General Liability Policies May Cover Antitrust, Patent, and Other Business Litigation – Part 1

by Farella Braun + Martel LLP

General liability insurance is frequently overlooked in business litigation. These policies, however, include coverage for “disparagement” and “malicious prosecution.” Both terms are construed broadly and may provide coverage for a variety of lawsuits, including antitrust claims, patent disputes, trade secret claims, as well as other commercial litigation between competitors, or suppliers and their customers.

What should clients and counsel look for? There are two types of allegations in particular which should immediately raise a red flag regarding the potential for insurance: 1) any allegation that the insured made unfavorable comments about the plaintiff or its products, or 2) any allegation that the insured filed improper lawsuits or otherwise misused the litigation process. Today’s post will examine coverage for “disparagement”-type claims; Part 2 will examine claims for the misuse of legal process.

The typical general liability policy includes coverage for “oral, written, or electronic publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.” Business litigation often includes express claims for defamation or disparagement. Such allegations trigger a duty to defend both the covered and uncovered claims, although the carrier may subsequently seek reimbursement of any costs solely related to uncovered claims. Buss v. Superior Court, 16 Cal. 4th 35, 50 (1997). On a practical level, however, establishing such an allocation is difficult and reimbursement claims are rarely, if ever, pursued by insurers. Thus, an insured may obtain coverage for the entire lawsuit, even if the disparagement is a relatively minor aspect of the dispute. Bear in mind as well that, even if the insured is the plaintiff, a counter-claim by the defendant may also trigger coverage, potentially funding most or all of the cost of prosecuting the original action.

The disparagement coverage may apply even if there is no express cause of action for disparagement, as long as the facts alleged or known to the party potentially involve disparagement. In the recent case of Travelers Property Casualty Co. of America v. Charlotte Russe, 207 Cal. App. 4th 969 (2012), Charlotte Russe had been sued by one of its suppliers. The supplier alleged that its brand was identified as “premium” and “high-end,” but that Charlotte Russe had published prices for its goods that implied that they were not, resulting in “significant and irreparable damage to and diminution” of the supplier’s brand and trademark. While there was no express claim for trade libel, the court found these factual allegations created a potential of coverage for “disparaging” the supplier’s products, and thus triggered the insurer’s duty to defend.

Coverage has also been found for allegedly false claims of patent infringement. See Atlantic Mut. Ins. Co. v. J. Lamb, Inc., 100 Cal. App. 4th 1017 (2002). There, it was alleged that the insured had falsely told the underlying plaintiff’s customers that the plaintiff’s products were subject to patents, and purchasing those products would subject them to litigation. The court found that these allegations fell within the “disparagement” coverage because the statements were “derogatory to the plaintiff’s title to property, or its quality, or to his or her business in general.”

Coverage has also been found for antitrust claims. In CNA Casualty of Cal. v. Seaboard Surety Co., 176 Cal. App. 3d 598 (1986), the underlying plaintiff alleged, as part of his antitrust claim, that the defendant misrepresented “the business, property and rights possessed by plaintiffs to persons with whom plaintiffs did business in an effort to disrupt and prevent” these business relationships. This allegation was found sufficient to trigger the “disparagement” coverage of the policy.

Other false statements criticizing a business or its goods also constitute “disparagement” if they explicitly or implicitly call into question the company’s honesty, integrity, or competence. See, e.g., Polygram Records, Inc. v. Superior Court, 170 Cal. App. 3d 543, 550 (1985). For example, if defendant files a counter-claim alleging that the plaintiff falsely accused the defendant of trade secret theft, this statement impugns defendant’s honesty and integrity and would trigger the disparagement coverage.

As these cases indicate, “disparagement” coverage is very broad and should be considered whenever an opposing party alleges (by complaint or counter-claim) that unfavorable statements were made by the insured. Our next post will explain how general liability policies may also cover antitrust and patent claims under the policy’s “malicious prosecution” coverage.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Farella Braun + Martel LLP | Attorney Advertising

Written by:

Farella Braun + Martel LLP

Farella Braun + Martel LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.