How words actually can hurt you… in the pocket.
I often get quizzical looks from small business owners when I mention the importance of Personal and Advertising Injury coverage in a General Liability policy. They don’t realize they may be liable if they write or say something false and defamatory about someone or an organization.
Today’s news, entertainment and social media outlets are full of half-truths, lies and misrepresentations about events, people, and organizations at every level. Business owners and their employees may say and write things that could be construed as defamatory. Social media is a particularly tricky area.
By definition, there are seven specific offenses that fall under Personal and Advertising Injury. In this article we focus on oral or written public material that libels or slanders an individual or organization, or their goods, products or services. Libel is written defamation and slander is defamatory oral remarks.
What is defamation?
Defamation only exists if the communication is a false, defamatory statement put out as fact about the plaintiff, and published to a third party. All of these factors must be true to have an actionable lawsuit for defamation. Let’s look at each of those elements:
- Falsity: This is basic. The statement must not be true to be considered defamatory.
- Defamatory: The false statement(s) must be considered defamatory. This means the plaintiff would be subjected to ridicule or their reputation must be tarnished among a respectable minority of his or her community.
- Statement of Fact: This means the alleged defamatory comments cannot be considered opinion, exaggerations or jokes. Customers posting highly negative customer reviews are almost always sharing their opinions. But a false fact within the review could be determined to be defamatory. For example, say a disgruntled customer stated in a Yelp review that cockroaches were crawling on the restaurant walls and tables. That could be considered defamation if it’s not true.
- Third-party Publishing: This means the statement was seen or heard by anyone other than the person or organization about which it was made. So, if the customer was speaking directly to the restaurant owner about the cockroach infestation, that’s not defamatory. But if other diners heard him or her making that false statement, they could be sued for defamation.
Exclusions to Personal Injury and Advertising coverage
Material published with knowledge of its falsity
The most significant exclusion in defamation coverage concerns material published with the knowledge of falsity. Your policy will not pay damages or defend if you (or your employee) makes a defamatory statement knowing it is false. That is considered reckless disregard for the truth.
However, if the statements concern people who aren’t known publicly, there is no requirement to show reckless disregard for the truth. When the defamatory statement is false and published to a third party, your policy should cover defense costs and damages as long as you didn’t know it was false.
Media and internet types of businesses
Another exclusion to the General Liability policy has to do with businesses in the internet and media business. Such businesses clearly need a Media Liability policy.
Electronic chat rooms or bulletin boards (AKA social media)
But there is yet another exclusion for electronic communications. It specifically addresses injury arising out of electronic chat rooms or bulletin boards the insured owns, hosts, or has control over. Social media is perhaps a more modern term to describe electronic chat rooms and bulletin boards. With social media marketing so widespread, most businesses have social media accounts for marketing purposes. They need a Cyber Risk policy policy to cover this gap. Purchase Cyber Risk coverage by adding an endorsement onto an existing General Liability policy or purchase a stand-alone policy. See our prior blogs on Cyber Risk including “9 Reasons Why You Must Purchase Cyber Insurance Now.”
Obviously, the reason for this exclusion is the high risk in social media platforms of sparking spontaneous and highly-emotional exchanges. Such platforms are public. Any opinions laced with false or defamatory statements, knowingly or unknowingly, are not exempt from litigation.
The bottom line
Know the simple rules about what constitutes an actionable defamation case to help keep your business out of trouble. Also, make sure you are protected by General Liability and Cyber Risk insurance.
Contact us if you have any questions about your personal/advertising injury coverage under your General Liability or if you have questions about Cyber Risk.