Applied Systems, Comulate Spar Over Trade Secret Theft Allegations

Competitors in the insurance technology market are now warring through litigation, with each company bringing hard-hitting allegations against the other.

Late last month, insurance software provider Applied Systems sued Comulate on allegations that Comulate created a fake agency to take trade secrets. Comulate followed with a court filing seeking immediate relief against Applied Systems for its “frivolous litigation,” and accused Applied of a scheme to eliminate competition.

Of Comulate’s latest action, filed in the Delaware Court of Chancery on Dec. 3, Applied Systems said, “Comulate’s predictable retaliatory claims are baseless and intended to deflect from its own corporate theft scheme exposed in our recent lawsuit. Applied welcomes fair competition but will not tolerate outright theft.”

Comulate, which uses artificial intelligence to automate accounting work for brokers, has a much different take. According to the court filing, it basically accuses Applied of sour grapes—allegedly launching a campaign to stomp out Comluate after a failed attempt to acquire the company.

“Applied does not compete—it destroys,” Comulate said in its complaint. “When a startup builds technology that Applied cannot match, Applied’s playbook is simple: acquire or annihilate.” Comulate further claims Applied has lied to customers that Comulate is going out of business, and threatened to cut off clients that continue to work with Comulate. This is particularly important since Applied in 2013 acquired Ivans, which has been providing products for insurance data exchange and integration between insurance carriers and agencies for decades.

“Applied has established its dominance through anticompetitive conduct that violates the letter and spirit of antitrust laws,” Comulate said, adding that it sought a “different path to resolution” with Applied, which was not successful. “Applied leverages its market power to squash competitors and eliminate customer choice.”

Meanwhile, Applied in its lawsuit filed in November in U.S. District Court for the Northern District of Illinois, said Comulate tried to “cheat its way to competitiveness” by making a fake insurance agency to access Applied’s software platform “solely for the purpose of misappropriating Applied’s trade secrets and improperly reverse-engineering Applied’s software for over 19 months.”

Comulate said Applied has been aware, without objection, that it had access to Applied’s platform. “Applied’s assertion that Comulate’s use of the [software] is somehow improper is thus baseless,” Comulate said in its filing.

Comulate seeks a temporary restraining order, preliminary and permanent injunctive relief, and compensatory damages. Applied is seeking injunctive relief, monetary damages, and other remedies.

Applied’s Rich Cohan, chief legal officer, said its lawsuit was “necessary to protect ourselves from further fraud, theft, misappropriation and potential data exposure for the interests of our customers, employees, partners and investors.

“We are obligated to protect our IP to ensure future and ongoing protection of our trade secrets that have been built through hundreds of millions of dollars of investment over several decades.”