Guild accuses the insurer of reneging on policy covering legal claims

The Screen Actors Guild has sued Federal Insurance Co. for refusing to reimburse $330,000 the guild paid to settle Ken Osmond’s class-action suit over foreign tax revenues.

Filed Friday in Los Angeles Superior Court, the suit alleges that Federal is in breach of contract under the terms of the policy covering legal claims, which was in effect when Osmond filed his action in 2007.

Federal Insurance was not immediately available for comment. SAG alleges that the insurer had agreed in 2008 to defend the action, then decided last month not to reimburse SAG on the basis that the guild was “not legally entitled” to the foreign funds.

Osmond, who played Eddie Haskell in “Leave It to Beaver,” sued over SAG’s handling of “foreign levies” collected from countries through mechanisms such as taxes on video sales and rentals to compensate copyright holders for reuse. The guild reached a preliminary settlement last August with Osmond and finalized it in February, under which he received $15,000 and his lawyers received $315,000.

SAG has insisted it’s done nothing wrong and settled to avoid the cost of litigation, an assertion it maintained in the suit against Federal.

The SAG suit also noted that Federal had litigated unsuccessfully in a similar situation in 2006, and asserted that the insurer has since been made aware that only a judicial determination of “wrongful profit” — not just an allegation — excludes it from paying such claims.

SAG is seeking damages of $330,000 on each of its two claims, plus its additional costs.

The Osmond settlement brought about judicial oversight of SAG’s handling of “foreign levies,” which started flowing in 1989 after the U.S. agreed to the terms of the Berne Convention establishing the right of authorship for individuals. SAG, the WGA and the DGA began collecting the funds in the early 1990s on behalf of members and nonmembers.

Osmond’s suit contended that SAG overstepped its authority to make those agreements and never disclosed them until he and Jack Klugman threatened to file suit. A similar suit on the foreign levies issue was filed in 2005 against the WGA West by William Richert and was settled last year; another was filed in 2006 against the DGA by William Webb, who settled in 2008.

SAG had contacted nearly 100,000 people who could be recipients of the foreign funds with only 31 opting out and only a single objection from Eric Hughes. He asserted in February’s filing that SAG’s agreements with foreign collecting societies allegedly indemnify the societies if claims are filed that the foreign funds haven’t been properly distributed.

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