Your insurance policy mentions intellectual property. But are you actually covered?
Intellectual property (IP) can show up in surprising places in a commercial insurance program. A cyber policy might refer to IP. A technology errors & omissions policy may include language about infringement. Even a commercial general liability policy can contain limited protection involving certain IP allegations.
So, when the subject of intellectual property liability insurance comes up, it is understandable that a founder might respond: “I think we already have that.”
Maybe. But seeing words like intellectual property, copyright, trademark or infringement somewhere in an existing insurance policy does not necessarily mean the company has meaningful protection for its most significant IP exposures.
The important question isn't whether your policy mentions intellectual property. It's what happens when an intellectual property dispute actually occurs.
Not all IP risk is the same
Consider two very different scenarios. In the first, a company publishes marketing material and is accused of using someone else's copyrighted photograph without permission. In the second, a competitor alleges that the company's core product infringes one of its patents and seeks an injunction preventing the company from selling it. Both are IP disputes. But from an insurance perspective, they are very different risks; and a policy that responds to the first may provide little or no protection for the second. This distinction matters particularly for innovative companies whose value is tied to the products and technologies they have developed.
A reference to “intellectual property infringement” buried within a policy should therefore be the beginning of the conversation, not the end of it.
Why cyber insurance isn't necessarily IP insurance
Cyber insurance is enormously valuable, but its primary purpose is different. Broadly speaking, cyber insurance is designed to respond to risks arising from privacy and network-security events: data breaches, ransomware, cyberattacks, business interruption caused by network events, privacy liability and related costs. Some cyber policies may contain language touching intellectual property, but that does not mean they are designed to protect against the full spectrum of IP litigation.
What about Technology E&O?
This is another common source of confusion. Technology errors & omissions (E&O) insurance generally addresses liability arising from errors, omissions or failures in providing technology products or services. Depending on the wording, some policies may also provide protection for certain infringement allegations. Again, however, the details matter.
What types of IP are covered?
Copyright? Trademark? Trade secrets? Patents?
Does the protection apply to the company's own products and technology, or only to particular services or content?
And perhaps just as importantly: what does the policy exclude?
A policy can appear quite broad until the definitions, exclusions and endorsements are read together. That is why searching a PDF for the word “infringement” isn't a reliable coverage analysis.
Five questions worth asking
Founders don't need to become insurance experts. But if you believe an existing policy already protects your intellectual property exposure, there are a few useful questions to ask your broker:
Which types of intellectual property does this policy actually cover? Patent, copyright, trademark and trade-secret risks should not automatically be treated as interchangeable.
Does the coverage apply to our core products and technology? Understanding where the infringement protection applies can be as important as knowing that it exists.
What IP-related exclusions or endorsements apply? Don't read the insuring agreement in isolation.
Would the policy pay the legal costs of defending an infringement allegation? And if so, are those costs subject to a limit or sublimit?
Does the policy help us enforce our own IP rights? This is often where the distinction between incidental IP protection and specialized IP insurance becomes particularly clear.
Look beyond the reassuring words
Cyber, technology E&O and other commercial insurance policies can provide important protection, and in some circumstances that protection may include elements of intellectual property risk. The mistake is assuming that some IP coverage means all IP exposure is covered. For a company whose competitive advantage depends on a patent, proprietary technology, brand, process or other intellectual property, the better exercise is to identify the scenarios that could genuinely threaten the business and then determine which, if any, of the company's existing policies would respond.
So if you search your insurance policy and happily discover the words “intellectual property”, don't stop there. Ask the more important question: “Which of our intellectual property risks does this actually protect?”. Because when it comes to insurance, sometimes the most expensive coverage gap is the one you thought you'd already filled.
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