PLUS Symposium Zooms in on 24/7 Media Exposures
The media liability insurance field resembles a highway “with lots of roadside attractions” including exposures from reality TV shows, video games, music sampling, 24/7 entertainment and news programming, and happenings such as Janet Jackson’s “wardrobe malfunction.”
Allegations of libel, slander, defamation and false advertising have become almost inevitable in today’s media liability landscape, with the number of such claims and the costs to defend them on the rise, according to participants in a recent program, “Media Liability: Trends, Risks and Solutions in a Changing Landscape.” The program, held in Philadelphia, was part of a symposium series sponsored by the Property Liability Underwriting Society (PLUS).
Michelle Worrall Tilton, First Media Insurance Specialists Inc., who opened with the “roadside attraction” remark, steered panelists’ discussion of lawsuit trends, underwriting considerations, market availability and claims handling in what she called “this ever intriguing and challenging” line of insurance.
Sandra Baron of the Media Law Resource Center, sharing results of a survey her organization performed in 2001, reported that corporations and business executives are the biggest source of lawsuits against media companies, followed by government officials including judges, law enforcement personnel and politicians.
In terms of lawsuit targets, her survey showed that newspapers (47 percent) are the most frequently sued with television stations (27 percent) next, followed by networks (12 percent) and production cable companies (5 percent). The Internet is barely negligible in suits filed.
Most suits against newspapers are against those in the smaller, so-called “below 50” markets, with libel being the “claim of choice.”
The survey showed that out of 503 trials, far fewer cases are going to trial since 1980, although when media corporations do go to trial, they stand a good chance of victory, winning about 54 percent of the cases.
Damages awards are on the rise. In 1980, the average award was $1.5 million; by 2000, it was $3.5 million, according to Baron, who also said that about 45 percent of the verdicts are over $1 million.
Fewer cases going to trial suggests that more are being settled out of court. “But nobody knows the dollars spent on legal fees and on out-of-court settlements,” Baron added.
One of the first considerations of an insurer of media
liability is whether the risk is primarily a content distributor or a content creator, noted Eric Seyfried, Marsh. Content distributors have not been a huge risk traditionally because the content is provided by a third party and the distributor is usually indemnified by contract. Content creators, on the other hand, present a bigger challenge in risk and placement. These include movie studios, publishing houses and similar enterprises that actually create content.
“There has been explosive growth in the cost on this side. Competition here is vastly diminished both in the primary and re-insurance markets,” Seyfried reported.
But there has been an upside to these rising prices, he added, in that more media creators are taking on more risk themselves. “They have gotten better at managing risk and using freelancers to do the content,” he noted.
On the distribution side, underwriters have to ask how the organization is managing risk and acquiring the content. Under-writers want to be sure the firm is being held harmless over the content in their contracts, Seyfried explained.
On the content creator side, the “issue is more complex” and among the factors weighed by underwriters are what clearance and vetting procedures are in place, and how closely the staff works work with their lawyers.
A third category of media risks is the traditional newsgathering organizations that both create and distribute content.
“The insurance market here is more brisk due to the first amendment protection that these newsgathering organizations are afforded. Newsgathering is a mature market as competition is very brisk and it can be very profitable.”
In this hybrid market, there is “steady softening and increased competition,” he maintained.
But even this traditional arena is in transition, Seyfried cautioned, due to changing regulation over ownership and decency standards and the fast pace of today’s 24/7 culture.
In fact, the real story may be whether insurers are keeping pace with how media companies are changing. “Technology and media are ahead of the insurance markets,” he noted, as companies “morph” from one type of media company to another. As an example, he cited cable television content providers moving into voice and data services. “Now the risk has a telecom angle, so exposure has changed quite dramatically. It is a challenging time for new products and growth and unlimited opportunities,” Seyfried added.
Tracie Zamarra, National Union, a member of American International Group (AIG), noted that advertisers also fall into the media liability category and can face copyright and
trademark issues. Video game copyright questions are looming large now, as are privacy matters such as unauthorized use of materials or photos on the Internet, she said.
Zamarra stressed the importance of setting proper retentions. “Every four years an underwriter assumes he is going to have a major pop,” Zamarra commented. “So you have to set retention and premiums properly. Insureds think they are high but there is no choice.”
Even when a media company follows proper clearance and vetting procedures, there can be losses in some of these cases, Zamarra noted. Also a claim can come “out of nowhere” and often include “underlying emotional claims.”
Media claims can be difficult ones to mediate because they almost always include a business interest and often include matters of reputation, according to Thomas Kopp, AIG Technical Services. Kopp specializes in negotiating media liability claims.
“Media companies don’t want to pay to get rid of the case. They have a reputation to uphold. There is a lot of desire to protect the reputation on both ends,” he noted.
Media companies are also often trying to stay ahead of their competition by pushing the limits of copyright, decency and other standards, he added.
Among new media exposures, Kopp cited Web posting by businesses of so-called white papers. These documents may contain references to competitors, including pricing or product comparisons, thereby inviting charges they should be considered advertising.
Since media claims can attract a lot of attention, the parties often insist on “top notch” attorneys, leading to what Kopp said can be “exorbitant” defense costs of $500, $600 and even up to $800 per hour. Today’s higher retentions are slowing this trend, Kopp suggested by making insureds more sensitive to the actual costs of defending such claims.
“Even in cases where a situation may not be covered by the policy, the insurer may have a duty to defend,” Kopp reminded his PLUS audience.