Andy Warhol Found. Visual Arts v. Fed'l Ins.
| Decision Date | 01 August 1998 |
| Docket Number | Docket No. 98-7914 |
| Citation | 189 F.3d 208 |
| Parties | (2nd Cir. 1999) ANDY WARHOL FOUNDATION FOR THE VISUAL ARTS, INC.; FREDERICK W. HUGHES, as Executor of The Estate of Andy Warhol, Plaintiffs-Appellants, v. FEDERAL INSURANCE COMPANY, Defendant-Appellee |
| Court | U.S. Court of Appeals — Second Circuit |
HOWARD S. SCHRADER, New York, New York (Paul J. Hanly, Jr., Coblence & Warner, New York, New York, of counsel), for Plaintiffs-Appellants.
CURTIS C. MECHLING, New York, New York (Michael F. Perlis, Charles E. Torres, Stroock & Stroock & Lavan LLP, New York, New York, of counsel), for Defendant-Appellee.
Before: WINTER, Chief Judge, CARDAMONE, and PARKER, Circuit Judges
In this appeal we discuss the question of when a "claim" is made so as to trigger an insured's obligation to give notice to its insurer. Among other things, one necessary ingredient distilled from a survey of the decisional law is that a party that has a claim must itself assert it: a concept perfectly capsulized in Longfellow's "Why don't you speak for yourself, John?" Henry W. Longfellow, The Courtship of Miles Standish, in The Complete Poetical Works of Henry Wadsworth Longfellow 197 (Houghton, Mifflin & Co., Household ed. 1901).
More specifically, the appeal deals with whether notice to an insurance carrier of liability claims made against its insureds was given as soon as practicable so as to trigger the company's obligation to provide coverage. The genesis of the litigation began at the 1963 funeral of President John F. Kennedy when a professional photographer named Henri Dauman snapped a picture of the President's widow, Jacqueline Kennedy, that was later published in Life magazine, a Time Inc. publication. The photograph was copyrighted by Time and as a result by Dauman. Subsequently, the famous American pop-artist Andy Warhol allegedly improperly incorporated the copyrighted photo into his artworks. Such use of the photo precipitated a copyright infringement suit by the copyright holders against the Andy Warhol Foundation for the Visual Arts, Inc. (Foundation) and Frederick W. Hughes, as executor of the Estate of Andy Warhol (Estate) (collectively, Warhol entities). Both these Warhol entities are insured by Federal Insurance Company (Federal), the liability carrier in this case.
When Dauman and Time filed a copyright infringement suit against the Foundation and the Estate in federal district court, the Warhol entities asked Federal to provide coverage. Federal refused on the grounds that it had not been given timely notice of the claims as required by the policy. The Foundation and the Estate thereupon instituted the instant declaratory judgment action in the United States District Court for the Southern District of New York (Griesa, J.) as plaintiffs seeking a judicial ruling that they are covered by the carrier's policy for any liability that might be found against them in Dauman's and Time's copyright infringement suit. The district court granted Federal's motion for summary judgment and dismissed the complaint. From that judgment, plaintiffs appeal.
Plaintiffs in the declaratory judgment suit are the Foundation, a not-for-profit organization dedicated to supporting the advancement of the visual arts, and the Estate, which held most of the assets of the late Andy Warhol and is administered in New York State by plaintiff Hughes as executor. In December 1995 Federal issued an Association Directors & Officers Liability Insurance Policy (policy) to the Warhol entities, as it had for the two prior years, with a policy term from December 18, 1995 to December 18, 1996. The policy is a "claims made" policy, meaning that coverage is provided only for claims actually made against the Foundation and the Estate during the period when the policy is in effect.
Separate "Insuring Clauses" of the policy spell out the various circumstances in which coverage is triggered. This case concerns only the coverage of Insured Associations - here the Foundation and the Estate - a subject addressed in Clauses 1.3 and 1.4 of the policy. Under Clause 1.3, Federal agreed to pay all "Loss" resulting from a claim for a "Wrongful Act" made against any "Insured Association" and reported to Federal during the policy period. A Wrongful Act is defined in § 8.1, as amended by Endorsement Number six, as:
[A]ny error, misstatement or misleading statement, act or omission, or neglect or breach of duty committed, attempted or allegedly committed or attempted by an Insured individually or otherwise, in the discharge of his duties to the association, or any matter claimed against him solely by reason of his serving in such capacity .... All such causally connected errors, statements, acts, omissions, neglects or breaches of duty or other such matters committed or attempted by, allegedly committed or attempted by or claimed against one or more of the Insureds shall be deemed interrelated Wrongful Acts.
Clause 1.4 further obligated Federal to pay on behalf of any Insured Association all "Loss" resulting from a claim for certain specified types of acts enumerated in Clause 1.4, including "infringement of copyright or trademark or unauthorized use of title," made against any Insured Association and reported to Federal during the policy period. Thus, the insuring clauses provide coverage generally for Wrongful Acts in Clause 1.3, and then provide coverage for certain specified types of acts in Clause 1.4.
The term "claim," used in both Clauses 1.3 and 1.4, is not defined in the policy. Nonetheless, both clauses provide for reporting to Federal of any claim "in accordance with Section 4" of the policy. Section 4.1 states
A specific Wrongful Act shall be considered to have been first reported to [Federal]:
(A) at the time that any Insured(s) first give written notice to [Federal] that a claim has been made against the Insured(s) for such Wrongful Act; or
(B) at the time that the Insured(s) first gives written notice to [Federal] (1) of the material facts or circumstances relating to such Wrongful Act as facts or circumstances having the potential of giving rise to a claim being made against the Insured(s) or (2) of the receipt of written or oral notice from any party that it is the intention of such party to hold the Insured(s) responsible for such Wrongful Act; whichever occurs first.
Further, under § 4.2, "as a condition precedent to their rights under [the] policy" the Foundation and the Estate were required to give Federal "written notice as soon as practicable of any claim" made against them.
With these policy provisions in mind, we examine the copyright suit brought against the Foundation and the Estate. On October 25, 1994 the attorneys for Dauman sent a letter to the Foundation with a copy to the Estate, which set forth in detail acts of alleged copyright infringement committed by the Foundation and/or the Estate. Specifically, the letter asserted that Henri Dauman was the undisputed author of the Jacqueline Kennedy photograph taken at her husband's funeral. According to Dauman's letter, this photograph was first published by Life magazine on December 6, 1963 with Dauman's express permission. The letter states that Life took "all appropriate steps to preserve Mr. Dauman's interests in the Photograph by, among other things, . . . affixing a copyright symbol and Mr. Dauman's name as required by the copyright laws of the United States." This photograph, according to Dauman, was subsequently wrongfully copied and appropriated by the artist Andy Warhol for use in a large number of his artworks. The Foundation and the Estate allegedly compounded that wrong by selling these works and including the photograph in publications. The letter demanded compensation and assurances that there would be no further infringement.
On October 27, 1994 counsel to the Foundation responded, requesting additional information from Dauman's counsel and indicating a willingness to meet and "discuss your client's claim." Counsel for Dauman replied with a letter dated January 6, 1995, describing, among other things, Time's registered copyright and its number. The letter added that counsel for Dauman "have communicated with counsel for Time, who has expressed support for our position in this matter and who has further indicated a willingness to take all reasonable and necessary steps as may be appropriate to effect a recovery in this matter."
In an attempt to facilitate a settlement, on May 31, 1995 Dauman and the Foundation entered into a "tolling agreement" (agreement), which recited that Dauman and the Foundation "are aware of claims arising out of the use by Andy Warhol of a photograph of Jackie Kennedy taken by Dauman." It provided for a tolling of the statute of limitations until 30 days after written notice of termination of the agreement, during which time settlement negotiations were to be held.
These negotiations did not succeed, so Dauman and Time sued for copyright infringement in the Southern District of New York on December 6, 1996. See Dauman v. Andy Warhol Found. for the Visual Arts, Inc., No. 96 Civ. 9219 (S.D.N.Y. filed Dec. 6, 1996). When Dauman and the Warhol entities attempted to negotiate a settlement, counsel for Dauman was not representing Time, and therefore did not purport to assert a claim on its behalf....
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