Are you Protected for Libel & Slander Under your Business Policy?
What would you do if your business got SLAPPed?
SLAPP stands for "strategic lawsuit against public participation." A business that gets SLAPPed has been sued for speaking out against or about a person or entity. Researchers have called it "a lawsuit primarily designed to intimidate and quash free speech." The plaintiff (the party filing the suit) accuses a person or business of harming it by speaking out publicly against its actions or announced plans. For example, small businesses in a village may protest plans to build a huge shopping mall nearby. The owners of the proposed mall might sue them for alleged defamation - libel (written statements) or slander (oral statements) that are false and harm the victim's reputation.
A court may eventually decide such a lawsuit is groundless. However, in the meantime the party being sued accrues great costs, including attorneys' fees, court costs, and lost income. If a business gets SLAPPed, it will have to find the money to cover these costs from somewhere. The source may well be the business's commercial general liability (CGL) insurance policy.
Standard CGL policies provide Personal and Advertising Injury Liability Coverage. It pays amounts the policyholder legally must pay as damages to someone else for injury arising out of, among other things, "Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services." In addition, it covers the cost of defending against a lawsuit seeking those damages. The most the insurance company will pay for any one loss is the amount shown in the policy's information page as the Limit of Insurance for Personal and Advertising Injury Liability. This amount could be $500,000, $1 million or higher.
The insurance does not cover all accusations of wrongdoing. The company will not pay to defend or settle a claim for damages if:
- The insured person knew the statement would violate the other party's rights and injure them
- The insured person knew the statement was false
- The material was published before the date the insurance policy took effect
- The insured person's action was a criminal act
- The insured person is in the media or internet business
- The injury arises out of an electronic chatroom or bulletin board that the insured company hosts
The first, second and fourth items on the list involve deliberate misconduct; insurance is not available against such behavior. Companies in the media or internet business need to buy special liability insurance designed for them; the CGL policy is designed for businesses that do not face a media company's special risks. The third item would be covered by the policy in effect before the current policy took effect.
Being accused of libel or slander can be a traumatic experience for a business owner. A SLAPP can be especially upsetting because the victim was exercising the constitutionally protected right to free speech. Personal and Advertising Injury Liability insurance can ease the financial worries that accompany such a claim.
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