In a recent cryptic coverage decision, a New York state intermediate appellate court reversed an order denying summary judgment to a media policyholder and held that the insurance companies were obligated to provide insurance coverage for underlying copyright infringement actions. Although cryptic, the decision addresses exclusions and their applicability to media insurance policies.
In McGraw-Hill Education, Inc. v. Illinois National Insurance Co., No. 655708/16 (N.Y. App. Div. 1st Dep’t Dec. 17, 2019), a media company was sued for copyright infringement in underlying actions. The media company had purchased a series of claims-made multimedia insurance policies, which covered a wide variety of potential liability, including copyright infringement. The policy, as most do, had several exclusions. The parties disputed coverage for the underlying actions and cross-moved for summary judgment. The motion court denied both motions, holding that there were issues of fact concerning the applicability of certain exclusions to the underlying copyright actions.
The appellate court reversed in favor of the policyholder and held that the exclusions did not preclude coverage. The court held that exclusions that precluded coverage for claims arising out of contract did not apply in this case because the contracts (license agreements) were not the “but for” cause of the loss. As the court said, “[a]lthough the parties had license agreements, the licensors could have brought claims based on copyright regardless of whether a contract had ever been entered into; thus, the contract is not the but for cause of the loss.” (citations omitted).
The court also rejected the applicability of an exclusion for intentional violation of the law. The court held that a more specific provision, which barred coverage only where it was judicially determined that the violation was intentional and was carried out by a senior officer, controlled over the general exclusion. Moreover, held the court, there was no judicial determination like that in the underlying actions and the issue could not be litigated in the coverage action.
Finally, the court rejected the applicability of the fortuity doctrine to bar coverage given the express purpose of the policies to provide coverage for the defined risk of copyright infringement. Because applicability of the fortuity doctrine under the facts of the case would render coverage illusory, the doctrine could not apply.