By Sabrena Sally, CPCU
Article Synopsis:
A lot has been written about how agencies can use social networking tools to enhance their online marketing and market reach. This article explores how the use of social media can impact the E&O risks agencies face and recommends specific steps agencies can take to mitigate those risks, so that the agency can get the full benefit out of these new tools.
Agency E&O Considerations When Using Social Media
Not a day goes by without my email containing an invitation to join a social networking site. Whether used for business contacts, maintaining contact with friends and family, or to reconnect with acquaintances from years past, the use of social networking sites is rapidly increasing. According to one internet research firm, 2008 saw the use of social networking sites overtake email by Internet users across the world.
Much discussion has taken place on how to best harness the power of social networking for the benefit of your insurance agency. ACT and other organizations have written extensively on the power of social media to enhance agency online marketing and to generate “virtual” referrals. The focus of this article, however, is to examine the risks that agencies need to take into account when they take advantage of these opportunities to broaden their reach. I will examine the more common errors and omissions risks that can be associated with the use of social networking, along with steps you can take to mitigate those risks.
If you are not familiar with social networking sites, here is a brief discussion of the most common functionalities. This is by no means all-inclusive, as the technology changes daily. Most sites offer the ability to create a homepage following a template provided by the site. Depending on the site being accessed, the profile template may be limited to key information you wish to be known about your agency along with an uploaded photo, or it can be as robust as a site containing multiple photos, videos, and links to other sections of the site (as well as to other sites) containing additional content you have created and posted. Users of the site typically invite other users to join their community, and the invitee is free to accept or decline. Most sites also offer blogs, chat rooms, forums, and search capabilities to help locate other users based on your chosen search filters.
Rules of the Site
Posted privacy statements and user agreements are standard on social networking sites, and most also include a list of “do's and don'ts” to follow when using the site. Although containing lengthy legal terminology, it is in your best interest to fully read a site's user agreements and privacy statements before agreeing to the terms of usage. User agreements tend to be very broad in favor of the site owner, commonly giving the rights to the site to use all content posted by users, and retaining the right to remove, discard or withhold user posted information at any time. User agreements usually state that the site assumes no responsibility to monitor disputes between users, and contain hold harmless/indemnification agreements in favor of the site for damages suffered by the site as a result of content posted by a user or as a result of any actions of the user while using or misusing the site.
Now, let's assume you have read the user agreements, privacy statements, and “do's and don’ts” of a site you have chosen to use. You are ready to sign up. But wait! Don't hit that submit button too quickly. Instead, take some time to consider what type of errors and omissions exposures your agency may face by using the site.
Overview of E&O Exposures
The exposures can range from advertising, contractual liability, defamation, offering erroneous recommendations, and may even extend to antitrust issues. These are not new exposures to your agency, but the nature of social networking sites does impact errors and omissions exposures in several ways. Information entered on social networking sites is able to achieve instantaneous worldwide distribution in a matter of seconds. An electronic record is also created which can survive indefinitely. In addition, discussions taking place on these sites tend to be more casual and take place more quickly then even email communication, making it easier for a statement to be taken out of context. Let’s drill down to the most common errors and omissions exposures faced by agencies using social media.
Contractual Liability
The user agreement on the site most likely contains a requirement that you hold harmless and indemnify the site. The agreement at one popular site is quite broad, stating:
“....you shall indemnify and hold us harmless from any damages, losses and costs related to third party claims, charges or investigations, caused by your failure to comply with this agreement, including without limitation your submission of content that violates third party rights or applicable laws, caused by any content you submit to us, or caused by any activity in which you engage through the site.”
That provision in itself is amazingly broad, but it becomes even more so when you look at the definition of the site agreement. The site agreement in this particular case states that you must comply with all applicable laws, the “Do's and Don'ts” posted on the site, the notice and take-down procedures of the site, the site privacy policy, and any other notices of the site.
Loss Control Tip:
- Read the user agreement, privacy statement, and “do’s and don’ts” thoroughly. Consult with your legal counsel if needed to be sure you have a full understanding of the liabilities to which your agency is agreeing.
Advertising Liability
You most likely will create some type of agency home page, so let's look next at advertising exposures. The insurance regulations in several states specifically mention Internet advertising. For example, this excerpt from NY L Circular
Letter No. 5 (2001) is both specific to Internet advertising and broad in scope:
"Advertisements that appear on the Internet are subject to all applicable existing statutory and regulatory guidelines and restrictions applicable to advertisements in any other medium.”
It is clear that the same level of care should be given to agency advertising on social networking sites as is given to the agency's traditional advertising. Where the line can easily be blurred, however, is when an individual agency owner or employee uses the agency name, logo, or other advertising identifier as part of their personal social networking site. Does that then constitute advertising for which the agency can be held liable? That question has yet to be settled. The agency’s exposures from advertising on these sites can be mitigated by following the same legal vetting process as is used for traditional advertising. An agency procedure should also be established that addresses to what extent employees have permission to link to the agency’s sites, or use the agency name, logo, or other advertising material on their personal sites (more on this procedure later).
Loss Control Tips:
- Be sure your agency advertising on the site complies with all statutory and regulatory guidelines.
- Establish an agency procedure addressing employee linking to agency sites or use of agency name, logo, or other advertising on their personal social networking sites.
Defamation
Most social networking sites feature blogs, chats or forum discussions. Participating in these discussions can present exposure to defamation, or in this case libel since the discussion is in written form. Your agency has always faced exposure to defamation from verbal discussions and written communications. On social networking sites, however, discussions taking place on blogs and in chat rooms or forums tend to be less formal, may include more opinion than fact, and tend to move quite rapidly between many parties. In fact, the popular site Twitter limits text comments to no more than 140 characters. The end result is that it is much easier to make a statement that is taken out of context. Unlike verbal discussions, comments made on the interactive features of social networking sites or in blogs that accompany online articles are captured electronically and can be stored indefinitely, further exacerbating the issue of less formality.
Keeping in mind that commercial speech – speech which proposes an economic transaction – is entitled only to limited First Amendment constitutional protection, there is a real question as to the level of First Amendment protection business representatives will receive when they write or respond to a blog. The answer is not yet clear. As this area continues to develop, you would be well served to consult with legal counsel experienced in First Amendment law for guidance on creating the agency’s policy regarding the content you will permit on blogs on your agency’s behalf.
Loss Control Tip:
- Consult with qualified legal counsel for guidance on the agency’s policy on blogging.
Privacy Issues
Closely tied to defamation is public disclosure of private facts, which occurs when someone reveals information that is not of public concern, and the disclosure of the information would be offensive to a reasonable person. The interactive spaces on social networking sites are not secure spaces for discussing personally identifiable information.
Agency Procedures for Social Web Use
Agency procedures for social networking should require employees to keep their discussions professional and they should distinguish between statements of fact versus those of opinion. Comments that can be construed as leading or participating in attacks on either individuals or businesses should be avoided.
Employees should limit their focus to a generalized discussion of an insurance topic. When a discussion becomes specific as to an identifiable risk or individual, it is no longer appropriate for an interactive space, and should be moved offline. Once moved offline, a discussion specific to an identifiable risk or individual should then move into the agency’s established workflow process. This provides the standard servicing and documentation that would occur had this discussion taken place in person, via phone or within email.
Loss Control Tip:
- Establish written agency procedures addressing employee use of social networking sites, including:
- Who within the agency has permission to participate on behalf of the agency
- Define acceptable behavior (professional, fact versus opinion, no leading or participating in attacks on individuals or businesses)
- Employee sites should make clear they reflect their own views and not those of the agency
- Identify when a discussion should be moved offline and into agency workflow
- State the consequences of non-compliance.
Incorrect Advice
Agencies face exposure every day when rendering or failing to render professional services. Operating in the virtual world of the social web is no exception. Whether it is the advertising of agency services provided as part of the agency home page or comments made in a chat area discussion, the standard of care in providing professional services is no less than what exists in more traditional venues.
The standard disclaimers used on your agency’s voice mail, email, and website also should be used on social networking sites. The same agency procedures your staff follows regarding risk analysis, recommendations, and documentation also apply to all content and discussions on social networking sites. As mentioned above, the interactive features of social networks do provide unique challenges. The written procedures your agency establishes to address social networking will not only guide agency staff behavior while using these sites, but will also help protect your agency against allegations of errors and omissions.
- Use standard disclaimers such as those used in voice mail, email, and on website
- Be clear in the agency’s procedures that established processes and workflows apply to all discussions and service focused on an identifiable risk or individual or business generated through the social network site.
Armed with an awareness of the main errors and omissions exposures that can arise from use of social networking sites, you are almost ready to take advantage of the opportunities presented while still protecting your agency against unexpected exposures. But before getting started, give careful thought to what your goals are in using these tools. Do you plan to use sites such as Facebook or LinkedIn more as another venue in which to advertise your agency? Or, are you considering jumping in with both feet and actively participating in or running an interactive discussion to generate new “fans” who can become prospects?
Once you have decided on your goals, consult with qualified legal counsel. By following the advice of qualified counsel that is specific to your planned use of these sites, and applying the loss control tips I just discussed, you will be ready to enjoy all the benefits of social networking with the peace of mind of knowing you have taken steps to mitigate the risks.
This article is intended only for educational or illustrative purposes and should not be construed to communicate legal or professional advice. You should consult legal or other professionals with respect to any specific questions you may have. Further, the statements and/or opinions contained are those only of the author and do not constitute and should not be construed to constitute any statement, opinion or position of Swiss Re.
Sabrena Sally, CPCU is Senior Vice President of Westport Insurance Corporation, a Swiss Re company, who manages the Big “I” Agency Professional Liability Program. Sabrena can be reached at sabrena_sally@swissre.com. Sabrena produced this article for the Agents Council for Technology (ACT), a part of the Independent Insurance Agents & Brokers of America. For more information about ACT, visit www.independentagent.com/act or contact Jeff Yates, ACT Executive Director at jeff.yates@iiaba.net. This article reflects the views of the author and should not be construed as an official statement by ACT.