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Cox Communications’ insurers don’t want to pay for BMG/Round Hill legal battle

By Chris Cooke | Published on Wednesday 25 November 2015

Bad things come in threes, apparently. So here’s bad thing number two for US internet service provider Cox Communications. According to Torrentfreak, the ISP’s insurer – the Lloyds Of London underwriter Beazley – is refusing to cover legal costs linked to and any liabilities stemming from the case brought against it by BMG and Round Hill Music. We await number three.

As previously reported, Cox is currently embroiled in a legal battle with the two music rights firms over its refusal to forward warning letters to suspected online copyright infringers among its customer base. Cox is not part of the anti-piracy Copyright Alert System that most other big American ISPs are signed up to, but instead has its own system for dealing with complaints by copyright owners against its users. Though BMG and Round Hill reckon that’s a rubbish system.

Cox argues that its refusal to help BMG and Round Hill deliver warnings to its allegedly file-sharing customers was down to their employment of anti-piracy agency Rightscorp, whose warning letters to potential pirates have been criticised elsewhere.

Either way, with the legal dispute set to head to court next month, last week the judge overseeing the proceedings issued a pre-trial ruling on some key matters. The most important being whether or not Cox could rely on so called safe harbour protection under US law. If it can – and all ISPs claim safe harbour protection – it cannot be held liable for any copyright infringement conducted on its networks by its customers.

The judge said that, by failing to forward BMG and Round Hill’s warning letters, Cox had lost the safe harbour protection. Given that issue is at the heart of this case, it was surprising that the judge ruled on the matter in summary judgement ahead of trial, but him doing so was a major setback for the net firm.

And now comes setback number two. Beazley is seeking court confirmation that it is not liable to pay Cox Communications’ legal costs – which have reportedly already topped $1 million – or any damages it may or may not have to pay to the music firms down the line, basically on the basis that the ISP was stupid to let this matter go legal, and should have just forwarded on BMG and Round Hill’s warning letters.

Specifically, Beazley says that the legal costs and damages payments Cox is incurring, or may incur, stem from “an intentional business policy” of not forwarding Rightscorp letters, rather than through the simple “act of rendering internet services”, which is what the ISP’s insurance policy covers.

Say the insurers in their court filing: “By letter dated 9 Jan 2012, Cox was advised by an agent of copyright holders that if it did not forward those notices to its customers, it would be exposed to claims of contributory and vicarious copyright infringement. Cox continued to intentionally ignore the notices and did not forward them to its customers”.

So, the current legal woes “arose out of Cox’s policy and practice of ignoring and failing to forward infringement notices and refusing to terminate or block infringing customers’ accounts, not acts in rendering internet services”.

Just in case that argument doesn’t work with the judge, the insurer adds that the lawsuit against Cox was filed a year ago, whereas the net firm’s insurance policy starts on 1 Dec 2014. It remains to be seen how the judge rules on this matter, but it could make Cox’s stand against the Rightscorp approach to tackling piracy a costly endeavour for the ISP.