Crescendo: Yin and Yang. Black and White. Dick Cheney and Mother Theresa. Left Brain and Right Brain. Yet, somehow, there is still a connection that can be imagined. Yin and Yang share the same teardrop shape. Black and white are both colors. Left Brain and Right Brain have their Corpus Callosum. Cheney and Mother Theresa both breathe.

Tension and similarity between contrasting notions are what make life intriguing. Take, for example, music and insurance coverage, two of my interests. Can two concepts be any further apart? Somehow, even these polar opposites can share their own unholy bond. Examine the following.

Boston Symphony Orchestra v. Commercial Union Insurance Company, 406 Mass. 7, 545 N.E.2d 1156 (1989).

This case is near and dear to my heart. It has the BSO. It has a movie star. It has Commercial Union. And it involves the “duty to defend”- arguably the most important benefit to liability coverage. The duty means that the insurer will pay your attorney and costs incurred in defending against a claim or lawsuit brought against you, no matter how frivolous or outlandish, as long as the aggrieved party asserts facts suggesting potential liability within the scope of the purchased insurance. Vanessa Redgrave, a well known British actress, is a self-proclaimed human rights activist. If you follow the link, you will have more than enough background as to why she might have been a hot potato in the early 1980s. In March, 1982, the BSO contracted with Redgrave for her appearance as narrator in a series of performances of Igor Stravinsky’s “Oedipus Rex.” When the BSO learned of protests regarding her engagement, it repudiated the contract and, on April 1, 1982, issued a public statement of cancellation. Redgrave’s attorneys demanded that the BSO apologize and restore the engagements and threatened a lawsuit to vindicate Regrave’s rights, including her “right” to speak freely, to perform without fear of blacklisting or discrimination, and not to be subjected to public ridicule or embarrassment. The BSO forwarded this letter to its liability insurer CU, advising that it expected Redgrave’s impending lawsuit would involve claims of damage to her reputation. The anticipated suit arrived a few months later, containing only a claim for breach of contract and allegations that the BSO’s breach “ha[d] led others to refrain from hiring Ms. Redgrave for professional engagements.” The BSO sent the Complaint to CU, which refused to provide a defense because the policy did not cover breach of contract. The BSO then filed its own suit against CU.

As is often the case, the CU policy covered “personal injury” including damages arising out of the oral or written publication of material by an insured that libels or slanders or disparages another person or organization. When a suit contains such an allegation, whether or not supported, the defense benefit could obligate the company to pay for the insured’s defense until liability is found, a settlement is entered or the potentially covered claims are dismissed and concluded.

The Complaint did not use the words “libel,” “slander,” “defamatory” or “disparaging” and there was no assertion of a publication by the BSO. This is not surprising given that the BSO’s only public statement was the notice that the performances were canceled. Nonetheless, the court found that the Complaint allegations did raise a possible claim against the BSO for damages on account of published libel or slander or disparagement. To do so, the court had to rely on the letter and Redgrave’s belief that the cancellation damaged her reputation, causing others not to deal with her. The court also found “disparaging” to be ambiguous enough to include implied harm to reputation allegedly caused by the cancellation. Finally, the court dispensed with CU’s argument that the claim must actually be one for damage arising out of the defamatory or disparaging conduct, instead finding that a suggestion of disparagement, no matter how slight or preposterous, was enough to require an insurer – funded defense.

Reliance National Indemnity Co. v. General Star Indemnity Co., 72 Cal.App.4th 1063, 85 Cal.Rptr.2d 627 (1999)

Lollapalooza. The name conjures up early 1990’s memories of flannel, work boots and grunge. The big music festival is synonymous with Perry Farrell, front man of the early 1990’s group Jane’s Addiction. And what giant concert in the greater Boston area would be complete without Don Law? The date was August 3, 1994, the place, Providence, Rhode Island. Teens everywhere were polishing their nose rings and inking their tattoos in anticipation. Despite the overwhelming smell of teen spirit, the players were relatively sharp business people and knew the value of a contract outlining rights and responsibilities. The contract obligated Law to assume responsibility for harm occurring at the event, protect Lollapalooza from resulting claims and purchase insurance coverage for Lollapalooza insuring that responsibility. To be sure, Lollapalooza had its own primary and excess policies with Reliance but, as is typical in these arrangements, the parties contractually shifted the burden of coverage to the promoter. Law purchased the necessary policy from Gulf Insurance and Lollapalooza was added as an insured. This also permitted Lollapalooza automatic status as an “insured” under Law’s excess policy issued by General Star.

Think of the policies as layers of clothing. The layer closest to your skin, the faded black Metallica t-shirt, is your primary layer of coverage. The buffalo plaid flannel shirt you bought at the Salvation Army store is your first layer excess policy. And, for extra protection, your second-hand snorkel jacket snagged from your bass player in trade for your old Doc Marten’s is your second layer excess policy. The music started. As it happens at these events, “moshing” and “crowd surfing” erupted. These activities are not for the faint of heart. As luck, or fate, would have it, an audience member somehow managed to injure himself while crowd surfing. For the uninitiated, crowd surfing is when an attendee dodges security, climbs onto the stage or any available higher ground and leaps onto the crowd in the hopes it will support his body and pass him like the Wonder ball. Heavy reliance is placed on a willing audience, which is far from guaranteed. When the Lollapalooza audience failed to comply, likely parting before him Red Sea-style, the poor chap suffered more than a bent toenail: his claim was settled for $2,142,858 and an autographed copy of Pavement’s latest release (just kidding on that last part). The insurers all contributed a share. Then the real moshing began.

Lollapalooza’s insurer Reliance argued that Law’s primary and excess insurers, Gulf and General Star, should “shoulder” the entire burden for the settlement. Reliance argued that the indemnification clause in the contract in favor Lollapalooza permitted Reliance to seek recovery from Law’s camp for amounts it paid on Lollapalooza’s behalf – i.e., Reliance could “step into the kicks” of Lollapalooza and assert its rights against Law, Gulf and General Star. In essence, Reliance argued that Law and friends needed to remove all of their clothes before Lollapalooza had to shed a single thread: a classic case of “after you Alphonse – no Gaston, after you…”- insurance style. Gulf caved like a 98-pound weakling frozen in the growing shadow of an approaching, crowd-surfing Tom Brady and settled out with Reliance, leaving Law’s excess insurer, General Star, flying its flannel overshirt. General Star stood its ground, maintaining it was not responsible until both Reliance and Gulf’s primary policies were fully paid out.

The trial court agreed with General Star and granted its summary judgment motion, permitting Law to retain the flannel. The intermediate appellate court agreed. The court held that primary was primary and excess was excess and never the twain shall meet. The court noted policy language plainly stating that first layer coverage must respond entirely before policies clearly intended to be a second layer of protection. The court also rejected Reliance’s plea that equitable considerations, evidenced by the underlying contract’s shift of responsibility to Law, required that Law’s policies fully respond to harm arising out of the event before Lollapalooza’s policies could be targeted. In short, policy language overcame policy considerations. Jane says: keep your shirt on!

Third Eye Blind, Inc. v. Near North Entertainment Insurance Services, Inc., 127 Cal.App.4th 1311, 26 Cal.Rptr.3d 452 (2005)

Ahh. It’s all back stage parties and free beer until someone fires a band member. Then, all bets are off. And if you thought using an insurance broker with a specialty in coverage and risk management for the entertainment industry would protect you, think again. Apparently the alternative rock-pop band Third Eye Blind, its management and its broker failed to see (note subtle pun) that the liability policies it purchased contained a Field of Entertainment Limitation Endorsement (“FELE”) which barred coverage for little things that never would occur in the music business, such as invasion or interference with the right of privacy or publicity, infringement of copyright or trademark, defamation, plagiarism, piracy or unfair competition or breach of contract regarding the band’s professional entertainment work.

The aggrieved former member naturally sued his former bandmates alleging misappropriation of his right of publicity in the unauthorized use of his name, likeness and goodwill and violation of the copyright and trademark laws arising out of the continued use of the name “Third Eye Blind.” When TEB sought insurance help, the insurer flashed the FELE and declined defense and indemnity. TEB defended itself, paying over $3 million in attorneys’ fees and settlement amounts, and then sued its insurer, manager and broker, seeking coverage, or at least reimbursement.

TEB asserted that the broker breached duties as an expert by failing to note the FELE and recommend other coverage for the gap. The trial court ultimately found that the liability insurer did have a duty to defend the suit and the insurer settled its liability with TEB. The action against the broker continued and the trial court entered judgment for the broker and manager based on the liability insurer’s settlement. TEB appealed.

The appeals court reversed. First, the court determined that the actuality of coverage under the CGL was not the “yin” to TEB’s “yang” that the broker should have found other coverage to fill the gap. The court viewed these as independent considerations. The broker’s alleged failure to note the shortfall and recommend other coverage still potentially damaged TEB regardless of the settlement. Since this failure was a proximate cause of TEB’s alleged damages separable from the existence of some coverage under the liability policy, the court reinstated TEB’s claim against the broker. Be careful of calling yourself an expert: someone might hold you to it.

McCraw v. Mensch, 461 F.Supp.2d 872 (W.D.Wis. 2006)

Couldn’t resist this one either – I knew of Mensch back in the day in Chi-Town, when she offered a contract to represent a band in which I was a member. We didn’t end up signing that contract. The BoDeans, however, did sign that contract and Attorney Mensch represented them from 1985 to 1997. In the course of that representation, Mensch also became involved in dealings with their manager, McGraw. As is often the case in music, partnerships break up and the lawsuits fly and Mensch ended up on the wrong end of suits by McGraw and the BoDeans.

Mensch was canny enough to know that she shouldn’t defend herself on multiple fronts and submitted the claims to her professional liability insurer. That policy applied to claims that were made against Mensch and reported to the insurer within the specified policy period or a 60 day extended reporting period. In June, 2004, Mensch was deposed in a suit between McGraw and the Bodeans regarding her earlier representation. In October, 2004, Mensch submitted her insurance renewal application, omitting any reference to possible incidents that could result in a claim or suit arising in the prior 12 months. In December, 2004, Mensch received a letter from the BoDeans’ attorney advising of their intent to bring a legal malpractice suit against her and indicating that, based on her deposition, they doubted she would be surprised.

The insurer sought court intervention, asserting Mensch”s notice was late and breached the policy conditions. Alternatively, the insurer asserted that the two lawsuits should be considered a single claim, subject to a single limit of liability. The court conceded the condition of timely notice must be satisfied before coverage may be extended. But, the insured’s duty to notify only arises when it would appear to a “reasonably prudent” person that a claim may be brought against the insured. The court saw insufficient basis to establish that Mensch, or, assuming one could be found in the Chicago music scene at that time, any other reasonably prudent person, would have been on notice of an impending malpractice claim at the time of the deposition. The court further found that, even if Mensch was put on notice of a potential claim, her five month delay was insufficient to breach the condition.

The court further held that the policy language providing that a single limit was available for a claim arising out of a single act or omission or series of related acts or omissions was ambiguous. Thus, the court applied the rule that a separate claim would be found for each discrete act of negligence in the course of representing Mensch’s clients. The upshot was that Mensch could conceivably secure a separate full limit for each separate negligent act or omission occurring in the course of her representation of McGraw and/or the BoDeans. That’s a lot of singles!

Manzarek v. St. Paul Fire & Marine Ins. Co., — F.3d —-, 2008 WL 763385 (9^th Cir. March 25, 2008) (slip opinion).

This one is fresh! John Densmore, the original drummer of the seminal rock group, The Doors, and estates of controversial frontman Jim Morrison and his late wife brought suit against original band members Ray Manzarek and Robbie Krieger and their new band over plans to tour under the name “Doors Touring, Inc.” The suits alleged that Manzarek and friends were infringing on The Doors’ copyrights and logo in connection with the marketing of products and merchandise. In true petulant, overly-sensitive-rock-musician style, Densmore added that he suffered economic damages and injury to his reputation since it appeared that Densmore was not an integral part of the band and could be easily replaced. These suits resulted in liability against Manzarek and Company, but no damages were awarded. Manzarek incurred over $3 million in legal fees.

St. Paul issued two liability policies: one to Manzarek and one to Manzarek, Kreiger and DTI. Although the policies were in effect at the time Manzarek and friends tendered the matter, St. Paul had not yet actually provided them with copies. The policies contained standard language, covering accidental “bodily injury”, as well as “advertising injury” and it was conceded by all that some of the alleged misconduct fell within the “advertising injury” definition. However, FELE reared its ugly head again, limiting coverage for “advertising injury” in connection with advertising or publicizing within the insured’s “field of entertainment” business. The definition of this latter term was sufficiently broad to include just about anything having to do with entertainment generally and music in particular. The endorsement did not affect the “bodily injury” coverage and “bodily injury” was defined to include mental anguish.

When St. Paul refused to provide a defense or a promise of indemnity, Manzarek and DTI filed their own suit against St. Paul. The trial court granted St. Paul’s motion to dismiss and Manzarek appealed. The Court of Appeals reversed, finding the Complaints left open the possibility that the insureds engaged in covered “advertising injury” in connection with goods other than music, outside the scope of the FELE. The Court posited that the endorsement would not exclude coverage should Manzarek and friends bottle and sell salad dressing called “The Door’s Own” bearing a label with a picture of Jim Morrison, no doubt “red wine and poppy seed” flavored. The Complaint did not clearly rule out this possibility. The Court also found Densmore’s allegation that Manzarek and DTI injured his reputation by causing people to believe he was not an integral part of The Doors implied mental anguish and “bodily injury”. Finally, the court raised the issue that the various insureds likely did not know the contents of the endorsement when they tendered the claim and, therefore, could not have been aware of the import of the language. Thus, the court found that St. Paul breached its “duty to defend.” This of course begs the question: would Manzarek, et al., have grokked the language had they actually had the chance to read it earlier in the time-line?

Coda: Music and insurance make an unlikely duet. Nonetheless, the importance of proper coverage in all commercial and personal transactions, even in creative pursuits, forms a bridge between disparage verses and chorus. Understanding the scope of coverage before a need arises can keep that relationship harmonious and melodious. Whether its rock, pop, jazz, or classical, “cover”-age songs still pay the bills. And that’s a wrap.