With all the indecency on the airwaves today, a funny thing is happening to the cost of indecency- liability insurance: It's going down. After three years of hikes, rates leveled off this year for the insurance that protects broadcasters from huge damage payments to litigants who have been defamed or embarrassed by TV news and radio shock jocks.
The reason: In the current government crackdown, more insurance companies are jumping in to cover broadcasters' assets, creating a competitive market that is lowering prices across the board.
Three years ago, Media/Professional Insurance, the country's largest provider of media liability policies, with roughly 50% market share, was the only big supplier for broadcasters. Since then, three giants have jumped in to help broadcasters deal with the perils of indecency: AIG, Chubb, and Hiscox, a member of the U.K's Lloyd's syndicate.
Insurance companies don't typically pay government fines but instead cover court costs and civil damages related to shock jocks and careless news crews. Radio stations most often get hit with "emotional-distress" suits or invasion-of-privacy complaints caused by shock jocks' antics, such as calling individuals while on the air and pretending to be their boss. Television outlets are most likely to face damages for libel incurred by newscasts.
In 2000, WPYX(FM) Albany, N.Y., settled out of court with a local woman who sued DJs Bob Mason and Bill Sheehan for spoofing her as the ugliest bride in the area after pulling her wedding photo from the local newspaper. The woman had sued for $800,000, claiming she was demeaned and injured. The settlement was not disclosed. The problem has gotten so bad in radio that insurers typically demand "exclusion clauses" that absolve them of liability for stunts pulled by jocks Howard Stern or Mancow Mueller.
The bulk of insurance payouts aren't for court-ordered damages because most of the hundreds of lawsuits filed annually are dismissed or settled out of court. Still, stations must hire First Amendment specialists to represent them, one reason court costs make up most payouts.
After three years of nearly 30% annual increases in liability premiums, "I think the rate ceiling has been reached," says John Black, senior vice president for the Willis Group's Bethesda, Md., office, who buys media liability insurance for Washington-based Allbritton Communications' nine-station TV group. Black, who acts as a broker, says, "Carriers were able to force only marginal rate increases last year."
In addition to competition, some insurance brokers predict that the current self-policing by broadcasters—an effort to avoid hefty fines during the current government crackdown—will keep a lid on insurance rate hikes for the foreseeable future. "Over the long term, this [self-policing] will have a positive effect on the availability of insurance," says Jim Borelli, vice president of claims for Media/Professional.
Brokers say rates have soared in part because underwriters have become increasingly concerned with aggressive local news crews, which rush inaccurate news to their Internet news sites or use hidden cameras in questionable situations. "Underwriters were concerned that new technology was taking broadcasters in a different direction than in the past," says Chad Milton, Marsh USA's national practice leader for media. Rates have also lost momentum in part because the insurance industry's economic condition has improved since 9/11 and the stock-market crash.
Even without the hikes, indecency-liability insurance still isn't cheap. One Midwestern group with four TV stations in Iowa and Nebraska pays upwards of $11,000 a year for coverage. Major media companies can pay millions—for coverage that kicks in only after they themselves have covered, on average, a few million dollars in deductibles.
"Numbers are all over the place because of the deductibles they choose and the type of programming they air," says Stephen Patterson, president of broker Preston-Patterson, Conshohocken, Pa.