HUB Recommends that Toymakers Close their Coverage Gap with an Intellectual Property Policy

Ever since the Internet exploded onto the scene in the 90s, businesses have been faced with an ever increasing array of promotional, media and distribution outlets. From advertising to multiple forms of standard communications and from product design to packaging, the possibilities for invading on another company’s intellectual property are endless and potentially costly.

Additionally, toy companies are facing significant intellectual property risks as a result of insurers reducing the scope of coverage in their Commercial General Liability (CGL) policies. While older CGL policies often provided coverage for trademark claims, the revised policies exclude liability for all trademark (other than trade dress) infringement claims. Because of this gap in coverage, toy companies are vulnerable to significant financial risk if they do not have the out-of-pocket funds to defend their right to a copyright or trademark.

“Advertising injury” gaps in a CGL policy – those that lack a clear definition of advertising and omit product coverage – can be filled by an Intellectual Property Infringement policy.   These IP policies are the first ever designed to protect policyholders enterprise-wide for intellectual property claims arising out of advertising, publishing and other corporate communications or product design and packaging.  This policy will pay the costs to defend a company if someone tries to claim the rights to the same business model, process, or application.

The following claim scenario highlights the protection afforded by an Intellectual Property policy:

A mid-sized toy company that makes novelty products for kids was sued by a division of a famous luxury goods maker for trademark infringement. The luxury company alleged that the products, which used a name that was a clear play on the well known name, infringed
its marks. Although the court threw the case out, it cost the toy company approximately $200,000 in defense costs and more in lost revenue.

“More than ever before, intellectual property claims involving infringement of copyright and trademark are being filed and litigated at a tremendous cost to both parties,” states Benjamin Thrush, vice president of business development at HUB International Northeast. “To close this gap in coverage, toy companies should consider purchasing additional insurance products that are specifically designed to cover intellectual property risk.”

TIA members who have questions about foreign general liability coverage, or who would like a free analysis of their current policy, may contact Mr. Thrush at 1-800-706-3023. Additional information on HUB's business insurance offerings to the toy industry is available online at the newly updated www.hub-tia.com.