Does Professional Liability Insurance Protect Us From Copyright Infringement Lawsuits?

Yes, a professional indemnity insurance policy can give protection against copyright infringement lawsuits. Professional liability insurance, which is also called, errors & omissions insurance policy, offers coverage against professional risks and related legal expenditures.

The errors and omissions insurance has an IPR infringement clause which offers coverage in case there is a violation of intellectual property. The policy includes third-party claims, which may arise from the violation of copyright rules with regard to images, slogans, design work, etc.; without the permission of the creator.

Key Takeaways

• Unintentional is the Key: Professional indemnity is a safety net for mistakes, not a license for theft. As seen in the K.S. Creative case, the insurer only provided coverage because the use of the portfolio was an accidental administrative error, not a deliberate attempt to steal work.

• The “Internet is Free” Myth: One of the most common causes of PII claims is the belief that images or designs found online can be used freely. If a creator holds the copyright, using their work without a license is a violation that PII is designed to manage.

• Dual Protection Mechanism: PII provides a two-pronged defense: it pays for the high cost of specialist IP lawyers to defend you (Duty to Defend) and settles the actual monetary compensation if you are found liable (Duty to Indemnify).

• Notification Urgency: Intellectual property disputes can escalate quickly. To ensure coverage, it is mandatory to inform your insurer the moment you receive a “cease and desist” letter or a formal legal notice.

• Contractual Obligations: Some policies may exclude damages arising from a specific “breach of contract” regarding IP. It is vital to ensure your policy specifically includes a broad IPR infringement clause to cover third-party claims.

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Just because, some images are available on the internet, it doesn’t mean that they can be used freely. It’s like some other person or company has its copyright and thus, would likely be paid in return for using these things.

In case, the person goes ahead with such ‘things’ without the permission of the creator; it could term as a violation of the copyright act. If the other party files a case against you, the errors and omissions insurance policy will offer you coverage.

It is interesting to note that businesses can benefit from a professional indemnity insurance policy in two ways: the insurer’s duty to defend and the insurer’s duty to indemnify.

As per the duty to defend, the insurer is required to pay for the defense of a policyholder against all those claims which fall under a professional liability insurance policy. The insurer also pays legal expenses incurred by the policyholder in defending itself in court. Along with this, the insurer is required to indemnify the third party for those losses which are actually covered by the insurance policy contract.

If a claim of infringement has been filed against your company, it is essential to inform the insurance company as soon as the claim arises.

It is important to note that in those cases, where the insurer finds out that the policyholder infringes on copyright intentionally, it can refuse to settle your claim. Another reason when the insurer can refuse to settle the claim is when there is a breach of contract which says that the insurer will not cover those damages that the policyholder is obligated to pay due to the policy contract.

Case

An ace designer, Jayant Singh filed a case against K.S Creative. Jayant prepared his design portfolio which he used to send to his prospective clients. He sent the same portfolio to K.S Creative to take up some freelancing projects from it. Though K.S Creative rejected Jayant’s portfolio; its creative head unintentionally used some of Jayant’s design works in its latest project. The creative head thought that the company had hired Jayant as a freelancer and mistakenly used his work.

When K.S Creative launched that project on the internet, Jayant found out similarities between his work and the company’s project. Further investigation revealed that the company had used his design works.

Now Jayant filed a case against K.S Creative for using his designs without his permission. He filed a case for copyright infringement.

When the case reached the court, K.S Creative argued that the similarity was mere coincidence, and it was unintentional. However, the court concluded that though the company used Jayant’s design work unintentionally, the company was liable to pay monetary compensation to Jayant on account of the infringement of the copyright.

Summary Table: Copyright & IPR in Professional Indemnity

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Here, K.S Creative had an errors & omission insurance policy, and the company had already informed the insurer as soon as the case was filed against it by Jayant. After carefully scrutinizing the situation, the insurer found that the claim fell under professional indemnity insurance coverage and therefore, agreed to give the coverage.

In this case, the insurer not only awarded the monetary compensation to Jayant on behalf of K.S Creative but also covered the legal expenses which were incurred by the company in defending itself in court.

In case, the copyright infringement was intentional; the insurer would have rejected the claim.

Frequently Asked Questions (FAQs)

1. Does my policy cover me if I accidentally use a trademarked slogan?

A) Yes. Most Professional Indemnity policies with an IPR clause cover unintentional infringement of slogans, titles, and trademarks, provided the error occurred during the course of your professional services and was not a deliberate attempt to mimic a competitor.

2. What happens if the insurer proves I knew the work was copyrighted?

A) If an investigation reveals that the policyholder intentionally bypassed licensing or ignored warnings of copyright, the insurer will likely invoke the “Intentional Acts Exclusion” and refuse to pay for the legal defense or the settlement.

3. Does “Duty to Defend” apply even if I am clearly in the wrong?

A) Yes. Even if it seems likely that you made a mistake, the insurer has a duty to defend you in court to ensure the settlement amount is fair and that your legal rights are protected throughout the process.

4. If I am a freelance writer, does my policy cover “Plagiarism” claims?

A) If a client alleges that your writing was plagiarized and sues you for the resulting damages, your Professional Indemnity policy can cover your defense and the settlement, provided the plagiarism was not a willful or criminal act.

5. How does the insurer decide if the infringement was “Unintentional”?

A) The insurer’s claims team will scrutinize internal communications, project briefs, and the timeline of the work. In the case of K.S. Creative, the “mistaken belief” that a freelancer was already hired was the evidence needed to prove the act was a professional error rather than theft.

About The Author

Amit

MBA Finance

Amit is an experienced insurance professional with 7 years in the industry, specializing in Errors & Omissions Insurance. Writing for SecureNow, he provides clear and insightful blogs and articles to help professionals understand the importance and nuances of E&O coverage. His expertise ensures that readers receive practical advice on protecting themselves from potential liabilities and professional risks. Dedicated to making complex insurance topics accessible, Amit stays updated on industry developments, delivering valuable content that empowers professionals to make informed decisions about their E&O insurance needs.