When an insurer agrees to provide a defense under a reservation of rights, or is faced with claims of potentially uncovered damages, it can end up in a very difficult position in determining its indemnity obligations at the end of the case. Many times when there is a possibility of covered and uncovered damages, the insurer is held responsible for the entire indemnity because it is not possible to distinguish between the covered and uncovered portion of damages in the judgment. This dilemma is especially acute in infringement cases where coverage is triggered under Advertising Injury Coverage.

It is apparently for this reason that Lamorak Insurance Co. recently sought to intervene in the case of Navajo Nation v. Urban Outfitters, Inc., Docket No. 1:12-cv-00195-BB-LAM, a dispute currently pending in the United States District Court for the District of New Mexico over claims of tribal trademark infringement. According to the motion papers, Lamorak is looking for the ability to have jurors answer special interrogatories “if and only if” Urban Outfitters is actually held liable for damages.

The insurance carrier wants to have the jurors be asked specifically which products, and in what years, sold by the defendants Urban Outfitters, Anthropologie and Free People, infringed on the Navajo Nation’s trademarked name and tribal pattern. Lamorak argues that this would allow it to allocate any damages awarded to the Navajo Nation and determine to what extent those damages are or are not covered under its insurance policy.

According to the motion papers, Lamorak contacted counsel for Urban Outfitters and the Navajo Nation and both of them are opposed to Lamorak’s intervention. In support of its motion to intervene, Lamorak argues that its request for intervention does not introduce any new issues into the litigation or seek a coverage determination. Lamorak also notes that it would not even need to be present at trial or be heard by a jury for its request to be entertained.

This latest development in this case, which has had a very long history, illustrates how the interests of independent or even insurance-appointed counsel can diverge from the interests of the insurance company who may be seeking to determine which, if any, of the awarded damages actually fall within coverage. It is not difficult to see how, if the request is denied, and Urban Outfitters is ultimately held liable, the insurance company could be significantly prejudiced in any subsequent coverage action.  It appears opposition papers have not yet been filed, but it will be interesting to see what arguments are raised by the parties to the lawsuit in opposition to the motion and where the Court ultimately comes down on the request to intervene.

Thanks to Maria Jorgelina Foglietta for her contribution to this post.  For more information, please email Dennis Wade at .