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With so much of the business world gone digital, veteran media sector insurance consultants Chad Milton and Michelle Worrall Tilton like to say that every company is now a digital media company.

Therein lies the business kernel of their mutual venture, Kansas City, Mo.-based Media Risk Consultants, which the two formed this spring.

Milton and Worrall Tilton started talking about joining ranks about a year ago, after perceiving a coverage gap. The largest retail brokers have dedicated media risk resources, but the use and availability of those resources vary, so the spread of the media risk expertise is uneven. That, they feel, provided an opening for them.

"We both were trying to figure out what we wanted to do next and we started talking about consulting and how there was a need for that in the media liability marketplace," said Worrall Tilton.

"And at some point I thought, 'I really do not want Chad to be a competitor,' " she said.

Before founding their company, Milton and Worrall Tilton, each of whom hold law degrees, served a combined 60 years in a number of related areas. That experience included brokering, claims, underwriting and handling broader risk management issues.

Milton was a national media practice leader at Marsh Inc. for 10 years. Earlier in his career he was employed by Media/Professional Insurance Inc., one of the largest managing general agency and claims administrators for media. Worrall Tilton's father, Larry Worrall, was a co-founder of Media/Professional.

Milton and Worrall Tilton met at Media/Professional when Worrall Tilton was hired out of law school to work under Milton.

In 1998, Worrall Tilton was a founder of First Media Insurance Specialists, which was a media liability claims and underwriting managing general agency. She sold that business to OneBeacon Professional Insurance in 2005, and served as OneBeacon's media liability product manager.

With their new business, the partners are addressing what is widely perceived as spreading media risk.

As more companies live in a larger digital silo, many are adopting the media liability practices of traditional media companies, Milton said.

That's because companies, practically all of which have some form of media component, are facing digital media risks without having much experience in dealing with it. "And that's where we can help bridge the gap," Worrall Tilton said. "We can help the nonmedia companies understand and manage their emerging media liability risks."

Hospitals, for example, have become voracious users of media in their public outreach, as they build elaborate websites, present conferences and seminars online and create formal publications and produce videos to inform the public about health issues. Those activities take them beyond healing patients and into health information publishing.

Universities and sports teams, both of which disseminate content, license intellectual property or encourage social networking, may also benefit from a media liability policy because of coverage disadvantages inherent in the commercial general liability form, Worrall Tilton said. Political candidates, many of whom generate media content, might also think of obtaining media liability policies to ensure adequate coverage, she said.

Advertising and public relations agencies, authors, journalists, film and program producer/distributors, multimedia companies and other public communicators should also be covered by an up-to-date media liability policy, the partners noted.

As independent consultants, Milton and Worrall Tilton are responding to a trend in the broker market handling of media liability. Brokers understand that media liability is a very important coverage for their clients, and for many clients it is a core product. As a result, many brokerage firms, especially the larger ones, are establishing internal resources to help the firm's brokers manage this risk.

"In time, we believe that all brokerage firms will have this expertise, but in the meantime, there is an uneven spread of knowledge that creates an opportunity for us," said Milton. Hiscox, Chubb, CNA, OneBeacon, AXIS Pro, Mutual Insurance Company of Bermuda, Chartis and ACE dominate the media liability marketplace, which Milton and Worrall Tilton estimate at about $1 billion in annual premium.

It's not only the companies for whom digital media is a relatively new risk that Milton and Worrall Tilton think they can provide value.

"Given our experience, we foresee doing business with large, traditional media companies where we expect our work to be project-oriented, doing the kinds of risk management process that the risk management staff doesn't have the resources to do," Milton said.

It might be handling a risk management assessment on a new operation, or due diligence on a potential acquisition, or developing a checklist for policy specifications. An additional scope of work could be helping manage a large portfolio of claims for the insured, Milton said.

Milton, 65, and Worrall Tilton, 49, think one of most important services they will bring to the market will be the ability to assess exposures. "We know how to help the broker ask for these coverages, so the needs of the media companies are fully addressed," Worrall Tilton said.

Milton said that given the demands on an underwriter's time, typically the underwriter will quote the exposure as presented on the application. If the application isn't complete, large coverage gaps can arise.

For smaller brokers, Media Risk Consultants can help them service an account that has exposures which the broker may not have the expertise to address: a marketing strategy, renewal strategies, and managing specialized claims, Milton said.

Media Risk can also help midsized and larger brokers to build a more robust practice.

"We can help them identify those risks faced by their clients and potential prospects," Milton said. "There are lists of talking points for approaching these prospects and helping brokers develop materials."

In a recent case, Worrall Tilton and Milton were asked by a public policy think tank to help develop a media liability policy as the institution was getting a lot of content from nonemployees.

"We went through their policy and pointed out where it could be improved," Milton said. "In that case we did not interact with the broker because the broker was not experienced in that area."

Another area in which Milton and Worrall Tilton expect to be called on is in going over policy terms for new technology developments.

"The technology and business applications of media content are rapidly changing and even the most sophisticated brokers and content creators have a hard time managing risks such as copyright and trademark infringement, invasion of privacy and libel," Worrall Tilton said.

Often the traditional solutions, such as commercial general liability policies or even standard media policies, are inadequate, Worrall Tilton added. "It can be tricky to match insurance coverage to these new and emerging risks," she said. "A lot of these traditional policies are not revised whenever there's a change of technology."

Defense costs arising from a copyright infringement suit, even without litigation, can be high.

In 2008, the Authors Guild and the Association of American Publishers settled a class-action copyright suit with Google. Google had to set aside a $125 million fund in a case involving Google copying books, Worrall Tilton said.

-By Steve Yahn

July 24, 2012

Copyright 2012© LRP Publications