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Financiers and distributors of movie and TV productions almost always require the relevant production company to maintain some type of media liability insurance coverage. Such policies typically include a provision that requires the insured to give timely notice to the insurer when a claim arises. In a recent New York decision, General Insurance Company of America v. Marvel Enterprises, an entertainment production company was granted summary judgment in its claim for a declaratory judgment, which involved the issue of whether it had given its insurance company timely notice of a claim. General Insurance issued a media liability insurance policy in April 2000 to Marvel relating to claims arising from copyright infringement, misappropriation of ideas, trademark infringement, unfair competition and deceptive trade practices. The one-year policy was in effect from April 30 of that year until April 30 of the following year. Several years earlier, in 1993, Marvel had licensed to Twentieth Century Fox Film Corp. the rights to create, produce, distribute and promote live action feature-length movies based on the Marvel’s “X-Men” comic book characters. Under this license, Fox produced “X-Men,” a feature film released theatrically in July 2000. One month later, Marvel began developing an idea for a new TV series that would feature new Marvel characters that, due to genetic experiments, displayed physical mutations. Marvel entered into an agreement that month with Tribune Entertainment Co. Inc. for the production of a weekly TV series of hourlong episodes based upon this concept. In January 2001, promotional materials relating to this series, ultimately titled “Mutant X,” were distributed to the entertainment industry. Fox, however, claimed that the new series was nothing more than a thinly veiled version of “X-Men.” The movie studio sent Marvel a letter in March 2001 asserting that the production and distribution of the “Mutant X” series violated its rights. The letter also stated, “Fox hereby demands that any further development, production and distribution of ‘Mutant X’ cease immediately, and Fox will take all appropriate action to enforce its rights and will seek such remedies as may be necessary to protect itself against such a flagrant and willful breach of our agreement.” The letter further demanded, in anticipation of potential litigation, that Marvel “retain all documents, including e-mails, related to this project, and notify Tribune Entertainment � and any other entities involved with the production or distribution of ‘Mutant X’ to do the same.” It also stated that “the foregoing is not a complete statement of the facts or of Fox’ position or potential claims or causes of action against you, and all of Fox’ rights and remedies are reserved.” Marvel faxed a copy of the letter to its insurance broker, HRH, with a cover sheet indicating that the letter was being forwarded “because it might result in litigation from Fox regarding ‘Mutant X.’” HRH set up a file for the letter but did not notify General Insurance or First Media Insurance Agency, General Insurance’s agent, of the receipt of the letter or its contents. In an exchange of internal e-mails, the claims manager for HRH noted that no claim for damages had been asserted by Fox, although he characterized the letter as a “claim for injunctive relief.” He concluded that notification to General Insurance was not required given that no suit had yet been filed. Marvel, after retaining an outside law firm to investigate Fox’s allegations, concluded that litigation was all but inevitable and authorized that firm to prepare and file an action seeking a declaratory judgment that the production and distribution of the “Mutant X” series did not violate Fox’s intellectual property rights or otherwise breach Marvel’s licensing agreement with Fox. On the same day that Marvel filed its action, Fox initiated its own lawsuit, which, among other things, claimed causes of action against Marvel for breach of contract and copyright infringement. The two actions were consolidated by the U.S. district court, after which Fox moved for injunctive relief. HRH, in response to an inquiry from First Media, forwarded to First Media copies of both complaints, along with the March 19, 2001, letter from Fox and Marvel’s notice of claim. In its letter acknowledging and responding to its receipt of these documents, First Media noted that the insurance policy excluded coverage from claims arising from breach of contract. Therefore, it said, coverage would not be available for any legal expense or loss arising from such clauses of the action. While First Media also advised HRH that Marvel’s declaratory judgment action did not fall within the definition of a claim contained in the policy, it indicated that the policy did provide coverage for copyright and trademark infringement, related unfair competition claims and deceptive trade practices. It requested that HRH provide additional information concerning the underlying dispute and reserved all of General Insurance’s rights under the policy as to these causes of action. In July 2001, HRH submitted four invoices to First Media that totaled in excess of $952,000 for legal services and disbursements incurred between March 22, 2001, and June 30, 2001. It requested payment of this amount, along with additional amounts that Marvel had paid directly between March 22 and March 31, 2001. In October 2001, General Insurance commenced an action against Marvel for a declaratory judgment, alleging that all of the claims asserted by Fox in the federal litigation fell within the breach of contract claim exclusion. It further alleged that Marvel failed to cooperate by not apprising it of developments or providing it with information necessary to assess coverage. General Insurance alleged, for the first time, that Marvel’s notice of claim was untimely in that Marvel had failed to comply with the notice provisions of the policy by failing to submit a notice of claim after receiving the March 2001 letter from Fox. Marvel responded by making a counterclaim for a judgment in its favor and subsequently moved for summary judgment with respect to the causes of action claimed by General Insurance. The court granted Marvel’s motion for summary judgment in part, finding that, except for two contract claims, all of the claims asserted by Fox against Marvel in the federal court litigation fell within the risks covered by the policy. However, the court denied Marvel’s motion with respect to General Insurance’s claim that the notice of claim was untimely. The court concluded that issues of fact existed as to whether the March 2001 letter from Fox to Marvel constituted a demand for relief that qualified as a claim under the terms of the policy, and, if so, whether the 29-day interval between that letter and Marvel’s April 17, 2001, notice of claim to General Insurance qualified as timely notice. This issue was referred to a special referee who concluded that the March letter from Fox constituted a claim against Marvel under the policy. As a result, Marvel’s April 17 notice of claim was untimely. General Insurance moved to confirm the referee’s report while Marvel moved to vacate it. Both parties moved for summary judgment. The court examined whether the findings of the special referee were supported by the record. Marvel argued that those findings should be rejected because General Insurance waived its defense of late notice by failing to include the defense among its grounds for denying coverage in its April 2001 letter of disclaimer. The court indicated that General Insurance appears to have been in possession of all the information it would need to disclaim coverage on the ground of untimely notice. General Insurance reserved its rights and did not limit that reservation solely to those reasons that might “become apparent in the future” but instead expressly reserved all of its rights under the contract. Based on these facts, the court found that General Insurance did not waive its defense of late notice as a matter of law and the referee’s report could not be rejected on that ground. The court next examined whether Fox’s March 2001 letter qualified as a claim under the policy. This is relevant because the notice of claim provision in the policy provides that the “insured shall provide notification of any potentially covered claim as soon as reasonably possible to the company or any of its agents by forwarding all suit papers and documents.” The policy specifically defines a claim as “a demand or suit for money tendered to the insured for loss or injunctive relief, even if any of the allegations are groundless, false or fraudulent, or a request to toll or waive any applicable statute of limitations relating to a claim or potential claim � “ Marvel argued that the report of the special referee should be rejected because the language of the policy demonstrates that the March 2001 letter was not a claim under the terms of the policy. The court agreed with Marvel, indicating that the notice of claim provision in the policy explicitly required Marvel to notify General Insurance only of any “potentially covered claim” and not of potential claims. Nor did it alter or amend the definition of “claim” contained in the policy. The policy specifically defined claim as a “demand or suit for money tendered to the insured for loss or injunctive relief.” According to the court, injunctive relief, by definition, is a judicial remedy. As a result, a letter to another party — even one that contains strongly worded cease-and-desist language and a threat of litigation — cannot constitute a demand for injunctive relief as that term would ordinarily be understood. The court stated that when proper deference is given to the definition of the term “claim” as it is contained in the policy, the special referee’s finding that Fox’s March 2001 cease-and-desist letter rightfully qualified as a claim was not supported by the record. Accordingly, the court granted Marvel’s motion to reject the report and denied General Insurance’s motion to confirm the report. In light of the above, Marvel’s motion for summary judgment seeking a declaratory judgment that General Insurance was obligated to defend it in the underlying federal court actions was granted. Although the decision in this case was very fact-specific, it does point out the need for companies — and their counsel — to be aware of, and comply with, the specific provisions of each insurance policy. Michael I. Rudell is an entertainment attorney at Franklin, Weinrib, Rudell & Vassallo in New York City.

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