Do You Need Liability Insurance?
by Daniel Steven

It’s a lawsuit-happy world out there, and even fiction writers need to be aware of the dangers.  If you write true-crime novels, for example, you might be sued for defamation, invasion of privacy, or violation of the right of publicity.  Or your novel may be too close to someone else’s novel, and you could be sued for copyright infringement.  Let’s look at some of the common questions and issues.
 
Q.  Doesn’t my publisher carry insurance?
 
A.  Yes, most publishers have a “publisher’s perils” insurance policy.  This policy, however, protects the publisher, not you -- unless you are specifically added as an “additional insured.”  Depending on your negotiating power, some publishers will be willing to do this without cost to you, while others will refuse the request or require you to pay for the an endorsement to their policy.
 
Q.  If my publisher defends the lawsuit, why do I have to worry?
 
A.  If both you and your publisher are sued (the usual situation) then, to the extent the publisher defends the case, you also will benefit.  However, there may be a conflict of interest between you and the publisher, or the publisher may settle, leaving you alone in the lawsuit.  Furthermore, most publishing agreements require the author to indemnify the publisher for all claims and damages resulting from a breach of the author’s warranties (see below).  As a result of this indemnification clause, you will have to pay not only your own attorney’s fees, costs, and any judgment, but also those of the publisher. 
 
Q.  Can I limit this liability to my publisher?
 
A.  Yes.  Publishing agreements usually include both a warranties clause and an indemnification clause.  In the warranties clause, you warrant that your manuscript does not violate any copyright, does not defame anyone, or violate any privacy or other personal rights.  In the indemnification clause, you agree to pay the publisher for any damages it suffers as a result of your breach of these warranties.  As a minimum, you should limit your warranties to a “best of your knowledge” standard, and amend the standard indemnity clause by limiting your obligation to repay the publisher to “final judgments,” i.e., judgments that have been finally sustained after all appeals are exhausted.  This will protect you from having to reimburse the publisher for frivolous lawsuits.
 
Q.  Should I buy my own liability insurance?
 
A. Ideally, yes.  All authors should be covered for copyright and trademark infringement, libel (written defamation), slander (slander – spoken defamation – can occur in an audio version of the book or in an author interview), invasion of privacy, invasion of the rights of publicity, and unfair competition.  This is a so-called “media perils” policy.
 
Q.  What is the cost of a media perils policy?
 
A.  Unfortunately, the cost of an individual media perils policy often is thousands of dollars a year.  The cost will vary, however, with the nature of the book or other work, the deductible amount, and the amount of coverage.  In general, the more extensive your coverage, the more expensive will be the policy.  You can contact any general insurance broker to get quotes for media perils insurance, or go directly to companies that specialize in publisher’s insurance, such as Argo Insurance (http://www.publiability.com.). 
 
Q.  What kind of policy should I buy?
 
You may have to choose between two types of coverage: “occurrence” or “claims made.” With the more expensive “occurrence” type policy, you will be covered whenever a claim is actually made, even after the policy expires, as long as your novel is published during the term of the policy.  The less expensive “claims made” policy only provides coverage in the event a claim is made during the term of the policy – this means you’ll have to renew every at least every year your book is in print. 
 
You also can reduce the policy’s cost by choosing a large deductible: you are effectively “self-insuring” for this amount.  For example, a $10,000 deductible means that the insurance company would defend you – hiring an experienced lawyer on your behalf – but would bill you for the first $10,000 of legal expense and/or any settlement below that amount.
 
In this regard, make sure you understand how your policy handles “costs of defense.”   Ideally, the policy should pay for your attorney fees over and above any coverage for damages, after the deductible.  Some less expensive policies, however, include the attorney fees in the overall coverage limits.
 
Q.  Can I limit my liability by incorporating?
 
A.  To some degree.  If you assign your copyright to a copyright or limited liability company, there are contract claims you can avoid personally, but not copyright infringement or defamation – as the author, you always can be sued individually for these. 
 
Conclusion
 
Because of its cost, most fiction writers will forgo liability insurance.  If, however, your book has a high risk factor because of its subject matter or characterization, it may be worth investing in liability insurance.  You’ll sleep better at night.
 
© 2003 Daniel Steven