******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 John P. Ruditis, Petitioner ) ) v. ) CSR 5247-L ) Time Warner Cable - St. Augustine, FL,) Respondent ) ) For Commercial Leased Access ) MEMORANDUM OPINION AND ORDER Adopted: July 22, 1998 Released: July 27, 1998 By the Chief, Cable Services Bureau: 1. John P. Ruditis ("Ruditis") filed the captioned petition for relief pursuant to 47 C.F.R.  76.975 alleging violations by Time Warner Cable - St. Augustine ("Time Warner") of the Commission's commercial leased access regulations. Ruditis claims that Time Warner requires Ruditis to obtain and maintain an insurance policy providing for errors and omissions coverage and naming Time Warner as an additional insured party, that the insurance requirement is unreasonable within the meaning of the Commission's regulations, and that Time Warner has failed to justify the reasonableness of the insurance requirement. Ruditis asserts that Time Warner has stopped carrying its programming because of his failure to obtain insurance. Ruditis also states that Time Warner has provided three different rate schedules over a six week period, expresses a belief that a problem may exist with the method Time Warner uses for calculating leased access rates, and suggests an audit to insure the accuracy of Time Warner's rates. 2. Time Warner submitted a response to the petition accompanied by information addressing the need for protection against risks associated with the transmission of all programming, including commercial leased access programming. Time Warner contends this information establishes the reasonableness of the requirement for insurance associated with leased access programming. Time Warner states that general liability insurance is required to protect the cable system from property damage to cable system headends and equipment, damages flowing from breach of a leased access agreement, and from claims by subscribers concerning faulty products sold by leased access programmers. Time Warner states further that media perils liability insurance, also known as broadcasters' liability/errors and omission insurance, protects cable systems from the content of programming including advertising, copyright infringement and trademark claims, obscenity allegations and other content-based claims, whether such claims are meritorious or not. 3. Time Warner also contends that the insurance clause required of Ruditis is the same as that appearing in the standard form contract for leased access programming used by other cable systems affiliated with Time Warner. The clause requires media perils liability coverage of at least one million dollars, which Time Warner contends is substantially less than the two million dollar limit required of non- leased access programmers and smaller national satellite networks. National satellite networks with strong financial resources are required to provide Time Warner with comprehensive indemnification against liability arising from their programming. Time Warner contends that network programmers in turn typically require insurance protection from their program suppliers. Certain other national networks are required by Time Warner to carry insurance similar to that required of Ruditis. Time Warner also points out that Ruditis's current programming consists primarily of unrehearsed original programming of an ad hoc nature, and that there are no guarantees respecting the nature of Ruditis' future programming. Time Warner asserts that such programming, which is unrehearsed and includes people unaware of being photographed, imposes various liability risks including copyright infringement and invasions of privacy, and may be considered offensive or intrusive by people for various reasons. 4. With respect to the allegations concerning its leased access rates, Time Warner asserts that Ruditis not only failed to present any specific, substantive information supporting the allegations but failed also to request and obtain a report of an independent accountant of its rates as required by Section 76.975(b) of the Commission's rules. In this regard, Time Warner represents that it stands ready to cooperate with Ruditis fully in an audit of its leased access rates in compliance with Section 76.975(b). 5. A cable operator's right to require reasonable liability insurance coverage for leased access programming was initially indicated in Anthony Giannotti v. Cablevision Systems Corporation. Noting that the costs and expenses attributable to defending a prosecution for carriage of an allegedly obscene program may be covered by such insurance, the Commission has stated, "this is a reasonable term or condition relating to use of leased access channel capacity in light of the removal by Congress in amended [S]ection 638 of cable operator immunity for carriage of obscene programming." Subsequently, the Commission in its Second Report confirmed that the regulations concerning reasonable terms and conditions of use for commercial leased access do not deny cable operators the right to require reasonable liability insurance coverage for leased access programming. Specific conditions or limits regarding the amount of coverage or the type of insurance policy that operators may require were not adopted in the Second Report, on the grounds that "a specific restriction might not be appropriate for all situations." Instead, the Commission stated that insurance requirements must be reasonable in relation to the objective of the requirement. The Commission further stated that determinations of a "reasonable" insurance requirement will be based on the operator's practices with respect to insurance requirements imposed on non-leased access programmers, the likelihood that the leased access programming will pose a liability risk for the operator, previous instances of litigation arising from the leased access programming, and any other relevant factors. The burden of proof in establishing reasonableness was placed on cable operators. 6. We find, based on the record summarized above, that Time Warner has met the Commission's requirement to justify the reasonableness of the insurance coverage requested of Ruditis. First, the insurance requirement at issue here appears to be substantially like that imposed on any other leased access programmer leasing capacity on any of Time Warner's cable systems nationwide or on national satellite networks that cannot demonstrate sufficient financial resources to support reliance on an indemnifications clause. Second, we believe that Time Warner has a reasonable concern that Ruditis's programming exposes not only Ruditis, who produces such programming, to risks of liability, but also Time Warner, who carries that programming to subscribers. Moreover, Ruditis has not demonstrated possession of financial resources sufficient to provide any assurance that an indemnification clause, in lieu of insurance, would offer practical protection against liability risks that may be incurred by Time Warner in carrying his programming. 7. Turning to the allegations regarding leased access rates, the dispute resolution procedures adopted in the Second Report require that a cable operator's maximum leased access rate be determined by an independent accountant prior to the filing with the Commission of a petition for relief alleging that a cable operator's leased access rate is unreasonable. In the event that the parties cannot agree on a mutually acceptable accountant, the rules require that the parties each select an independent accountant, who must then select a third independent accountant to perform the review. The record does not show that a determination of Time Warner's maximum leased access rate by an independent accountant was obtained prior to the filing of Ruditis' petition as required by the dispute resolution procedures. The record shows on the other hand that Time Warner is willing to cooperate with Ruditis in utilizing the independent accountant review procedures. Accordingly, Ruditis's complaint about the reasonableness of Time Warner's leased access rate will be dismissed for failure to comply with the Commission's new dispute resolution procedures. ORDERING CLAUSES 8. For the foregoing reasons, the petition for relief of John P. Ruditis in File No. CSR 5247- L IS DENIED. 9. This action is taken pursuant to authority delegated by Section 0.321 of the Commission's rules, 47 C.F.R.  0.321. FEDERAL COMMUNICATIONS COMMISSION Deborah A. Lathen Chief, Cable Services Bureau