intentionally.