Insurers Duty to Defend in Trade Secrets Cases Involving Bad Faith: An Analysis of Lionbridge Technologies LLC v. Valley Forge Insurance Co. Ruling

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TPG alleged that Lionbridge personnel “falsely told TPG’s customers that Lionbridge was purchasing TPG and that they should contract with Lionbridge directly before the sale.” Furthermore, the complaint alleged that Lionbridge acted in bad faith by contacting TPG’s existing and prospective clients to misrepresent separate litigation related to the company’s co-founders and to “introduce doubt” about TPG’s stability. As a result, the complaint alleged that some TPG clients reduced their business with TPG.

Valley Forge Insurance Co. had issued a commercial general liability policy to Lionbridge. The policy covered personal and advertising injury, including the oral or written publication of material that slanders or libels an organization or disparages the organization’s goods, products, or services. Valley Forge initially defended Lionbridge from the TPG lawsuit under a reservation of rights. However, the insurer and insured engaged in numerous disagreements over what eventually grew to multimillion-dollar attorney fees.