I purchased a stock photo for a client’s website using a standard “Web Use” license for $50. Six months later, the client loved the design so much they blew it up for a national TV spot during the playoffs. The stock agency’s AI crawlers found it immediately and demanded $150,000 for “unauthorized broadcast use.” The client turned around and sued me, claiming I didn’t warn them about the license limits.
Key Takeaways
- You are the “Professional”: The law expects you to understand licensing better than your client. Failing to warn them is “Professional Negligence.”
- “Unauthorized Use” Exclusion: Some policies exclude claims related to copyright infringement if you failed to buy the correct license in the first place.
- The “Duty to Inform”: If you can’t prove you told the client “Web Only,” you are liable for the difference in cost.
- Cross-Claims: This is a triangle. The Stock Agency sues the Client -> The Client sues You. Your insurance steps in at the second arrow.
The “Why”: The Intellectual Property Management Trap
The Trap: General Liability does not cover this. You need E&O (Errors & Omissions).
However, look at the Exclusions. Many policies exclude “Breach of Contract.” If your contract said “I will provide cleared assets” and you provided assets that weren’t cleared for TV, you breached the contract. You need a policy that covers “Intellectual Property Infringement arising out of Professional Negligence.”
The Investigation: I Quoted 3 Major Carriers
1. Thimble
- My Analysis: I checked their IP wording. It’s decent for direct infringement, but thin on “mismanagement of licenses.” If the claim is that you bought the wrong license, they might argue it’s a contract issue.
2. The Hartford
- My Analysis: They are strong here. Their “Media Liability” endorsement specifically anticipates “misappropriation of ideas” and “infringement of copyright.” They would likely defend you against the client’s negligence claim.
3. CNA
- My Analysis: Excellent for agencies. They cover the “content of the matter” extensively. If you are managing large assets, CNA is the safest bet.
[IMAGE: Comparison of “Standard License” vs “Extended License” costs and liabilities]
Comparison Table: Licensing Liability
| Carrier | Covers IP Mismanagement? | Defense Costs | Cost | Best For… |
| Hartford | Yes | Outside Limits | | Full-time Freelancers |
| CNA | Yes (Broad) | Inside Limits | | Agencies |
| Thimble | Limited | Inside Limits | $ | Small Gigs |
Step-by-Step Action Plan
- Find the Receipt: Prove you bought the Web License. You are not a pirate; you just had a scope mismatch.
- Find the Email Warning: Did you ever send an email saying “For web use only”? If yes, you are saved. If no, you are in trouble.
- Notify Carrier: Report it as a “Failure to Instruct” claim.
- Negotiate the Retro-License: Often, the stock agency just wants the money. Your insurance might settle for the cost of the TV license (
5k−5k−10k) to avoid the $150k lawsuit.
FAQ
Why is the client suing me?
Because you are the expert. They assume “I paid for the design” means “I own it for everything.”
Does insurance pay the $150k?
They will try to negotiate it down to the actual value of the license. They pay the settlement + your legal fees.
Am I liable if the client ignored my warning?
No. If you have proof you told them “Web Only” and they ran it on TV anyway, your insurance lawyer will get the case dismissed.