Trade Secret Insurance
November 1999
Suppose your client hires a rising star away from a competitor in its industry to improve the company's manufacturing process, design a superior product, improve distribution methods, or revamp the marketing approach. Shortly after the whiz kid begin
General Credit
1. Extrinsic facts can trigger an insurance company's duty to defend only if they are learned through formal discovery. True False
2. An allegation made in a complaint that a company misappropriated its competitor's manufacturing process is probably sufficient by itself to trigger the duty to defend under an advertising injury provision. True False
3. The insurer's duty to defend is broader than its duty to indemnify. True False
4. Even if a complaint does not give rise to coverage on its face, the insured may provide extrinsic facts to the insurance company that would trigger the duty to defend. True False
5. To trigger an insurance company's duty to defend a misappropriation of trade secret cause of action, the carrier must actually be aware of information that would give rise to a duty to defend. True False
6. If the specific allegations of a complaint do not trigger a carrier's duty to defend, there still may be a defense obligation if the complaint could reasonably be amended to give rise to potential coverage under the policy. True False
7. An insurance company may have to defend a misappropriation of trade secret lawsuit even when coverage for the claim is doubtful and ultimately proven not to exist. True False
8. In order to properly deny a defense for a misappropriation of trade secret lawsuit, the insurance company must affirmatively prove that there is no possibility of coverage. True False
9. An insurer's duty to defend a misappropriation of trade secret cause of action is measured by the actual legal cause of action that was pleaded in the underlying complaint. True False
10. <i>Bank of the West v Superior Court</i> was a landmark California Supreme Court decision deciding the scope of a carrier's duty to defend an unfair competition case. True False
11. To trigger a duty to defend a misappropriation of trade secrets case, the insured's advertising activity must cause the alleged injury, not merely expose it. True False
12. The insurer owes a duty to defend its insured against claims that create a mere potential for coverage. True False
13. The claim of misappropriation of advertising ideas is typically limited to written sales materials. True False
14. If coverage for misappropriation of trade secrets is doubtful or uncertain, there is no duty to defend. True False
15. If there is no misappropriation of any trade secret beyond the production process for a product, then there is no coverage under a typical CGL for the misappropriation of trade secret claim. True False
16. "Misappropriation of advertising ideas" is generally not defined within a typical comprehensive general liability (CGL) policy. True False
17. Without any nexus between the alleged misappropriation and the insured's advertising activities, there can be no coverage. True False
18. An allegation of misappropriating marketing techniques can be sufficient to demonstrate a nexus between the offense and the insured's advertising activities. True False
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