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Eleventh Circuit: Attorney Fees Not Covered by Liability Insurance in Infringement Case

January 11, 2017 | Posted in : Coverage of Fees, Defense Fees / Costs, Fee Issues on Appeal

A recent Daily Business Review story, “Court: Infringement Case Fees Not Covered by Insurance,” reports that liability insurance won't cover a West Palm Beach-based company's legal fees for the year and a half it waited to tell its insurer it had been sued, the U.S. Court of Appeals for the Eleventh Circuit ruled.

EmbroidMe.com Inc. racked up more than $400,000 in legal fees defending itself against a copyright infringement lawsuit in the Southern District of Florida, all before telling its insurer about the litigation.  The defense work in that case was done by McHale & Slavin in Palm Beach Gardens.

The custom embroidery company sued its insurer, Travelers Property Casualty Co. of America, after it declined to cover the fees incurred before it was notified of the lawsuit.  The appellate court ruled that the lawsuit should be tossed, affirming U.S. District Judge Kenneth Marra's decision to grant summary judgment in Travelers' favor.

EmbroidMe argued the insurance company did not tell its policyholder that it planned to use a coverage defense within the 30 days required by law.  But the appellate panel found the law did not apply because Travelers didn't use a coverage defense when it declined to reimburse EmbroidMe.  Instead, it relied on an exclusion, telling its policyholder the insurance contract expressly excluded pre-tender legal expenses.

Circuit Judge Julie Carnes authored the opinion, with Circuit Judge Adalberto Jordan and U.S. Court of International Trade Judge Richard Goldberg concurring.