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A lawsuit brought by Elderhostel Inc. against Zurich American Insurance Co. alleging breach of an insurance policy is an example of increasingly common coverage disputes between companies that wage expensive trademark battles and their insurance carriers. Elderhostel, a nonprofit educational travel company, initially sued Zurich in Suffolk Superior Court in Massachusetts on May 6 over the insurance company’s refusal to reimburse it for nearly $967,000 in legal fees and costs to fight a trademark case. Zurich removed the case to the U.S. District Court for the District of Massachusetts on August 25. In Explorica Inc. v. Elderhostel Inc., the underlying trademark case filed in the District of Massachusetts, Explorica sued Elderhostel after the nonprofit branded its educational learning programs Exploritas last October. The two sides reached a consent judgment in May following a five-day jury trial in February. The consent judgment called for Elderhostel to stop using the Exploritas name. In June, Elderhostel announced that it would brand its travel programs Road Scholar. In the coverage dispute, Elderhostel Inc. v. Zurich American Insurance Co., Elderhostel claimed it submitted bills for $441,114.14 on March 4 and $525,786.88 on March 28, for a total of $966,901.02. Its claims include breach of insurance policy contract and the Massachusetts consumer protection law, which offers multiple damages. Elderhostel also seeks a declaratory judgment from the court that Zurich is “obligated to defend and reimburse Elderhostel for the legal fees and expenses” incurred in defending the trademark case. Elderhostel asked the court to award legal fees, expenses and costs as well as unspecified compensatory and multiple damages. Zurich’s law firm, Boston’s Edwards Angell Palmer & Dodge, declined to comment on the case. As a matter of policy, “Zurich does not generally comment on pending litigation,” said company spokesman Sean Kevelighan. Elderhostel’s lawyers at Boston intellectual property boutique Wolf, Greenfield & Sacks also declined to comment. Spokeswoman Despina Gakopoulos said the organization “does not comment on ongoing legal matters.” From the court filings, it appears that Zurich agreed to defend the case under “reservation of rights” terms, said Bob Pierce, a shareholder at Boston’s Pierce & Mandell, who has significant trademark and insurance litigation experience, but isn’t involved in the case. Reservation of rights means that the insurance company agrees to pay the lawyers, but reserves the right to later withdraw coverage, Pierce said. At this juncture, there’s typically an agreement between the law firm and the insurance company about rates, but it’s unclear from court papers if that occurred in this matter, Pierce said. Even so, disputes between insurance companies and law firms over rates to defend trademark cases are common, Pierce said. “Insurance companies are not used to paying the rates of commercial law firms that defend intellectual property cases,” Pierce said. “It’s not unusual at all for there to be a beef.” Insurance companies are mindful of, and frequently question, costs related to defending trademark cases, said David Henry, a Dallas intellectual property partner at Washington’s Patton Boggs. Henry, who also specializes in trademark and copyright work, isn’t involved in Elderhostel’s case. “[Trademark litigation] does tend to be a little out of most insurance managers’ day-to-day experience,” Henry said. “They do question when the bills come in.”

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