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March 24, 2012

The Insurance Implications of Social Networking Websites, Part 1

Summary:

Because of the vast interaction between individuals on these social networking sites, the problems that can occur in the real world can also occur in the digital world. People can make defamatory remarks about an individual, post private information about others on the Internet, post sensitive or revealing photos or videos, make threats, cyberstalk, or engage in any number of activities that can result in criminal or civil liability.

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This is the first part of a six part series of articles discussing insurance coverage for claims that can be brought against individuals or companies because of the use of Social Media websites. The first part discusses the background of Social Media and claims that can be brought as a result of using social media. The second and third parts will discuss coverages potentially triggered under Coverage B — Personal and Advertising Injury and any applicable exclusions. Parts four and five will discuss bodily injury coverage under Coverage A and any applicable exclusions. Finally, part six will discuss practical applications and examples.

Additional articles in this series can be found here: Part 2 and Part 3.

Background
Social networking on the Internet has grown. These social networking website include Myspace, Facebook, Twitter, LinkedIn, YouTube, and personal websites or blogs provided by third parties including Yahoo. Facebook alone has more than 500 million active users. 50% of these Facebook active users log onto Facebook on any given day. MySpace has over 100 million users, and Twitter has over 145 million registered users.

Users can share web links, news stories, blog posts, notes, photo albums, and video. Users can also post comments on their profile, comment on other user's profiles, photos, or videos, or send messages to each other. What is posted on these social networking sites can be viewed by individuals throughout the United States and the World.

Because of the vast interaction between individuals on these social networking sites, the problems that can occur in the real world can also occur in the digital world. People can make defamatory remarks about an individual, post private information about others on the Internet, post sensitive or revealing photos or videos, make threats, cyberstalk, or engage in any number of activities that can result in criminal or civil liability.

As a result, individuals have been sued over comments posted on the Internet. Individuals or companies (when their employees engage in such activities) are tendering these claims to either the home owner's insurer or the commercial liability insurer, asserting that there is a duty to defend and/or duty to indemnify the insured as a result of their activities on the Internet. Some carriers have even explicitly agreed to cover such activities, while others have excluded them from coverage.

Whether you represent a client who has been the victim of defamatory comments on the Internet or you represent a client who is being sued for engaging in activities in the Internet, or you represent a carrier whose insured has been sued, you need to understand what coverage issues may arise when such claims are presented.

This presentation discusses both personal injury coverage issues that need to be addressed when a claim is presented under either a commercial general liability (“CGL”) policy or a homeowner's policy. It also addresses the bodily injury coverage issues as well.

Causes Of Action
A plaintiff can pursue various causes of action as a result of improper activities that may occur on the Internet. These generally mirror the same causes of action that are asserted when individuals engage in such conduct in the real world.

Defamation
A plaintiff can assert a claim for libel, slander, or defamation of character. To be defamatory, an individual must publish something that is false and must bring the defamed person into disrepute, contempt, or ridicule, or must impeach the plaintiff's honesty, integrity, virtue, or reputation. A user engages in libel, for example, when it posts defamatory remarks or sends a message or e-mail containing defamatory remarks. A user engages in slander by posting videos containing defamatory remarks. Thus, the difference between libel is that it is a written defamatory remark, while slander is a spoken defamatory remark.

An individual can defame someone by accusing someone of being a liar, of engaging in fraud, of engaging in a crime, being mentally unstable, of having an immoral character, of having a sexually transmitted disease, or anything else that brings disrepute to the individual's personal or business reputation.

Several courts have held that the posting of derogatory information on Internet websites states a claim for defamation.

Invasion Of Privacy
Most jurisdictions adopted the Restatement (Second) of Torts view that an individual can assert a cause of action against another individual for the tort of “invasion of privacy.” There are four types of “invasion of privacy”:

  1. Intrusion upon the plaintiff's seclusion or solitude, or into his private affairs — RESTATEMENT (SECOND) OF TORTS § 652B (1977);
  2. Public disclosure of embarrassing private facts about the plaintiff — RESTATEMENT (SECOND) OF TORTS § 652D (1977);
  3. Publicity which places the plaintiff in a false light in the public eye — RESTATEMENT (SECOND) OF TORTS § 652E (1977); and,
  4. Appropriation, for the defendant's advantage, of the plaintiff's name or likeness — RESTATEMENT (SECOND) OF TORTS § 652C (1977).

Generally, only claims under subsection 2 (public disclosure of private facts) and subsection 3 (false light invasion of privacy) are asserted.

Disclosure of privacy facts can occur when you post an individual's social security number, driver's license number, medical history, or any number of private facts that otherwise would have remained private.

A false light invasion of privacy claim is similar to a claim for defamation. A defamation claim seeks recovery for injury to reputation while a false light invasion of privacy claim seeks recovery for injuries to emotions and mental suffering.

A false light invasion of privacy claim can occur when something untrue has been published about an individual. A false light invasion of privacy claim may also arise if the defendant publishes true information about the plaintiff that creates a false implication about the individual. False innuendo is typically created by a highly offensive presentation of a true fact.

A plaintiff may be able to assert either a claim for defamation or a false light publicity claim, or both based upon the nature of the publication.

Intentional/Negligent Infliction Of Emotional Distress
A plaintiff may assert that any libel or slander or invasion of privacy resulted in the intentional or negligent infliction of emotional distress.

Intentional Interference With Business Relationship
A plaintiff may assert that any libel or slander or invasion of privacy resulted in intentional interference with its business relationship with existing or potential customers or interfered with the business relationship that the individual had with the existing or prospective employer.

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