- The laws surrounding social media continue to evolve, making the responsibility of managing social media, and the content and platforms used, much more difficult for businesses today.
- Discussions of both the positive and negative implications of social media must be had internally, and an overall risk management plan must be put in place defining how to address the many diverse exposures through social media.
- Employers should insert language into their employee handbooks to address and define items such as code of conduct, harassment and confidentiality policies as they relate to the use of social media.
Whether it be Facebook, Twitter, LinkedIn or YouTube, it is clear that social media is a phenomenon revolutionizing the way we communicate with one another. Texting, tweeting, blogging, viral videos and Facebook pages—whichever communication platform or method you choose—companies throughout the world are utilizing this new and exciting technology to reach the masses on a grander scale. They are using these venues to generate interest for their products and services for a fraction of the cost of the conventional advertising methods of old. This sounds almost too good to be true, which does beg the question—is it?
Power and Pitfalls
But with any great new and exciting idea, there are also pitfalls and drawbacks. Let us be conscious of the fact that although social media can be credited for a wide array of positive outcomes, social media also has a darker side with negative consequences on individuals if misused. This can also be said about social media’s impact, when misused, on business.
The good news for brand owners is that insurance products have also evolved and will continue to evolve to protect and help shield them for the many risks associated with social media.
When assessing the risks associated with social media, it is important to identify some of the risks that businesses face from both the internal and external use of the social media platform.
Libel/Slander/Defamation: Negative comments made by either employees and or customers about a competitor’s product and or services.
Proprietary Information: Employees engaging in social media could disclose valuable corporate information to the general public.
Network Security: Outsiders gathering information on employees to gain access to networks and valuable confidential information.
Reputation: Bad publicity stemming from negative comments, photographs, etc. posted by employees that are found to be offensive by the general public could lead to a loss of both sales and clients.
Viruses: Harmful computer viruses or spyware could be transmitted onto corporate computer operating systems and or servers for the purposes of stealing valuable information about the company.
Copyright Infringement: Unauthorized use of a competitors slogan or trademark could bring rise to a claim.
There are typically two types of insurance exposures that are affected the most by the use of social media. The first exposure is that of the liabilities emanating from the use of social media to market your products and services. The second exposure is that of social media and how it relates to employment practices such as cyber bullying. And there are two insurance products available that can help assist in covering these exposures.
Cyber liability insurance is one of the coverages that can pay to defend against claims arising out of items such as defamation of character or the infringement of intellectual property rights when the use of social media is the direct cause for said claims.
Many businesses assume that their standard general liability policy would provide coverage or protection against lawsuits of this type. Unfortunately, the majority of most general liability or commercial general liability (CGL) policies specifically exclude coverage for claims arising out of an electronic chat room or bulletin board that the insured either owns, hosts or controls. All of these instances fall under the definition of social media.
The majority of organizations might feel that they are limited to the exposures experienced by the use of social media. However, considering the fact that there have been instances where an employer was held responsible for the actions of its employees as they pertain to social media, even though the employer was not involved, further substantiates the need for such policies as cyber liability. For example, employees use their Facebook Pages on their personal time to disparage a competitor’s product. A lawsuit ensues claiming defamation of character. The company is named in the lawsuit as it is the employer of these individuals. The standard general liability policy would not provide payment for either defense costs or indemnification for claims stemming from social media.
The second exposure, which is also insurable by employment practices liability insurance (EPLI), is that of employment practices liability claims deriving from the use of social media. This area is a bit more controversial and, in my opinion, a little more volatile considering the circumstances that can bring rise to a claim. Industry statistics indicate that the probability of being sued by an employee have increased sustainably over a 10 year period. Industry statistics also indicate that almost 60% of the employee liability claims filed annually are filed against companies with less then 100 employees.
Considering all of the facts; companies need to adopt a social media policy outlining the expectations and responsibilities in an effort to protect against EPLI type claims. First, employers should insert language into their employee handbooks to address and define items such as code of conduct, harassment and confidentiality policies as they relate to the use of social media. And the second line of defense is EPLI coverage with the definition of social media being covered. This coverage will provide for both defense costs as well as settlement expenses from claims deriving from sexual harassment, wrongful termination, discrimination, etc., and many companies have now begun to adopt policy wording addressing the social media type exposures.
To understand how social media fits under EPLI coverage, consider two very plausible examples.
The first: An employee at a manufacturing company has a confrontation with his manager in front of his fellow employees. Later that day, the employee posts comments on his personal Facebook page about the manager being a “jerk” and notes how much better the company would be if the manager were to get fired. Management finds out about the post and terminates the employee.
The employee sues the employer for invasion of privacy. Another example worth mentioning: An employee working at a retail store posts some harsh words on a newly hired employee’s social networking page. Several fellow employees find the post amusing and add additional comments and unflattering statements about the new employee. The new employee sues the store for not preventing workplace bullying or a hostile work environment.
Overall, it is clear that social media can have a positive impact on business with its ability to help grow and expand the number of people touched on a daily basis. However, it is equally important to understand today’s changing legal environment and address the many diverse and new exposures that the use of this exciting new technology does bring. Staying informed and being diligent in the approach to the use and monitoring of social media platforms as they relate to your business and brands will ensure that the pros of using this new and innovative technology will far outweigh the cons.
Kenneth C. Hegel Jr. is the vice president/unit manager of Cosmetic Insurance Services, a division of Frenkel & Company. www.frenkel.com