Social Media Risk Management: New challenges, insurance solutions exist

Facebook, Twitter and YouTube are giving life to new risks for individuals and businesses. The speed at which images and words can be cut, pasted and redistributed by anonymous sources magnifies the risks for any organization that relies on its reputation when transacting. Most people and companies using social media either don’t fully understand these risks or the potential liabilities. While there have been few legal cases yet, experts assert that it is only a matter of time before we witness multimillion-dollar court cases and insurance settlements.

Chubb Insurance, Fireman’s Fund Insurance Company and Travellers Insurance are leaders in underwriting policies for newspapers, broadcasters, movie makers and online media companies. Chubb, however, is now also recognizing the potential risks from social media participation and is investing resources to adapt its underwriting and protect client companies that are not in the business of media.

“We’re coming in and trying to wake people up,” said Ken Goldstein, Chubb’s worldwide media liability manager to The Star Ledger, New Jersey’s leading daily newspaper. “Non-media companies now have the same exposures: defamation, invasion of privacy, copyright infringements, advertising infringement, allegations of false advertising and trade libel.”

Today, non-media companies represent as much as 15 percent of Chubb’s current book of media liability insurance. The carrier anticipates that this number will climb now that social media has turned almost everyone and their mother into a publisher.  

Dealing with liability
Unlike a traditional media company, the issue for businesses putting up Facebook pages or participating in LinkedIn Groups is the law will likely consider these to be a promotional vehicle or an extension of their brand, which means these web pages and forums are governed by rules for commercial speech.

“You are more exposed to liability for false statements made in advertisements,” as told by David Heller, a senior staff lawyer for the nonprofit Media Law Resource Center, to The Star Ledger. “I think as users feel their way through the new social media, so too will lawyers and judges get a sense of what the norms are for this type of communication.”

Looking ahead

The quickly changing media landscape means companies need to rethink how to protect their brand from potentially devastating lawsuits, as any company that is involved in social media needs to reconsider securing a traditional errors and omissions insurance, even if it has never been a past requirement.

In 2009 there were hundreds of legal threats and thousands of copyright notices sent to the members of the Media Bloggers Association, said Robert Cox, the group’s president to The Star Ledger. Interestingly, he indicated that well over a third of these members write for businesses across all social media platforms.

“I have had personal experience with being legally threatened,” Cox said. “What I learned is how vulnerable we are; all the laws that apply to mainstream media don’t apply to us.”

With a little courage and a lot of common sense, the rewards from sharing information through social media outweigh the risks. These communications vehicles are just like any new business trend as they offer both an opportunity and a threat, which is why you are wise to consult professionals when weighing the costs and benefits.

For more information, contact Drew Gunn at dgunn@oswaldcompanies.com or 216 367-3286.  ■