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Social Media In 2011


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An overview of the liability risks associated with social media and potentially applicable insurance.

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Social Media In 2011

  1. 1. Spotting the Pitfalls & Installing the Safety Nets
  2. 2. THE NUMBERS THE SITES  500,000,000 +  100,000,000 +  50,000,000  500,000,000  Facebook Users in 2010  Facebook Mobile Device Application Users  Twitter “Tweets” per day  Minutes per month spent on Facebook
  3. 3. Security Claims Failure of network and information security Privacy Claims Failure to protect private or confidential information Media/Content Claims False advertisement, false endorsement and disparate access to information Intellectual Property Claims Infringement of trademark, copyright and trade secret information Employment Claims Breach of employee privacy, failure to protect employees from online harassment, use of web- based research in employment decisions and libel/slander/disparagement Professional Liability Claims Breach of ethical duties and professional standards (esp. for lawyers, securities brokers, directors and officers)
  4. 4.  Duty to protect private and confidential information  Breach of security or disclosure of this type of information costly  Research to determine the scope of breach  Notice to affected parties  Suits and damages for actual injuries
  5. 5.  Highly regulated:  Federal regulation and guidelines  Lanham Act  State consumer protection laws  Three general issues:  False or unsubstantiated advertising  False, misleading or unauthorized endorsements  Disparate access to information
  6. 6.  Breach of another’s protected IP  Another’s breach of your protected IP  Employee disclosure of confidential and proprietary information
  7. 7. Employee privacy Online harassment of employees Use of web-based research in employment decisions Libel/slander/disparagement
  8. 8.  74% of managers believe that SNS put their company’s reputations at risk. Potential Claims or Issues  Defamation Claims for Statements Made Online  Admissions Against Interest in Litigation  Providing “Free” Discovery to Opposing Counsel  Breach of Employee Privacy by Employers Accessing SNS Sites  Violation of Non-Competes through Job or Customer Searches  Employee Discrimination and Harassment Claims  Defamatory Statements made about Employer by Employees
  9. 9.  Breach of ethical duties  For lawyers: unauthorized advertisement; ex parte communications with court; and disclosure of confidential information  For securities brokers: misrepresentations in sell of securities and disclosure of confidential information  Breach of professional standards  Mismanagement and self dealing of directors and officers
  10. 10.  As the means by which we communicate change, old risks evolve and new risks emerge  Brokers :: insurance industry trying to respond to the risk, but has not caught up  Gaps in coverage, ambiguities in terminology create challenges for insureds who want to ensure that they have covered their modern- day risks and liabilities
  11. 11.  Social media exposures cut across multiple policies, depending on the exposure issue:  Cyber liability (privacy and data security)  Defamation, libel or slander  Copyright infringement – consider Facebook  Media / content liability  Employment issues  Professional liability
  12. 12. 1st Party Coverage 3rd Party Coverage Direct loss to business from injury to electronic data or systems Liability to others for financial losses resulting from internet or other electronic activities Business interruption Notification costs Crisis management expenses Data restoration Extortion payments Credit monitoring Theft of company data & intangible property Forensic costs/expenses Network security breaches (e.g., failing to detect and prevent transmission of a virus to third parties) Privacy violations (e.g., flaw in IT system gives hackers access to patient information) Media and content practices (e.g., liability for deceptive and misleading advertisements on website)
  13. 13.  No standardized policy terms … yet  Coverage often (always?) applies only to protected data (e.g., Social Security number or confidential health data) – does not extend toTwitter, Facebook and other social media sites (which do not gather protected info)  Ambiguity  What = private?  Terminology not uniform
  14. 14.  Example: The Hartford launched CyberChoice 2.0 in 2008, describing the policy as a combination of E&O and first-party coverage  Third-party liability coverage for data privacy and network security liability; Internet and electronic media liability; professional services liability  First-party coverage for business interruption; cyber extortion coverage for threats against data and identity theft  IP coverage for advertising and tech products  Reimbursement of expenses in event of breach :: notification costs, crisis management, fines, credit monitoring, experts
  15. 15.  Cyber liability coverage designed to address risks associated with storing electronic data via web-based communities  CGL coverage limited to BI, PD, PI & AI  No coverage for identity theft, damage to intangible property  May provide coverage for invasion of privacy  Coverage for cyber-specific remedies  Notification costs  Fines & penalties  Crisis management (might be covered by endorsement)
  16. 16.  Example: Electronic data liability endorsement on CGL policy (2001 form)  Modifies definition of “advertisement” to include “notices placed on the Internet or on similar means of electronic communication”  Regarding websites, only that part of insured’s website about its goods and services = advertisement  Coverage territory = “all other parts of the world” if personal injury through Internet
  17. 17.  CGL policies issued after 2001 may cover “personal injury” and “advertising injury” (also “personal and advertising injury”)  Defined terms are important – scope of PI and AI can differ
  18. 18.  Personal Injury  Defamation, libel & slander  Misappropriation of likeness, false light  Invasion of privacy, unreasonably publicity  Advertising Injury  Misappropriation of ideas, plagiarism, infringement of copyright, title or slogan, piracy  Defamation, libel & slander
  19. 19.  2005 form – amending personal injury and advertising injury coverage  “Coverage territory” defined to include other parts of the world if injury takes place online
  20. 20.  Personal & Advertising Injury Exclusions  Knowing violations of rights of another  Material published with knowledge of falsity  Insureds in media or internet businesses (e.g., internet search, access, content or service provider)  Electronic chatrooms or bulletin boards
  21. 21.  Early libel case (filed in 2009) involving tweets and MySpace posts  Following an escalating dispute, a fashion designer accused Love of posting “false and malicious” statements about her  The designer sued Love in conjunction with the online rant; Love settled for $430K in March 2011
  22. 22.  CGL policy – by endorsement, no coverage for “unsolicited communications” – facsimile, e-mail, posted mail (i.e., snail mail) or telephone
  23. 23.  Post-2001 CGL may cover copyright infringement “in your advertisement” – may expressly extend to web-based marketing / advertisements  Professional liability for architects & engineers may cover copyright infringement, piracy, plagiarism, misappropriation of ideas in rendition of professional services  Non-professional services, non-advertising IP claims may not trigger coverage
  24. 24.  Employment Liability  Does social media present an enhanced risk?  Sexual harassment :: EPL coverage  Hostile environment :: EPL coverage  Importance of social media & electronic device policies and procedures  Employer Liability  Ensure the policies extend coverage to employees
  25. 25.  E&O for a tech company may look a lot like cyber liability  PL or E&O for everyone else is going to be limited to wrongful acts in the rendition of professional services  Does this cover marketing activities regulated by the state bar? How about unauthorized practice of law issues – perhaps arising from answering a question posed by someone in another jurisdiction on AVVO?  Ethical issues
  26. 26.  This architects & engineers PL policy excluded coverage for “copyright infringement” – but by endorsement added coverage for plagiarism, piracy or misappropriation of ideas under implied contract  Insurer covered lawsuit against architect alleging copyright infringement
  27. 27.  CGL policy issued to a tech company – by endorsement, no coverage for computer software errors and omissions  Acts, errors or omissions in design, licensing, selling, etc.  Actual or alleged unauthorized duplication or unauthorized use
  28. 28.  Social media policy  Training and monitoring on appropriate social media use  Educate the C-suite  Data breach incident response plan  Firewalls? Block social media use during business hours?
  29. 29.  Are underwriters, brokers & insureds using the same words to convey the same concepts Answer: No.  Part of the challenge is the new, increasingly global economy, which stems in part from global access via the web. Exposures differ from country to country – in the UK, privacy is protected; in the US, the right to privacy is more limited.  R U covered? According to brokers, the insurance industry hasn’t caught up with the risks.
  30. 30. Amy E. Davis RoseWalker LLP Amy Elizabeth Stewart Amy Stewart PC