Most social media sites are FREE to partakers, right? WELL, “free” may be cutting too fine an edge, because social media is not exactly free. Company losses from social media missteps and data security breaches can be translated to monetary costs 84% of the time, according to a 2011 survey from Symantec. The top costs were: lost productivity; lost revenue; loss of organization, customer, or employee data; and damage to a company’s brand reputation. Litigation costs, regulatory fines, and reduced stock price are also among the costs companies identified.
It’s a commonly accepted fact that anyone with a web site now has the legal liabilities of a publisher. Law firm web sites typically post a disclaimer and some even include a discussion of privacy issues for visitors. But social media is a different beast. Additional exposures are now available to law firms (and companies), also for free, compliments of your partners and your employees who distribute information to the public via third party websites; i.e. social networks, content sites, and et cetera.
This blog post attempts to start a discussion about insuring the entity and mitigating missteps.
Can I purchase “social media insurance?”
No. After a bit of digging, I haven’t found a stand-alone insurance product called Social Media Insurance—for law firms or for any type of business. For now, law firms and businesses will just have to find coverage, if they want it, within existing products. The key, according to experts, is to know where to look and what to look for.
Let’s start by identifying the most common types of social media risk and liability:
- Advertising liability
- Employer hiring/firing practices
- Copyright infringement
- Security breach
- Privacy breach
- Breach of trade secrets, statements, or other confidential information
According to the expert sources I spoke with, here is where you might find coverage:
- First Party Coverage under a general business policy (BOP)
- Errors and Omissions Coverage (E&O) under a professional liability policy
- A stand alone Cyber Liability policy
- Brand Impairment policy
- Employment Practices Liability (EPL) policy
- Media & Advertising liability policy
- Business Interruption Coverage policy
Across the board, the experts with whom I spoke to strongly suggested that law firms and businesses should review their current insurance coverage for clarification and confirmation that online activity is covered in both professional liability and general business policies.
Thanks to Brad Shear, Angela Elbert, Sonya Rosenberg, Neil Hughes, and Bob Stalker, I now have enough information to be dangerous.
(Disclaimer: I am not a lawyer. I am not affiliated with any insurance products or agents. In fact, I don’t know beans about insurance and I only know enough about the law to fill an ice bucket—well, maybe a large cooler. Please do not consider my comments to be advice in any way. I’m just a “cub reporter” poking into Pandora’s box. Your stories and knowledgeable comments, however, are welcome!)
The General Business Insurance Policy
Brad told me that he has obtained written confirmation from his general business policy insurer that his blog, his Tweets, and his digital content are covered should any unforeseen mistake occur.
“If you are going on line, it is expected that as a professional you have certain responsibilities. Still, where social media channels are concerned, if it’s not spelled out in your business coverage policy as social media, you should get assurance that you, and your employees’ activities, are covered. This may be found under a rider related to electronic communications; i.e. email, websites, etc., but, it’s important to confirm specifically.”
He also mentioned that the most recent renewal of his policy required a much more lengthy questionnaire than in the past. Hmmm.
Angela R. Elbert, a partner at Neal Gerber Eisenberg, Chicago, helps clients identify potential risks and helps them work through insurance coverage options as well as litigate complex insurance coverage disputes when necessary. While she hasn’t seen a lot of claims against law firms, yet, she told me that:
“At least every one I’ve looked at so far has enough risk there to include media liability to their coverage.”
She explained that, for example, defamation related to things you’re doing on the Internet or on your website—is sometimes, but not always, included in a media liability component of your E&O coverage. At a minimum, Ms. Elbert advises law firms to consider adding media coverage in their E&O policy, especially if they are active in social media.
Neil Hughes, President of Hub International Midwest, an insurance brokerage firm that specializes in developing custom insurance programs for law firms and other businesses echoed that advice:
“Law firms should review their current E&O policy to insure that electronic communications are covered—they probably are—but not all E&O policies are created equal.”
I asked if media coverage within an E&O policy might be channel specific, i.e. print vs. online, or other. Mr. Hughes suggested that it’s worth asking:
“A general malpractice policy could potentially have an exclusion for Internet related activity – especially if the insurer sold a stand-alone media product.”
According to Ms. Elbert, “privacy lawsuits are going like crazy.” One example she gave is the Zip Capture lawsuits being filed in California, involving merchants who ask for zip codes at the check out and subsequently may face liability for privacy breaches.
“[Coverage for] privacy breaches can be contained in E&O policy, D&O policy, general liability policy covering personal and advertising issues, or a stand-alone cyber policy. But, while there may be privacy coverage in one of those policies, many general liability insurers do not want to pay under that clause.”
Although a law firm isn’t in the “retail” category, per se, it would probably be wise to check out the fine print…you’re familiar with that, right? 🙂
The concept of cyber liability takes into account first- and third-party risks. The risk category includes privacy issues, the infringement of intellectual property, virus transmission, or any other serious trouble that may be passed from first to third parties via the web.
Mr. Hughes suggested that a stand-alone cyber liability policy might be redundant for the type of risks a law firm would face via social media activity primarily because confidential information breaches are typically covered in an E&O policy. However, he added that the decision deserves scrutiny and that every law firm’s activity and risk tolerance varies:
“While traditional insurance policies typically have not handled these emerging risks of cyber liability; i.e., hackers, theft of employee’s identity information, or theft of intellectual property, in recent years claims have increased and limited coverage under traditional policies has become available.”
Brand impairment coverage, typically a stand-alone policy for businesses that might have risks related to product recall, is built into some policies on the professionals’ side, I assume because it is rare. Still, brand impairment happens. While it does not typically fall into the liability bucket, if it happens via social media—very viral—there are sure to be huge expenses related to public relations and restoring good will.
CORRECTION: My apology to Ms. Elbert for incorrectly interpreting where one might find Brand Impairment Coverage. She emailed me this morning stating, “I don’t agree that there is coverage per se for brand damage. What may be included in a cyber policy is coverage for pr (public relations) responses to help reduce brand damage.”
Ms. Elbert suggested that coverage under a first party property policy or a crisis management component under a cyber policy should protect against money you’re out because of brand damage related to a social media misstep.
Sonya Rosenberg, an employment law attorney at Neal Gerber Eisenberg, Chicago, and frequent speaker on social media and employer/employee issues, suggested that an Employment Practices Liability (EPL) policy might be available in the right context.
“In lawsuits where information is sought and found on public social media profiles, i.e., pages, blogs, videos, etc., and are factored into failure-to-hire-claims they will likely fall under general discrimination laws.”
However, she went on to say that:
“Abuse cases are just starting to come out of the woodwork, and as always, the lawsuits trail the practical developments. But as far as lawyer and law firm conduct involved in employment lawsuits and social media, I’m not seeing a trend. The Stengart case in the New Jersey state court might be a related example. Stengart involves the production of emails in litigation, which came from an employee’s private personal email account.”
An October 2011 report from law firm DLA Piper revealed that while social media is being embraced in the corporate world, the pace at which it is developing is such that organizations’ policies and procedures are struggling to keep up.
Their research found that 65 percent of employers responding actively encourage the use of social media for work related activities. Twenty-one percent have taken disciplinary proceedings because of information an employee displayed on a social media site about another individual and 31 percent because of information posted about their organization.
Despite this, the report found that only a small proportion (25%) of businesses had a stand-alone, dedicated social media policy, and less than half (43%) had a social media policy that existed alongside another, such as an IT or HR policy.
The best defense is an offense: Have a social media policy and enforce it.
Ms. Rosenberg believes that an insurance policy alone is not enough. Law firms and companies need to proactively mitigate social media risk by doing the following:
- Have a social media policy,
- Educate active users in the details of what is in the policy and exactly what is expected of them,
- Include guidance on business appropriate behavior (younger employees may not know),
- Update the social media policy frequently as the medium evolves, and,
- Enforce your policy.
“To the extent an employer decides to issue a social media policy, they need to be willing to enforce the policy, including any disciplinary actions outlined in the policy,” said Rosenberg. “They should be enforcing and taking steps, if not, it’s a pointless policy. Are they actually doing it? Not in all cases. But those who have implemented them and want to be taken seriously need to enforce them.”
Bob Stalker, Senior Vice President at Hub International Midwest, said:
“Companies (law firms) that are being more proactive with policy, employee compliance agreements, and education generally see fewer claims. You can mitigate exposure by having good employee contracts.”
Mr. Shear also elaborated on the importance of enforcement:
“In general, I advise that if you have a policy you must enforce the policy, educate about the policy, and follow the policy. If you’re not going to abide by it, why bother. For firms who have a lot of people online, people need to know what to expect.”
He gave as an example of what not to do: ESPN (sports network)
ESPN revised its social media policy last August (2011) to include a clause that reporters must tweet all news through ESPN platforms (accounts). Within two weeks, an employee (a radio broadcaster) tweeted on an individual account breaking the news that Payton Manning’s injury was worse than reported—an obvious violation of the new policy. However…
“When ESPN found it they did not do anything,” said Mr. Shear. “When the next person violates the policy, they have no teeth.”
The discussions generated during these interviews revealed many interesting details, as well as did my extended Internet research, that cannot be contained in a single blog post. I will revisit soon. (Subscribe to the VMO!) For now, I don’t think professional liability insurers are poised to threaten a shut down of social media engagement as a condition of coverage. I do, however, think we will see products surface in the near future. As Mr. Shear suggested to me:
“If and when the insurance industry develops specific product, my best guess is that we can look to how insurers treated online content for the last 15 years. Social media insurance products are likely to mirror those from the era (1994-95) when law firms first started hosting websites.”
Special thanks to Nathan Darling, Kim Perret and Betsi Roach of the Legal Marketing Association Task Force on Social Media Ethics for inciting me to dive into the subject! This post is truly an effort inspired by the LMA advocacy efforts. We can expect to hear more from the LMA on this topic and other law firm management related issues in the future.
If you have further questions, I encourage you to contact the experts directly.
Bradley S. Shear is the Founder and Managing Partner of the Law Office of Bradley S. Shear. Bradley is an internationally recognized attorney, consultant, speaker, and writer. He is the first private practice lawyer in the United States to work with a state government (State of Maryland) to draft social media law. His blog, Shear on Social Media Law is the first blog to focus on social media law and public policy issues and is syndicated by the publisher of The American Lawyer and The National Law Journal through its Law.com Blog Network. Bradley is an adjunct professor of sports management at The George Washington University and print, radio, and television news outlets regularly request his commentary and insight. He has testified in front of the Maryland House of Delegates, the Maryland Senate, and state administrative agencies on social media and digital law matters.
Angela R. Elbert counsels clients on complex risk management and insurance issues and helps them obtain the maximum recovery possible when claims arise. She focuses her practice on advising entities and boards of directors on a wide variety of risk management issues, including indemnification agreements, obtaining insurance with the most favorable terms available in the marketplace, financial insolvency concerns and insurance aspects of corporate transactions and other business contracts. She has significant experience in handling complex insurance coverage litigation, other commercial litigation, mediations and arbitrations, with an emphasis on representing policyholders in insurance coverage disputes nationwide involving virtually every line of insurance. Based upon interviews with her clients and peers, Angela has been described as a “leading light” whose “breadth of knowledge is matched only by her commendable work ethic,” reports Chambers USA, America’s Leading Lawyers for Business.
Sonya Rosenberg counsels and represents employers in various labor and employment-related matters. Her experience includes counseling employers through the many aspects of the employment relationship and representing employers in administrative proceedings and through various stages of litigation at the state, federal district and appellate court levels. Sonya has given multiple presentations and authored multiple articles on various employment-related topics, including discrimination, blogging in the workplace, social networking sites, non-compete agreements, workplace violence, conducting reductions in force and notable changes and developments in labor and employment law. Sonya is currently on the Board of ELIT (Executive Leaders In Transition), a professional network group dedicated to human resources and finance executives in transition.
Neil Hughes and Bob Stalker can be reached via Hub International Midwest.