Libel Insurance and Online Commenters

Say you posted a comment online — on a site such as Yelp, on a blog, or elsewhere — and now someone is threatening to sue you for libel. What do you do?

Well, if you have homeowner’s insurance (or renter’s insurance), look at your policy — such policies, to the surprise of many people, generally cover libel lawsuits. One policy that I read, for instance, says that

If a claim is made or a suit is brought against any insured for damages because of bodily injury … caused by an occurrence to which this coverage applies, we will:

1. pay up to our limit of liability for the damages for which the insured is legally liable; and

2. provide a defense at our expense by counsel of our choice even if the allegations are groundless, false, or fraudulent….

POLICY DEFINITIONS ….

“Bodily injury” means; … personal injury … arising out of … libel, slander or defamation of character; or … invasion of privacy.

If you have an umbrella liability policy, it may provide extra monetary coverage. Of course, you’re only covered if your insurance contract does indeed specify this, explicitly or implicitly. You ought to read your policy, and pay close attention both to the body of the policy and any separate definitions section. The policies are often quite readable, but tend to have surprising definitions — for instance, if you had read the policy above and assumed “bodily injury” means physical injury to the body, you would have missed that bodily injury is actually defined to include libel.

These policies generally don’t cover punitive damages, but they do cover both compensatory damages and litigation defense costs. Fortunately, that’s what you most want to have covered. Libel cases are hard for plaintiffs to win, and punitive damages are especially hard to get. If your comment is seen as being on matters of public concern (and at least some consumer complaints are so treated), and you are sued for libel, you can’t be liable for punitive damages unless a jury finds that you knew your statement was false or at least knew it was quite likely false but blithely published it without any investigation. So chances are you won’t be on the hook for punitive damages, or even for compensatory damages.

But even if you win the case, you could spend huge amounts of money defending yourself. That’s where the insurance can be especially handy.

Note that the policies generally explicitly exclude liability related to “business pursuits.” The exclusion and the definition of “business pursuits” may vary from policy to policy, so check yours (and again check both the homeowners’ insurance and your umbrella policy, if you have it). Still, I’m told that most policies just say “business pursuits,” and sometimes define them as referring to a “trade, occupation, or profession.” So if your comment is on your own blog, and you make even a bit of money from the blog (for instance, via advertising), you might not be covered, though that depends on the state.

So, if you get a threatening letter:

1. If you do think your policy covers libel, or think that it might, immediately notify your insurance company, in writing, that there might be a claim against you. Send the company a copy of the nastygram you received, and a dated cover letter. Tell the company that you need to consult a lawyer to deal with the threatening letter, and ask it to get you a lawyer right away, or to authorize you to consult one yourself on their dime. The insurance company may not have an obligation to pay your lawyer’s bills until the lawsuit is filed, but it doesn’t hurt to ask.

I’m told that you can usually do the notification through your insurance broker, who knows how to deal with the company, and whom to talk to there. In any case, talk to your broker and see whether he’ll do the notification for you or whether you ought to notify them yourself.

2. Always communicate in writing, keep copies of all communications, and date all your communications. You can also call the company or the broker (particularly important if you need to nag them), but confirm any substantive communications in writing.

3. If the other side’s gripe with you is sound — if you did indeed err — post a correction. It’s the right thing to do, and it may avoid a lawsuit.

4. If a Complaint is filed against you in court, notify the insurance company about that, too, by sending them a copy of the Complaint with a dated cover letter. Demand that they get back to you quickly about whether they’re hiring a lawyer on your behalf.

5. If the insurance company doesn’t get back to you quickly with an answer, hire a lawyer yourself, and show him a copy of the insurance policy. Then inform the company that you’ve hired the lawyer, and that you expect the company to pay the bills. Bug the insurance people repeatedly, if necessary, including through your insurance broker. If your policy covers libel, and you aren’t within the business pursuits exclusion, you likely have a very strong case for coverage; but they can still be slow, and you need to be the squeaky wheel.

6. If you do hire a lawyer, show him the policy, and negotiate with him in light of the policy. See if he would agree to represent you for rates that he’s pretty sure the insurance company would pay. See if he would agree not to charge you if the insurance company denies coverage. That, of course, depends on his sense of how likely coverage seems to be. But cyber-libel cases are potentially pretty interesting, even glamorous. Some lawyers may be willing to take a small risk of nonpayment to do a fun case like that.