Illinois Appellate Court Finds No Duty to Defend Copyright Infringement Suit

In Erie Insurance Exchange v. Compeve Corp., 2015 IL App (1st) 142508, the Illinois Appellate Court held that Erie Insurance Exchange had no duty to defend Compeve Corporation and Slava Packovskis in a copyright infringement lawsuit filed by Microsoft Corporation. Microsoft specifically alleged copyright infringement as a result of the defendants selling computers with unauthorized copies of Windows XP installed. Erie filed a declaratory judgment action. The Erie Policy contained standard CGL Coverage B language. The coverage dispute centered on the Infringement Offense, and more specifically, whether the underlying complaint set forth a causal connection between the defendants’ alleged advertising activity and Microsoft’s alleged advertising injury. The trial court ruled Erie did not have a duty to defend. The Appellate Court affirmed, finding that the underlying complaint failed to set forth such causal connection. Rather, the complaint contained mere conclusory allegations about the defendants’ advertisements. As a result, the Appellate Court reasoned that because the underlying complaint was “aimed at the installation of unauthorized Microsoft products in Compeve’s computers,” and did not “allege that any copyrighted information was contained a Compreve advertisement,” or that “the contents of Compeve’s advertisement harmed Microsoft,” it did not satisfy the required causal connection element for purposes of the Infringement Offense. How do courts in your jurisdiction evaluate the causal connection requirement with respect to the Infringement Offense under Coverage B? Do they tend to take a broad or narrow approach?

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