The impact of social media on personal lines

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Content

1. Executive summary

2. Introduction

3. Underwriting considerations, claim implications and legal aspects of social media on personal lines

3.1. What is “personal injury”?

3.2 Electronic aggression

4. Appendix

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1. Executive summarySocial media has entered many aspects of our lives including personal lines insurance. Previously, insurers could provide personal injury coverage as part of a personal umbrella policy for little or no premium. With the rise in defamation and cyber-aggression claims from social media, personal lines insurers are confronted with increased exposures. In order to protect their interests, personal lines insurers should consider the following:

setting an aggregate limit for personal injury coverage on any policy that provides personal injury coverage.

identical “each offense limits” and “aggregate limits.”

providing personal injury coverage in the personal umbrella only when the underlying homeowner policy is endorsed to provide personal injury coverage.

excluding “any ‘bodily injury,’ ‘property damage’ and ‘personal injury’ arising out of electronic communication and any claim for damages of negligent supervision arising out of electronic communication.”

excluding any claim for damages of negligent supervision arising out of electronic communication.

adding an “electronic aggression” exclusion to both the homeowner personal injury coverage endorsement and to the personal umbrella policy.

Social media presents a constantly evolving insurance exposure. Personal lines companies must remain vigilantly informed of legal developments. They must be nimble and stand ready to change position as the courts issue opinions interpreting coverage.

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2. IntroductionSocial media1 has swept over society with the force of a tsunami, albeit one that shows no signs of receding. The prevalence and near-exponential growth of social networking platforms like Facebook (800 million users worldwide), Twitter (over 200 million accounts, generating 140 million “tweets” daily), LinkedIn (over 100 million users), and YouTube (over 100 million videos uploaded to date) represent nothing short of a paradigm shift in how people communicate. Individuals are living their lives online, sharing nearly everything—no matter how intimate or mundane—with their “friends.” The result has been new causes of action like “libel by Twitter” (yes, you can defame someone in 140 characters or less), new defenses like the “Facebook alibi,” evolving notions of jurisdiction and legal duty, as well as an entirely new body of electronic evidence posing unique discovery and admissibility issues for courts nationwide. A growing number of countries (most recently the United States) even permit individuals to be served with legal papers via social networking sites. Given the sheer ubiquitousness of social media (65% of U.S. adults have a social networking profile, and over 80% of children aged 12–17 use social media), its potential for misuse poses new challenges for underwriters and claims professionals working in personal lines.

Consider the following real-life lawsuits:

In Houston, Texas, a father fed up with “cyberbullying” of his daughter by classmates who tormented the girl with an unflattering phony Facebook page and other social media taunts files a civil suit against these real-life “Mean Girls” and their parents. He alleges that the parents negligently supervised their children, triggering at least a duty to defend if not potential coverage under their respective homeowner’s policies;2

In Dallas, Texas, an eighth-grade boy writes an online “novel” using the real name of a female classmate, and subjects her character to date rape and ultimately murder. After he shares his literary efforts with classmates in his wealthy school district, the girl is allegedly humiliated. She and her parents have sued the boy, his parents (both doctors), and the school district for defamation and invasion of privacy;

The now-infamous suicide of Rutgers freshman Tyler Clementi in 2010 has sparked a nationwide debate over cyberbullying and led to criminal charges against the roommate who allegedly filmed Clementi’s sexual encounter with another man and streamed it live to third parties over the Internet. The roommate, 18 year-old Dharun Ravi, also allegedly sent tweets like “Roommate asked for the room till midnight. I went into Molly’s room and turned on my webcam. I saw him making out with a dude. Yay.” In addition to the criminal charges facing Ravi, legal experts anticipate a civil lawsuit to be filed as well;

Phoebe Prince, a 15 year-old Massachusetts girl, took her own life in January 2010 after weeks of bullying online and at school. Even after her death, students continued to leave hateful, vindictive comments on her Facebook page. According to the National Crime Prevention Council, cyberbullying is at an all-time high, with 43% of teenagers reporting being victimized online. What was once the brief taunt on the playground or school bus heard only by a few has now become a vitriolic, profanity-laced comment on a webpage (often accompanied by an embarrassing photo), and viewed by a potentially limitless number of people, both known and unknown;

Nationwide, a growing number of lawsuits are being filed over fake social networking profiles that defendants have created about real individuals. In a number of states, including California and Texas, “e-personating” someone is a criminal offense as well.

1 Social media is defined by Merriam-Webster as forms of electronic communication (as Web sites for social networking and microblogging) through

which users create online communities to share information, ideas, personal messages, and other content (as videos).

2 A court might rule that there is no coverage for negligent supervision where the insuring agreement provides something along the following lines:

“We will pay damages for ‘personal injury’ for which an ‘insured’ become legally liable due to one or more offenses listed under the definition of

‘personal injury.’” Where the plaintiff pleads a negligent supervision cause of action—as opposed to defamation—the court might find no coverage on

the ground that the definition of personal injury does not include the “offense” of negligent supervision (see page 7).

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Not all legal actions are successful. In Finkel v. Dauber, a recent New York Supreme Court case, the court held that statements posted on a secret Facebook group created by the defendants (five of the plaintiff’s classmates) did not rise to the level of defamation, but rather was merely “a vulgar attempt at humor.” As for the cause of action for negligent supervision against the harassers’ parents, the court rejected it in light of New York law requiring a showing that the parent entrusted the child with a dangerous instrument. The court declined to declare a computer a “dangerous instrument,” and thus “create an exception that would engulf the rule against parental liability.” Finkel v. Dauber, 906 N.Y.S. 2d 697 (Sup. Ct. Nassau County 2010).

3. Underwriting considerations, claim implications and legal aspects of social media on personal linesSocial media has been a catalyst, escalating a dispute among a small circle of friends to a wide and lasting publication. Consider the following scenario: Debbie Dean is a teenager with a Facebook account.3 Debbie and her best friend, Paula Plain, get in an argument at school. Debbie is upset. When she returns home from school, she retreats to her room, logs into Facebook, and types disparaging remarks about her former “best friend forever”.

Before the Internet, Debbie might have written her rants in her diary and locked it away for no one else to see, or, she might have gossiped with her other girlfriends by telephone, or simply vented to a sibling. With the advent of the Internet, however, with one click, a once private thought is transformed into an indelible and viral broadcast for the whole world to see, indefinitely.

Debbie types this post to her Facebook wall: “Paula Plain told me she is going to blow up the school!”

This post travels with lightning speed. The officials at Debbie and Paula’s school do not take this allegation lightly. Paula is suspended from school, pending a thorough investigation by the authorities. The officials notify the police department, who interrogate Paula. Paula’s classmates ostracize her. Paula’s parents sue Debbie’s parents on behalf of their daughter for defamation.4 Will the Deans’ insurance policy provide them with coverage in the defense of this defamation lawsuit?

Insurance coverage here will depend on a number of factors. What type of homeowner’s policy do the Deans have? Most standard homeowner insurance policies do not cover personal injury claims. Even if the Deans own a high-end home, and have an HO-5 homeowner policy, they probably do not have coverage for this claim. Unendorsed, the HO-5 only provides liability coverage for bodily injury and property damage as defined by the policy. Under the HO-5, “bodily injury” means “bodily harm, sickness or disease.”5 Historically, defamation is not included in the definition of bodily injury. “Bodily harm” is usually interpreted to mean physical injury (which defamation does not theoretically cause).

Whether the Deans have a basic form homeowner policy or an HO-5 policy, they may still be covered if they purchased a personal injury endorsement, for example, an HO 24 82, for their basic homeowner policy or for their HO-5. Alternatively, they may be covered if they purchased an umbrella or an excess liability policy that includes personal injury coverage.

To become an actionable tort in defamation, the plaintiffs must establish four elements: 1) a publication to one other than the person defamed; 2) a false statement of fact; 3) that is understood as a) being of and concerning the plaintiff; and b) tending to harm the reputation of the plaintiff; and 4) if the plaintiff is a public figure, he or she must also prove malice. In the past, defamation claims were brought as a result of a remark published in a newspaper, magazine, or book. In recent years, however, defamation suits

3 All names contained in these scenarios are fictitious.

4 Assume for purposes of this illustration that the lawsuit only contains allegations of defamation. We will address negligent supervision allegations and

the duty to provide a defense later in this article.

5 Bodily injury is distinct from personal injury in the insurance context. Bodily injury from an insurance standpoint means bodily harm, sickness or

disease, including death; whereas, personal injury usually describes defamation, libel, slander, false arrest, and other intentional torts

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have been brought as a result of remarks made in blogs or on social network sites. Is posting a remark on Facebook, for example, or on a blog, considered publication? The Insurance Services Office (the “ISO”) has weighed in on this issue as it relates to homeowner policies. The ISO amended its definition of “personal injury” earlier this year6 in its HO 24 82 Personal Injury Coverage Endorsement to include an oral or written publication “in any manner.” By amending its wording, the ISO has removed any doubt that this endorsement is intended to cover remarks made in emails, blog postings, and social networks. Thus, Debbie’s post on Facebook meets the definition of “publication” under ISO’s amended wording.

The homeowner policy’s personal injury endorsement and the personal umbrella liability policy contain a number of exclusions for personal injury coverage. Whether or not a family’s homeowner or personal umbrella policy provides coverage for a defamation suit depends on the facts of each suit, the policy’s definition of personal injury, and whether any of the exclusions are triggered.

3.1. What is “personal injury?”A policy’s personal injury insuring agreement specifically sets forth the types of torts or offenses that are covered, as well as any exclusion subject to the coverage. Accordingly, each policy must be analyzed and reviewed in order to determine the extent of the personal injury coverage provided.

The ISO’s Personal Umbrella Liability Policy DL 98 01 10 06 provides:

II. CoveragesA. Insuring AgreementWe will pay damages, in excess of the “retained limit,” for:

2. “Personal injury” for which an “insured” becomes legally liable due to one or more offenses listed under the definition of “personal injury” to which this insurance applies.

The crux of the coverage provided depends upon the definition of personal injury. From the ISO’s Personal Umbrella Liability Policy DL 98 01 10 06:

I. DefinitionsL. “Personal injury” means injury arising out of one or more of the following offenses, but only if the offense was committed during the policy period:

1. False arrest, detention or imprisonment;

2. Malicious prosecution;

3. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor;

4. Oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services; or

5. Oral or written publication of material that violates a person’s right of privacy.

While there are other exclusions that apply to personal injury, the primary exclusions in the ISO policy that apply to defamation are:

6 The effective date of the ISO updated homeowner policy forms for the majority of jurisdictions was May 1, 2011..

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III. ExclusionsA. The coverages provided by this policy do not apply to:

2. “Personal injury”:

a. Caused by or at the direction of an “insured” with the knowledge that the act would violate the rights of another and would inflict “personal injury”;

b. Arising out of oral or written publication of material, if done by or at the direction of an “insured” with knowledge of its falsity;

c. Arising out of oral or written publication of material whose first publication took place before the beginning of the policy period;

d. Arising out of a criminal act committed by or at the direction of an “insured”; or

e. Sustained by any person as a result of an offense directly or indirectly related to the employment of this person by an “insured.”7

For illustrative purposes, consider these claim scenarios arising from the use of social media:

Scenario #1: Debbie’s post on Facebook is false. Debbie knows that Paula did not threaten to bomb the school. Debbie simply posted a false statement on Facebook in anger in an attempt to embarrass Paula.

Result: Probably not covered. If Paula and her parents file a lawsuit against Debbie and her parents, the Deans’ homeowner policy will not provide coverage in all likelihood – even if they had purchased the personal injury coverage endorsement. Most homeowner policies exclude coverage for personal injury arising out of an oral or written publication of material, if done by or at the direction of an “insured” with knowledge of its falsity.8 The ISO’s personal umbrella liability policy, exclusion A.2.b., specifically excludes publication done “with knowledge of its falsity.” Assume for the moment, the lawsuit only contains allegations of defamation. While there may be no coverage here for Debbie, later in this article, we will address whether Debbie’s parents will be afforded coverage under a theory of failure to supervise.

Scenario #2: Paula is devastated over a break-up with her boyfriend. Paula confides in and cries on Debbie’s shoulder. Paula is distraught and blurts out that she is going to blow up the school and end it all. Debbie tries to calm Paula down and convince her that things will turn out all right, but Paula is inconsolable. Debbie is quite worried about Paula. Debbie logs into her Facebook account using her smart phone and posts: “Paula Plain has threatened to blow up the school!”

Result: Coverage is possible for Debbie. If Debbie thought Paula was serious about bombing the school, then the Deans’ homeowner or umbrella policy may provide coverage because Debbie had no knowledge of the falsity of her statement.9 There is a caveat, however. The ISO personal umbrella liability policy excludes personal injury “caused by or at the direction of an insured with the knowledge that the act would violate the rights of another and would inflict ‘personal injury.’”10 If Debbie knew that posting this remark would inflict personal injury to Paula, then this exclusion might apply thereby precluding coverage. Coverage in this scenario hinges upon whether Debbie knew the act would violate Paula’s rights and would inflict “personal injury.”

7 ISO’s Personal Umbrella Liability Policy DL 98 01 10 06

8 See ISO’s Personal Umbrella Liability Policy DL 98 01 10 06, Exclusion A.2.b.

9 If Debbie did not intend to inflict personal injury to Paula, and coverage is extended to Debbie, the Deans might prevail in a defamation suit brought

under this scenario since truth is a defense in a defamation suit.

10 See ISO Personal Umbrella Liability Policy DL 98 01 10 06, Exclusion A.2.a.

Scenario #3: Another classmate told Debbie about a rumor going around the school that Paula was bulimic. Debbie updates her status on Facebook by typing: “I hear Paula Plain is bulimic! No wonder she wears skinny jeans!” Debbie has 546 “friends” on Facebook. Paula is one of them. Paula sees the Facebook post, and is devastated by the publication of this malicious gossip. Paula is ostracized by her friends at school, she does not make the cheerleading squad, she becomes depressed, and her family sues the Deans.

Result: Electronic publication of gossip is a gray area as respects personal injury coverage under homeowner or personal umbrella policies. If Debbie had posted the rumor on her Facebook page knowing that Paula would be hurt by this gossip, then Exclusion A.2.a. might apply to this scenario as well, thereby precluding coverage.11

Scenario #4: Debbie’s mother majored in journalism in college but currently does not work outside the home. She has started her own blog in which she regularly writes about the trials and tribulations of parenting teenagers. While her blog currently has no advertisers, her blog does have a “tip jar.” She also hopes to garner a book deal from her blog eventually. Debbie complained to her mother about an argument with Paula. Debbie’s mother then wrote disparaging remarks about Paula in her blog. Paula was extremely upset over the remarks. Her parents agreed and filed a defamation suit against the Deans.

Result: Coverage dependent upon the policy form and the jurisdiction. Most homeowner policies and personal umbrella liability policies exclude liability related to business pursuits. Exclusion A.2.e. excludes personal injury “sustained by any person as a result of an offense directly or indirectly related to the employment of this person by an ‘insured.’”12 (Note that the business does not have to be profitable to be business-related. The business-related exclusion can apply to hobbies too.) Some policies define business pursuits as a “trade, occupation or profession.”13 Coverage could be dependent upon the jurisdiction. Some states provide coverage so long as blogging is not the insured’s primary occupation. However, the majority of jurisdictions adopt a two-prong test to determine whether an activity is a business pursuit: first, continuity, and secondly, the profit motive (not actual profit, but profit motive).14

In addition, Exclusion 30 in the American Association of Insurance Services’ (AAIS) Personal Umbrella Form specifically excludes:

“Personal injury” arising out of electronic chat rooms, bulletin boards, gripe sites, social networking sites, or other forums that an “insured” hosts, owns, or has the control or authority to update.15

Scenario #5: In a moment of indiscretion, Paula texted a topless photo of herself to her 15-year-old boyfriend, Joe Schmoe. Six months later, Paula dumps Joe. Joe is heart-broken, and in an act of revenge, sends the topless photo to all of his friends via a text message. Eventually, the photo is attached to a website. Paula and her parents sue Joe and his parents for invasion of privacy. The Schmoes have a personal umbrella policy with personal injury coverage.

Result: Probably not covered. In some states, “sexting” constitutes a criminal act, thereby precluding coverage under Exclusion 2.d. of the policy. In states where “sexting” is not a criminal act, Exclusion 2.a. would likely apply: “Caused by or at the direction of an “insured” with the knowledge that the act would violate the rights of another and would inflict “personal injury.”16

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11 A slight change in facts could alter these results. What if Debbie and Paula were simply acquaintances and Debbie only had 20 friends on Facebook,

and Paula was not one of them? Perhaps Debbie did not expect that Paula would ever even see this gossip that Debbie posted.

If Debbie’s intention was not to hurt Paula, then potentially Exclusion A.2.a. would not apply. (Presuming coverage, because truth is a defense in

defamation suits, if Paula were actually bulimic, the Deans could prevail in the suit.)

12 See ISO’s Personal Umbrella Liability Policy DL 98 01 10 06, Exclusion A.2.e.

13 AAIS’ Personal Umbrella Form PU 0001 10 11, Definition 5.a. states “Business” means a trade, a profession, or an occupation, including farming, all

whether full time, part time or occasional.

14 See e.g., Safeco Insurance Company of America v. Hilderbrand, 602 F.3d 1159 (10th Cir. 2010) (“Business pursuits” clause in insured’s homeowner

policy applies and insured did not have coverage for fatal injuries sustained by 17-year-old girl when attacked by insured’s Siberian tiger during high

school senior picture shoot (for which no fee was charged by insured) on insured’s farm that was used as an animal sanctuary.)

15 See AAIS’ Personal Umbrella Form PU 0001 10 11, Exclusion 30.

16 ISO’s Personal Umbrella Liability Policy DL 98 01 10 06, Exclusion A.2.a.

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Scenario #6: Debbie’s mother, Deidre, has a friend who just opened a dog training school. There is only one other dog training school in the area. To help her friend generate business, Deidre logs onto “Yelp” and posts a negative review of the competitor’s school. Deidre does not own a dog, nor does she have any knowledge of this competitor’s school. The competitor’s business drops. Somehow, he is able to determine that Deidre posted the false negative review. He sues Deidre for defamation.

Result: Probably not covered. Deidre knew her Yelp review was false. Accordingly, Exclusion 2.b. (Arising out of oral or written publication of material, if done by or at the direction of an “insured” with knowledge of its falsity) would apply, precluding coverage.

Scenario #7: Debbie posted her remark about Paula on December 15th, 2010. Debbie’s parents purchased their personal umbrella liability policy to be effective on January 1, 2011.

Result: Probably no coverage for publications made prior to the beginning of the policy period. Exclusion A.2.c. states the policy does not apply to any personal injury “arising out of oral or written publication of material whose first publication took place before the beginning of the policy period.”17 (The same rule applies to claims arising after the policy period ends).

Scenario #8: Debbie and Paula worked at the school’s concession stand during a football game. After the game was over, Debbie and Paula stole money from the concession proceeds. Afterwards, they argued over how to divide the money between themselves. In a fit of anger, Debbie posted a disparaging remark about Paula’s honesty on her Facebook.

Result: Probably not covered. Theft is a criminal act. The personal umbrella liability policy’s Exclusion A.2.e. excludes personal injury “arising out of a criminal act committed by or at the direction of an “insured.”18 The trigger “arising out of” usually results in a broad application by a court. The issue is not whether or not Paula is honest; the exclusion applies so long as the defamation arose out of a criminal act.

Despite the exclusions relating to allegations of defamation as illustrated above, the AAIS personal umbrella liability coverage policy does provide for defense coverage under certain circumstances:

“We” have the right to defend, investigate, and settle any claim or “suit” seeking damages covered by this policy. “We” may elect at any time to participate with an “insured” and with any “underlying insurer” or other insurer in the defense, investigation, and settlement of any claim or “suit” arising out of an “occurrence” or an offense that, in “our” opinion, may involve damages to which this policy may apply. Any such defense will be provided at “our” expense by counsel that “we” choose.19

Often, a plaintiff’s attorney will draft a complaint in a manner to include some aspect of coverage that is provided by an insurance policy, just to make sure there is a “deep pocket” involved in the litigation. For example, Debbie’s intentional act of posting a false statement about Paula on Facebook is excluded under the policy. A negligence action against Debbie’s parents alleging negligent supervision of a minor child’s use of the Internet could be covered. By adding an allegation that the Deans were negligent in failing to supervise Debbie’s Internet activities, the plaintiff’s attorney hopes to draw in coverage and settlement money.

17 See ISO’s Personal Umbrella Liability Policy DL 98 01 10 06, Exclusion A.2.c.

18 See ISO’s Personal Umbrella Liability Policy DL 98 01 10 06, Exclusion A.2.e.

19 See AAIS’ Personal Umbrella Liability Coverage PU 0001 10 11, Defense Coverage, 1.

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The addition of the “negligent supervision” allegation has potential to result in coverage as well as a defense for the Deans.20 An insurer with the above defense provision in its policy would likely provide a defense for the Deans as to the “negligent supervision” allegation, subject to a reservation of rights as to other allegations that are not covered under the policy. While Debbie’s defamatory actions would not be covered, the Deans’ policy could still provide a defense to the lawsuit with regard to the claims that they failed to properly supervise their daughter.

What if Debbie and Paula were not friendly? What if, instead, Debbie was a “mean girl” in her school, and Paula was her prey? Once bullying was relegated to the playground. Now, the Internet has opened up an entirely new arena from which to bully. The Megan Meier case 21 and Phoebe Prince case22 are two tragic examples of teenagers who committed suicide after being taunted on social networking sites. The once verbal taunts can now be broadcast worldwide with the click of a button. Certainly, these high profile and tragic cases have heightened awareness of cyberbullying. Parents want protection from their homeowner’s insurance and/or personal umbrella insurance. AAIS recently revised its policy, specifically addressing this issue.

Effective October 1, 2011, the AAIS excluded “cyberbullying” from coverage under its newly revised personal umbrella policy forms. The AAIS’ form excludes:

“Bodily injury,” “personal injury,” or “property damage” that arises out of electronic aggression, including but not limited to harassment or bullying committed:

a. by means of an electronic forum, including but not limited to a blog, an electronic bulletin board, an electronic chat room, a gripe site, a social networking site, a web site, or a weblog: or

b. By other electronic means, including but not limited to email, instant messaging, or text messaging. 23

3.2 Electronic aggressionThe AAIS’ forms use the term “electronic aggression” instead of “cyberbullying.” The term “electronic aggression” is used by the Centers for Disease Control and Prevention to describe a new form of behavior linked to physical injury. The new form specifically states coverage does not apply to bodily injury, personal injury, or property damage that arises out of electronic aggression.

The AAIS defines “electronic aggression” as:

Including but not limited to harassment or bullying committed by means of an electronic forum, including but not limited to a blog, an electronic bulletin board, an electronic chat room, a gripe site, a social networking site, a website, or a weblog; or by other electronic means, including but not limited to email, instant messaging, or text messaging.

While the ISO’s HO 24 82 homeowner policy endorsement does not address cyberbullying or electronic aggression by name, it implicitly excludes this type of behavior. Section II.1.a. excludes personal injury:

Caused by or at the direction of an “insured” with the knowledge that the act would violate the rights of another and would inflict “personal injury.”

While cyberbullying is not covered under the ISO’s homeowner policy’s endorsement or the AAIS’ personal umbrella policy form, coverage could be extended if the lawsuit contained an allegation of negligent supervision against the parents of the cyber-bully.24 If a plaintiff attorney included allegations that the Deans failed to properly supervise Debbie, and their failure to supervise resulted in Debbie’s cyberbullying, then the policy would likely provide a defense and possibly coverage to the Deans for the negligent supervision allegation.

20 The addition of a “negligent supervision” allegation in a cyberbullying suit triggers coverage similar to the “negligent supervision” allegation included

in defamation suits as discussed earlier.

21 Thirteen-year-old Megan Meier’s suicide was attributed to cyberbullying through MySpace. .

22 Fifteen-year-old Phoebe Prince committed suicide after being cyber-bullied through Facebook and texts.

23 See AAIS’ Personal Umbrella Form PU 0001 10 11, Exclusion 10.

24 The addition of a “negligent supervision” allegation in a cyberbullying suit triggers coverage similar to the “negligent supervision” allegation included

in defamation suits as discussed earlier..

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Prior to the Internet, personal lines personal injury claims were not commonplace. The likelihood of a personal injury lawsuit has increased exponentially with the advent of the Internet and with:

The ubiquity of cell phone cameras

The ability to quickly send a picture to multiple people instantaneously via a text message, email message and/or web-posting with a website link

The popularity of social media websites such as Facebook and Twitter that can lead to defamatory statements and cyberbullying

Web blogging and

Consumer review websites such as Yelp. Prior to the Internet age, insurers were safe from a profit and loss standpoint to provide personal injury coverage as part of a personal umbrella policy for little or no premium.25 As a result of this increase in exposure, in order to protect their interests, personal lines insurers might consider some of the following ideas:26

1. If not already done, consider instituting an aggregate limit for personal injury coverage on any policy that provides personal injury coverage—homeowners by endorsement and/or personal umbrella. With most personal umbrella policies, the personal injury limit applies on a per offense basis. In the case of defamation, does each email or text message constitute an offense? From a risk management view, it would be wise to have identical “each offense limits” and the “aggregate limits.” This may require revising some umbrella language that addresses covering excess and aggregate limits, providing an aggregate limit for personal injury coverage and possibly revising the declarations page to reflect the underlying personal injury aggregate limit.

2. The personal umbrella premium is generally $200 with no separate charge for personal injury coverage in the personal umbrella. The cost to defend a defamation claim on a reservation of rights basis costs considerably more than $200. Consider providing personal injury coverage in the personal umbrella only when the underlying homeowner policy is endorsed to provide personal injury coverage.

3. Consider adding an exclusion that excludes “any ‘bodily injury,’ ‘property damage’ and ‘personal injury’ arising out of electronic communication and any claim for damages of negligent supervision arising out of electronic communication.” Including only the term “bodily injury” could exclude cyberbullying suicide-related claims.

4. Consider adding an exclusion that excludes any claim for damages of negligent supervision arising out of electronic communication.

5. Consider adding an “electronic aggression” exclusion (along the lines of AAIS’) to both the homeowner personal injury coverage endorsement and to the personal umbrella policy.

Social media has forever changed the way disputes evolve and has changed the way disputes are resolved. Insurance organizations like the ISO and the AAIS have changed their forms so as to stay current with this technological evolution. Underwriters need to make sure the premium they receive is commensurate with this increase in exposure. When presented with a claim against their insured arising from the use of social media, claims professionals must include in their coverage investigation a review of all applicable policies and endorsements, the facts of each case, the intentions of the parties, and the applicable jurisdictions.

25 See Appendix for a discussion on non-Internet personal lines’ personal injury exposures.

26 See Disclaimer at the beginning of this article.

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4. AppendixItems or offenses listed in the definition of “personal injury” that may not involve an electronic exposure:

1. False arrest, detention or imprisonment: An act of the defendant which causes the unlawful confinement of the plaintiff. Some gruesome, infamous examples, such as the Elizabeth Smart and Jaycee Lee Dugard criminal cases come to mind; however, the criminal acts exclusion would apply to most of these offenses. Consider an insured alleged to have made false statements to the police that caused an innocent person’s arrest. The innocent person then sues the insured in this case. Coverage for this kind of claim is fact-specific and dependent upon the jurisdiction. Giving a false statement to the police that the insured knew was false would be considered a crime and not covered by virtue of Exclusion A.2.a cited above. It is possible an unknowingly false statement that resulted in the arrest of an innocent person might be covered. Even in the latter case, a judge may find that the insured made a false statement, not a false arrest, which would fall outside the definition, and thus not be covered.

2. Malicious prosecution: An action for damages brought by one against whom a civil suit or criminal proceeding has been unsuccessfully commenced without probable cause and for a purpose other than that of bringing the alleged offender to justice. Malicious prosecution claims have been covered by a personal umbrella policy. For example, an attorney, representing himself, was deemed by a court to have filed a frivolous lawsuit in a personal matter. He was then sued by the defendant in the frivolous case for malicious prosecution. We have heard that some insurance carriers will delete this offense from coverage by endorsement if one of the named insured’s has a law degree—especially if he or she is a lawyer in private practice.

3. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor. If rental units are covered, then this offense can represent an exposure to loss. Most insurers have a significant limitation on the number of rental units that can be covered under a personal umbrella – typically the maximum is seven or eight units, and generally no more than twelve units. We believe these limitations make this exposure manageable, but it must be recognized that the recent economic crisis has caused more people to not pay their rent on time so the exposure to loss is increasing.

4. Oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services; or services. Slander is the oral communication of false statements that are harmful to a person’s reputation. If the statements are proven to be true, it is a complete defense to a charge of slander. Libel is the written communication form.

We consider the slander exposure minimal because most personal umbrella insureds do not have access to the broadcast media unless they are in the business of broadcasting. The business exclusion (Exclusion 2.e. above) would preclude coverage for most slander claims for insureds with occupations in the broadcasting industry. That being said, slander or defamation claims can be a concern under Strategic Lawsuits Against Public Participation (SLAPPs).

Strategic Lawsuits Against Public Participation are lawsuits intended to scare, intimidate and silence critics. A typical SLAPP suit was brought by real estate developers who brought defamation suits against those who spoke out against their proposed developments at city council or zoning meetings. The developers’ sole purpose for filing the lawsuits was to silence their critics, and scare people who might criticize them in the future, by forcing them to spend money to defend baseless suits. Many legal observers believe these lawsuits amount to unjust legal intimidation.

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These kinds of lawsuits are effective because even a meritless lawsuit can take years and thousands of dollars to defend. Most defendants have to pay for their defense out of their own pocket because they do not have an insurance policy that provides coverage for libel or slander. To end or prevent these kinds of lawsuits, and the personal cash drain, those “hit” with a SLAPP suit frequently agree to muzzle themselves, apologize, or “correct” statements. Insurance policies covering personal injury for libel, slander or defamation may cover these kinds of lawsuits. Ironically, developers, who have filed a frivolous lawsuit and are then sued by the defendants, may have malicious prosecution coverage in their personal and advertising injury coverage in their commercial lines CGL policy.

A frivolous lawsuit with the intention of silencing someone may or may not be deemed a SLAPP. What is frivolous is in the eye of the beholder. Not all frivolous suits qualify as a SLAPP under a state’s anti-SLAPP statute. Many, but not all, states have passed anti-SLAPP statutes. How a lawsuit qualifies as a SLAPP under such anti-SLAPP statute and the remedies available to a defendant of a SLAPP lawsuit vary considerably from state-to-state. While each statute needs to be analyzed, in general, if a lawsuit is deemed to qualify as a SLAPP under the statute, then the plaintiff is fined and the plaintiff pays all costs the SLAPP defendant incurred in defending the lawsuit.

The Public Participation Project has a website devoted to anti-SLAPP legislation: http://www.anti-slapp.org/. This informative website contains a state-by-state description of each state’s anti-SLAPP statute and also the legislation citation, most useful to underwriters. Underwriters should be aware that the personal lines personal injury exposure is higher in states with a non-existent or ineffective anti-SLAPP statute than in those states with an effective one. Individual companies will need to address this difference in exposure. Because there would be no monetary incentive for the defendant to be silent, if a plaintiff in a SLAPP suit discovers there is personal injury coverage under the defendant’s personal insurance policies, they may immediately “drop” the suit.

About the authors

© 2011Swiss Reinsurance Company

Title:The impact of social media on personal liness

Authors:John G. BrowningLewis Brisbois Bisgaard & Smith, LLP

Gerald DeneenCarol KreilingSwiss Re

Editing and realization:John Novaria

Graphic design and production:Juan Pertuz Logistics/Media Production

Swiss Re175 King StreetArmonk, NY 10504

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This article is intended to be used for generalinformational purposes only and is not to be reliedupon or used for any particular purpose. Swiss Reshall not be held responsible in any way for, andspecifically disclaims any liability arising out of or inany way connected to, reliance on or use of any of theinformation contained or referenced in this article. Theinformation contained or referenced in this article isnot intended to constitute and should not beconsidered legal, accounting or professional advice,nor shall it serve as a substitute for the recipientobtaining such advice. The authors of this reportundertake no obligation to publicly revise or updateany statements, whether as a result of newinformation, future events or otherwise and in no eventshall Swiss Re Group or any of its entities be liable forany damage and financial or consequential loss arisingin connection with the use of the information relatingto this publication.

12/11, 500 en

John G. BrowningLewis Brisbois Bisgaard & Smith, LLP

John Browning is the managing partner of the Dallas, Texas office of Lewis Brisbois Bisgaard & Smith, LLP, where he handles civil litigation in state and federal courts in areas ranging from employment and intellectual property to commercial cases and defense of products liability, professional liability, media law, and general negligence matters. Mr. Browning has extensive trial, arbitration, and summary judgment experience and has represented companies in a wide variety of industries throughout Texas and on a pro hac vice basis in other jurisdictions.

Mr. Browning received his B.A. with general and departmental honors from Rutgers University in 1986, where he was a National Merit Scholar and member of Phi Beta Kappa. He received his J.D. from the University of Texas School of Law in 1989. Some of his honors include being a 2009 and 2010 recipient of the prestigious Burton Award for Achievement in Legal Writing; rated "AV," the highest commendation issued by Martindale-Hubbell for legal ability, ethics, and professionalism; selected as a "Super Lawyer" in the field of Civil Ligation Defense (2005¬-2010, Law & Politics); inducted as a Charter Fellow of the Litigation Counsel of America, a trial lawyer honorary society limited to 3,500 Fellows, representing less than one-half of one percent of American lawyers; and elected to the American Law Institute (one of only seven lawyers in Texas elected in 2009).

Mr. Browning is a noted legal writer, and is a frequent contributor to national and regional legal publications on a wide variety of subjects. His weekly syndicated newspaper column "Legally Speaking" has garnered numerous journalism awards. His book, The Lawyer's Guide to Social Networking: Understanding Social Media's Impact on the Law, was published in December 2010 by Thomson Reuters\West Publishing. He is a member of the Texas Association of Defense Counsel, the International Association of Defense Counsel, and also serves as an adjunct professor at SMU Dedman School of Law, where he teaches the course “Social Media and the Law.”

He is the author of numerous articles on social media-related topics, and has been quoted as a national authority on the subject by the New York Times, TIME Magazine, Salon.com, Inside Counsel Magazine, Law 360, and other publications.

Gerald F. Deneen, CPCU, AreVice President, Swiss Re

Gerry Deneen started his insurance career as a reinsurance treaty broker with E. W. Blanch Co. after graduating from college. In 1985 he joined Employers Reinsurance Corporation. For the next 18 years he spent most of his time almost exclusively in the casualty treaty department in various underwriting and production roles. He spent a year with W.R. Berkley in the Chicago area as a property and casualty underwriter. He re-joined Employers Reinsurance in 2004 in the Casualty Product area. He has remained in the Casualty Product department with Swiss Re since their purchase of Employers Re from General Electric in 2006.

Gerry's specific industry areas of focus are commercial and personal umbrellas and construction underwriting. He has extensive knowledge of the ISO commercial auto and commercial general liability manuals as well as ISO policy forms and endorsements. He has an expertise in casualty insurance coverage issues and policy and endorsement form review.

He has Bachelor of Arts in Business Administration from the University of St, Thomas in St. Paul, Minnesota, and a Masters of Business Administration from the University of Missouri-Kansas City. He has earned the CPCU and ARe professional designations.

Carol B. Kreiling, J.D.Vice President, Swiss Re

Carol Kreiling is a Claims Expert for Swiss Re’s Claims, Accounting, and Liability Management where she manages complex litigation on the Global & National Claims Team for Swiss Re America’s Casualty Claim Unit. She received her law degree at the University of Missouri at Kansas City. Prior to joining Employers Reinsurance Corporation in 1992, Carol served as a trial counsel in the U.S. Army Judge Advocate General’s Corps.

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© 2011Swiss Reinsurance America Corporation