Media Insurance: Arguing Over 'Dr. Doom'

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Raise your hands, class: Has your media company recently confronted a claim like this? “You didn't invent Dr. Doom—I did.” Or this? “When I invented the character in 1950, 1960, and 1970—as your employee—it was not as a work made for hire.” Or this? “The contract my grandfather signed in 1939 entitled him to 7% of gross receipts from DVDs, plush toy sales, and other revenue sources to be invented decades later.”

Claims like these are everyday occurrences for broadcasting or cable networks, independent studios, radio stations, comic book publishers, Web designers, etc.—virtually no species of media company is immune. That's why most have purchased specialized media liability insurance policies to protect themselves.

Responding to the coverage gaps left by commercial general liability policies, media liability insurance coverage protects against lawsuits alleging interference with ownership arising from the publication or dissemination of intellectual property or creative work product. Typically, plaintiffs claim they created a fictional character or story and that the use of the character or story by the media outlet took place without the creator's permission. Such claims may allege copyright infringement, unjust enrichment or invasion of privacy.

When facing this type of claim, a media corporation will rely upon its media liability insurance company to pay defense costs and cover any loss or settlement. It is important to understand the ins and outs of these niche insurance policies.

Media liability policies will respond to “media acts” encompassed by the events alleged in a lawsuit against your corporation. Which raises two questions: What's “media,” and what's an “act”?

If you think answers to these kinds of questions are obvious, you've never worked for an insurance company. Fortunately, however, most media liability policies define both terms expansively.

The word “media” can include any medium through which intellectual property or creative work product is propagated. Books, magazines, films, radio and television broadcasts, audio recordings, Web publishing and countless other forms.

As for “acts,” most policies define the interchangeable terms “media act, “media activities” or “multimedia activities” broadly, and almost any activity involving the distribution of media may be encompassed. Here's a typical definition:

“Multimedia activities means...the researching, preparation, publication, republication, serialization, production, release, exhibition or distribution of scheduled media, a broadcast, telecast or cablecast over scheduled media; or the execution of a contract to publish, broadcast, produce or advertise scheduled media. If the lawsuit claims your company improperly produced a film, sold a magazine or distributed a literary work in alleged violation of the plaintiff's ownership rights, it is safe to assume that your media liability policy has been triggered.”

Once you've determined that media liability insurance should cover your claim, the next trick is to figure out which of your policies, stretching back in time, will be triggered. To do that, you need to determine whether you have “occurrence-based” or “claims-made” policies. Bear with us, because this arcane-sounding difference is crucial.

Media liability policies typically provide coverage based on when an “occurrence” allegedly takes place, rather than when a claim is made. An “occurrence” policy in effect during 2005 therefore could be triggered by a lawsuit filed in 2008. So-called “claims-made” policies, in contrast, protect the policyholder against lawsuits filed during the period the policy is in effect. If such a policy covers Jan. 1, 2008-Jan. 1, 2009, a claim in 2008 triggers the policy even if the alleged bad deed took place years earlier.

When a claim asserts a series of acts occurring over a succession of years, policies issued by various insurance companies covering a number of different years and policy periods may respond to the loss.

It's crucial to figure out which policies may be implicated so that you can provide all relevant insurance companies with what they call “timely notice” of claim. Otherwise, your claim may suffer an untimely death. Invariably, your media liability policy will contain a provision requiring your company to notify the carrier in writing “as soon as practicable” or “promptly.” Your failure to comply can be costly. Some New York courts have regarded even short delays in giving notice as a complete bar to insurance coverage.

Note that a quasi-legal or informal action may constitute a “claim” under your company's media liability policy. Under many media liability policies, a letter demand for money or services will fall under the definition of claim, and any costs and expenses arising from the demand will be treated as a covered loss. If you fail to tell your insurer, it could deny a later claim.

In the end, in the information age, fictional characters, creations and stories released into the marketplace of ideas will be claimed by many “owners” and media liability insurance becomes indispensable. Whether their claim is pressed through the courts or by a short missive seeking compensation, media liability coverage will respond—depending on the specific wording of the policy. The claims may be groundless, but let your insurers know about them, sooner than later.

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