Ties That Bind, Tweets That Defame

Brian Rosenbaum, Director of the Financial Services Group, (Legal Research and Practice), Aon Reed Stenhouse Inc.
Michael C. Smith, Partner, Borden Ladner Gervais LLP

Many of us have realized, with the blood draining from our faces (notwithstanding a quickened heartbeat), that the ‘undo’ button does not work after the ‘send’ or ‘post’ button has been pressed. Many of us have written things and quickly sent them into cyberspace, only to spend a long time afterwards wishing we could take those things back because, on even a bit of reflection, the comments were inappropriate, harsh, etc. Anecdotally, it seems people generally do not put as much consideration into what and how they write in email and social media tools as they do with conventional forms of communication. Perhaps this is due to the immediacy of the medium and the lack of inherent opportunity for sober second thought prior to publication.

The use of social media is commonplace and growing.  It is now interwoven with most online applications. It is available on your phone in your pocket or purse when, say, you have had a few too many cocktails.  You can hardly find a product online that does not have consumer reviews attached to it.

One consequence is a remarkable increase in the opportunity to defame others, and to do so instantaneously to the entire world, permanently. Defamation liability risk has increased exponentially in this brave new world. The magnitude and prevalence of that risk may not be fully appreciated by insurers and insureds alike because, we suspect, many cases considering these issues are being settled before courts consider them and report their decisions. There is still a dearth of reported cases and guidance from the courts today. But only a few high-profile judgments, settlements or class actions are required to increase that consciousness. Victims of online defamation will become aware of their rights, increasing claims volume. Businesses and individuals will start asking for protection, if they are not already.  Brokers need to develop an understanding of the risk/coverage equation in this space if they do not already have it. Opportunities likely exist for insurers to introduce new products offering appropriate coverage to the various classes of insureds they service – from the family with social media-crazed teenagers in the house to large multi-national corporations.  

The Risk

The tort of defamation protects a person’s reputation from false statements. Libel (written words and broadcasts) and slander (spoken words) are subsets of defamation. A statement is defamatory if it lowers the subject’s reputation. The relative ease with which at least prima facie liability for defamation can be established is not widely appreciated. The only thing the victim of defamation has to prove to establish liability is that the defendant published a statement – in the sense that a third party heard or read the statement – concerning the victim that, in its literal meaning or by innuendo, had a tendency to lower the reputation of the victim. Then the onus shifts to the defendant to prove the elements of one of the defences to the tort [e.g. justification (truth), fair comment (opinion), qualified privilege or responsible communication on matters of public interest]. The defendant’s intention is largely irrelevant. Liability can be established even if the defendant did not intend to defame the victim. Liability is determined based on the words used and the fact of publication.

Any repetition of defamatory statements makes the person repeating them liable as a publisher just as if they had made the statements originally. This is where the law needs to catch up with the Internet Age and provide guidance as to whom is a “publisher” in cyberspace. For example, are Internet service providers “publishers” and liable simply because defamatory comments pass over their servers for publication? What about a blog host? What about the employer from whose laptop and servers an employee sent a defamatory statement? What about someone who hyperlinks to or passes on the address to a defamatory Web site? (A decision is currently pending from the Supreme Court of Canada on this point.) What about a travel review Web site that contains defamatory reviews?

Until we have more definitive answers to these questions, and as long as there remains an omnipresent desire to find “deep pockets” to pay for the court awards or the costs of the litigation, we will see victims including anyone who could potentially be a “publisher” as a defendant in their lawsuits.  Employers will likely be implicated in lawsuits stemming from an employee’s defamatory postings from work assets.

Damages for defamation are not subject to the “cap” on general damages for pain and suffering (currently around $345,000). The damages are “at large.” Some awards have exceeded $1 million. The courts have recognized the reach and permanency of Internet defamation and have signaled that damage awards will be higher as a result.

With the risk outlined, let’s look briefly at the coverage provided by common types of liability policies and the coverage issues that may be raised.

Homeowner’s Policy

If the communication is made in the social networker’s individual capacity, then his or her homeowner’s policy could provide some coverage for defense costs and judgments/settlements arising out of a defamation action. However, a number of provisions in the typical homeowner’s policy could preclude coverage.

In order for the personal liability coverage to trigger in a homeowner’s policy, a “bodily injury” must result from an “occurrence.” An occurrence is generally defined as an accident. Many U.S. and Canadian courts have determined the intentional posting of defamatory or offensive messages is not accidental in nature and therefore would not qualify as an occurrence. Recently, however, a number of courts have ruled the intentional posting of defamatory remarks can constitute an occurrence if the effects of such a posting were unintentional and accidental.

Assuming the occurrence requirement is met, a bodily injury must still result from the defamatory statements. Certainly if a plaintiff alleges a physical injury, such as a heart attack, such an allegation would constitute bodily injury under the policy definition. However, many courts have ruled that mental anguish alone, the most common allegation in defamation actions, would not meet the bodily injury requirement.

Even if the occurrence and bodily injury requirements have been satisfied, a number of exclusions might preclude coverage. The expected or intended injury exclusion would eliminate coverage if the social networker’s defamatory posts could be considered as intentional or made with an expectation to injure someone. Further, the business exclusion would preclude coverage if the defamatory remarks resulted in bodily injury arising out of or in connection with a business conducted from an insured location or engaged in by an insured, irrespective of the ownership of said business. Other fact-specific exclusions in the typical homeowner’s policy could also limit or preclude coverage.

It should be noted some insurers can provide defamation coverage that is not conditional upon establishing bodily injury.  
Commercial General

Liability Policy

A Commercial General Liability policy (CGL) is designed to provide general liability coverage to business entities. It can potentially provide coverage for defense costs and settlements/judgments resulting from an employee’s defamatory statements, but only if the remarks were made in the scope of employment. Two standard coverages under a CGL policy come into play when considering defamation.

Coverage A

Coverage A deals with bodily injury and property damage. It is very similar to the homeowner’s policy, so the above analysis is applicable in determining coverag
e limitations. Bear in mind that many CGL policies contain a personal and advertising injury exclusion pertaining solely to Coverage A that forces any claims of bodily injury arising out of personal injury into Coverage B.

Coverage B

Coverage B deals with personal and advertising injury. It is considerably broader than Coverage A, in that there is no bodily injury or occurrence requirement to trigger coverage. However, in order to access the policy, the personal injury must arise out of a specifically defined wrongful act that might include the posting of libelous statements or remarks violating another’s privacy.

Also, a number of specific exclusions can limit or eliminate recovery. If a statement is published with the knowledge that it is false, coverage may be precluded. In addition, defamation allegations are often coupled with invasion of privacy allegations. This can create coverage difficulties under Coverage B due to an exclusion for knowingly violating another’s rights. This provision would preclude coverage when the personal injury was caused with the knowledge that the act would violate the rights of another and would inflict personal injury. Recovery could also be eliminated if the personal injury arises out of an electronic chatroom or bulletin board the insured hosts, owns or over which the insured exercises control.

Media Liability Policy

Other insurance policies might provide slivers of coverage for defamation in the social media arena. However, the most robust coverage available for this risk is contained in a media liability policy. This insurance is specifically designed to protect businesses and their employees against claims arising out of the communication of information and would include broad defamation coverage. Companies and their employees use social media for a whole host of purposes and not all media liability policies are created equal, so it is important to review the policy definitions, terms, conditions and exclusions with an insurance specialist in this area. Of particular importance is the definition of covered media. To a large degree, this will determine the breadth of coverage. However, since media liability insurance is specifically crafted to cover defamation, there are fewer obstacles to recovery than those in homeowner’s and CGL policies.

Stay tuned (or logged on). If, as we predict, defamation claims volume increases as social media users gain rights awareness, so to will come an increase in coverage demands and coverage issues.