For most online publishers, insuring against libel and other publishing liabilities is a lot like insuring your house against a fire. The odds you'll ever need to use the policy are low, but the consequences of not having it when you need it can be catastrophic.
As the Internet has flourished in recent years, online publishers of all types have found themselves the target of litigation. All of the standard liabilities that plague offline publishers have migrated to the online world, including claims for libel, invasion of privacy and infringement of intellectual property. Everyone publishing online -- from mega publishers like Dow, Jones & Company, to small online publishers like Gizmodo.com, to bloggers and freelancers -- is at risk.
The Communications Decency Act -- a statute enacted by Congress in 1996 -- generally protects online publishers from liability for defamatory statements made on their sites by others. For example, a Web site operator generally cannot be held liable for defamatory statements posted by participants on a message board on its site.
However, online publishers can be sued for the content they create. In many ways, online publishers face even greater liability risks than traditional media.
Many online publishers are small operations. They often lack the resources enjoyed by traditional media to protect against the publication of defamatory or otherwise actionable content. Most, for instance, do not have attorneys standing ready to review potentially defamatory stories in advance of publication, as many offline publications do.
The need to publish in "Internet time" further increases the risks for online publishers. The public now expects to read about news online as it happens, thus affording little opportunity for the type of extensive editing and fact-checking procedures typically employed in the offline world. Bloggers generally post to the Web without any review or oversight by a third-party.
In addition, material published on the Web is more widely and easily accessible to the public than traditional media publications and remains so unless someone removes the content from the Web. Even then, content might be archived by a third party -- such as the Wayback Machine -- and remain published long after the original publisher deleted it. This increases the risk that a plaintiff will learn of defamatory statements about them, makes it easy for them to identify precisely what was said, and potentially increases their damages because of the worldwide distribution of the content.
Although some of the suits against online publishers have turned out to be a mere nuisance, many have resulted in protracted and expensive litigation. Just ask Ton Cremers. He operated a Web site and listserv devoted to museum security and stolen art. Cremers received an e-mail from a man named Robert Smith, who identified himself as a building contractor in North Carolina. Smith told Cremers that he overheard a client, Ellen J. Batzel, state that she was the granddaughter of Nazi Gestapo chief Heinrich Himmler. Smith concluded that numerous works of art in Batzel's home had been stolen during World War II.
Cremers posted Smith's e-mail, with some minor wording changes, to the Museum Security Network Web site and distributed it through the network?s listerv. (See a recent OJR story on the Cremers case.)
Batzel sued Smith, Cremers and the Museum Security Network for defamation. Cremers argued that he was immune from liability under the Communications Decency Act because he essentially just republished Smith's e-mail. The court of appeals, however, ruled that Cremers would only be protected if he could establish that a reasonable person in his position would have believed Smith intended his e-mail to be published, and it sent the case back to the trial court for further proceedings. Cremers must therefore continue litigating a case over an e-mail that he did not originally author and that was read by a comparatively miniscule audience.
Even where an online publisher wins a suit outright, the cost of defending the litigation can be in the tens or even hundreds of thousands of dollars -- more than enough to wipe out all but the most robust online publishers. Fortunately, online publishers don't have to go it alone: Many insurance companies are now offering media liability insurance policies -- the product most often used to insure against libel lawsuits -- to online publishers large and small.
Over the last decade, insurers have modified the basic policy form that has been in use for more than 50 years for traditional print media to encompass online distribution of content.
Coverage in media liability policies usually includes, at a minimum, the following:
- Libel, slander and defamation
- Invasion of privacy
- Plagiarism, piracy and misappropriation of property rights
- Copyright infringement, infringement of title, slogan, trademark, trade name or service name
- Error, omission, misstatement or misleading statement
Although there are many common characteristics of media liability policies, they are not all created equal. In comparing such policies, here are some questions to ask:
- Will you be covered if sued outside the United States?
Online publishers have a greater risk of being sued abroad than traditional publishers. While many U.S. media companies limit distribution of their print publications to the United States and perhaps a select few foreign countries, online publications can be accessed anywhere in the world at the click of a mouse. This increases the risk that an online publisher will be sued abroad by plaintiffs searching for more favorable libel laws than in the United States. Typically, libel laws outside the United States are far less forgiving to publishers, many imposing liability even when an error has occurred without fault on the part of the publisher. It is therefore imperative that online publishers ensure that their policy will cover them if they are sued abroad.
A recent case against Dow, Jones & Company illustrates just how easily an online publisher can find itself litigating a half a world away. In late 2002, Australian mining magnate Joseph Gutnick, who lives and works in Australia, sued Dow, Jones in Australia for libel based on an article appearing on wsj.com, the online edition of The Wall Street Journal. He alleged that the publication falsely accused him of engaging in the manipulation of share prices and of associating with a well-known American money launderer and tax evader. Even though Dow, Jones' Web servers were located in New Jersey, and only a few hundred readers in Australia read the article, Australia's highest court rejected Dow, Jones' efforts to have the case transferred to the United States. The ruling was based on Gutnick's allegation that his reputation was harmed in Australia, not the United States.
- Who selects counsel?
Media policies vary in terms of who selects counsel in the event of a claim. If possible, it is preferable for insureds to retain the right, or at least a say, in the selection of counsel, particularly if the insured has a pre-existing relationship with a law firm that it would like to have defend it if there is a claim. In addition to the peace of mind of working with an attorney familiar with your business, counsel of your choice will protect your interests beyond the financial value of a single claim.
- Who decides if the case will settle?
Many insurance policies have what is known as a "hammer" clause, meaning that the insurer can force the insured to accept a settlement of the claim, unless the insured is willing to forego coverage or accept reduced coverage. A "hammer" clause can be particularly problematic for publishers, who may wish to continue to fight a lawsuit based on First Amendment or other journalistic principles even when pure economics would dictate a settlement. An insurer is likely to be unsympathetic to these types of concerns, and almost certainly will decide whether to settle based on a pure cost/benefit analysis.
- Who decides if a correction or retraction will run?
When an individual believes they've been defamed, they often demand that a retraction or correction be run. In many states, there are statutes that limit damages for publishers that run timely corrections or retractions. As a result, some media policies provide the insurer with a say in how an insured will respond to such a demand. Again, a publisher's interests may sharply diverge from the insurer's interests in this situation. While the publisher may be unwilling to run a correction or retraction because he or she feels there is nothing to correct or retract, an insurer may wish to appease the complaining party in the hope of avoiding costly litigation or at least reducing liability.
- Does the policy cover the award of punitive damages?
Punitive damages can sometimes be the largest component of an award in a libel or invasion of privacy case. Juries often respond to plaintiffs' lawyers' admonitions to punish the media for alleged arrogant or irresponsible coverage. As a result, it is important to obtain insurance that covers punitive damages to the maximum extent permitted by state law.
- Does the policy provide coverage for information gathering?
In recent years, many plaintiffs have attempted to side step the First Amendment protections applicable to libel suits by asserting claims not for what was published, but rather for how the publisher gathered its information. For instance, if a publication obtains information through covert or undercover means, the plaintiff might sue for trespass, fraud or invasion of privacy rather than libel. Thus, depending on the type of publication, it may be critical for online publishers to ensure that their media policy covers newsgathering and related activities, and will provide coverage for suits even where there is no publication of the material gathered.
- What is the event that triggers coverage?
Some media liability policies are known as "claims-made" policies, meaning they are triggered by the assertion of a covered claim during the period of coverage. Other policies are "occurrence" based, meaning they are triggered if the offending action occurred during the policy period. Although either type of policy is acceptable, the "occurrence" form is preferable because coverage is not contingent on when the plaintiff elects to sue. For example, if an insured defames someone during the policy period (typically one year), an insured with a "claims-made" policy will be covered only if the plaintiff sues while the policy is still in effect. In contrast, an insured with an "occurrence" policy in the same circumstances will be covered for that conduct regardless of when the plaintiff sues, even if the occurrence policy has long since expired.
- Are defense costs deducted from the policy limits?
Although all media policies will either provide counsel to the insured or will pay for defense costs arising from a claim, policies vary in terms of whether defense costs are deducted from the policy limits. If they are deducted, an insured with a $1 million policy limit and $500,000 in legal fees defending a claim will have only $500,000 available for reimbursement if it is found liable or if there is a settlement. With many lawyers today charging in excess of $500 an hour, defense costs can mount quickly. Thus, in determining the amount of coverage to obtain, online publishers must remember to ask whether defense costs will be deducted from, or be in addition to, the policy limits.
- Is the insurer financially secure?
Even the most comprehensive insurance policy is of little use if the insurer cannot stand by its coverage obligations. Be sure to ask your insurance broker or consultant whether the proposed carrier is well rated by agencies that assess the financial health and reliability of insurers, such as A.M. Best or Standard & Poors.
Every online publisher should at least consider media liability insurance. In deciding whether to get coverage and, if so, how much to get, a variety of factors come into play. For instance, if your online publishing is incidental to your core business, some of the media liability risks may be sufficiently covered in your Commercial General Liability policy. In contrast, virtually all homeowner's policies exclude coverage for the business risks of online publishing.
The more widely read and controversial the material, the greater need for coverage. An obscure Web site touting the joys of knitting presents less risk than a popular Web site devoted to spreading scandalous gossip. But you never know in advance what might trigger a suit. Even the publisher of the knitting site might be sued for a domain name or trademark infringement, or for making a defamatory comment about one of the posters on the site's message board.
Coverage is available for virtually any business with Internet activities -- from the titans of Internet publishing and e-commerce, to bloggers and freelancers. Freelancers are often covered under the media policies of the publications in which their articles appear, so individualized coverage may not be necessary if the freelancer can confirm the existence of such coverage in advance.
Typically, the minimum limit for a media policy is $1 million. For larger publishers, coverage up to $100 million can readily be placed. Premiums for media policies can start as low as $1,500. Deductibles generally start at $5,000 for a $1 million policy.
How much coverage you need depends on many factors, including how much money you have to spend and what kind of content you're producing. Publishers with less risk generally would buy $1 million to $2 million of coverage, medium risk publishers might consider a $5-million policy, and companies with substantial risks might get coverage for $10 million to $50 million.
Until recently, media liability insurance has been offered by only a few insurers as a specialized product. Premiums are now at record highs. The good news, however, is that there are more insurers than ever actively seeking to enter this line of business, including two new carriers in just the last couple of months -- AXIS U.S. Insurance and OneBeacon Insurance Co. This phenomenon is likely to drive down the cost of premiums for media policies in the coming years, making coverage more widely available to online publishers of all varieties.
See this chart for contact information for the major insurers with media liability insurance products. You must go through a licensed agent or broker to get coverage. In light of the complexities of the policies, you should consider hiring an attorney or consultant to help you evaluate and select the program most appropriate for your business.