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The HO Policy and Illegal Music Downloads

Author: Bill Wilson

The chances are good that someone in your household or that of your customers is downloading music or other types of files from iTunes or other online services. It is also possible that someone is using a file sharing program to download files illegally. Are the increasing number of lawsuits against consumers covered by a homeowners policy?


On June 18, 2009, the first illegal music downloading case to go to a jury trial resulted in a verdict requiring a mother of four children to pay $1.92 MILLION for illegally downloading 24 songs from the Kaaza file-sharing web site. This amounts to $80,000 per song, though she could have been hit for $150,000 per song for the over 1,300 songs she allegedly downloaded (over $195 million). Note: For a 2010 update on this story, click here. For a 2013 update on this story, click here.

On July 31, 2009, a federal jury ordered a Boston University graduate student to pay $675,000 for illegally downloading and sharing music online. He admitted to downloading hundreds of songs but the suit only specified 30 songs for which he was ordered to pay $22,500 each. He could have been found liable for up to $150,000 per song for a maximum of $4.5 million. For the full story, click here.

In the December 2005 decision BMG Music et al v. Cecilia Gonzalez, a federal court ruled that the illegal downloading of songs by a consumer constituted copyright infringement and awarded damages against her of $22,500 for downloading 30 songs ($750 penalty per song). The defendant had actually downloaded 1,370 songs and, under federal law (while it is highly unlikely), the damages could have potentially been assessed at over $205 million.

To read the full article on this subject, click here. To listen to oral arguments by downloading an MP3 file (legally, I assure you :-) and a PDF of the court's decision, click here.

The chances are good that someone in your household or that of your customers is downloading music or other types of files from iTunes, other online services, or a peer-to-peer file-sharing network. It is also possible that someone is downloading these files illegally. Are the increasing number of claims and lawsuits against consumers covered by a homeowners policy? If not, can coverage be added by endorsement?

First of all, there would probably be no coverage under Section II of an ISO Homeowners policy for at least three potential reasons:

  1. The insuring agreement would not be triggered because there has been no "occurrence" as defined by the policy:

    "Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period, in:

    a. "Bodily injury"; or
    b. "Property damage".

    Since, in most cases, the person downloading the songs or files is aware of the illegality of their theft or infringement, there has been no "accident."

  2. This position, if true, is supported by the "intentional loss" exclusion:

    Expected Or Intended Injury
    "Bodily injury" or "property damage" which is expected or intended by an "insured" even if the resulting "bodily injury" or "property damage":

    a. Is of a different kind, quality or degree than initially expected or intended; or
    b. Is sustained by a different person, entity, real or personal property, than initially expected or intended.

    However, this Exclusion E.1. does not apply to "bodily injury" resulting from the use of reasonable force by an "insured" to protect persons or property;

  3. Even if the loss could be considered an "occurrence," the insuring agreement is still not triggered because there has been no "property damage" as defined by the policy:

    "Property damage" means physical injury to, destruction of, or loss of use of tangible property.

    The MP3s or other types of electronic files are not tangible property, nor have they been physically injured. Therefore, without any "property damage," coverage is not triggered.

Second, the only endorsement that could potentially provide coverage is the HO 24 82 - Personal Injury endorsement with covers "personal injuries" as defined in the form:

"Personal injury" means injury arising out of one or more of the following offenses, but only if the offense was committed during the policy period:

1. False arrest, detention or imprisonment;

2. Malicious prosecution;

3. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor;

4. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services; or

5. Oral or written publication of material that violates a person's right of privacy.

Clearly, copyright infringement is not defined to be a "personal injury." Even if it was, the following exclusions would most likely remove coverage for the reasons outlined above:

With respect to the coverage provided by this endorsement, Section II – Exclusions is deleted and replaced by the following:
This insurance does not apply to:
1. "Personal Injury":
   a. Caused by or at the direction of an "insured"
      with the knowledge that the act would violate
      the rights of another and would inflict
      "personal injury";
   d. Arising out of a criminal act committed by or
      at the direction of an "insured";

Since insureds can almost certainly not rely on insurance coverage for what could be a potentially catastrophic legal liability claim, it is imperative that they understand that the consequences for unlawful conduct on the internet can be severe. Since many of the users illlegally downloading files are teens, it is also important that parents communicate the seriousness of this and that, if warranted, they monitor their children's activities online.

More information:

Last Updated:  November 5, 2010
August 3, 2009

​127 South Peyton Street
Alexandria VA 22314
​phone: 800.221.7917
fax: 703.683.7556

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