Earlier this year, the four primary members of the Canadian Recording Industry Association (now Music Canada) – Warner Music Canada, Sony BMG Music Canada, EMI Music Canada, and Universal Music Canada – settled the largest copyright class action lawsuit in Canadian history by agreeing to pay over $50 million to compensate for hundreds of thousands of infringing uses of sound recordings. While the record labels did not admit liability, the massive settlement spoke for itself.
The Canadian case has now settled, but Universal Music has filed its own lawsuit, this time against its insurer, who it expects to pay for the costs of the settlement. National Union Fire Insurance Company has refused, understandably taking the position that the liability reflects Universal Music’s own use of copyright works for which it promised to set aside money for future payment. As the Hollywood Reporter notes:
UMG put out albums without artist permission, held back royalties from these artists, and then finally paid out when faced with a much bigger legal threat. Now, even though the settlement money seems to cover what was claimed and acknowledged to be owed to artists, UMG is using the guise of a copyright claim to recover the money from its insurer.
Perhaps this represents an innovative new business model – profit from infringing on tens of thousands of copyrights and then look to an insurance policy to cover the expense. Needless to say, if Universal Music is successful, this will presumably encourage infringing activities for anyone with insurance policies (ie. businesses, universities, even some homeowner policies) that could engage in risk-free conduct secure in the knowledge that an insurer would cover potential liability.