This clause establishes that one party's insurance coverage is primary and non-contributory, meaning it is the first and sole source of coverage for intellectual property-related claims, losses, or damages. In practical terms, if an IP infringement claim arises, the insured party's policy pays first and in full, without requiring contribution from other insurance policies that might also apply. This is particularly important in IP contexts because infringement claims can be complex, expensive to defend, and unpredictable in outcome. The non-contributory aspect protects the insured by preventing insurers from invoking "other insurance" clauses that would otherwise allow them to share liability proportionally across multiple policies. This matters significantly because IP disputes often involve substantial legal fees and potential damages awards, and having clear primary coverage ensures resources are available without delay or dispute between insurers.
The clause typically appears when one party (often a vendor, contractor, or licensor) agrees to maintain insurance that covers the other party's exposure to IP claims. For example, a software vendor might agree that its errors and omissions insurance is primary and non-contributory for any claims that the software infringes third-party patents. Without this language, the insured party might find itself caught in disputes between multiple insurers, each arguing the other should pay, resulting in delayed coverage and increased out-of-pocket costs.
If you are the party receiving the benefit of primary and non-contributory coverage, verify that the other party actually maintains adequate insurance limits and that the policy explicitly names you as an additional insured or loss payee. Request proof of current coverage annually and confirm the policy won't be cancelled without notice to you. If you are the party required to provide such coverage, ensure your insurer will actually agree to primary and non-contributory status in writing before committing to it contractually, as some insurers resist this language. Negotiate the scope carefully—clarify whether it applies only to third-party claims or also to first-party losses, and confirm the coverage limits are realistic for the IP risks involved.
Frequently Asked Questions
What does this clause mean in simple terms?
This clause establishes that one party's insurance coverage is primary and non-contributory, meaning it is the first and sole source of coverage for intellectual property-related claims, losses, or damages. In practical terms, if an IP infringement claim arises, the insured party's policy pays first and in full, without requiring contribution from other insurance policies that might also apply.
Why should I care about this clause?
This is particularly important in IP contexts because infringement claims can be complex, expensive to defend, and unpredictable in outcome. The non-contributory aspect protects the insured by preventing insurers from invoking "other insurance" clauses that would otherwise allow them to share liability proportionally across multiple policies.
What are my options?
This matters significantly because IP disputes often involve substantial legal fees and potential damages awards, and having clear primary coverage ensures resources are available without delay or dispute between insurers. The clause typically appears when one party (often a vendor, contractor, or licensor) agrees to maintain insurance that covers the other party's exposure to IP claims.
How does this affect small businesses?
For example, a software vendor might agree that its errors and omissions insurance is primary and non-contributory for any claims that the software infringes third-party patents. Without this language, the insured party might find itself caught in disputes between multiple insurers, each arguing the other should pay, resulting in delayed coverage and increased out-of-pocket costs.