The Growing Need for Media Liability Insurance

We live and work in a digital age where massive amounts of information is consumed on the internet and social media platforms. That’s why it’s not surprising to see businesses use digital platforms more often to reach a wider base of clients and customers.  However, doing so can increase their media liability exposure.

 

“We do see media liability claims as a threat to a variety of non-media businesses, like professional firms,” said Andrea Potetz, professional liability insurance product director at The Hartford. “We’re seeing firms on the receiving end of IP-related lawsuits, alleging copyright infringement of content in social media posts or business documents, such as marketing and training materials.”

 

Professional firms may believe their general liability insurance would cover these types of allegations as advertising and personal injury claims, but “that’s not always the case,” Potetz added. The result is a coverage gap.

 

Consumer use of social media has steadily been increasing, but it skyrocketed during the COVID-19 pandemic. They’re using social media platforms not only to recommend brands and businesses to friends and family, but also as a way to connect with companies and their clients. And businesses are noticing this as they invest in social media strategies.

 

In fact, business executives believe their business’ social media marketing budget will increase over the next three years.¹

 

Using social media to communicate with customers or advertise professional services can expose companies to media liability, according to Steve Barbal, national managing director/underwriter at The Hartford.

 

It’s not just the use of social media that can expose firms and companies to media liability risks. Any content or materials that a company creates, prints, publishes or disseminates can put them at risk, including the content and materials that a service firm creates for its clients.

 

For example, a consulting firm gets hired to organize a client’s training event and create their course materials. The content in the training material mistakenly – and negligently – includes unsubstantiated references to a competitor product and confidential information about the client’s newest product line. The firm mistakenly posts the material to a public page on its website and the client gets sued by the competitor for alleged defamation. The client accuses the consulting firm of negligently handling internal training materials and breaching the service agreement, demanding the firm defend and indemnify them from the competitor suit.

 

In this scenario, Barbal says that the consulting firm’s general liability coverage wouldn’t help.

 

“A general liability policy typically covers your company for advertising injury, but it only applies to the promotion of your own business,” Barbal explained. “Once you cross that gray area and you’re now creating content for your clients, like creating whitepapers, using social media or producing training materials, it exposes your firm to media liability risks that a general liability policy usually won’t cover because it’s a claim coming out of a professional service.”

 

Damages from a copyright infringement claim can reach up to $150,000 – and that doesn’t include the costs to hire a lawyer.² In 2022, McKinsey agreed to pay a nearly $600 million settlement for its role in providing questionable sales advice to pharmaceutical companies, which supported the promotion of opioids.³

 

Rising legal costs are something professionals at The Hartford believe will continue.

 

“Defense of media claims can be quite costly,” Potetz said. “Attorneys specializing in this area of law are often required. When you combine the need for specialized legal talent with the current economic climate and the fact hourly rates for legal professionals are higher than they were three years ago, we anticipate increasing costs.”

 

It’s not uncommon for media liability lawsuits to also be lengthy, which can further increase legal costs, Potetz said.

 

“With intellectual property infringement, litigation takes longer to resolve. The parties are pursuing more than just monetary value, their business depends on the rights to their IP. A settlement that limits or vacates those rights is not acceptable,” she explained.

 

While legal costs make up a big part of media liability claims, the direct costs to respond to them can also be expensive. Whether it’s paying to fix the mistake or recalling content, a firm’s costs can quickly add up, Barbal said.

 

He added that The Hartford recognizes businesses may have to deal with these costs, which is why its media liability endorsement provides coverage to help pay for the expenses of:

 

A variety of businesses can benefit from media liability coverage, including:

 

Both Barbal and Potetz emphasized that any business or firm creating materials while performing a professional service may want to consider media liability coverage.

 

“With the ease of disseminating content, it increases the likelihood that businesses can be in a media liability scenario,” Barbal said. “If they push out content that someone questions the legitimacy of, they have a risk exposure because the company should have known better.”