Amway Seeks To Force Insurers To Cover Copyright Damages

Law360, New York (April 28, 2017, 7:35 PM EDT) — Amway Inc.’s parent company slapped AIG subsidiaries with a suit in Michigan federal court Thursday in a bid to force the insurers to cover the health and beauty marketing firm’s settlement of a copyright dispute with several of the world’s largest record companies.
Alticor Global Holdings Inc. claimed in its complaint that AIG Specialty Insurance Company, now known as Chartis Specialty Insurance Company, and National Union Fire Insurance Company breached the terms of their policies by denying coverage for “well in excess of $5 million” in legal damages resulting from copyright suits brought by Sony Music Entertainment, Warner Music Group Corp. and UMG Recordings Inc.

Alticor seeks the maximum liability of $25 million under a Chartis policy protecting internet media and $5 million to $50 million under a National Union excess policy covering potentially disastrous legal damages.

“[Chartis] knows that no basis exists for its failure and refusal to pay the claim and [Alticor’s] loss, and [Chartis] has acted with reckless disregard of the duties and obligations it owes to [Alticor],” the complaint states. “National Union intentionally disregarded the interests of [Alticor] and the Amway Interests, and has wrongfully failed to accept coverage for the claim and the loss under the commercial umbrella liability policy in order to protect its own financial interest at the expense of [Alticor].”

The record companies accused Amway in 2014 of infringing on more than 1,000 of their sound recordings and videos in the firm’s marketing materials uploaded to the internet. It settled the cases in January for an undisclosed amount.

Alticor said it paid more than $750,000 for internet and network security insurance from Chartis, which it argued should have covered up to $25 million in claim expenses on behalf of the company and its subsidiaries, including “reasonable and necessary” attorneys’ fees. Additionally, Alticor claimed to have paid National Union $1.75 million for its commercial umbrella liability policy meant to cover up to $50 million when the company exhausted its other insurance policies, as it did in its copyright infringement suits.

Though Alticor argues that it filed claims with both insurers in a timely manner and met the threshold for coverage, Chartis denied the company’s claim and refused to reevaluate its decision, while National Union said it was still investigating the claim years after the suits were filed, according to the complaint.

Amway fought back with a countersuit in 2014 alleging the record companies conspired to flout an agreement under which they promised to provide notice of allegations of copyright infringement by Amway distributors so that Amway could investigate and stop them.

Alticor also seeks attorneys’ fees, interest at 12 percent per year on the unpaid amount, punitive damages and any further relief deemed reasonable by the court.

Counsel for Alticor and a representative for AIG subsidiaries declined to comment Friday.

Counsel information for Chartis and National Union was not immediately available Friday.

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