BSA Lawyer Letter! Will Insurance Cover?

Nov 08, 2019

The Business Software Alliance (BSA) targets small businesses that may be improperly using software of its members and retains lawyers to send a BSA audit letter to the business. There are two common questions that arise from the business: 1) is the BSA audit letter legitimate, and 2) will a business insurance policy cover the claim.

The BSA audit letter from a lawyer is most likely legitimate and can be verified by the business or its own attorneys. Hiring an attorney with experience in defending a business from the BSA’s allegations can be the first step toward an amicable  resolution. However, a business may also wonder whether it may be more cost effective to seek representation from its insurance carrier. 

The short answer is: most likely not. The reason has to do with the allegations that the BSA asserts in its letter. The BSA will usually allege that the business is using software illegally. More specifically, that there is illegal duplication under The Copyright Act. Consequently, there are a few ways to state the allegation: software infringement, copyright infringement, or more generally, intellectual property infringement. 

A company’s general liability policy would not necessarily address any type of copyright infringement because general liability policies cover bodily injury (a.k.a. personal injury) and property damages.

A company’s professional liability policy could cover copyright infringement; however, unintentional copyright infringement is usually expressly excluded by default. Further, if there is evidence that the business owner knew of the infringement, then coverage would most likely be excluded as a fraudulent or dishonest act.

Even if a business has paid for unintentional copyright infringement insurance, there is a more obscure issue of whether the BSA has made a claim that would trigger insurance. Because the BSA is requesting a voluntary audit to uncover “possible instances of illegal duplication,” the insurance company would likely argue that there is no claim to settle. Nevertheless, a business could be interested in making sure that there is no actual claim in order to have an opportunity to keep the matter confidential. 

Although an insurance policy is not likely to cover the allegations contained in a BSA audit letter. A lawyer experienced in settling BSA audit matters can still help a business conduct an accurate software license audit and negotiate the terms of a settlement agreement, if necessary.