Hulk Hogan’s $140 Million Sex Tape Verdict May Trigger Gawker’s Insurance Policies (Gawker Hopes)
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On March 18, 2016, a Florida jury awarded Hulk Hogan (real name Terry Bollea) $115 million in damages in his lawsuit against Mr. Bollea sued Gawker in Florida state court after it published portions of a video showing him having sex with the wife of a former friend, Todd Clem (a DJ better known as Bubba the Love Sponge). Mr. Bollea claimed he did not know he was being filmed and sought $100 million. He claimed, among other things, that his “goodwill, commercial value, and brand [were] substantially harmed” and that he suffered emotional distress by the posting. Following trial, the jury deliberated for six hours and awarded more than the amount sought: $55 million for economic harm and $60 million for emotional distress. On March 21, 2016, the jury awarded an additional $25 million in punitive damages.

At least some of Gawker’s liability would have been covered under a typical commercial general liability (CGL) insurance policy, which would cover damages awarded against an insured because of negligent acts that cause bodily injury or because of privacy violations causing personal injury. In this case, however, Gawker and its CGL insurer have already litigated the extent of coverage available. The insurer sued Gawker in July 2014 seeking a declaratory judgment that Gawker’s policy did not apply to the underlying case and seeking reimbursement of defense costs. Following cross motions for summary judgment, the parties settled. The parties filed a stipulation of dismissal with prejudice in March 2015. The terms of the settlement were not disclosed. In any event, according to a June 12, 2015 New York Times article, Heather Dietrick, Gawker’s president and general counsel, reported that the company had exceeded the cap on its insurance in the Hulk Hogan case and was paying out of pocket for it. (The article did not specify to what type of coverage Ms. Dietrick was referring.)

Gawker’s CGL carrier may have engaged in a common strategy to avoid or reduce its coverage obligations: While agreeing to defend under a reservation of rights, insurers often retain the threat of seeking reimbursement of defense costs, thus leveraging a low settlement of coverage disputes. Policyholders should be wary of this frequently used and inappropriate strategy. As for Gawker, in light of the potentially devastating verdict, it should evaluate any sources of potential coverage, including errors and omissions (E&O) coverage or insurance procured by any other potentially culpable third parties under which Gawker may have been named as an additional insured. E&O protects insureds from liability for financial losses to clients caused by errors or omissions in the performance of professional duties.

Gawker has already promised to appeal the verdict and will surely seek to have the damages reduced. That process, as well as any possible settlement, will once again allow an opportunity to involve Gawker’s insurers to contribute towards a resolution. In addition, to protect itself against potential liability for any similar claims in the future, Gawker and other internet blogs focusing on celebrities and the media industry should review their existing insurance programs to confirm they contain adequate coverages, eliminate gaps in coverage, and eliminate the potential for future coverage disputes.


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