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

1. Spotting the Pitfalls & Installing the Safety Nets

3. 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

4. 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)

5.  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

6.  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

7.  Breach of another’s protected IP
 Another’s breach of your protected IP
 Employee disclosure of confidential and
proprietary information

8. Employee privacy
Online harassment of employees
Use of web-based research in employment
decisions
Libel/slander/disparagement

9.  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

10.  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

11.  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

12.  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

13. 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)

14.  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

15.  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

16.  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)

17.  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

18.  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

19.  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

20.  2005 form – amending
personal injury and
advertising injury
coverage
 “Coverage territory”
defined to include other
parts of the world if
injury takes place online

21.  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

22.  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

23.  CGL policy – by
endorsement, no
coverage for
“unsolicited
communications” –
facsimile, e-mail,
posted mail (i.e., snail
mail) or telephone

24.  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

25.  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

26.  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

27.  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

28.  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

29.  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?

30.  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.

32. Amy E. Davis
RoseWalker LLP
Amy Elizabeth Stewart
Amy Stewart PC