United States: Insurer’s Use of Narrative Policy Language From Another Insurer’s Policies Held to be Copyright Infringement

Copyright law protects expression, not ideas. Although it is well-settled that an insurer can protect its intellectual property rights in an insurance policy by obtaining a copyright, it has long been an open question as to the scope, if any, of that protection. Generally speaking, a copyright in the form of an insurance policy does not prevent other insurers from using the insurance plan contained in the copyrighted policy. Similarly, an insurer can include clauses and provisions similar to those in a copyrighted policy as long as the original expression is not copied wholesale. So, is there a real benefit to copyrighting an insurance policy? Are there any real dangers in "paraphrasing" the policies of other insurance companies?

Since at least the 1930s, federal circuit courts have adhered to the general view that "[t]o constitute infringement … a showing of appropriation in the exact form or substantially so of the copyrighted material should be required." Historically, courts have been loathe to find copyright infringement in insurance policies as well as many other commercial works (particularly business forms) unless there is a "striking" or "substantial" similarity between two policies. Courts rationalize that, with respect to insurance policies, "[a]ll the words and expressions are commonplace within the insurance field" and, thus, "what might be called a paraphrase and plagiarism in another work, is significantly different for the purposes of comparing two insurance policies." As one court has stated with regard to insurance and other business forms, there is "a stiff standard of proof for infringement." In other words, courts have traditionally required a finding of near identity (or more) before holding that a copyrighted insurance policy has been infringed. On January 11, 2006, however, the United States District Court for the Northern District of Georgia issued a summary judgment and preliminary injunction ruling in American Family Life Insurance Co. of Columbus v. Assurant, Inc., No. 1:05-CV-1462-BBM, which may have changed forever the way insurers look at their policies in terms of copyright law.

The facts of the American Family case are briefly summarized as follows. American Family Life Insurance Company of Columbus (AFLAC) produced four supplemental insurance policies — cancer indemnity insurance, hospital confinement indemnity insurance, hospital confinement sickness indemnity insurance, and an accident-only policy — that AFLAC drafted in a "narrative" style. AFLAC used this narrative style believing that it would be easier for laypersons to digest than the traditional legalistic style employed by most insurance companies. The evidence introduced during the course of the proceedings showed that it took approximately eight to nine months for AFLAC employees to transform the style of existing policies into the narrative style. Once completed, AFLAC registered the policies with the United States Copyright Office. AFLAC subsequently sued the defendants alleging that the defendants infringed AFLAC's copyrights.

The defendants — Assurant, Inc., Fortis Insurance Company, and the John Alden Life Insurance Company — traditionally have been known for major medical insurance coverage but began looking to develop their own line of supplemental insurance policies in December 2003. Initial drafts of the defendants’ supplemental policies were created in early January 2004 and were filed in April 2004. Evidence in the record indicated, among other things, that the defendants hired a former AFLAC senior vice president and risk manager to develop the supplemental policies, the defendants had made a failed attempt to enter the supplemental insurance market in 2002, and some initial versions of the defendants’ draft policies were verbatim copies of AFLAC’s policies.

A basic tenet of copyright law is that a work must be original to the author in order to receive copyright protection. The defendants thus argued that AFLAC failed to identify any original expression in its supplemental policies that was copyrightable; that AFLAC's creation of these policies reflected nothing more than AFLAC making discretionary decisions about providing insurance services based on previous policies. The court rejected this argument finding that AFLAC had made many discretionary choices in drafting its supplemental policies. According to the court, AFLAC modified its old policies through devices like editorial revisions, annotations, and elaborations. These modifications created a copyrightable interest in the new, narrative style policies. The court went even further, finding that even if AFLAC relied merely on discretionary decisions about what benefits to offer for purposes of its infringement claim, that, too, was protected by copyright law. In short, the court found that AFLAC's supplemental, derivative work policies met the threshold for originality.

The defendants next argued that AFLAC could not enforce copyrights in the new supplemental policies because, the defendants claimed, AFLAC surrendered its policy language to the public domain by failing to sue other insurance companies which previously copied AFLAC’s earlier policy language — the language AFLAC transformed into its narrative style supplemental policies. The court rejected this argument, holding that even if the old policies were part of the public domain, AFLAC had a new copyright interest in the new policies. The differences between the old policies and the new policies were sufficient to establish that the new policies were protected as derivative works.

Finally, the defendants argued that the language AFLAC used in its supplemental policies was necessary to express the idea underlying that language and, thus, not copyrightable. Under what is known as the "merger doctrine," when there are so few ways of expressing an idea that the idea and its expression merge, copyright law provides no protection for the expression because the protection would be on the idea itself. The court found that AFLAC used language commonly found in insurance policies in sections covering definitions, limitations, and exclusions. The Court accordingly held that AFLAC could not assert its rights over these sections of the policies. In contrast, the narrative language benefits sections of AFLAC's new policies did not reflect language commonly used in the industry and, thus, AFLAC could assert its rights over those portions of the policies. As a result, the court ruled that the defendants had closely copied the narrative benefits section of two policies and granted summary judgment and a preliminary injunction in favor of AFLAC.

Although it is too early to tell if the American Family decision marks the beginning of a reversal of the decades-long trend of the courts' general refusal to find infringement of a copyright over an insurance policy, the case signals the opportunity for the policy writing departments of insurance companies to conduct a thorough review of their policy drafting procedures and related copyrighting practices.

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