Patriots’ Owner Sues Hiscox for Coverage on Social Media Infringement Claims
The owner of the New England Patriots, Kraft Sports and Entertainment, LLC, has filed a breach of contract and unfair claim practice lawsuit against Hiscox Insurance (“Hiscox”) for its failure to defend or indemnify it, the Patriots, and Kraft Soccer (collectively, “Kraft Sports”) for music copyright infringement claims reported under media liability policies that Hiscox issued to Kraft Sports.
The media liability coverage suit against Hiscox
Kraft Sports’ lawsuit, originally filed in the Norfolk County Superior Court, was removed by Hiscox, an Illinois corporation, to the federal court on October 27, 2022, based on the diversity of corporate citizenship between Kraft Sports and Hiscox.
Kraft Sports’ lawsuit alleges that since 2013 Hiscox had sold Kraft Sports Video, Film, and Television Producers Liability policies (“media liability policy or insurance”) that covered the Kraft Sports entities for claims arising from their production of media content that might infringe copyrights.
In January 2021, Kraft Sports began receiving copyright infringement claims concerning its dissemination of copyrighted music in social media promoting its sports entities. It duly reported the infringement claims to Hiscox, but until March 2022, Hiscox denied coverage without allegedly providing Kraft Sports with valid reasons for the coverage denials.
Kraft Sports’ complaint states that in March 2022, Hiscox reversed its legal position and advised that it would defend the infringement claims under a reservation of rights. However, by September, Kraft Sports sued Hiscock based on its alleged:
Failure to deliver any reservation of rights letter to Kraft Sports.Failure to respond to Kraft Sports’ request for settlement authority; and,Failure to respond to Kraft Sports’ request for mediation under the policies’ alternative dispute resolution provision.
The lawsuit seeks a declaratory judgment concerning coverage under the policies for the music infringement claims, damages, multiple damages for unfair claim practices, and attorney fees.
Kraft Sports’ Video, Film, and Television Producers Liability policies
Kraft Sports purchased media liability insurance coverage from Hiscox between 2013 and 2022.
The latest policy attached to Kraft Sports’ complaint was placed through AON\Albert G Ruben Insurance Services, Inc. of New York. The policy provided coverage of $5,000,000 for “Each and every claim, inclusive of defense costs and damages but a maximum of $5,000,000 in the aggregate.”
The retention was “$50,000 [for] Each and every claim inclusive of defense costs and damages.”
Kraft Sports paid a premium of $19,866.00 for the one-year policy. The policy form stated on its cover that “This is a duty to defend policy with defense costs within the policy limits.”
The insuring agreement provided for Hiscox to pay “damages” if: “[y]ou or anyone acting on your behalf during the policy period engages in film and program production activities that give rise to a claim against you that arises from the insured production(s) or advertising, regardless of when such claim is made or where such claim is brought, and including but not limited to any claim for any actual or alleged:
copyright infringement . . . any act of passing-off, or any misappropriation of content, … [or] musical compositions …; [or]
breach of a license you have acquired to use a third party’s trademark and/or copyrighted material, but only to the extent your use inadvertently exceeds limitations expressly set forth in the license regarding the territory, duration, or media in which the material may be used and only if such breach is asserted in conjunction with and based on the same factual allegations as a claim under (a) above. “
The policy defined a covered Insured Production(s),” as “All programming and content produced or disseminated by you and all content provided by the insured to third-party social media websites and media outlets.”
The notices of alleged infringements by social media music
On January 7, 2021, Kraft Sports notified Hiscox of its first claim of alleged music copyright infringement.
Following this first claim of infringement, Kraft Sports submitted additional notices of alleged infringement on January 14, 2021, and March 8, 2021.
On March 10, 2021, Hiscox denied coverage for the January 7 and January 14, 2021, infringement claims. On May 4, 2021, it denied coverage for the March 8, 2021, notice letter.
After Hiscox’s denials of Kraft Sports’ initial claims, Kraft Sports continued to receive music copyright infringement claims. Kraft Sports notified Hiscox, according to the terms of the policies, of these claims on June 16, 2021, June 21, 2021, September 15, 2021, October 22, 2021, November 8, 2021, January 27, 2022, February 1, 2022, February 14, 2022, March 3, 2022, March 8, 2022, March 10, 2022, and July 14, 2022.
In all, Kraft Sports’ complaint listed fifteen separate copyright infringement claims made against Kraft Sports reported to Hiscox
Hiscox denies coverage but then agrees to a defense under a reservation of rights
After having received three claim notices from Kraft Sports, Hiscox advised on July 14, 2021, that it would “be issuing denial of coverage letters on the recently notified matters…”
On October 29, 2021, not having yet received the denial letters promised on July 14, 2021, Kraft Sports pressed Hiscox’s with their own letter arguing the issue of coverage for the noticed infringement claims.
Hiscox responded to Kraft Sports’ coverage letter on December 3, 2021, maintaining its denial of coverage for all the infringement claims reported through October, including the June 16, June 21, September 15, and October 22, 2021, notices of infringement claims.
On February 8, 2022, counsel for Kraft Sports sought the coverage status of the four infringement claims noticed since November 8, 2021. On February 18, 2022, Hiscox responded to counsel for Kraft Sports, after their second request, that the coverage issues had been referred to coverage counsel.
On March 11, 2022, Hiscox, through counsel, advised Kraft Sports that Hiscox would withdraw its blanket denials of coverage and participate in the defense of the infringement claims under a reservation of rights.
The policy’s mediation and arbitration requirements were ignored by Hiscox
Kraft Sports requested mediation with Hiscox on June 17, 2022, invoking the media liability policy’s clause on alternative dispute resolution.
This clause, inserted by Hiscox, provided, in part:
“We and you agree that any dispute arising out of or relating to this policy, including but not limited to its construction, application, and validity, or any breach thereof, shall be resolved through either non-binding mediation or binding arbitration…Either you or we may elect the type of Alternative Dispute Resolution (“ADR”) to resolve a dispute under this policy…”
The provision continued with a further stipulation that if non-binding mediation failed, the parties would resolve the dispute through binding arbitration.
After more than three months had passed without Hiscox responding to Kraft Sports’ request for mediation, Kraft Sports filed its lawsuit on September 26, 2022, in the Norfolk Superior Court.
Kraft Sports lawsuit alleges four counts:
Count I seeks a declaratory judgment requesting the Court to declare that Hiscox has a duty to defend and engage in the resolution of the infringement claims and indemnify Kraft Sports for any expenses incurred or that it will subsequently incur related to the claims. Also, Count I seeks to have the Court declare that Hiscox has lost, by its neglect, any rights under the alternative dispute resolution provisions of the Policies.
Count II alleges breach of contract and seeks damages for Hiscox’s refusal to perform its contractual obligations to investigate, defend, and settle the music copyright infringement claims and pay the amounts Hiscox owes under its insuring agreements.
Count III alleges Hiscox breached its implied covenant of good faith and fair dealing under the media liability policies. This count seeks damages based on Hiscox’s actions being done in bad faith to deny Kraft Sports the benefit of its insurance contracts.
Count IV alleges violations of G. L. c. 93A, the unfair and deceptive trade practice act. This count alleges, as the basis for recovering multiple damages and attorney fees, Hiscox’s alleged unfair claim practice, including:
Misrepresenting pertinent facts or insurance policy provisions relating to coverage for the alleged infringement;Failing to timely acknowledge and/or act reasonably promptly upon communications from Kraft Sports with respect to the alleged infringement;Failing to adopt and implement reasonable standards for the prompt investigation and payment of claims arising under the Policies;Refusing to pay claims without conducting a reasonable investigation based on all available information;Failing to affirm or deny coverage within a reasonable time;Failing to effectuate prompt, fair, and equitable settlements in which liability has become reasonably clear;Delaying the investigation and assumption of its insuring obligations by requesting Kraft Sports provide information that had already been provided; andCompelling Kraft Sports to pursue this litigation in order to compel the performance of Hiscox’s insuring obligations.
Agency Checklists will keep you posted
Kraft Sports’ lawsuit is in its initial stages. Kraft Sports filed their complaint in the Massachusetts Superior Court in September, but Hiscox Insurance, as an Illinois corporation, exercised its rights to remove the case to the United States District Court in Boston.
The case was entered on the federal district court’s docket on October 27, 2022, and Hiscox has yet to answer Kraft Sports’ complaint.
Agency Checklists will follow this suit and report on material developments.
Claims of misuse of copyrighted music by sports teams
The lawsuit between Kraft Sports and Hiscox does not detail or specify the copyrighted music or how the alleged infringement occurred.
A likely scenario appears in a 2020 article on the CBSPORTS.com website, which highlighted the problem of sports teams negligently infringing on music copyrights, “Music industry cracking down on copyright issues could change how NFL and other leagues distribute content.”
The author of that article, Johnathan Jones, summed up a major part of the problem, stating:
“The issue, as I’m told, is not only teams placing copyrighted music into videos without permission. Instead, this revolves around copyrighted music playing in the background of videos. Players dancing to music during practice or music playing in the stadium as a player talks into the camera is the problem.”
Reprints, or use of this article in any way on another website should include an attribute to Owen Gallagher and a link to Agency Checklists. Thank you.
Owen Gallagher
Insurance Coverage Legal Expert/Co-Founder & Publisher of Agency Checklists
Over the course of my legal career, I have argued a number of cases in the Massachusetts Supreme Judicial Court as well as helped agents, insurance companies, and lawmakers alike with the complexities and idiosyncrasies of insurance law in the Commonwealth.
Connect with me directly, by calling me at 617-598-3801.
