AIG can’t escape coverage for Amway’s copyright infringement claims

In multiple copyright claims spanning a period of many years, Amway was pursued by major recording companies including Sony Music Entertainment and Warner Music Group for copyright infringement, arising from the unlawful use of their recordings by Amway’s independent business owners. The owners created marketing videos that unlawfully incorporated copyrighted music recordings and uploaded them onto major websites such as YouTube and Vimeo.

Amway settled the dispute on a global basis in 2017 for approximately $7.6 million, and sought coverage from two of its insurance companies, both part of AIG. The AIG insurers refused coverage and litigation ensued.

AIG argued that the losses weren’t covered because Amway had a prior settlement with the same companies. Therefore, the new claims Amway settled related to acts that occurred prior to the inception dates of the policies under which Amway sought coverage. The federal court rejected this argument, stating that the Internet video claims at issue involved different technology, different time periods, different copyrighted works, and different independent business owners from those involved in the 1996 lawsuit and settlement.

The AIG insurers also argued that the earlier litigation ended with the parties agreeing to an alternative dispute resolution process to address future claims, thus barring these claims as part of the prior resolution. AIG argued that this ADR process made the new claims sufficiently related to the prior settled claims, because all of these claims arose prior to the inception of the AIG policies. The federal court rejected this argument, as well, reiterating that the new claims involved different independent business organizations, different technology and new claims that primarily post-dated the settlement of the 1996 case.

Although there are issues between the parties that remain unresolved and the litigation continues, round one goes to Amway.

Cases like this are a reminder to policyholders that the tenacious policyholder who does not give up can get themselves the coverage they paid for.

If are having an issue getting your insurance company to pay for coverage for you or your business, please contact us.


Evan S. Schwartz
Founder of Schwartz, Conroy & Hack