Misappropriation Exclusion Does Not Preclude Coverage
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Misappropriation Exclusion Does Not Preclude Coverage

An employer sued a former employee and his current employer for theft and misappropriation of trade secrets in addition to a violation of the Computer Fraud and Abuse Act alleging unlawful access to the company’s computer system to copy information. The insured tendered the suit to its directors & officers insurance carrier and was denied coverage. The court declared the D&O insurer owed a duty to pay defense costs for a lawsuit primarily alleging the misappropriation of trade secrets, despite the policy’s misappropriation exclusion because the underlying complaint asserted a claim alleging computer fraud that was not excluded by the policy. Under both Delaware and Kansas law an insurer is required to defend the entire action even if only a single count or theory of liability is potentially within the coverage.

Woodsprint Hotels LLC Plaintiff v National Union Fire