PUBLISHERS LIABILITY INSURANCE

IVAN HOFFMAN, B.A., J.D.



        In today’s very litigious world, it seems essential that publishers carry liability insurance. Because this is somewhat new and alien to many publishers, let me explain some of the key elements that should be included in such insurance policies.

Author Contract Issues

        Preliminarily, however, publishers and authors should focus on a few of the relevant contractual issues that should be included in the publisher’s agreement with the author.  These are important for the reasons expressed below but also because often the insurance company will want to review that agreement as a condition to writing the insurance.

        It is essential that the publisher’s agreement with the author include thorough representations, warranties and indemnities including the right on the part of the publisher to withhold monies due the author in the event of a claim not only under the contract related to the particular book but under any other contract between the author and publisher. (Read “The Indemnity Clause in Book Contracts” and “Cross Collateralization in Book Contracts”).  This means that if there is a claim made against the book, the publisher may help secure the claim by resort to the author’s royalties.  However, these provisions may not be sufficient to fully protect the publisher.  There may be instances where there are claims made that require the expenditure of sums for attorneys fees, costs as well as ultimate damages for which the sums due the author are insufficient and/or the author otherwise lacks sufficient assets to satisfy these claims.  In addition, as discussed below, there is always a deductible or retention amount that the publisher has to pay before the insurance coverage commences and this also may be costs the publisher cannot recover from the author.

        Moreover, every publishing agreement should require that the author obtain signed permissions and releases from anyone that may have any potential rights in the work (read “The Permission Form” on my site.)  This is a form the publisher should provide the author to make certain that the publisher, as well as the author, is fully protected.

        Thus, because the contract itself may not be enough, the publisher should carry insurance.

The Policy

        The insurance should at least cover claims for:

a) copyright and trademark infringement;
b) libel or slander (slander, being oral defamation, may occur in an audio version of the book or in some interviews given by the author in the promotion etc.);
c) invasion of privacy;
d) invasion of the rights of publicity (i.e. commercial exploitation of someone’s name or likeness and may arise in marketing and promotional materials as well as in the text);
e) unfair competition (such as infringing on the rights of a product or service that is not a registered trademark);
f) personal injury (in the instance of a book dealing with health or physical fitness advice for instance) and including the infliction of emotional distress; and
g) taking of ideas (such as a claim from an author who submitted a manuscript, had it rejected and now claims that a book published by the publisher is his or her idea (read “Handling Unsolicited Material”).


        The policy should cover the work in all of its versions such as both hard and soft cover as well in an online and electronic book version and in other formats such as if the offending passages are included in a serialized version.  The publisher should obtain specific coverage for any online activities since not all policies cover this type of business.  Often the publisher will make representations and warranties to the licensee that the licensed work does not infringe on the rights of others etc. and thus the publisher becomes liable for a breach of these warranties even if it has the right to turn to the author for a like breach.  The publisher should also seek coverage for versions published outside of the United States including ideally in other languages as well as well as for statements and photographs or other materials made on packaging, marketing and promotional materials, covers and the like.

        In some instances, a policy can include coverage against punitive damages as when there is a claim made that there was an intentional and malicious defamation or other such act.

        There are generally 2 types of coverage: one is an “occurrence” coverage and the other is on a “claims made” basis.  In the “occurrence” type policy, there is coverage no matter when a claim is actually filed, even after the policy expires, if the book or other material was published during the term of the policy.  A “claims made” policy only provides coverage in the event a claim is actually made during the term of the policy.  Thus, the “occurrence” type policy is obviously more favorable to the publisher but is often more expensive than a “claims made” policy and it is always advisable to pay the extra amount to have the greater scope of coverage since claims can be made for several years after a book is published, subject to the applicable statute of limitations.  If the publisher does not continue its “claims made” coverage for the years after publication, there may be no coverage when that claim is made.

        Additionally, it is essential that the policy include coverage for “costs of defense.” This is a very important part of any insurance policy and how this is handled varies from carrier to carrier.  Ideally, the policy should pay for your attorneys fees over and above any coverage for damages.  In some instances, however, the attorneys fees are merely included in the overall coverage and subject to the limitations in amount the publisher has selected.  There may also be policies that provide that the carrier chooses and pays for the cost of defense.

        In some policies, there is a condition precedent to obtaining coverage that the manuscripts all have to be reviewed by the publisher’s attorneys before they are insured.  Although having an attorney “vet” the manuscript can be very expensive, it should be done in any instance, whether or not there is insurance, since preventative law is almost always less expensive than remedial law.  Seeking to prevent claims is a much wiser approach for a publisher than paying to defend them once they arise.

        Insurance is one of those areas of business where you get what you pay for.  The more extensive your coverage, the more expensive it is going to be.  Obviously, the cost of the insurance will vary with all of the above factors but in addition to those, there are other issues that may affect the rate.  These other issues include the nature of the book or other work (risk factors), the “retention” or deductible amount (this is the amount the publisher pays out of its pocket before the insurance kicks in), the coverage amount and whether or not the author is to be named as an additional insured, among other factors.

Conclusion

        This article merely highlights some but certainly not all of the issues related to liability insurance.  You should of course consult with an experienced insurance professional with knowledge about this field as well as with your legal advisor.

        As in all areas of your business, it is well to keep in mind that help me is almost always cheaper than fix me.  It is the visionary publisher that sees far enough down the road to take care of potential problems when they are small rather than bury its head in the proverbial sand hoping that no problems will arise. The fault with this ostrich approach is that the publisher’s worst enemy is actually a successful book.  If the book is a stiff, no one is probably going to make any claim.  But if the book “takes off,” you can’t count the number of claimants that are going to come out of the woodwork.  So by not seeing with vision, the publisher puts itself in a “lose-lose” situation: if the book is a failure, the publisher loses money; if the book is a success, the publisher also loses money.

        Which to “root” for?  How to sleep at night?

        Be kinder to yourself.

© 2000 Ivan Hoffman

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This article is not intended as a substitute for legal advice.  The specific facts that apply to your matter may make the outcome different than would be anticipated by you.  You should consult with an attorney familiar with the issues and the laws.
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No portion of this article may be copied, retransmitted, reposted, duplicated or otherwise used without the express written approval of the author.


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