Zurich Insurance Win in Trade Secrets Row Upheld by 11th Circuit

A unit of Zurich Insurance Group AG can avoid paying for damages stemming from a trade secrets case involving a Kentucky software development company, a federal appeals court affirmed.

Zurich American Insurance Co.'s insurance policy doesn’t cover the actions of a former life insurance agent who intentionally misappropriated Compulife Software Inc.'s trade secrets, the US Court of Appeals for the Eleventh Circuit said in a ruling Thursday. The circuit also denied Compulife’s attempt to make an argument contradictory to the one it succeeded with in the underlying suit.

Compulife, which makes software to compare term life insurance policies, sued Binyomin Rutstein for using the compilation of information in the company’s software, which constitutes a trade secret, on a different insurance-comparison site, according to Compulife’s complaint.

A federal judge in Florida found Rutstein and three others liable for more than $552,000 in damages for misappropriating the trade secrets. The Eleventh Circuit upheld that decision in a separate ruling on Thursday.

Compulife sought payment from Rutstein’s insurer Zurich, but the insurance company was granted summary judgment against Compulife at the district court level. The Eleventh Circuit affirmed the decision, freeing Zurich from coverage liability.

“Because the insurance policy only covers negligent acts, but Rutstein was found to have acted intentionally, the policy does not cover the tort liability at issue,” Judge Andrew Brasher wrote for the panel.

Compulife attempted to argue that Rutstein’s actions were negligent despite previously arguing his actions were tortious in front of the district court. The Eleventh Circuit threw out that argument citing judicial estoppel, which prevents a party from prevailing at one phase of the case with one argument and again at another phase with a contradictory argument.

“Only by advancing inconsistent positions can Compulife have its cake and eat it too—holding Rutstein liable for an intentional tort and collecting on his negligence-only liability policy,” Brasher wrote.

Compulife and Zurich didn’t immediately respond to a request for comment.

SRipLaw PA represents Compulife. Kutak Rock LLP represents Zurich.

The case is Compulife Software Inc. v. Newman, 11th Cir., Docket No. 22-12909, 8/1/24.