Ask the Experts: Liability Risks

Question: What liability risks does social media pose to my business?

The modern world presents an almost limitless opportunity to entrepreneurs who are brave enough to carve out their own new niche.  For the first time since perhaps the industrial revolution it is possible for a niche SME leveraging a technological advantage to transform itself in to a global phenomenon. 

Who would have thought in 2004 that Facebook started in a university dormitory would become a Global force and that “Facebook” would be a commonly used verb or that Twitter formed in 2006 would take the Stock Market by storm less than a decade later? 

We live in a time of rapidly developing technology, improved communication, with better access to information and most importantly we have a generation who have grown up during this age and created a culture of innovation. 

However, whenever a business is pushing the boundaries and challenging convention they will encounter certain risks.  These can vary from operational risks, challenges of trading in an emerging market place, vulnerability to economic change, scepticism and nativity from the establishment and financiers but also there are risks that such advances create in implementation. 

For instance, who would have thought that promoting ones products or services through Social Media could expose your business to libel actions?  For example, recently England cricketer Kevin Pietersen accepted substantial undisclosed libel damages regarding a Specsavers advertisement which implied that he may have tampered with his bat during the Ashes.

The advertisement was posted on Twitter perhaps to create a viral marketing buzz.  Specsavers Optical Group Ltd accepted that Pietersen did not behave in the manner suggested, apologised and removed the advertisement from circulation, in addition to making the substantial settlement.  A consequence that would hardly have been imagined when the marketing team conceived the tweet.  An example such as this, relating to an established and presumably well-resourced business, begs the question - what are the risks to the SME sector and what should and shouldn’t a business be doing when it comes to “Publishing”?

Key areas of the Defamation Act

•  Introduces a "serious harm" threshold for libel actions. The new act states that "a statement is not defamatory unless it causes serious harm to the reputation of the claimant". For companies this is stated to be harm which has caused, or is likely to cause, serious financial loss. It is anticipated that these changes will lead to more early strike out applications by defendants.
• Provides that trial of libel actions shall be without a jury unless the court orders otherwise.
• The defence of “justification” has been abolished in favour of a statutory “truth” defence. The Defendant has to prove that the statement complained of is “substantially true”. In practice it is likely that the underlying legal principles will remain the same.
• The defence of honest comment and publication on a matter of public interest is now in statutory form (in place of the common law defence referred to as fair comment).
• Provides a framework for a new process in relation to online posts, which will be put in place through regulations and will provide a defence to website operators if they are not the author of the post and comply with certain requirements.
• Give the protection of privilege to peer reviewed scientific and academic journals so long as a specified process has been followed.
• New provisions about jurisdiction and actions against those not domiciled in the UK or another EU member state. To prevent libel “tourists” litigating in England, the 2013 Act gives the court power to refuse jurisdiction unless it is satisfied that England is the most appropriate jurisdiction.
• Giving the court power to order that a summary of its judgment be published, and to order that a defamatory statement be removed from a website or distribution of it stopped.

It is essential that businesses are aware of these risks of online publication and take steps to manage these risks. For example, if a business has a Twitter account and is sending out tweets in the name of the company, businesses should be careful who is given access to their Twitter account and safeguards should be implemented to monitor tweets before they are published.  Similarly, caution should be taken if a company is posting blogs on a website.  Insurance against the risks of being the subject of a claim for defamation is a prudent course to take, and the Parliamentary debates indicate an assumption on the part of the law-makers that insurance is the wise option.”

Lockton Companies LLP have recently launched a first to Market insurance protection designed specifically for “Self-Publishing” this policy provides indemnity for costs and awards following an allegations of defamation or breach of Intellectual property rights and it is available for SME’s who make use of social media mechanisms and the internet to promote their wares and also for business and individuals who are looking to take advantage of e-publishing facilities to publish their own titles or manuscripts.  In addition to the indemnity the Insurance Solution includes support from DWF Fishburns in the form of a helpful guide to publishing activities and a proof reading service.

For More Information Please Contact Lockton Companies LLP: 0117 906 5000 email insure@uk.lockton.com

Professional advice should always be sought where you require assistance in specific areas of law. No responsibility can be accepted for any actions based on this Update.