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Insurers Win Ruling Against Fox, New World

NEW YORK (CN) - The 2nd Circuit reversed dismissal of a declaratory judgment action alleging that two insurers have no duty to defend Fox Film, Fox Television and New World Television Productions in a copyright infringement lawsuit over the music from the TV show "Santa Barbara."

Employers Insurance of Wausau and National Casualty Company claim Fox and New World waited a year and a half to notify them that the owners of music by composer Aeone Watson had filed a $75 million class action accusing the networks of using Aeone's copyrighted recordings in "Santa Barbara" without their permission.

The insurers claimed they had no obligations to the defendants in the underlying suit because the entertainment companies did not timely notify them about the claim or request coverage.

Defendants filed their own lawsuit seeking damages for breach of contract and a declaration that the insurers had to defend them in the class action.

After suffering a few setbacks, the insurers had their case dismissed by a district judge who concluded that "special circumstances" required Fox and New World's lawsuit to take priority over theirs, which had been filed first.

The federal appeals court reversed and remanded, saying the lower court must "balance the conveniences" before it can depart from the first-filed rule. It rejected the district court's finding that the second suit took priority because the insurers had tried to manipulate the forum by deliberately leaving New World off the initial complaint in order to keep the case in New York instead of California.

No such special circumstances existed, the appeals court ruled.

It also reversed dismissal of Fox Entertainment and News Corp. from the case.

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