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Development of social media policies, or terms of use and privacy policies for website, mobile apps, etc.

Insurance Research Letter (IRL)
October 2016

The meteoric rise of social media use has created a Pandora’s box of new and evolving liability risks for companies, from infringement and tort claims to employment issues.  Many of these risks may not readily fit within categories that are traditionally covered in standard Commercial General Liability (CGL) or Employment Practices Liability Insurance (EPLI).  For this reason, employers must proactively mitigate their exposure to novel claims based on employees’ social media use (or misuse) by, among other things, adopting detailed social media use policies and examining existing coverage.

EPLI and CGL Policies May Not Cover Social Media Risks

Third party claims. Many EPLI policies exclude or limit coverage for claims brought by third parties, such as customers or business associates, based on the conduct of employees.  And yet, employees’ use of social media opens an entirely new avenue for such claims under a wide range of circumstances.

In the recent Hawaii case of Howard v. Hertz, for example, a rental car company barely escaped liability for a customer’s negligent supervision claim, based on an employee’s offensive Facebook posts.  The employer was able to demonstrate that company managers were unaware of the employee’s prior, offensive social media use.  Similarly, in the recent New Jersey case Marino v. Westfield Board of Education, the court rejected the plaintiff’s defamation claim against an employer, because the employee’s allegedly defamatory posts were not acts of the kind that the employee was hired to perform (i.e., were not within the employee’s assigned scope of duties).

The Howard and Marino decisions should set off alarm bells for any employer whose employees regularly interact with customers and other third parties.  These decisions imply that an employer could be liable for an employee’s defamatory posts if management was aware of prior inappropriate social media use, and failed to take remedial action.  These decisions also indicate that an employer should be wary of any perception that it “sponsors” an employee’s social media account.  It is not a stretch to imagine a third-party claim asserting that an employer’s apparent sponsorship of its employee’s LinkedIn account (by, for example, linking to that account on a corporate website) rendered the employer liable for the content of that account.  And even when the employer “wins” such a suit, the damage to the employer’s reputation may linger.

Privacy-related claims. The Howard and Marino decisions indicate that employers should monitor and supervise employees’ social media use.  But, conversely, too much monitoring can be problematic as well.  In the 2008 case Pietrylo v. Hillstone Restaurant Group, for example, managers learned that some employees had posted derogatory comments about customers and other employees on their password-protected MySpace accounts.  The managers then coerced another employee with access to those comments to log in and show the comments to the managers.  A jury found that the managers had violated the Stored Wire and Electronic Communications and Transactional Records Access Act (SCA), which forbids any person to exceed his or her authorization to access electronic communications.

In a number of other cases, however, courts have held that employers do have a right to access and view electronic information posted during working hours, or on employer-provided devices.  But the ad hoc, sometimes contradictory, case-by-case approach that courts have taken to these issues indicates that employers have a very fine line to walk in establishing and enforcing restrictions on social media use.  Further, the difficulty of these cases indicates that employers who prevail against such claims nevertheless will face significant litigation costs in the process.  Thus, it is doubly important to check with your broker to learn if insurance coverage is available under these circumstances.

Labor claims. It is important to note that the National Labor Relations Board (NLRB) has increasingly viewed social media activity through the lens of the NLRA.  In Hispanics United of Buffalo, Inc., for example, the NLRB held that an employer violated the NLRA by firing five employees who had complained on Facebook about another employee.  According to the NLRB’s decision, the employees’ social media posts were “concerted activity” that is protected by labor laws.

In other words, if employees turn to social media to collectively vent about their employment, those posts may fall under the NLRA.  This raises two urgent concerns for employers.  First, employers may wish to consult with an employment lawyer before disciplining employees for such posts, to determine whether the employees have engaged in “concerted activity.”  And second, most standard EPLI policies exclude coverage for labor law disputes.

Companies should develop and implement social media policies and ensure adequate coverage

As the examples above demonstrate, employee use of social media creates a thicket of potential problems for employers.  A review of the varying cases reveals that perhaps the most effective program to possibly mitigate risk is by the adoption and consistent enforcement of good social media policies.  The most effective policies will draw a clear line between employees’ personal social media accounts and their duties at work, and make clear that the employer bears no responsibility or liability for the employees’ posts.  Good policies should also espouse a zero-tolerance approach to destructive social media behavior, such as defamatory comments, racial slurs, sexual behavior, and a broad range of discriminatory behavior (e.g., LGBTQ issues, gun rights, abortion, etc.).  Finally, these policies must be explained to employees and consistently enforced.  Spotty enforcement can be worse than having no policy at all, and could even open the door to negligent supervision claims.

A knowledgeable broker can be a significant source of comfort.

Finally, insurance brokers should discuss whether clients’ social media risks are covered under existing insurance.  Joseph L. Wheatley, P&C Marketing Director for AssuredPartners NL, in Louisville, Kentucky, ( ) reports that Media Liability and Cyber Liability policies may fill the gap for companies with specific, social-media related needs.  These policies often cover a variety of social media-related risks, including third-party tort claims, employee invasion of privacy claims, and claims based on intellectual property infringement.  Further, because Media and Cyber policies are still relatively new innovations in underwriting, Wheatley says that brokers and clients have a great deal of latitude in customizing coverage to meet a particular employer’s needs.  

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