Will Insurance Carriers for Streaming Services Deny Coverage in Songwriter Class Actions?

MTP readers will recall that Lloyds of London sued Cox Communications for a ruling that Lloyds was not obligated to insure Cox Communications for its spectacular failure to implement a repeat infringer policy?  That little failure that lead to the discovery of extraordinarily damaging emails that in turn resulted in Cox losing the DMCA safe harbor. As they richly deserved.

Why would Lloyds want out?  Because insurance carriers don’t cover bad acts, aka intentional torts.  Like willful copyright infringement.

It is entirely likely that all of the music services being sued for willful infringement have insurance, and it’s also likely that some rights owners may think that a quick settlement without a lawsuit and the inevitable discovery will be covered by insurance anyway, so no harm, no foul.

Because where else will money losing services get the money, anyway?  The carrier, however, is not just looking at a narrowly defined world that some might think is shaped for the purpose of allowing a Spotify to go to their carrier for the money to pay the settlement (instead, for example,  of cleaning out whatever “escrow” accounts the service might be holding–leave aside any fiduciary duties that may be owed to songwriters who don’t participate in the shaped settlement).

However, this misses a fundamental principle of insurance law:  Insurance companies exist to deny coverage.  From the carrier’s point of view, they may well look at the problem holistically and they may very well want to ask a court what their responsibilities are, particularly as there is no telling how much exposure the carrier really has absent a class action settlement.  That is certainly what happened in the Cox case.

So fasten your seatbelts, it’s going to be a bumpy night.