Gawker could have avoided Hulk Hogan payout with insurance coverage, professor argues

UNIVERSITY PARK, Pa. – Adequate insurance coverage would have allowed Gawker to avoid paying any of the $140 million a jury awarded former professional wrestler Hulk Hogan in his invasion of privacy case against the media company, argues Penn State Law visiting assistant professor of law Christopher C. French in a recently published law review article.

The wrestler, using his legal name, Terry Bollea, sued Gawker in a Florida court for invading his privacy when the company published a sex tape online featuring Hogan. In March, a jury delivered a verdict in Bollea v. Gawker, awarding Hogan $55 million in compensatory damages, $60 million for emotional distress, and $25 million in punitive damages. The verdict ultimately caused Gawker to file for Chapter 11 bankruptcy protection and go up for sale.

According to French, however, the company could have avoided paying the damages and its eventual bankruptcy if it had simply purchased sufficient liability insurance.  

In “Sex, Videos, and Insurance: How Gawker Could Have Avoided Financial Responsibility for the $140 Million Hulk Hogan Sex Tape Verdict,” published in the Southern California Law Review Postscript, French explains why conventional wisdom that insurance does not cover punitive damages and intentional torts like invasion of privacy—and that public policy does not allow such coverage—is wrong.

“Under the Personal and Advertising Liability coverage provisions of standard form Commercial General Liability (CGL) policies, numerous types of intentional torts, including claims for invasion of privacy, are covered,” French writes. “Specifically, under such policies, the insurer agrees to ‘pay those sums that the insured becomes legally obligated to pay as damages’ because of ‘oral or written publication, in any manner, of material that violates a person’s right of privacy.’”

French notes that Gawker reportedly only purchased $1 million in CGL insurance, which he calls “a surprisingly low amount for a business that annually generates approximately $45 million in advertising revenue and is regularly sued.”

Still, there are public policy arguments against allowing insurance to cover intentional torts. For instance, French writes, allowing such coverage would undermine the goal of discouraging such torts in the first place. If an entity will not suffer any financial ramifications for invading another’s privacy, then there is little incentive to avoid doing so. Similarly, the goal of deterrence in awarding punitive damages would be undermined if insurance covers punitive awards.

However, French argues that there are sound public policy arguments in support of allowing such coverage: “One, victims should be compensated for their injuries. In many circumstances, the tortfeasor’s insurance is the only significant source of compensation for injured parties because most people are judgment-proof for significant judgment amounts,” he writes. “Two, the terms of contracts, such as insurance policies, should be enforced.”

A number of courts across the country have determined that insurance coverage does and should cover intentional torts like invasion of privacy and that CGL policies can and do cover punitive damage awards.

“When weighing the competing public policies, many courts have concluded that the public policies in favor of enforcing insurance contracts and compensating victims outweigh the public policies of punishing and deterring wrongdoers,” French writes. “So, putting aside the questionable wisdom or legality of posting a celebrity sex video online, if Gawker simply had purchased adequate insurance, then it might have avoided bankruptcy and financial responsibility for the $140 million Hulk Hogan sex tape verdict …”

French has written and published extensively in the area where insurance law intersects with contract and tort law. He has written numerous chapters in a two-volume insurance law treatise entitled Policyholder's Guide to the Law of Insurance Coverage and he is co-author of the fifth edition of Insurance Law in a Nutshell, published by West Academic. His scholarly work has been published in, among other journals, the Georgia State Law Review, Kansas Law Review, Nevada Law Review, University of Pennsylvania Journal of Business Law, Villanova Law Review, and Virginia Law & Business Review.

Prior to joining the faculty at Penn State Law, where he currently teaches Contracts, Insurance Law, Remedies, and Torts, he taught at the University of Pittsburgh School of Law and Villanova Law School. He was formerly a partner at K&L Gates LLP where, as a commercial litigator, he handled all aspects of litigation matters for Fortune 500 companies and other businesses in federal and state courts across the United States, trying cases in seven different states. In addition to his advocacy work, he has also served as an expert witness and both a party-appointed and a neutral arbitrator.