Delaware court forces insurers to defend Motive in Samsara cyber clash

A Delaware court has ruled that insurers must defend Motive Technologies in a high-stakes cyber liability dispute arising from litigation with competitor Samsara, Inc. 

The case centers on whether Motive’s cyber liability and excess insurance policies require coverage for legal costs in ongoing business-to-business litigation. Motive Technologies, Inc., a Delaware corporation with its principal place of business in San Francisco, provides AI-powered logistics technologies and services across North America. Samsara, Inc., a direct competitor, filed suit against Motive, alleging misappropriation of confidential information, patent infringement, and the commissioning of studies to disparage Samsara’s services. Motive responded with its own lawsuit against Samsara, with both actions recognized as related by the U.S. District Court for the Northern District of California. 

To manage its risk, Motive purchased a primary cyber liability policy from Associated Industries Insurance Company, Inc., and excess policies from Vantage Risk Specialty Insurance Company, Allianz Underwriters Insurance Company, Arch Specialty Insurance Company, and Fortegra Specialty Insurance Company. The policies, governed by New York law, provided coverage for a range of “Media Wrongful Acts,” including defamation, product disparagement, copyright and trademark infringement, and unfair competition. The primary policy offered $5 million in coverage with a $75,000 retention, while the excess policy provided an additional $5 million in coverage. 

When Motive sought reimbursement for defense costs incurred in the Samsara litigation, the insurers denied coverage. They cited the “Prior Claims and Knowledge” exclusion in the primary policy, which bars coverage for losses arising from facts or circumstances known to Motive’s management before the policy’s Continuity Date of August 12, 2023. The excess policies included a “Prior and Pending Litigation” exclusion, which excludes claims arising from litigation or circumstances existing before the policy period. The insurers argued that pre-policy letters exchanged between Motive and Samsara triggered these exclusions. 

Judge Sheldon K. Rennie’s memorandum opinion and order examined whether the allegations in the Samsara Action fell within the scope of coverage or were barred by these exclusions. The court found that while some of Samsara’s claims related to conduct discussed in pre-policy correspondence, other allegations – particularly those involving a study conducted after the policy’s Continuity Date – were not excluded. The court emphasized that under New York law, an insurer’s duty to defend is “exceedingly broad” and applies if any claim in the lawsuit potentially falls within the scope of coverage. 

As a result, the court granted Motive’s motion for partial summary judgment in part, requiring the insurers to defend Motive in the Samsara Action. However, the court denied Motive’s request for coverage of legal costs related to its own affirmative lawsuit against Samsara. The court explained that, under New York law, an insurer’s duty to defend does not typically extend to an insured’s own affirmative claims unless those claims are a “mirror image” of the defense in the underlying action. Because Motive’s lawsuit against Samsara sought damages and injunctive relief rather than a declaration of non-liability, the court found it was not a mirror image and thus not covered. 

This decision is not final, as the underlying litigation and potential indemnification issues remain unresolved. However, the ruling underscores the importance of policy wording and the broad duty to defend under New York law, especially in the context of cyber liability and business-to-business litigation. For insurance professionals, the case highlights the complexities of cyber risk coverage and the need for careful attention to policy exclusions and definitions when underwriting or managing claims for corporate clients.