MLRC/NAA/NAB - Directrouter.com

MLRC/NAA/NAB 

USERS GUIDE 

TO 

MEDIA LIABILITY INSURANCE 

Chad Milton 

National Practice Leader, Media 

Marsh 

Kansas City, MO 

816-556-4365 

chad.e.milton@marsh.com 

Rick Fenstermacher 

Principal 

Risk Management Solutions 

Miami Beach, FL 

305-868-7600 

rfenstermacher@bellsouth.net

MLRC/NAA/NAB LIBEL CONFERENCE 

USERS GUIDE TO MEDIA LIABILITY INSURANCE 

Media Insurance Food Chain 

Media Insurance Food Chain 

Insured’s Team 

Insurance Company Team 

Client 

Broker 

Insurance Company 

Excess insurance 

Company 

Managing Agent 

Consultant Wholesaler 

Reinsurance Broker 

Reinsurance Broker 

Reinsurance Company Reinsurance Company 

Marsh 

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I. Who does what to whom? The Food Chain 

A. Insured/Buyer/Policyholder 

i. Role: Pay the premium and stay out of claims 

B. Consultants 

i. Role: Advise Insured on risk management and insurance issues; can be outsourced 

risk management 

ii. Compensation: Fee paid by client/insured 

C. Brokers 

i. Role: Advise Insured on risk management and insurance issues/ negotiate with 

underwriters and place insurance 

ii. Compensation: Commission paid by insurer or fee paid by client/insured 

D. Retail Agents 

i. Role (Same as Broker) 

ii. Compensation: Commission paid by insurer or fee paid by client/insured 

E. Wholesalers 

i. Role: Help brokers (generally smaller brokers) with placement of insurance 

ii. Compensation: Commission paid by insurer 

F. Agents/Managing Agents 

i. Role: Represent insurer as underwriter and/or claim manager 

ii. Compensation: Commission paid by insurer 

G. Underwriters/Insurers (Primary and Excess) 

i. Role: Accept the risk being insured and pay losses 

ii. Compensation: Premiums less losses and expenses 

H. Reinsurers 

i. Role: Accept part of the risk assumed by an insurer 

ii. Compensation: Premium paid by the insurer 

I. Reinsurance Brokers 

i. Role: Negotiate reinsurance for insurers 

ii. Compensation: Commission paid by reinsurers or fee paid by insurer 

Media Liability Insurers 

• Media / Professional Insurance for: 

-National Casualty 

-Axis 

• Chubb Group 

• One Beacon Professional Partners/First Media 

• Mutual Insurance Co., Ltd. (Bermuda) 

• American International Group 

• ACE 

• Hiscox 

• Beazley 

Marsh 

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II. Where Does the Money Go? 

A. Insurer Expenses 

i. Commissions and fees 

ii. Underwriting expenses 

iii. Overhead and profit 

B. Defense costs and settlement 

i. Legal expense counts and amounts to 75-80% of the total losses 

C. Calculating a loss ratio/what is acceptable 

i. Losses = Loss = Loss Ratio Ratio 

Premium 

ii. Paid Losses = Paid 

Paid 

Loss 

Loss 

Ratio 

Ratio 

Paid Premium 

iii. Incurred Losses 

Earned Premium 

=Incurred Loss Ratio 

= Incurred Loss Ratio 

iv. Incurred Losses + IBNR 

Written Premium 

=Underwriting Loss Ratio 

= Underwriting Loss Ratio 

Outstanding < 10% 

Favorable 10% > 30% 

Acceptable 30% > 50% 

Marginal 50% > 70% 

Adverse > 70% 

Increase 

Media Liability Attorney (Per Hour) 

65.60% 

Media Liability Premium (Newspaper, Cable & TV) 

3.40% 

Berkshire Hathaway (1 Class 'A' Share 

413% 

Florida Hurrican Insurance ($1mil Limit) 

1255% 

Private College Tuition 

49.70% 

Premium Gasoline (Per Gallon) 

26.50% 

Prime Rate 

-47.00% 

Consumer Price Index 

22.60% 

-60.00% -40.00% -20.00% 0.00% 20.00% 40.00% 60.00% 80.00% 

Marsh 

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III. How Underwriting Decisions Are Made 

A. Size 

i. Underwriters claim, with actuarial support, that large accounts produce large claims 

ii. Small accounts may have a hard time paying the deductible and premium 

B. Location 

i. Some states are suspect 

ii. National or regional audience not necessarily a problem 

iii. Audience likely to sue abroad? 

C. Medium/Media 

i. Media involving technology suspect 

ii. Feature film are suspect 

D. Publication or program formats 

i. Straight news best received by underwriters 

ii. Reality TV is suspect 

iii. Music is problematic 

E. Nature of content 

i. Investigative/prosecutorial 

ii. Hidden Cameras 

iii. Humiliating 

iv. Private stories 

v. Medical – for E&O 

vi. Entertainment can be a problem 

vii. Indecency causes concern 

F. Internal controls/loss prevention 

i. More is better 

ii. Underwriters look for editorial controls, training, involvement of lawyers 

G. Claim history 

i. Less is better 

ii. Underwriters assume that past history is predictor of future 

H. Non-content exposures 

i. Aggressive newsgathering 

ii. Ancillary businesses 

iii. Non-media businesses, especially involving technology, are suspect 

I. Underwriting the retention (deductible) 

i. Relative to size of client 

ii. Underwriter minimums 

iii. Benchmarked from claim history 

iv. Keyed to cost of successfully defending claims 

J. Premium calculations can include: 

i. Formula, usually based on revenues, subject to debits and credits 

ii. What the market will bear 

iii. Increases/decreases keyed to actuarial targets 

iv. Price for expected losses over time 

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IV. Impact on Insured of High Retention 

A. Control of defense enhanced 

B. Reporting new and ongoing claims may still be required, but may also seem 

pointless and burdensome 

C. Increased burden of keeping track of developments and costs 

D. Contacting insurer only in catastrophes weakens ongoing relationship 

V. Claims Handling Decisions 

A. Choice of defense counsel 

i. Initial choice matter of contract (policy wording) 

ii. When insurer has input, factors include: 

a. Hourly rate: only objective factor 

b. Experience and skill appropriate to the case 

c. Efficiency 

d. Compliance with guidelines: billing, reporting 

e. No surprises: events and severity 

f. Appreciation of insurer role 

g. Respect 

B. Effect of reporting, billing and other defense guidelines 

i. Expenses in breach may not get paid 

ii. May limit defense tactics 

iii. Query ethics of foregoing recommended tasks 

C. Settlements and defense guidelines 

i. Micro factors: cost/benefit in each case 

ii. Macro factors: client relationship, reputation in industry 

iii. Mega factors: corporate and reinsurance mandates and budgets 

Marsh 

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Media Policy Primer 

I. Two Types of Policies: 

A. All Risk, subject to exclusions 

B. Named peril, subject to exclusions 

II. Two Triggers 

A. Occurrence: 

i. Covers events which occur during the policy period, regardless of when claim is 

reported. 

B. Claims-made: 

i. Covers events which occur during the policy period AND are reported during the 

policy period, or during a specific extended claims reporting period [ECRP] after the 

policy expiration; 

ii. N.B. ECRP’s typically: 

a. Range from 30 days to 2 years; 

b. Can include a premium charge up to 300% of the expiring premium; 

c. May not be available if the current insurer offers renewal terms, even if the terms 

are prohibitive in cost, restrict coverage, increase retentions or reduce limits. 

III. Core Coverage 

• Libel, slander, defamation, disparagement 

• Invasion / infringement of privacy or publicity; false light; 

• Wrongful entry, trespass or eavesdropping 

• Copyright infringement, plagiarism, piracy, misappropriation; 

• Infringement of title, slogan, trademark, trade name, trade dress, service mark; 

• Error, omission, misstatement or misleading statement; 

• Infliction of emotional distress, outrageous conduct. 

IV. Typical Exclusions 

• “Alphabet” Exclusions: ASCAP, BMI, ERISA, FCC, FTC, HHS, OCR, RICO, SEC, 

SESAC, TRIA; 

• Intentional acts; 

• Criminal, dishonest, fraudulent, malicious acts; 

• Infringement of patent, trade secret; 

• Anti-trust, restraint of trade, unfair or deceptive business practices, unfair competition; 

• Employment practices; 

• Bodily injury or property damage; 

• Claims by independent contractors in rights disputes 

• Digital copies of freelance works: 

• Music downloading; 

• Computer security; 

• Coupons, prizes, awards; 

• Fines, penalties & taxes; 

• Loss of profits; 

• Costs of recall, reproduction, reprinting or correction. 

Marsh 

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V. Options (not offered by all insurers) 

• Worldwide territory (claims filed outside U.S.); 

• Bodily injury and Property damage; 

• Choice of counsel; 

• Multiple (or unlimited) annual aggregate limits; 

• Punitive damages (where contrary to public policy); 

• Elimination or modification of “Hammer” clause (Forced Settlement provision); 

• Newsgathering (without publication) 

VI. Related Acts 

• Acts that are the same, continuous repeated, or in a series of interrelated acts or are 

temporally, logically or causally connected by facts, circumstances, situations, 

transactions, events, advice, dissemination, utterances of decisions are deemed to be a 

single act. 

or “Recurring Coverage Issues” 

• Acts that involve the same or related subject, person, class of person or have common 

facts or circumstances or involve common transactions, events or decisions, regardless 

of the number of renditions, alterations, actions or forms of communication will be treated 

as one act. 

Marsh 

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Recurring Coverage Issues 

I. Bodily Injury / Property Damage 

Most Media Liability insurers will delete exclusion as it relates to content. 

Claim Example: 

• Southern Living magazine publishes a recipe for “ice box dinner rolls” in the April 2004 

issue. 

 

 

 

 

The recipe called for boiling one cup of water and a half cup of shortening over high 

heat for 5 minutes. Unfortunately, the combination of hot fat and boiling water had a 

volcano effect injuring at least 5 readers. 

The magazine issued its first product recall in 40 years, warning its 2.6 million 

subscribers of a “potential fire and safety hazard” and requested that distributors 

remove copies from newsstands. 

The standard Commercial General Liability policy excludes losses “relating to 

content”. 

Neither the Commercial General Liability nor Media Liability policies will cover the 

costs or recall or reprinting. 

II. Forced Settlement (Hammer) Clause 

“We have the right to investigate any claim, and with your written consent, settle any 

claims if we believe that it is proper. Our duty to defend ends if you refuse to consent 

to a settlement we recommend and the claimant will accept. You must then defend the 

claim at your own expense and negotiate any settlement.” 

Solutions: 

1. Replace the condition with: 

“No settlement shall be made without the Company’s consent, such consent shall not to 

be unreasonably withheld” or 

“The Company shall not settle Claims under this policy without the consent of the 

Insured, and the Company’s duty to defend and to pay Loss (including Defense Costs) 

shall not be limited by the Insured’s refusal to consent to any settlement” 

2. If the Company will not delete the condition in its entirety, negotiate a compromise: 

“The Company’s liability for any settlement or judgment will not be more than the amount 

for which the claim could have been settled had you consented, plus fifty percent (50%) 

of the costs and expenses incurred subsequent to the date of such refusal.” 

Marsh 

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III. Selection of Counsel 

Many insurers require that they employ defense counsel for all claims. While presented as 

part of their “duty to defend” it can also provide control – control of defense costs and 

outcome (see Forced Settlement). 

Solution: 

1. Some insurers will consent to the insured’s selection of counsel: 

“Retain counsel, subject to the continuing approval of the Company”; or 

“The Insured shall have the duty to defend Claims . . . and may retain counsel of its own 

choosing with the Underwriter’s prior consent, such consent not to be unreasonably 

withheld.” 

2. Other insurers will impose conditions: 

“With regard to any claim for which you seek coverage, the initial choice of counsel shall 

be made by you from the list of firms in the Schedule at an agreed hourly rate of $--- per 

partner, $--- per associate and $--- per paralegal. Fees, costs, charges and billings 

incurred through any law firm or other service provider, other than chosen counsel or a 

firm that we consented to or selected, shall not be recoverable under this policy as claims 

expense” 

IV. Over Redemption 

Claim scenario: 

• A national pizza chain wants the following ad printed in the local newspaper: 

The actual ad reads: 

“Two large pizzas + liter of XXX [beverage] for $15.00” 

BUT 

“Two large pizzas + liter of [beverage] for $.15” 

With total circulation of 2,000,000 and a typical response rate of 2%, the potential loss is 

$594,000 [40,000 x $14.85]. But the deal is so good, the actual response rate is 5%, 

creating a loss of $1,485,000. 

While most insurers will not delete the “coupons, prizes or over-redemption” exclusion, 

several will consider a sub-limit of $100,000 to $1,000,000 for an additional premium. 

Marsh 

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V. Worldwide Territory 

Many liability policies provide coverage for “. . . suits first brought in the United States”. 

With many publications distributed overseas in print or online, plaintiffs may file suit in a 

foreign jurisdiction more favorable to their interests. 

Solution: 

Most Media Liability insurers will grant “worldwide territory.” 

VI. Bad Acts Exclusions 

A. State Law Starting Point 

i. Common law: “public policy forbids indemnifying a person for his own willful 

wrongdoing” (SupCt AZ, 1984) 

ii. Statute (CA, e.g.): insurer is relieved if "loss is caused by the willful act of the 

insured." 

B. Basics 

i. This policy does not apply to liability arising out of: . . Criminal or dishonest acts. 

ii. This policy does not apply to any Claim against the Insured: . . .Based on or arising 

out of any actual dishonest, fraudulent, criminal or malicious act or omission by an 

Insured, however, this exclusion shall not apply to Claims Expenses or the 

Company’s duty to defend any such claim. 

iii. The Company shall not be obligated to defend or to pay damages or claim expense 

resulting from claims:...for or arising from any act that a jury or court finds to be 

dishonest, fraudulent. 

C. Targeted to Specific Conduct 

i. This policy does not apply to liability arising out of:….violations of federal or state 

wiretapping laws, telephone, computer and other laws for the protection of 

consumer privacy including, but not limited to, the Telephone Consumer Protection 

Act (47 U.S.C. §227, as amended). 

D. State of Mind 

i. This policy does not cover any claim, loss or wrongful act: . . 

ii. Arising out of or resulting, directly or indirectly, from any dishonest, fraudulent, 

criminal or malicious act error or omission, or any intentional or knowing violation of 

the law. 

iii. Arising out of a wrongful act committed with the knowledge that it was a wrongful 

act. 

E. Forgivable Misconduct 

i. The Company shall not be obligated to defend or pay loss or defense costs arising 

from claims: . . . For violation of a criminal statute, (as finally determined); except 

this exclusion shall not apply if the insured’s counsel had previously authorized such 

act or omission based upon a good faith belief that the criminal state violated the 

First Amendment (or similar state constitutional provision) or a good faith belief that 

the act or omission was not a violation of such criminal statute. 

Marsh 

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V. Punitive Damages 

A. OFFSHORE INSURERS 

i. Specifically include punitives in definition of damages 

B. DOMESTIC U.S. INSURERS 

i. Most include punitives in definition of damages, but with conditional language, e.g.: 

“With regard to punitive damages, this insurance shall apply to the fullest extent 

permitted by law. Where an Insured determines, based upon written opinion of 

counsel, that punitive damages are insurable under any applicable law, the 

Underwriter shall not challenge the Insured’s determination of insurability” 

“Damages does not include matter which may be deemed uninsurable under the law 

pursuant to which this policy shall be construed” 

Terms of this policy, including but not limited to the definition of damages, which are 

in conflict with the statutes or public policy of the State wherein this policy is issued 

are hereby amended to conform to such statutes or public policy” 

ii. Many domestic insurers have arrangements with off-shore insurers to underwrite 

“contingent punitive damages / punitive-wrap” policies. 

Marsh 

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Marsh USA Inc. 

2405 Grand Boulevard 

Suite 1500 

Kansas City, MO 64108 

816 221 4422 

Risk Management Solutions, Inc 

6444 Allison Road 

Miami Beach, FL 33141 

305-868-7600

MLRC/NAA/NAB - Directrouter.com

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