In today’s political climate of fake news, Russian bots and investigations of collusion, business owners need to understand some basics about defamation laws to keep from getting sued.
And if you are sued, it’s important to know which insurance might save you from a costly libel claim.
The First Amendment to the Constitution specifically protects free speech. But just because you are free to speak, doesn’t mean you are free to harm someone with fake news, false claims or outrageous lies.
Each state has its own defamation statutes, and the U.S. Supreme Court has largely defined which speech is libel and what is protected. The short answer is that libel is false, damaging defamation. But what exactly does that mean?
First of all, the truth is always protected. So, no matter how much it is uncomfortable or unpopular, if something is true, it should not be called libel or fake news. Proving something is true is the ultimate defense to libel.
But, once you start slipping into the territory of false statements, things get less clear, because just because someone says something that is false, doesn’t mean that they have automatically committed libel.
To be libel, the false statement must have damaged someone, and the statement must also have been that person’s fault.
The damage can be direct financial damage — such as lost sales because of a false statement in a Yelp review. The damage can also be reputational — such as embarrassment and lost public esteem from a false statement in a Facebook post.
However, the line gets blurry again when you are talking about opinion and satire, which are considered more protected than statements of fact, but are not completely lawsuit proof.
There is also a higher hurdle in place for public officials, meaning that even if President Trump can prove that a statement about him was false and damaging, because he is a public figure, he would also have to prove that the person who said it knew it was false when they published it, and he would have to prove that the statement was made with malicious intent.
Keeping you safe
As an individual, if you are sued for libel, your homeowners insurance or renters insurance policy may offer protection. These are often covered under the personal injury portion of your policy (because, remember, defamation is a claim that your words injured someone.)
But, just because you are covered doesn’t mean you should go around blithely libeling people. If you are sued because you intentionally said something false, your policy most likely won’t protect you — the coverage is intended for when you unintentionally damage someone.
Your policy might also not cover you if your false claim can be seen as a business activity that was made to help you financially in some way.
It also helps to know your policy limits, because libel claims are often high-dollar claims (think tens of millions of dollars), and the typical homeowners policy only covers damages in the hundreds of thousands. So, if you feel like you might need more coverage, an umbrella policy might make sense.
Umbrella policies are meant to kick in for larger claims that blow past your primary insurance coverage limits.
Keeping your business safe
Homeowners policies keep you safe personally, but what if your business is exposed to potential libel claim? Say, for example, you run a blog that President Trump says publishes fake news.
In that case, your liability clause in your business owner policy will come to your libel rescue.
Before you start shopping for business liability insurance, experts warn that it is best to keep scope in mind. A $10 million policy doesn’t make much sense if your revenues are in the thousands. But the other side of the coin is also true — a $500,000 policy wouldn’t make much of a dent protecting you if your business nets tens of millions each year.
That said, much larger policies aren’t necessarily proportionally more expensive. A $1 million policy may cost $1,000 annually, but a $5 million policy may only cost $3,000 per year. This might not be a place where you want to start pinching pennies if you have a real risk of being sued.
And that risk is another thing that you absolutely need to keep in mind. A publisher would obviously be much more likely to face a libel charge than a florist might. But, if you are a florist who has an active social media presence, don’t be lulled into a false sense of security. An Instagram post is legally considered publishing just as much as a story in The Washington Post.
Also, be mindful of your coverage terms as well. Your policy will likely come with two sets of limits — one that kicks in for each lawsuit, and another that is a policy cap for all claims combined.
Regardless of which coverage you choose, make sure to read the entire policy and ask good questions on the front end. The time to understand your coverage is before you need it, not after you get served.
Jason Hargraves is the managing editor of insuranceQuotes.com — which publishes in-depth studies, data and analysis related to auto, home, health, life and business insurance—where he studies the insurance industry in order to direct and oversee the management of editorial content that provides trusted tips, advice and insights for consumers.
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