Thursday, June 04, 2015

Ambiguity from mixing social media liability insurance with homeowner's and autos could hurt some Internet users (due to hidden anti-selection concerns)

There is a fuzzy confluence in the casualty and property insurance world between normal property losses (to accidents, storms, and most crime), personal liability – which is clear enough when it is physical injury from improper use of a vehicle or failing to maintain property properly – and reputational injury, libel and slander, and even possibly other vulnerabilities like copyright.  I think, for anti-selection reasons, the insurance industry (and remember, I used to be employed by the life insurance industry so I know what adverse selection and moral hazard mean) these perils ought to be handled “hands separately”, to use a metaphor from practicing piano.  
Generally, in the past, in most states (and probably now), if you want coverage for libel and slander, you buy an umbrella policy, either on your auto or home or renters.  Generally, in auto, to get over $300000 max in personal liability for an auto (up to $1 million or more) the converse is true.  You have to get libel and slander coverage to extend your auto liability, even though libel and slander normally have nothing to do with accidents.  

I admit, I haven’t talked to an agent yet, and probably will soon, so some of this seems speculative.
One of the most important features of an umbrella policy would be having litigation costs paid in case of a frivolous lawsuit.  

But logically, this scenario would envision an insurer’s examining an applicant’s social media presence to see if he or she was insurable (at least at the umbrella level) at all.  I don’t know whether this happens, but logically it could, to avoid anti-selection.  
Most web articles say that homeowner’s insurance (or renter’s, now often required by many apartment buildings – which leads to interesting speculation if you think about it) normally doesn’t cover personal libel or slander, unless you get optional coverage, available from some companies in some states.  Some companies, according to this 2013 article, may offer “social media coverage”.  For example, consider the scenario in this November 2013 article by Paul Hoover, n North Carolina, link.   Of course, in the example given, you could rule that the loss was covered by recklessness, and the parents shouldn’t be covered but should pay out their life savings to repair “Jeffrey’ anyway.  (You wonder why so many employers and friends believe everything on Facebook, but like with credit reports, until recently with identity theft, employers tended to hold associates strictly accountable for their reputations, whatever the cause.)  The article warns that employers often ask for Facebook logins, but doesn’t say that specifically about insurers.  Is that coming down the pike?   
A Feb. 2015 article in the Inquisitr, also discusses Social Media insurance as optional, here
However, an article in Insurance Journal in September 2013, “Bloggers Beware: Defamation Complaints Brought by Public Figure Plaintiffs”, article by Clayton N. Matheson and David A. Jones, link here takes a different tack.  The article maintains that sometimes that (“strange as it seems”) homeowners policies already cover defamation, contradicting other sources.  At least, there may a “duty to defend” even when there may be no “duty to indemnity”.  The article goes on to discuss gratuitous lawsuits from some celebrities, who may have legally weaker cases (the issue of actual malice, and different standards for privacy or false light).   
All of this would sound alarming, because that could lead to a cancellation or a non-renewal of a policy intended primarily to protect against tornadoes or wildfires, again, if social media audits became common, even when there have never been any claims. But, again, most sources say that defamation coverage usually isn’t provided unless asked for as an option.  
On top of all this, some states, in publishing consumer’s guides to property insurance, seem oblivious to the whole issue, as in Virginia’s consumer guide where nothing like this is brought up, link here .
Could social media defamation insurance become mandatory for users?  Will politicians think it expedient to think they can “require” insurers to offer it as standard coverage?  That would sound disastrous.  
Back in 2000, the National Writers Union tried to get defamation coverage for members.  The second time around (shortly before  9/11, as it turns out), many people were dropped if they covered controversial material, like LGBT (long before gay marriage was mainstream and when “don’t ask don’t tell” was still law).  These things are all interrelated. Imagine the world now, where foreign influences on religion and race have come roaring back.  

Social media use has evolved considerably over two decades.  Perceptions of what it achieves have changed, and vary among users.  National security concerns, like radicalization online from overseas and provision of dangerous information (on WMD’s) becomes pertinent.  At first glance, the moral hazard would sound so nebulous and unpredictable as to be uninsurable (despite the fact that in the beginning, defamation personal injury coverage options were rather inexpensive, suggesting insurers had not thought through the future risk).  It is true, for example, that personal homeowners policies generally exclude business risks (because a revenue-generating business would normally have its own policy), although home-based business could be a complication, as is use of personal auto for a job (other than commuting – imagine Uber, or imagine an auto accident when a blogger drives to a location to cover a news story like a political demonstration for an ad-revenue blog).  So that would exclude defamation from blogging, books, video or social media posts in conjunction with work or even a “legitimate” business owned by an individual.  But for non-commercial posts, insurers could require policyholders use full privacy settings --  which would prevent any material from being broadcast beyond people you already know.  Of course, that sounds like a canard, too – many defamation events have occurred from “private” posts that were repeated and then gone viral or been spread to an employer.   
It’s also apparent that a great deal of litigation (as a percentage of the whole) comes not from blogs or normal social media accounts, but from “review sites” like Yelp! And Angie’s List.  Some businesses are fighting back against consumers because they feel that one bad review (even if only marginally not completely true) can destroy their business.  

Insurers may have to become more concerned, too, that social media could result in criminal or enemy targeting (typical industry web article), although such behavior (often chronicled on “Dateline” or “20-20”)n has long been well-known in many crimes committed even before social media became available.  It would seem that for some users, Facebook's "real name" requirement could become a real issue, not well explored. 
It should be mentioned that some companies offer “identity fraud” protection on homeowner’s, without covering social media liability.  
Over the years, I’ve seen a lot of speculative articles about future Internet use, all trying to connect invisible dots.  Back in 2004, there was a piece “the coming crackdown on blogging” predicting that  campaign finance reform could make most political blogging for free illegal.  That didn’t happen, but it stirred a lot of controversy for about a year.   

I'll add that I personally know a couple of families that don't use social media or allow their kids to do so (outside of very strict privacy settings, perhaps) out of concerns for "workplace conflict of interest" or "implicit content" (which I have covered before) and unpredictable risks, given their own professional circumstances.
The move in Congress, to allow defendants of “SLAPP” lawsuits to go to federal court (my main blog, May 22), helps, but a federal SLAPP statute would help with this whole problem. 

The video embedded above makes it look too simple.

See also July 2, 2013
There is an update about this issue on a posting Aug. 14, 2015 (see same label). 


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