Monthly Archives: February 2014

“Second-Guessing” Immunity for Trial Attorneys

Legal malpractice lawsuits often focus on the plaintiffs second-guessing the strategic and tactical decisions made by their own counsel in a prior proceeding and claims of damages when such decisions do not result in their favor. To combat the propensity of such lawsuits made on “judgment” calls and to protect the good-faith decisions of lawyers, Florida law has long established that the doctrine ofjudgmental immunity insulates attorneys’ good faith decisions in “unsettled” areas of law from legal malpractice claims. Recently, the doctrine of judgmental immunity has been confirmed and expanded to include the good faith and tactical decisions that attorneys make at trial, as demonstrated by the decision of the United States District Court for the Southern District of Florida in Inlet Condominium Association v. Childress Duffy, Ltd., Inc., etal., Case No. 12-21711-CIV.

In Florida, the doctrine of judgmental immunity provides that while an attorney may be held liable for damages incurred by a client based on the attorney’s failure to act with a reasonable degree of care, skill, and dispatch,’ an attorney is not an insurer of the outcome of a case.’ In the seminal case of Crosby v. Jones, the Florida Supreme Court explicitly recognized that under the doctrine of judgmental immunity, good faith tactical decisions or decisions made on a fairly debatable point of law are not actionable, even if they later turn out to be incorrect.’ If an attorney acts in good faith and exercises an honest and informed decision in providing professional advice, “the failure to anticipate correctly the resolution of an unsettled legal principle does not constitute culpable conduct.”4 As such, the doctrine of “judgmental immunity is premised on the understanding that an attorney who acts in good faith and makes a diligent inquiry into an area of law should not be held liable for providing advice or taking action in an unsettled area of law.” Quite simply, an attorney is not liable for legal malpractice simply for losing an issue in a case or rendering advice in an unsettled area of law which later proves to be wrong.6 The Florida Supreme Court in Crosby stated as follows:

As a matter of policy, an attorney should not be required to compromise or attenuate an otherwise sound exercise of informed judgment with added advice concerning the unsettled nature of relevant legal principles. Under the venerable error­in-judgment rule, if an attorney acting in good faith exercises an honest and informed discretion in providing professional advice, the failure to anticipate correctly the resolution of an unsettled legal principle does not constitute culpable conduct… In short, the exercise of sound professional judgment rests upon considerations of legal perception and not prescience.’

In order to assert the defense of judgmental immunity, an attorney must show that: (1) the legal authority supporting the cause of action was “unsettled” or “fairly debatable;” and (2) the attorney acted in good faith and made a diligent inquiry into the unsettled area of law$ An issue of law is “unsettled” when it has not been determined by the state’s court of last resort and, as a result, well-reasoned lawyers may have reasonable doubts.9 In recent years, Florida courts have applied the defense of judgmental immunity in legal malpractice lawsuits, including, but not limited to, the following “unsettled” areas of law: the execution and preparation of a written release of individual defendants in an automobile accident lawsuit, even though the trial court subsequently dismissed the remaining defendant based on the release;10 the filing of a wrongfirl death claim resulting from medical malpractice and compliance with the medical malpractice statute of limitations;” the remedy of specific performance;12 and the failure to have a guardian appointed in relation to a minor services contract” The determination of whether an area of law is “unsettled” is a question of law’ and therefore may be decided by the court via a dispositive motion.

Most recently Cole, Scott & Kissane, P.A. was successful in asserting the defense of a judgmental immunity in Inlet Condominium Association v. Childress Du jfy, Ltd., Inc., et al., a legal malpractice case in which the Plaintiff was seeking over $1.5 million in alleged damages.’ In Inlet, the Southern District of Florida granted final summary judgment in favor of the Defendant, holding that the Plaintiff’s claims against the Defendant attorneys were barred by the doctrine of judgmental immunity.’ The Plaintiff brought a legal malpractice lawsuit against the Defendant after the trial court in the underlying first party property lawsuit struck Inlets claim for a $1.5 million elevator modernization contract at trial because the Defendant attorneys allegedly failed to call an elevator expert to opine that the elevator replacement was caused by hurricane damage.

Although the Plaintiff argued that the doctrine did not apply since there was no “unsettled” area of law with respect to calling experts in a first-party property case, the Inlet Court found otherwise and stated “there is no established method of prosecuting a first-party hurricane claim,” explaining that “the working up and trying of a case, in many respects, are matters of tactics, strategy, and professional discretion and judg ment.”” The court further ruled that “it is not `settled’ that a litigant must `retain, list, and call’ an expert in a particular field what attempting to link causation to an element of damages.”‘ The court found that the tactical decisions of the Defendant attorneys could not be “understated” relative to their proffer of a world-renowned wind expert in lieu of an elevator expert in order to prevent subjecting Inlet to cross-examination and a potential policy exclusion based on the extensive documentation of the pre-existing condition of the elevators.” Accordingly, the Inlet court thus concluded that the Defendant attorneys’ tactical decisions in an unsettled area of first-property hurricane claims were “what tactical decisions are made of’ and were thus exactly the type of decisions to which the protection of judgmental immunity should be afforded.”‘

In light of the Southern District’s recent application of the doctrine of judgmental immunity, it appears that the scope of judgmental immunity has now been expanded to protect attorneys’ well-reasoned and informed decisions in retaining, listing and calling particular witnesses and experts at trial; however, it is important to note that the doctrine of judgmental immunity is not applicable in the defense of every legal malpractice case, as Florida courts have limited the applicability of judgmental immunity in their interpretation of debatable and unsettled areas of law. For instance, the Fourth District Court of Appeal reversed a summary judgment entered in favor of a defendant attorney involving an untimely appeal, holding that the “mere `ambiguity of a rule’ of procedure, without more, does not equate to the somewhat more amorphous realm of `fairly debatable’ or `unsettled area of the law’ to which the doctrine of judgmental immunity is applied.”‘ In addition, the application of the doctrine of judgmental immunity has been limited in legal malpractice lawsuits concerning settlement. In Sauer Flanagan and Maniotis, P.A., the plaintiff filed suit against her attorneys for failing to properly advise and inform her of the risks involved in rejecting a settlement offer.”‘ The Sauer Court held that the doctrine of judgmental immunity did not bar the plaintiff’s legal malpractice lawsuit, stating that there is “no basis for concluding that an attorney is insulated from liability for failing to exercise ordinary skill and care in resolving settlement issues.’ Therefore, the reach of the doctrine of judgmental immunity does have limits relative to procedural matters and settlement decisions.

Despite these limits, trial attorneys subject to a legal malpractice claim can now take comfort in the fact that they will have a defense to the claim based on good faith tactical decisions that were made in the course of litigation and, in accordance with the recent decision in Inlet, the former client may have a more difficult time second-guessing such trial decisions.


1 See, e.g., Weekley v. Knight, 156 So. 625 (Fla. 1934); Riccio 1 Stein, 559 So. 2d 1207 (Fla. 3d DCA 1990).

Crosby is Jones, 705 So. 2d 1356, 1358 (Fla. 1998); see also Prato v. Graham, 788 So. 2d 393, 395 (Fla. 5th DCA 2001).

3 705 So. 2d at 1358.

4 Id. (emphasis added).

5 Id.

6 See id

7 Id (quoting Davis a Dann-ell, 119 Cal. App. 3d 883 (1981)).

8 See Haisfield a Fleming, Haile & Shan; P.A., 819 So. 2d 182, 185 (Fla. 4th DCA 2002).

9 Id.

10 Crosby, 705 So. 2d 1356.

11 Pronto, 788 So. 2d 393.

12 Haisfreld, 819 So. 2d 182.

13 Herig v Akerman, Senterfitt & Edi­son, P.A., 741 So. 2d 591 (Fla. 1st DCA 1999).

14 See Crosby, 705 So. 2d at 1358; see also Haisfield, 819 So..2d at 185.

15 See Omnibus Order on Parties’ Cross Motions for Summary Judg­ment (D.E. 222), Inlet Condomini­um Association v. Childress Dufji; Ltd, Inc., etal., Case No. 12-21711-CIV (S.D. Fla. Sept. 4, 2013).

16 Id.

17 Id at 11.

18 Id.

19 Id.

20 Id at 11-12.

21 DeBiarsi v. Snaith, 732 So. 2d 14, 16 (Fla. 4th DCA 1999).

22 748 So. 2d 1079, 1080 (Fla. 4th DCA 2000).

23 Id at 1082.

Pip And The Use Of The Medicare Fee Schedule: Flag on The Play

The ever-changing world of PIP is unpredictable. Frequent legislative changes, coupled with an oftentimes inconsistent and limited body of case law, constantly changes the way insurers defend PIP claims. In an arena that has become more about attorney’s fees in nominal breach of contract actions than about the swift and efficient resolution of insurance claims for insureds, insurers are faced with the complex task of defending within the confines of a confusing and offense-driven league.
One such changing area involves the use of the Medicare fee schedule to adjust Florida PIP claims. Both the courts and the legislature have changed the rules, causing Florida PIP insurers to re-evaluate their policy language and their claims handling.
The Florida No Fault Statute requires that insurers reimburse eighty percent of reasonable expenses for medically necessary treatment. The 2007 amendment provided a framework for evaluation of reasonableness when paying claims. Section 627.736(5)(a), Florida Statutes provides :


(a) 1. Any physician, hospital, clinic, or other person or institution lawfully rendering treatment to an injured person for a bodily injury covered by personal injury protection insurance may charge the insurer and injured party only a reasonable amount pursuant to this section for the services and supplies rendered, and the insurer providing such coverage may pay for such charges directly to such person or institution lawfully rendering such treatment, if the insured receiving such treatment or his or her guardian has countersigned the properly completed invoice, bill, or claim form approved by the office upon which such charges are to be paid for as having actually been rendered, to the best knowledge of the insured or his or her guardian. In no event, however, may such a charge be in excess of the amount the person or institution customarily charges for like services or supplies. With respect to a determination of whether a charge for a particular service, treatment, or otherwise is reasonable, consideration may be given to evidence of usual and customary charges and payments accepted by the provider involved in the dispute, and reimbursement levels in the community and various federal and state medical fee schedules applicable to automobile and other insurance coverages, and other information relevant to the reasonableness of the reimbursement for the service, treatment, or supply.
(Emphasis added).
Additionally, the 2007 amendment provided insurers with an option to limit reimbursement as set forth in section 627.736(5)(a)(2), Florida Statutes.

2. The insurer may limit reimbursement to 80 percent of the following schedule of maximum charges:

a. For emergency transport and treatment by providers licensed under chapter 401, 200 percent of Medicare.

b. For emergency services and care provided by a hospital licensed under chapter 395, 75 percent of the hospital’s usual and customary charges.

c. For emergency services and care as defined by s. 395.002(9) provided in a facility licensed under chapter 395 rendered by a physician or dentist, and related hospital inpatient services rendered by a physician or dentist, the usual and customary charges in the community.

d. For hospital inpatient services, other than emergency services and care, 200 percent of the Medicare Part A prospective payment applicable to the specific hospital providing the inpatient services.

e. For hospital outpatient services, other than emergency services and care, 200 percent of the Medicare Part A Ambulatory Payment Classification for the specific hospital providing the outpatient services.

f. For all other medical services, supplies, and care, 200 percent of the allowable amount under the participating physicians schedule of Medicare Part B. However, if such services, supplies, or care is not reimbursable under Medicare Part B, the insurer may limit reimbursement to 80 percent of the maximum reimbursable allowance under workers’ compensation, as determined under s. 440.13 and rules adopted thereunder which are in effect at the time such services, supplies, or care is provided. Services, supplies, or care that is not reimbursable under Medicare or workers’ compensation is not required to be reimbursed by the insurer.

(Emphasis added).

The Florida Supreme Court recently released a game-changing decision in Florida PIP law. In Geico Gen. Ins. Co. v. Virtual Imaging Servs., Inc., 2013 WL 3332385 (Fla. 2013), the Court held that Florida PIP insurance policies must give notice to policy holders that claims will be calculated using the Medicare fee schedule limitation set forth in section 627.736(5)(a)(2), Florida Statutes, in order to use the Medicare fee schedule when adjusting Florida PIP claims.
Over the last few years, most Florida PIP carriers have been using the Medicare fee schedule without specific policy reference, instead usually relying on a clause that generally purports to incorporate the provisions of the Florida PIP Statute. Generally, the language in most PIP policies states that the carrier will reimburse a reasonable amount for medically necessary services in accordance with the Florida No Fault Statute. The advantage of this approach was that there would be no need to rewrite the policy for specific statutory references as the statute was amended.

In Geico, the pertinent portions of the policy language at issue provided:

Under Personal Injury Protection, the Company will pay, in accordance with, and subject to the terms, conditions, and exclusions of the Florida Motor Vehicle No-Fault Law, as amended, to or for the benefit of the injured person:

(a) 80% of medical expenses; and
(b) 60% of work loss; and
(c) Replacement services expenses; and
(d) Death benefits.

“medical expenses” is defined as “reasonable expenses for medically necessary medical, surgical, x-ray, dental, ambulance, hospital, professional nursing and rehabilitative services for prosthetic devises and for necessary remedial treatment and services recognized and permitted under the laws of the state for an injured person.”
The Court found that because the policy did not make specific reference to use of the Medicare fee schedule, the language was insufficient to put insureds on notice of Geico’s intent to limit payment by utilizing the permissive fee schedule as set forth in section 627.736(5)(a)(2), Florida Statutes. This decision approves the similar result of the 4th DCA in Kingsway Amigo Ins. Co. v. Ocean Health, Inc., 63 So. 3d 63, Fla. 4th DCA 2011.1 In Kingsway, the court held that insurance companies are required to give notice to the insured of the intent to use fee schedules at the time of policy issuance or renewal. The court held that the 2007 amendment of section 627.736, Florida Statutes contained both a mandatory and permissive method of paying claims. Section 627.736(5)(a)(1), Florida Statutes set forth a mandatory reimbursement of 80% of all reasonable expenses. However, an insurer could elect to limit its reimbursement as set forth in section 627.736(5)(a)(2), Florida Statutes. The court held that because the election was permissive, the insurer must clearly and unambiguously identify which payment method it will elect. Id. at 65.
The Florida legislature has also addressed the Medicare fee schedule notice issue. The 2012 amendment to section 627.736(5)(a), Florida Statutes provides:

5. Effective July 1, 2012, an insurer may limit payment as authorized by this paragraph only if the insurance policy includes a notice at the time of issuance or renewal that the insurer may limit payment pursuant in this paragraph. A policy form approved by the office satisfies this requirement. If a provider submits a charge for an amount less than the amount allowed under subparagraph 1., the insurer may pay the amount of the charge submitted.

(Emphasis added).
While the most recent PIP statute amendments codified this requirement as of July 1, 2012, the decision in Geico v. Virtual Imaging, will apply to all cases for policies that have taken effect since January 1, 2008. Most carriers have already changed their policy language in response to the Kingsway v. Ocean Health, decision and the new statute change. The CSK team has been at the forefront of this issue by assisting a number of Florida PIP carriers and out-of-state carriers with evaluation of the language of their Florida PIP coverage. CSK is assisting many insurance companies as they grapple with the game-changing actions of the courts and legislature. We believe careful evaluation of policy language, an aggressive defense strategy, and a current knowledge of the playing fields will keep insurers in a game winning position.

1 The policy language at issue in Kingsway v. Ocean Health, provided: “The Company will pay in accordance with the Florida Motor Vehicle No Fault Law, as amended, to or for the benefit of the injured person:

1. 80% of medical expenses; Medical expenses means those expenses that are required to be reimbursed pursuant to Florida Motor Vehicle No Fault Law, as amended, and that are reasonable expenses for medically necessary services.”


new concerns for insurance agents with respect to the pending transfer of citizens insureds to non-admitted carriers

Recently, the Florida Legislature passed new legislation in an effort to decrease the number of policyholders that are insured with Citizens’ Property Insurance Corporation, which is the insurer of last resort in Florida. According to the legislature, the motivation for the new law arises from concerns that the number of Citizens policyholders had previously reached an all-time high, $1.5 million,1 and that Citizens would potentially not be able to cover such exposure from a future catastrophic storm, without levying additional taxes and assessments.

On May 29, 2013, Governor Rick Scott signed SB 1770 into law,2 which is codified in Sec. 627.3518, Fla. Stat. As a result, the state-run insurance company started transferring many of its 1.2 million homeowners’ insurance policies to non-admitted private insurance carriers3 endeavoring to decrease costs to the state.4 The new law mandates that Citizens must establish a clearinghouse program5 which enables the state-run insurer to enter into contracts6 with private market insurers to facilitate the transfer of their insurance policies to the private insurance sector.7

Although well intentioned, the new law may potentially lead to an escalation in claims against insurance agents, as Citizens, the largest residential property insurer in the State of Florida, depopulates an estimated 400,000 insurance policies.8 The reason for this is that the process by which Citizens will transfer insureds to new insurers does not require the express consent (either written or verbal) of the insured to occur. Instead, the only obligation for the insured is to “opt-out,” if the insured does not want to be transferred to the carrier in the private market. This means that the process by which an agent typically explains policies to the insured and by which the insured agrees to such coverage by signing a written proposal and application will not be provided for under the new law.

Under Florida law, an insurance agent or broker has a fiduciary relationship with an insured and therefore can be sued for breach of fiduciary duty.9 Claims for breach of fiduciary duty commonly arise when a policyholder alleges that the insurance agent or broker did not inform them about specific coverage options or that the residence/business would not be covered for the subject loss. In light of the new legislation, uninformed policyholders may seek to blame the insurance agent for failing to explain the changes in the insurance coverage. Moreover, if a policyholder files a claim which is denied by the insurance company due to lack of coverage, an insured may bring an action against his/her agent whose alleged negligence caused the insured to become embroiled in litigation to secure coverage and incur attorney’s fees and costs.10

As part of the pending transfer, Citizens policyholders can anticipate receiving notification from Citizens that their homeowners’ insurance policies may be transferred to an insurance carrier in the private market. Upon receipt, the Citizens policyholder will have two options: (1) remain with Citizens; or (2) accept coverage from one of the private insurance companies to which Citizens transfers its policies. If the policyholder fails to respond to the notification, his/her homeowners’ insurance policy will be automatically transferred to the private insurer.

Policyholders who “opt-out” and remain with Citizens may face more restrictive coverage options. Further, policyholders that opt to transfer their policies to the private insurance carriers may encounter differing or reduced coverage. Either way, insurance agents may have cause for concern if policyholders are not knowledgeable regarding the differences in coverage between the policies. Often, when an insurance company denies a claim asserted by the policyholder, the policyholder blames the insurance agent for failing to procure coverage.

As a result of Citizens’ mass transfer of their insurance policies, there may be an increase in actions filed against insurance agents. Even if an insurance agent initially procured the requested insurance properly, the transfer to a new carrier may alter that coverage, which could ultimately expose the insurance agent to liability for failure to procure and/or advise the policyholder of the lack of coverage. For example, in one such case that has already been filed, an insurance agent procured homeowners’ insurance coverage with a carrier that ultimately issued mass cancellation polices for many of its insureds as the insurer eliminated its Florida client base. After the insurance policy was transferred by the insurance carrier to another insurance carrier, the new policy had differing insurance coverage. As a result, after the policyholder experienced interior water damage, the new insurance carrier denied the claim due to lack of water damage coverage under the policy. The policyholder sued the insurance carrier for breach of contract and the insurance agent for negligence in failing to procure water damage coverage, which would have been provided under the prior insurance policy. After much litigation, the matter was able to be resolved in the insureds’ favor.

Generally, in Florida, an insurance agent’s obligation to its client ends after procurement of the insurance policy;11 however, in cases where a policyholder’s insurance policies are transferred to a new carrier before the end of the policy period, there may be a debatable point of law with respect to whether the insurance agent has a duty to advise the policyholder of the differences in the policies. In order to protect themselves against potential claims relating to coverage from a transferred insurance policy, it would be advisable for insurance agents to make efforts to inform policyholders in writing that the coverage may differ from the prior insurance policy.

Given the rise in lawsuits being filed against insurance agents, there are some measures that may help protect insurance agents and brokers from potential lawsuits regarding Citizens’ transfer of insurance policies. Although there is no legal obligation to do so, insurance agents can contact all Citizens’ policyholders and inform them of the new legislation, which may affect premiums and coverage. Second, it would be preferable

for insurance agents to obtain written consent from each Citizens’ policyholder, acknowledging that the policyholder agrees to the change in insurance carrier and realizes that the coverage may not necessarily be the same as under the prior policy. This can be achieved by insurance agents inviting Citizens’ policyholders to review their new insurance policies with the insurance agent and discuss any changes or additional coverage that may be available. After discussing the changes and/or additional coverage that may be available, insurance agents can send written correspondence to the policyholder documenting that discussion. In addition, an agent should attempt to maintain a complete client file, documenting all communications with the client contemporaneously and memorializing any change in coverage or rejection of coverage. Generally, the more complete and well documented an insurance agent’s file, the easier it is to defend, should litigation occur.

While there is never a guaranty that a policyholder will still not attempt to blame an insurance agent if they are not covered for a loss following the pending transfer, prudent insurance agents can seek to minimize their potential exposure to lawsuits by following good practices, including these suggested measures.


1 Jim Turner, Citizens Property Insur­ance gets ‘disappointing’ transfer numbers, Miami Herald, Sept. 30, 2013, available at http://www.miam­ citizens-property-insurance-gets. html?story_link=email_msg.

2 CS/SB 1770 Property Insurance, The Florida Senate, Sept. 29, 2013, available at http://www.flsenate. gov/Session/Bill/2013/1770.

3 Another issue may arise regarding surplus lines carriers with respect to potential insolvency. For instance, if Citizens transfers insurance policies to surplus lines carriers, which are not backed by the Florida Insurance Guaranty Association, should in­solvency occur, coverage to policy­holders will not be provided by the State of Florida.

4 Mary Ellen Klas, As Citizens shed policies, consumes face new deci­sions, Miami Herald, Sept. 24, 2013, available at http://www.miamiher­ html?story_link=email_ms.

5 See Florida Statutes Sec. 627.3518(3) (2013).

6 See Florida Statutes Sec. 627.3518(3) (c) (2013).

7 See Florida Statutes Sec. 627.3518(2) (2013).

8 Florida’s Citizens Signs with 10 Insurers to Take Nearly 400,000 Policies, Insurance Journal, Sept. 27, 2013, available at http://www.­east/2013/09/03/303631.htm.

9 See Beckett v. Department of Financial Services, 982 So. 2d 94, 101 (Fla. 1st DCA 2008).

10 Bitz v. Ed Knox Clu & Associates, 721 So. 2d 823 (Fla. 3d DCA 1998).

11 See Cat’N Fiddle v. Century Ins. Co., 213 So. 2d 701, 704 (Fla. 1968)

Contributory Trademark Infringement: What is it and What are its Implications on the Insurance Industry?

Contributory Trademark Infringement can Effect Carriers Issuing everything from the Standard Commercial General Liability Policy all the way to an Intellectual Property Trademark Abatement Policy 

It may be common knowledge that you cannot directly use someone’s trademark without first seeking permission. However, many carriers may not realize that a party can also be pulled into a trademark infringement lawsuit if it is determined they assisted or facilitated in a third-party infringing on someone else’s trademark. The purpose of this article is to help educate carriers on what contributory trademark infringement is and the effects it may have on a variety of policies. For example, the potential risks that may come with issuing a commercial general liability (“CGL”) policy to a flea market[1] or writing a trademark abatement policy for a well-known software program.[2]      

 Contributory trademark infringement occurs when a party either 1) intentionally induces a trademark infringement or 2) knows or should have known that it was supplying products or services to a party infringing on another’s trademark.[3] While the concept of contributory trademark infringement has been around since 1924[4], it was not defined into the above two-part test until 1982 when the United States Supreme Court made its ruling in Inwood Labs. v. Ives Labs.[5] This is the same two-part test which is applied by courts today.[6]  

Those holding a trademark are no longer limited to pursuing only the parties who are counterfeiting their products. Instead, they can now go after the, theoretically, far fewer market places or suppliers that are making this infringement profitable on a wide-scale basis. This includes the flea market that is renting space to a vendor dealing in counterfeit purses[7] all the way to the internet search engine that is allowing third-parties to link advertisements to a trademarked name.[8] While plaintiffs still need to prove the underlying infringement in order to pursue their contributory claim,[9] those parties who had historically been benefiting indirectly from the infringement can no longer claim ignorance as a defense.[10]

The implications for the carriers issuing the standard CGL policies are that they are now potentially on-the-hook for an insured that had previously been able to benefit from the underlying trademark infringement without the risk of being pulled into a potential lawsuit. These risks are not just limited to carriers issuing policies to brick-and-mortar store fronts. This threat has now expanded into the policies in place for companies selling advertising[11] and contractors making construction bids.[12] Contributory trademark infringement claims open a wide variety of potential defendants not previously at risk for these trademark infringement lawsuits.

For carriers issuing trademark abatement policies, they now have the ability to pursue the most cost effective means of bringing and litigating a trademark infringement lawsuit. Instead of targeting the countless counterfeiters, they can now focus on the companies and individuals facilitating the infringement on a large scale basis. Historically, one of the greatest difficulties in enforcing a trademark was the cost associated in bringing an infringement action. The question that would be asked was “is it worth spending a few hundred thousand dollars to bring down a mom and pop operation?” With the use of contributory claims, trademark holders are now being able to get more “bang for their buck” by going after parties with deeper pockets.

There is no clear answer for what the future holds for contributory trademark infringement claims. For now, it appears that courts are holding companies accountable for maintaining some form of safeguards to protect the rights of the trademark holder, even if they are minimal. For example, an insured leasing retail space can no longer turn a blind eye to the vendor selling a $300.00 designer purse for only $20.00.[13] Carriers who are at risk of being brought into a contributory trademark infringement claim need to consider trying to educate their insureds about the risk associated with allowing a third-party to use someone else’s trademark. They need to also discuss reasonable safeguards insureds should have in place to identify if such infringement is occurring. Carriers benefitting from the ability to bring a contributory trademark claim need to consider evaluating on a case-by-case basis with their insured who the primary target of an infringement lawsuit should be, the counterfeiter or their facilitator, because it may turn out that you need the assistance of one to make your case against the other.[14]

[1]Coach, Inc. v. Gata Corp., 10-CV-141-LM, 2011 WL 1580926 (D.N.H. Apr. 26, 2011) on reconsideration in part, 10-CV-141-LM, 2011 WL 2358671 (D.N.H. June 9, 2011).

[2]Rosetta Stone Ltd. v. Google, Inc., 676 F.3d 144 (4th Cir. 2012)

[3]Sarah Wells Orrick, Deciphering Rosetta Stone: Why the Least Cost Avoider Principle Unlocks the Code to Contributory Trademark Infringement in Keyword Advertising, 28 Berkeley Tech. L.J. 805, 810-11 (2013)

[4]“One who induces another to commit a fraud and furnishes the means of consummating it is equally guilty and liable for the injury.” William R. Warner & Co. v. Eli Lilly & Co., 265 U.S. 526, 530-531 (1924)

[5]Even if a manufacturer does not directly control others in the chain of distribution, it can be held responsible for their infringing activities under certain circumstances. Thus, if a manufacturer or distributor intentionally induces another to infringe a trademark, or if it continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer or distributor is contributorially responsible for any harm done as a result of the deceit.” 456 U.S. 844, 853-854 (1982).

[6] Supra note 3.

[7] Coach, Inc., 2011 WL at 1580926  

[8] Rosetta Stone, Ltd., 676 F. 3d at 144

[9]Suntree Technologies, Inc. v. Ecosense Int’l, Inc., 693 F.3d 1338, 1345-1347 (11th Cir. 2012)

[10] Coach, Inc., 2011 WL at 1580926  

[11] Rosetta Stone, Ltd., 676 F. 3d at 144

[12] Suntree Technologies, Inc., 693 F. 3d at 1338

[13] Coach, Inc., 2011 WL at 1580926

[14] Suntree Technologies, Inc., 693 F. 3d at 1343

What is a Patent Troll and Why Should Insurers of Software and Internet Based Companies Care?

Patent Trolls have Cost U.S. Software and Internet based Companies Billions in Litigation Costs and Untold Amounts in Unreported Licensing Fees 

Since the mid-2000s, U.S. software and internet based companies have been under attack by patent trolls where losses have numbered in the billions. Hopefully, this article will offer some guidance as to how to deal with this “patent war” that has been raging for over a decade. For carriers, this threat and the potential risk is nothing new.  That said, there are some corner stone considerations to  identify when offering policies that cover intellectual property rights.

So what exactly is a patent troll? If you have been insuring software and/or internet based companies and are not familiar with the term, count yourself amongst the lucky ones. Patent troll is a slang term used to describe a non-practicing entity (“NPE”) that holds numerous broadly worded software and/or technology patents that targets primarily small-to-mid-size companies in a new form of what some have referred to as legalized extortion.  So let us take a look at how it works:

Starting in the 1960s and hitting its height during the software boom of the early 1990s, a number of computer programmers and/or companies applied for and were awarded software patents by the United States Patent and Trademark Office (“USPTO”). The USPTO, not being very familiar with software coding at the time, approved a vast number of these patents which included very broad language as to what the patent covered. Fast forward to the mid-2000s and welcome the introduction of the patent troll. These NPEs went out and purchased these loosely worded patents. The kicker is that these NPEs do not actually use the patent or produce any products.  Instead, they just hold the rights to these very broadly worded software and/or technology patents. The troll then looks for software and/or technology based companies that use a process and/or technology that could possibly be covered by one of its patents. For example, a company that uses the internet for marketing is a target for a number of these trolls. Sound familiar?

After the troll identifies a potential target, it will then send what is called an infringement letter to the company which states that the company is infringing on the troll’s patent and unless the company agrees to pay a licensing fee, the troll will sue. If the company refuses, it is slapped with a lawsuit which can cost several hundreds of thousands of dollars to defend with no guarantees that a court will find the troll’s patent unenforceable. If the company agrees to pay the licensing fee, it opens the door for other trolls to send infringement letters.

In 2011, Georgetown Law Journal published that software patents made up 74% of the most litigated patents.[1] Also in 2011, Boston University School of Law performed a study that found patent trolls costs U.S. companies over $500 billion in litigation loses, with an average loss of $83 billion per year from 2007 through 2010 (in 2010 dollars).[2] These figures did not take into account licensing fees companies agreed to pay to the trolls to avoid an infringement lawsuit.

In the past, companies and insurers were being advised to pay these licensing fees; however, over the past two years a growing trend has been emerging to fight these trolls. Some companies have found that when they challenge these infringement letters and threaten the validity of the patent, these trolls have backed down. The 2011 Georgetown Law Journal article discussed above found that when trolls (NPEs) litigate a suit, they only win 8.0-9.2% of the time (taking into consideration default judgments); however, if troll is successful the damages accessed can be significant (as discussed above).[3]

Unfortunately, at this time, there does not appear to be a clear cut answer as to how to handle these trolls, whether to pay the licensing fee or take the risk that comes with the lawsuit. Companies and their insurers need to address each encounter with a troll on a case-by-case basis and ultimately make a business decision as to what is in the company’s best interest, the risk associated with the lawsuit or the risk that additional trolls may come knocking if they see the company has already paid one of them. Whatever the decision maybe, making sure the company and the carrier understand all their options is paramount.                   

[1]John R. Allison et. al., Patent Quality and Settlement Among Repeat Patent Litigants, 99 Geo. L.J. 677,  695-96 (2011)

[2]James E. Bessen, Jennifer Ford & Michael J. Meurer, The Private and Social Costs of Patent Trolls, 17 (Boston Univ. Sch. of Law, Working Paper No. 11-45 (Sept. 19, 2011) (Revised November 9, 2011), available at

[3]Allison, Patent Quality at 708.


Email Disclaimers: Recipient Beware

Email correspondences have become the norm in the legal world to exchange written communications with clients, opposing counsel, and governmental entities. In doing so, however, there exists the risk of inadvertent disclosures. As such, it has become common practice for senders to institute an automated disclaimer at the bottom of each email indicating that the communication may contain confidential and privileged information, and that if said email is received in error, it should not be read or copied, and the recipient should notify the sender immediately of same. See R. 4-4.4(b), Fla. Rules of Ethics.

However, what legal implications does such disclaimer really have? For starters, it is important to note that emails sent to governmental agencies may be automatically deemed a public record.  Although it does not appear that courts have directly addressed the particular issue of the enforceability of an email disclaimer, general contract law leads us to believe that the answer is that such disclaimers are not enforceable. In order to form contract, there must be an offer, acceptance, and consideration – simply put, both parties must agree to the terms of an agreement.

Pursuant to the contract formation, an email disclaimer would generally not be legally binding. More specifically, while an email disclaimer seeks to establish an agreement between the sender and recipient, thereby giving rise to a duty of nondisclosure, the act of receiving a message does not, in and of itself, give rise to an acceptance and agreement to keep the email contents confidential.

 While it is certainly unclear the extent to which disclaimers are enforced, email disclaimers in the legal world do serve an important purpose. Specifically, courts have considered email disclaimers in determining whether the content of an email should be deemed privileged communications. Diodato v. Wells Fargo Ins. Servs. USA, Inc., 2013 WL 3524829 (M.D. Pa. July 11, 2013) (finding that emails which carried disclaimers identifying the communications as confidential were protected by the attorney client privilege).

The “Real” Owners of Your Social Media Photos

From capturing those unforgettable life moments to tracking your weight loss goals with fellow dieters – the 21st Century social media craze has truly redefined what it means to share one’s photographs with other Internet users. Today, sharing photographs has become a social media phenomenon in which Internet users have embraced such websites as Facebook, Instagram, Twitter to “like, comment, comment, hashtag” and otherwise share their personal photographs with the online community. But what exactly do you agree to when you post your photos online?

As small and often hidden the fine print may be, once you track it down you will find that your photos are, in many respects, far from “yours” once you post them on a social media website. Pursuant to copyright law, social media websites are quick to assert that the creator of a photograph has the exclusive right to display, copy, use, produce, and distribute such photographs. See 17 U.S.C.A. § 106 (West). Based upon their terms and conditions, however, users who post their photographs on such websites are, in effect, granting these companies a license to use their photographs in any way the company desires.

Facebook, for instance, states in its terms and conditions that a user “specifically grants Facebook with a non-exclusive, transferable, sub-licensable, royalty-free, wordwide license” to any photos posted on or in connection with Facebook. Similarly, Instagram[1] declares in its terms that, while it does not claim ownership of your photos, users effectively grant to Instagram “a non-exclusive, fully paid and royalty-free, transferable, sub-licensable, worldwide license to use” of photos posted shared via Instagram.”

 Interestingly, Twitter not only states that a user’s photos “may be syndicated, broadcast, distributed, or published” by its partners” – Twitter further declares that, if Twitter utilizes a user’s photos in any of the aforementioned ways, and such user does not have the right to those photos, the user may be held liable and Twitter will not be responsible or liable for its own use of a user’s photos.

So, what is the takeaway? Well, the digital age has really just begun, and the Internet will continue to provide a platform for which users may share their photos with others. So continue to share, comment, and hashtag to your heart’s content – but tread lightly, as in the mere click of the “post” button on what you believe to be “your page” and “your friends” may lead your photos to be shared and/or commercially exploited without any legal recourse whatsoever.

[1]Facebook has recently acquisitioned Instagram in 2013.