It seems like every business these days—from technology start-ups to hardware stores—is engaging its customers and clients through posts, tweets and hashtags (and blogs like this one). For example, last year, Duane Reade tweeted a photograph of actress Katherine Heigl carrying the drug store's bag, and wrote: "Love a quick #DuaneReade run? Even @KatieHeigl can't resist shopping #NYC''s favorite drugstore[.]" As a result of the tweet, Ms. Heigl sued Duane Reade for false advertising and misappropriation of her likeness, and sought $6 million in damages. While the parties ultimately settled for an undisclosed sum, Duane Reade's misstep is a prime example of the risks companies face when using social media.
Social media platforms like Twitter, Facebook, LinkedIn, and Google+ unquestionably allow companies to efficiently and quickly communicate with a broad consumer base. But these new marketing and advertising channels also create an increased risk of lawsuits for libel, slander, invasion of privacy, copyright infringement, and misappropriation of advertising ideas. These risks are collectively known as "advertising injuries" and, like many common risks, often are covered by the standard Commercial General Liability (CGL) policy or by specialty insurance policies.
Katherine Heigl's dispute with Duane Reade highlights both the risks associated with social media and the benefits of insurance coverage under standard CGL policies and specialty insurance policies for advertising injuries. CGL policies, which provide third-party liability coverage, usually provide the following personal and advertising injury coverage: "We will pay those sums that the insured becomes legally obligated to pay as damages because of 'personal and advertising injury' to which this insurance applies. We will have the right and duty to defend the insured against any 'suit' seeking those damages."
The typical CGL policy defines "advertising injury" to include economic injury arising out of:
- Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;
- Oral or written publication, in any manner, of material that violates a person's right of privacy;
- The use of another's advertising idea in the policyholder's advertisement; or
- Infringing upon another's copyright, trade dress or slogan in the policyholder's advertisement.
In addition to CGL policies, many insurance companies offer specialty policies that may cover injuries specifically stemming from social media. Technology Errors & Omissions insurance, or "Tech E&O," is a type of insurance that covers third-party losses stemming from either a product that fails to perform as intended, or losses arising from an act, error, or omission committed in the course of policyholder's performance of services. Many Tech E&O policies offer media liability coverage specifically designed for publishers, broadcasters, and companies that distribute information online.
Social media has changed the ways in which companies advertise and interact with consumers. However, many of the risks inherent to social media are already covered by existing insurance policies. Coverage counsel can help policyholders maximize insurance coverage in the event a company faces liability based on an advertising injury. #socialmediarisks
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