Reality Kings' Insurer Denies Coverage in Record Industry Suit

Sep 16, 2010 6:15 PM PST
LOS ANGELES — Reality Kings, which faces copyright infringement claims from 26 recording company plaintiffs, says it has an opportunity to settle the lawsuit for a "reasonable amount" when the parties face a mediator next month.

But Reality Kings' parent, RK Netmedia, has been hung up with another pressing issue — its insurer refuses to provide funding for litigation efforts to defend itself against the recording companies, including any possible settlement coverage.

Reality Kings, in court papers obtained by XBIZ, says that it has been paying premiums for several years for two policies that provide $1 million each in coverage and that American Safety Indemnity Company is "failing and refusing to defend and indemnify" the adult company in the recording company suit.

American Safety contends in an exchange of correspondence with Reality Kings that its general liability policy precludes coverage for claims based on copyright, patent and trademark infringements, as well as "knowing violation of rights of another."

To make matters even more contentious, Reality Kings says that American Safety has refused to send representatives to attend the mediation hearing before retired Judge Layn Phillips on Oct. 15.

"[American Safety] has failed to provide a defense to Reality Kings, has refused to attend the mediation scheduled with [plaintiffs], has refused to make available funds from the policies settlement ... when under circumstances, a reasonably prudent person faced with the prospect of paying the totally recovery amount would do so, and has not agreed to indemnify [Reality Kings]," the suit said.

As a result, Reality Kings filed suit last week against American Safety for breach of contract, claiming that American Safety "engaged in bad faith conduct" to protect its own interests.

For the past two months, Reality Kings has been defending itself in federal court over the use of recorded music used in connection with 112 Reality Kings videos.

The suit, filed in July at U.S. District Court in Los Angeles and amended last week, originally had eight plaintiffs suing Reality Kings, but that list has more than tripled to 26, involving an assortment of recording studios, labels and copyright holders.

The recording companies say that Reality Kings poached the most-popular recordings from Madonna, Flo Rida, Gnarls Barkley, Sean Paul, Katy Perry, Bubba Sparxxx and David Gueta. It also said it stole musical compositions written or co-written by Michael Jackson, T.I., Katy Perry, Timbaland, Dr. Dre, Lil Wayne, Sisqo, Kelly Clarkson, Sean "Puffy" Combs, Notorious B.I.G. and Usher.

According to the suit, Reality Kings “simply stole these sound recordings and music compositions, synchronizing plaintiff’s works more than 500 times onto the soundtrack of their pornographic videos without license of consent from the plaintiffs.”

The plaintiffs claim that Reality Kings "not only incorporated plaintiff’s works into their videos, but then used them to draw an audience to their website and to advertise and promote their videos… encouraging their performers to lip-synch the lyrics to plaintiff’s recordings while engaged in sexual acts on-camera.”

"Ironically, while infringing hundreds of Plaintiffs' sound recordings and musical compositions, [Reality Kings'] terms and conditions disingenuously states that 'the [site] respects the intellectual property of others,'" says the suit, which seeks $150,000 for each alleged infringement.

Reality Kings attorneys Robert Josefsberg and Bruce Van Dalsem did not immediately return XBIZ calls to comment on the new developments.

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