Libel/ Slander Defamation Coverage under Liability Insurance

Transmission of information- quality as well as quantitatively, is paramount in any society. Various modes for this transmission or “Media” for disseminating information are instrumental in enhancing business outreach. Apart from traditional media, businesses use various social media handles like Twitter, Instagram, Facebook to stay relevant and connected to the potential customers. But as the Peter parker principle goes- “with great power comes great responsibility”, and in today’s world with responsibility comes a greater exposure to liability. With so much content and information available from corporates and heightened sensitivity among the targeted audience/readership, someone is bound to get offended, some error will happen, resulting in a content related litigation brought on multiple parties such as the owner of the product, the publisher, advertising company and so on.

Whilst most risk managers and insurance buyers are very well versed with compensation demands for Bodily Injury, Property Damage issues or legal cases resulting from Errors and Omissions or Cyber risk exposures, we often tend to overlook, Libel (written defamation), Slander (oral defamation) or Defamation (includes both libel and slander)coverage afforded through many liability insurance policies for corporate buyers of insurance.

And surprisingly there are many policies under which Defamation and Product Disparagement are covered and this article dwells on the coverage afforded for Defamation by some of our most common policies as follows :

• The Commercial General Liability (CGL) Policies through Personal and Advertising Injury Coverage
• Directors’ and Officers’ (D & O) Liability Policies
• Cyber or Network Security Policies through the Media Liability Cover
• Multimedia Policies

One word of caution though – If you are a Media Company ( those engaged in performing media activities or providing media services as explained further), then other than the D & O policy above, most insurers will draw the line at giving you coverage for Personal and Advertising Injury in CGL or Multimedia Liability in Cyber, asking you to opt for a separate Multimedia Liability Policy instead. Even under the D & O given to a Media Company, claims alleging defamatory conduct in the performance of media services will potentially attract the Professional services Exclusion under the policy and may be treated as a non-payable claim.

A few salient points which would apply to all the coverages discussed above:

• Where the Insured person/entity is sued because of actual or alleged defamatory conduct, the liability policies generally indemnify the Insured both for damages awarded and defence costs incurred, subject to the terms conditions and exclusions of the said policies.
• Because the coverage is under Liability Policies, what are allowable are Defence Costs – so it follows that if there is legal action taken against the Insured alleging that the Insured has been guilty of defaming the claimant then defence costs would be allowed under the Policy. However, if the Insured is the victim of a defamation attack, and he intends to take action against the perpetrator of the same, then prosecution costs are not allowed under the Policy.
• Coverage for Libel, Slander, Defamation must be mentioned as a specific coverage in the Policy. So in all the policies discussed above, this coverage must be explicitly mentioned and clearly provided, we have often seen policies in which it is not so.
• Since the Policyholder in most of these policies is the corporate entity, for defamation to find coverage it must be relevant to the business activities of the Organisation.

Let us now discuss the provisions with specific reference to each of the above policies

Under the Commercial General Liability (CGL)Insurance Policy

This is provided under Coverage B “ Personal and Advertising Injury” which is defined as follows :

It is important to remember that every Insurer uses different wording even for CGL so it is quite possible that

• In some Insurers’ base wording entire Coverage B is missing, and one will need to get that added by an endorsement.
• In some Insurers’ quotes Personal and Advertising Injury may be sub-limited and thus not granted up to full limits
• In yet other Insurers’ wording, Personal Injury and Advertising Injury are both defined separately but given as a combined cover with a single limit and sometimes in both definitions Libel, Slander and Defamation are covered !

Under the D & O policy

Most Management Liability Policies or Directors’ and Officers’ Liability Policies (D&O) also offer protection against claims alleging conduct that may be deemed to be defamatory under the Definition of Wrongful Act (standard definition reproduced below), however there are notable exceptions to this rule as well, which brings home the point made earlier on; that policy wording always needs to be checked for affirmative coverage.

“Wrongful Act means any actual or alleged misrepresentation, misstatement, misleading statement, error, omission, defamation, negligence, breach of warranty of authority or breach of duty by an Insured, acting solely in their capacity as such, or any matter claimed solely because of such status …”

Under Cyber or Network Security Policies

Let us now examine the situation under Cyber Policies where it will either be given under Media Liability Extension or even in the base wording; the practice differs from Insurer to Insurer. Obviously if it is under an Optional Extension then both limits and grant of cover needs to be affirmed by specific mention in the Schedule of the Policy. The wording in the Base form could be for:

Defamation including libel, slander, trade libel, infliction of emotional distress, outrage, outrageous conduct or other tort related to disparagement or harm to the reputation or character of any person or organization;

Electronic Media Claim - Any Claim made against the Insured Entity by a Third Party arising directly and exclusively from:

1. libel, slander or any other reputational damage, or
2. breach of any intellectual property right, right of publicity or privacy right,

In terms of Optional Extensions, the wording could be as follows :

The Insurer will pay to or on behalf of any Company all Damages and Defence Costs (not to exceed the Sublimit stated in the Schedule) which arise out of a Claim by a Third Party against the Company solely in the performance of or failure to perform MultiMedia Activities arising from the following alleged or actual wrongful acts:

1. defamation, including but not limited to libel, slander, or disparagement of trade, reputation or the character of any person or organization, or infliction of emotional distress or mental anguish arising from the foregoing……

However, by the very nature of the Cyber policy ,the above coverage is only for cyber or digital activities carried out by the insured, i.e., only electronic dissemination of information.

However the common thread running through the coverage given under all three above is that these are not intended to cover Media Companies. Media Companies would be gently but firmly steered towards a specific Multimedia Policy which is specially designed to cover various errors and omissions arising out of their professional media activities/services.

There are many recent instances about cases being filed against popular web series for defamation of a community or region, insulting religious sentiments or wrongful portrayal of an entity.

Advertising Industry is also highly susceptible to litigation. Companies continue to employ the most innovative techniques to woo their customers and boost sales. While attempting to do so, often advertisements face the wrath of legal action owing to allegations of offensive, disparaging and misleading content. Advertising agencies are now becoming aware of the potentially crippling liabilities they could incur in their business and the fact that the responsibility of ensuring that a client’s brand or image is correctly conveyed to stakeholders is an important job and damage to reputation is often sought to be addressed by substantial claims for damages.

Kindly note that the above discussion aims to concentrate on conceptual issues and specific requirements or risk exposures may need customised coverage.

The contents herein cannot be termed as legal or professional advice only as a guidance to policy coverage elements and any actual claim admissibility and quantification is decided by the circumstances unique to every particular claim and by the terms and conditions of the Policy under which the claim lies.