Social media is the new frontier in the communications world. It is also the new frontier for risk. From blogging to Tweeting to Facebooking to YouTubing, there are increasing opportunities to expose your organization to unexpected liabilities. If you think you are protected against such risks, tweet this: most standard insurance coverages do not provide protection for claims involving social media.

When assessing social media risks, there are generally two types of activities which expose your organization to risk. One source of risk is the liabilities generated by using social media to market your products and services. The second source of risk created by social media involves your employment practices.

Social Media & Cyber Liability

In recent years, there has been an explosion in the number of businesses using blogs, Twitter and Facebook to promote their products and services, yet there has not been a corresponding increase in the purchase of “cyber liability” insurance, one of the few coverages which pays to defend against claims arising out of the defamation of character or the infringement of copyright, patent, trademark, trade secret or other intellectual property rights when social media is involved.

Many businesses assume their standard general liability policy provides protection against such lawsuits. Unfortunately, most general liability policies specifically exclude injury “arising out of an electronic chat room or bulletin board the insured hosts, owns, or exercises control” – - all of which define today’s social media.

Some organizations may feel their use of social media is either too limited or tightly controlled to pose a significant liability risk; yet there are circumstances where employers can be held accountable for social media activities even when they are totally uninvolved. For example, employees who use Facebook on personal time to disparage competitors can unwittingly result in defamation of character lawsuits against their employer. Most general liability policies would not provide payment for defense costs in such situations due to the use of social media.

Until recently, cyber liability insurance was viewed primarily as protection in the event of data privacy breaches. Now, cyber policies are evolving to address the social media risk exposure gap, thus broadening the product’s appeal and value.

Social Media & Employment Practices Risks

The second area of risk created by social media emanates from a different, and possibly more lethal, direction: your organization’s “employment practices”. A recent case involving an ambulance company in Connecticut demonstrates how social media is creating new liability minefields for employers of all sizes.

After terminating a medical technician for making derogatory remarks about her employer on Facebook, the employee sued for wrongful termination. The National Labor Relations Board supported the suit on the basis Federal law protects an employee’s right to voice opinions on working conditions, pay and other employment related issues while off the job. After two years of litigation, the ambulance company settled last month for an undisclosed sum and agreed to revise its social media policy in the company’s employee handbook.

Ten years ago, disgruntled employees had limited outlets for publically “bad-mouthing” their employers. Today, anyone with internet access can post unfavorable remarks about their employer for the world to view. While it may be a quite natural desire to sack tweeting/blogging/Facebooking employees for unfavorable comments, the ambulance company case clearly shows that knee-jerk reactions by management can create significant risk.

Industry statistics indicate the probability of being sued by an employee is considerably higher than the chances of incurring a property loss. According to one recent study, 60% of the employee liability claims filed annually are against organizations with less than 100 employees. The study also estimates that a single employment practices liability suit could bankrupt 50% of all such businesses.

Educating your workforce on social media expectations and responsibilities is your first line of defense against employment related lawsuits and social media. Employers should insert broad language addressing the use of social media into their existing employee handbooks defining information technology, code of conduct, harassment and confidentiality policies.

Your second line of defense is Employment Practices Liability Insurance (EPLI) which protects against legal defense and settlement expenses resulting from wrongful employment practices including discrimination, sexual harassment and wrongful termination. While a growing number of organizations now include EPLI coverage as a core component of their risk management program, there are still a significant number of organizations that do not purchase this coverage.

Conclusion

Social media will only grow in use by employees and employers alike. Use social media to further your business, but recognize this new frontier includes new risks. Consult your insurance broker regarding these risks to be sure you are properly protected.