Orlando federal judge says no duty for insurer to defend Benjamin Bros. vs trade secrets suit

By Marian Johns | May 16, 2019

ORLANDO — A federal judge has granted Scottsdale Indemnity Company's motion to dismiss a lawsuit alleging the insurer breached an insurance contract.

According to the March 20 filing in the U.S. District Court for the Middle District of Florida, the plaintiff Benjamin Brothers (B&B), filed suit against Scottsdale, alleging Scottsdale breached its "business and management indemnity policy" contract with B&B under which Scottsdale was obligated to defend B&B. The plaintiff alleged the insurance contract provides "directors and officers and company liability coverage to [the plaintiff] on a 'claims-made basis.'"

B&B's lawsuit against Scottsdale stems from B&B being sued by Travelpass Group LLC  for alleged misappropriation of trade secret data. B&B alleges Scottsdale "denied coverage for the claim and refused to provide a defense," according to the court filing. 

Scottsdale moved to have the lawsuit dismissed and said its policy with B&B has an "intellectual property exclusion" and that it has no obligation to defend regarding this specific claim. 

The court agreed with Scottsdale and cited case law stating that Florida law states insurance contract interpretation is "a question of law to be decided by the court." 

U.S. District Judge Gregory Presnell further concluded that "common sense prevents the court from construing the policy to impose on the Insurer a duty to defend against literally any claim. Looking at the policy as a whole, it is clear that Scottsdale’s duty to defend is limited by the exclusionary clauses."

The court also stated that intellectual property exclusion is relevant to "losses incurred as a result of intellectual property claims brought against the plaintiff."  The court noted that according to the definition of "loss" in the policy, it includes "damages, judgments, settlements, pre-judgement or post-judgment interest awarded by a court, and costs, charges and expenses incurred by directors and officers..." and that those "costs" must have been "incurred by any of the insureds in defending claims." 

According to the court's order, the B&B legal costs for which they were suing Scottsdale, "constitute a loss under the policy," which is not covered under the exclusion clause. 

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