The Office of General Counsel issued the following opinion on March 10, 2003, representing the position of the New York State Insurance Department.
Re: Patent Infringement Abatement Insurance.
Pursuant to the New York Insurance Law, is patent infringement abatement insurance an authorized kind of insurance in New York?
Patent infringement abatement insurance is included within "legal services insurance" under N.Y. Ins. Law § 1113(a)(29) (McKinney Supp. 2003). However, patent infringement abatement insurance may be offered only in conjunction with a prepaid legal services plan that satisfies the requirements of N.Y. Ins. Law § 1116 (McKinney 2000) and N.Y. Comp. Codes R. & Regs. tit. 11, Part 261 (2000) (Regulation 161).
No specific fact pattern was provided. Mr. A states that he has been reading about policies insuring patent owners for the costs of litigating against those who infringe upon their patents. He would like to know whether patent infringement abatement insurance is an authorized kind of insurance in New York.
Chapter 65 of the Laws of 1998 added a new paragraph (29) to subsection (a) of section 1113 of the New York Insurance Law effective April 1, 1999, to set forth a new kind of insurance entitled legal services insurance. Pursuant to that subsection, legal services insurance is defined as providing legal services or reimbursement of the cost of legal services. Chapter 65 also amended Section 1116 of the New York Insurance Law to authorize the writing of prepaid legal services plans and legal services insurance. Please note that pursuant to Chapter 65, §§ 17 and 18, Section 1113(a)(29) and Section 1116 will expire and be deemed repealed effective April 1, 2003, unless the Legislature extends those provisions. Chapter 65 also provides that the relevant provisions will continue to apply to all contracts executed on or before April 1, 2003 until the expiration of such contracts or until April 1, 2007, whichever occurs first.
N.Y. Ins. Law § 1116(a)(3) (McKinney 2000) provides as follows:
(a)(3) Legal services insurance may not be written except (i) in conjunction with prepaid legal services plans as authorized in this section, or (ii) pursuant to a regulation promulgated by the superintendent permitting legal services insurance to be written as part of a policy of liability insurance covering related risks and, provided further, that legal services for defense only coverages for commercial or other business related lawsuits or arbitration proceedings commenced against the business entity that purchased the policy is not more than an incidental part of such liability insurance.
N.Y. Comp. Codes R. & Regs. tit. 11, § 262.0(c)(2000)(Regulation 162) provides, in relevant part, that:
Legal services insurance is often thought of as being legal defense insurance, or defense-only coverage, particularly in connection with liability insurance. However, legal services insurance is a broader concept, and may encompass situations where coverage is provided for initiation of a proceeding. Examples include a suit alleging infringement of a patent right . .
Thus, patent infringement abatement insurance is included within legal services insurance under Section 1113(a)(29). However, such insurance may be offered only in conjunction with a prepaid legal services plan that satisfies the requirements of Section 1116 and N.Y. Comp. Codes R. & Regs. tit. 11, Part 261 (2000) (Regulation 161). Patent infringement abatement insurance, as stand-alone insurance, may not be offered in New York.
For further information you may contact Senior Attorney Pascale Joasil at the New York City Office.