As technology advances and communication becomes easier, faster, and more widespread, companies may face traditional liabilities in new forms. For example, e-mail allows for virtually instantaneous communication throughout a company and, over the internet, the world. Statements made by officers, directors, or employees in e-mail may be sufficient to constitute libel or defamation, for which the company could be liable. Many companies do not realize, however, that their current insurance policies may offer protection against such liability.
Defamation consists of a false or defamatory statement that is published to a third party, with fault amounting to at least negligence on the part of the publisher, and which causes special harm or (in some cases), where the statement is actionable regardless of special harm. Restatement 2d Torts § 558 (1977). Libel is, essentially, the publication of defamatory matter by written or printed words. Id. at § 568. Thus, statements made in e-mail or over the internet could constitute defamation and/or libel. Further, if an officer or director of your company posts a defamatory statement on the internet or in an e-mail, your company might be deemed to have "published" the defamatory statement. If, however, your company is sued for defamation or libel, the claims may be covered by the company's insurance.
Commercial general liability ("CGL") policies generally provide indemnification and defense costs for claims alleging, among other things, "personal injury" or "advertising injury." Under many CGL policies, the insurance company agrees to "pay those sums that the insured becomes legally obligated to pay as damages because of 'personal injury' or 'advertising injury' to which this insurance applies." The "personal injury" and "advertising injury" must have been committed in the "coverage territory" (usually the United States) during the policy period.
Defamation may constitute a "personal injury" or an "advertising injury" under a policy, and thus may be covered by CGL policies. As CGL policies typically provide for both defense and indemnity for defamation claims, the insurance can be very valuable. Generally, an insurance company has a duty to defend if the claim even potentially falls within the policy. Thus, an insurance company likely will be obligated to defend a company in an internet or e-mail defamation suit even if the court ultimately finds that there was no defamation.
Insurance companies may attempt to deny coverage for internet or e-mail defamation claims on the grounds that the company knew that an employee's defamatory statements were false. However, to prevail, the insurance company would have to prove both that the policyholder directed the activities of the employee and had knowledge of the falsity of the statement, both of which would be unlikely in most cases. Further, depending on the terms of the policy, the insurance company may deny coverage on the grounds that the defamatory statement was not within the coverage territory or that the policy does not cover defamatory statements made by one employee against another. These are fact intensive issues that will likely be the subject of disputes on a case by case basis.
The important thing to remember is that CGL policies should cover most of the internet or e-mail defamation and libel suits that a company might face, and that companies should not overlook this valuable protection against liability in such suits. Finally, some insurance companies have begun to sell policies specifically relating to the internet, which also may provide coverage.
For more information, please contact:
| Clarissa L. Weiant - | Denver - (303-634-4000) |