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.
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 website or used to run a website 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.
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, website 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.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.
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.
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 website or used to run a website 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.
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, website 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.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.