"Media Liability" Coverage in Tech/Media/eBusiness Policies
February 2006
This article continues our series on policy
wording issues in the newer liability insurance policies that provide coverage
for technology, media, Internet liability, and/or network security liability
risks.
by Michael
A. Rossi
Insurance Law
Group
In our first article, Insuring Liability for
Third-Party Claims Seeking Lost Profits, we discussed the very important
subject of insuring third-party claims seeking lost profits—an issue with respect
to which these new policy forms vary, sometimes dramatically, from one insurer's
form to the next. In this article, we discuss some of the key aspects of "media
liability" coverage provided by these policy forms, whether in the insurer's
off-the-shelf policy form or by endorsement.
Please note that the issues discussed in this series of articles touch on
only a few of the 40+ issues that should be considered whenever buying, or broking,
these newer policies. Many of those additional issues will be discussed at the Tech-eRisk 2006 Seminar series in March and
April 2006, just as they were during Tech-eRisk 2005 and Tech-eRisk 2004.
Offline Media versus Online Media Coverage
Most of the combined tech/media/eBusiness forms in the market limit their
media liability coverage to "online" media. That is, they limit the coverage
to liability arising out of the content on a Web site or used to run a Web site
or other of the company's operations (e.g., software) and content sent via the
Internet (like e-mails). But more and more insurers are willing to add endorsements
to their forms to extend such coverage to offline media—e.g., traditional forms
of advertising, publishing, broadcasting, etc.
So, one of the questions that insureds and brokers alike should ask themselves
when reviewing a quote for a combined tech/media/eBusiness policy is whether
they want coverage for offline media activities. If so, they also need to understand
what issues to look for when negotiating the various endorsements that insurers
use for offering offline media coverage; as one might imagine, not all endorsements
are created equal. Some of those issues are discussed below.
Interplay with CGL "Personal and Advertising Injury" Coverage
One of the issues that might drive an insured's decision regarding the need
to pursue offline media coverage is how the insured's general liability program
is structured. By "general liability" we mean commercial general liability,
foreign general liability, and umbrella liability. These policies provide coverage
for "bodily injury," "property damage," "personal injury," and "advertising
injury" (with newer forms combining the latter two coverages into "personal
and advertising injury" coverage).
Several general liability insurers will put endorsements on their programs
that bar all "personal injury" and "advertising injury" coverage from the program,
because they don't want any part of that risk, and know that the insured is
buying separate coverage for "media liability" in some fashion or another. If
an insured's general liability program contains such an exclusion, then the
insured should seriously consider seeking coverage for offline media in the
insured's combined tech/media/eBusiness insurance program. Also, care must be
taken when doing this, because the tech/media/eBusiness policy, even when endorsed
to address offline media, might not cover all risks typically covered by the
"personal injury" coverage of a general liability program. Accordingly, an insured
might need to approach its general liability insurers and ask them to amend
their "personal injury/advertising injury" exclusions so as to minimize gaps
in coverage.
Coverage for "False Advertising" Claims
Some of the biggest claims we've seen over the past 7 years on this line
of coverage are claims alleging "false advertising." This is not to be confused
with "advertising injury," a type of coverage still afforded by general liability
policies. Claims alleging "false advertising" typically allege that the claimants
suffered some type of economic injury because they committed some act or failed
to commit some act in reliance on content that was created by or on behalf of
the insured (e.g., content in an advertisement, magazine, Web site page, infomercial,
package label, etc., that contained certain descriptions about the insured's
goods, products, or services).
Defense costs in "false advertising" claims can run into the millions of
dollars quite easily. Indeed, some "false advertising" claims have involved
defense costs in the tens of millions of dollars. And such claims could easily
be covered by older forms of media liability policies, or combined tech/media/eBusiness
policies. That's because many of those policies had "false advertising" exclusions,
expressly recognizing that the insurer had a duty to defend "false advertising"
claims until there was a judgment or final adjudication that the insured knowingly
falsely advertised.
With claims experience like this, the insurance market reacted. Many insurers
amended their "false advertising" exclusions to make them absolute, so that
not even defense coverage was provided. However, even to this day, some insurers,
whether knowingly or not, are using versions of "false advertising" exclusions
in their policies that do not bar the insurer's
duty to defend, and some exclusions do not even bar coverage for settlements
and certain types of judgments. So, "false advertising" exclusions must be reviewed
carefully to correctly assess the extent of coverage, or lack thereof, that
a particular policy form provides for "false advertising" claims.
Coverage for Software Copyright Infringement Claims
Another source of large claims we've seen involves claims of software copyright
infringement. This area is a subject in and of itself when reviewing tech/media/eBusiness
policies. Some forms expressly cover software copyright infringement, but often
not for software in the insured's products. If coverage for that is desired,
it must be negotiated.
Some forms appear to provide coverage for software copyright infringement,
but actually exclude such coverage. Unfortunately, in those forms the exclusionary
provisions are buried in hard-to-find places. Accordingly, if software copyright
infringement is important, not only should the insured and its broker carefully
review the policy, they also should discuss the subject with the insurer. Many
insurers are willing to add an endorsement to insure software copyright infringement
if their off-the-shelf forms excluded it; they just want to be able to underwrite
the risk.
Concluding Remarks
This article discusses some of the key issues to consider when reviewing
the "media liability" coverage in a combined tech/media/eBusiness policy. There
are other issues as well, which are beyond the scope of this article. But the
article demonstrates that the policy forms that have developed over the past
several years to address technology, media, Internet liability, and network
security liability risk differ greatly from one insurer's form to the next.
Insureds and brokers must therefore take the time to review the policies carefully,
understand the differences, and make informed buying decisions where they cannot
negotiate the wording, and negotiate the wording where they can. This series
of articles, and the Tech-eRisk seminar series, hopefully helps educate insureds
and brokers to do just that.
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