Media risks rise as public trust fadesReprints
President Donald Trump has accused the mainstream media of being the enemy of the people, but the media’s own enemy remains defamation lawsuits, with social media complicating the equation.
Mr. Trump’s negative view of the media is shared by a sizable segment of the U.S. population, with their distrust being compounded by concerns over “fake news.” These developments may have made media companies more vulnerable to litigation, experts say, raising concerns over increased liability exposures.
While media companies have traditional First Amendment protections as well as more recent laws to protect them from malicious or frivolous lawsuits that aim to chill free speech, media liability coverage can be bought for added protection.
“It’s a really interesting time for news media, in particular having to do with the political environment and a focus on whether news media organizations are as truthful as I think we have always assumed,” said Shannon Groeber, Philadelphiabased senior vice president for JLT Specialty USA. “They have been held to the highest standard of providing factual, accurate and cross-referenced information for as long as the First Amendment has been protective and then all of a sudden they are under intense scrutiny. That also has to do with the introduction of non-traditional media companies and the accessibility through social media for any organization to provide content without reaching the same standards as some of the larger, traditional or more established media companies.”
Americans’ trust and confidence in the mass media “to report the news fully, accurately and fairly” has dropped to its lowest level in Gallup Inc. polling history, with only 32% saying they have a great deal or fair amount of trust in the media, according to a September 2016 report, a drop of eight percentage points from the previous year.
“There is a growing group that has an inherent distrust of the media,” said Emily Caron, vice president of media liability claims for the entertainment division for OneBeacon Insurance Group Ltd. based in Overland Park, Kansas. “Whether that is warranted or not, it is causing a shift, particularly when dealing with juries. This whole phenomenon of fake news, which used to be satire, but as we saw in the election, people are unable to discern what is fake news and what is real. It’s really undercutting the credibility of what real journalists do, which I see as a threat to the First Amendment and the media’s role as the Fourth Estate in the government.”
The distrust breaks down largely along partisan lines, with Republican trust and confidence eroding to 14% from 32% in the previous year, partly due to the belief that Mr. Trump received unfair or negative media attention. Democrats and independents generally have more trust and confidence in the media, with their levels declining only three-to-four percentage points.
George Freeman, executive director of the Media Law Resource Center in New York, said he did not believe Mr. Trump’s accusations — such as his numerous Twitter posts referring to the “fake news media” — has led to more libel litigation, “but to have a more and more polarized situation with Trump supporters who think the media is terrible is not a healthy situation and could potentially lead to more lawsuits.”
The center has not been able to track the overall number of cases filed against media organizations because of decentralized court systems, but found the number of cases going to trial against media defendants has decreased significantly since the 1980s. And anecdotally, Mr. Freeman, the former assistant general counsel for the New York Times, said there has been decline in litigation against the newspaper — confirmed by a Times spokesperson — and other major media outlets.
However, media liability insurers, brokers and attorneys are concerned about the effect of the anti-media rhetoric.
“I’ve seen defamation claims booming lately and attacks on the media as well,” said Lee Brenner, Los Angeles-based chair of the media and entertainment practice group of law firm Kelley Drye & Warren L.L.P. “We have an administration that has basically made no bones about the fact that he has contempt for the press.”
First Lady Melania Trump has also been involved in disputes with the press, winning a financial settlement and an apology from one of Britain’s largest newspapers. She sued Mail Media Inc. in New York in February for “false, salacious and highly offensive statements” made in an August 2016 story in the Daily Mail that repeated past allegations that the modeling agency she worked for was also an escort service.
The parties settled the litigation in midApril, with the media company paying a reported $2.9 million in damages and costs.
“We accept that these allegations about Mrs. Trump are not true and we retract and withdraw them,” the media company said in a statement. “We apologize to Mrs. Trump for any distress that our publication caused her.”
But the biggest media liability case in recent years was Bollea v. Gawker, filed by Terry Gene Bollea, better known as professional wrestler Hulk Hogan, who sued New York-based Gawker Media L.L.C. in December 2012 for invasion of privacy over the media outlet’s publication of a sex tape. The $140 million jury award in favor of Mr. Bollea rocked the media world and forced Gawker into bankruptcy protection in June 2016.
The First Amendment
Freedom of the press protections were established by the First Amendment and in subsequent case law, particularly the U.S. Supreme Court’s 1964 decision in the New York Times v. Sullivan case which required public figures to prove actual malice in libel and defamation cases.
“The first line of defense will be the judges,” Ms. Caron said. “If the judges are inclined to stick with the New York Times vs. Sullivan standard and are able to themselves discern fake news from real news, things should be fine. But if there becomes more confusion, I could see that muddying the waters and allowing more cases to go through to a jury.”
The actual malice standard has been reaffirmed in numerous cases, including by the Texas Supreme Court in January in Wade Brady v. Leaanne Klentzman and Carter Publications Inc. The case emanated from an article that indicated that a local police chief intimidated officers on behalf of his son who was allegedly drinking and driving. The jury, after being erroneously instructed that the media defendants bore the burden of proving the statements were substantially true, found in favor of the plaintiffs. But the state Supreme Court determined the matter to be of public concern in overturning the jury award to Mr. Brady and observed that courts have declined to get involved in deciding the newsworthiness of specific details or making editorial decisions for the media.
“I think one of the important takeaways in that case was that the (state) Supreme Court made clear, at least with a media defendant and a story involving a matter of public concern, the plaintiff bears the burden of proving falsity rather than the defendant having to prove truth,” said Tom Williams, a Fort Worth, Texas-based partner at law firm Haynes and Boone L.L.P.
More than half of U.S. states, including California and Texas, now also have anti-SLAPP laws on their books. Strategic Lawsuit Against Public Participation are lawsuits designed to censor, intimidate or silence critics, but these anti-SLAPP laws push back by allowing defendants to quickly move for dismissal and receive reimbursements of their legal fees if those motions are successful. Mr. Williams said the strong Texas statute, adopted in 2011, resulted in a reduction in claims in the state.
But Mr. Brenner expressed concern about the high settlement involved in the Melania Trump case, given that the neutral reportage privilege generally allows the media to report about allegations made, especially against public figures, even though he observed the protection isn’t foolproof.
“I’m sure that it had its reasons, even though I continue to believe the Daily Mail had a strong neutral reportage privilege in this case,” he said. “The media has a fairly wide berth to report about allegations that have been made against public figures like Melania Trump. Read in context, the Daily Mail was not vouching for the allegation that had been made against Mrs. Trump.
Media, cyber risk hand in hand
Media liability coverage is typically bought in tandem with cyber liability, particularly by large clients with $500 million or more in revenues, leading to some volatility that might not otherwise exist, said David Finz, New York-based media product leader, senior vice president and client adviser with the Marsh L.L.C. E&O Center of Excellence.
For “standalone media coverage, the capacity in the marketplace, the pricing, has been relatively stable,” he said. “Not all markets that write cyber are necessarily willing to write media liability coverage, especially on a primary basis, so there is a finite number of markets that will write media. There has been some movement within the underwriting community of some talent from larger markets to some of the up-and-comers in this space, which may translate into additional opportunities for us as brokers to have alternate markets to write media on a primary basis.”
Blending media liability and cyber coverage makes sense for many media companies because the evolution in the delivery of content, via streaming services or social media, introduces cyber risks to their operations, and they may also have subscriber information that could be targeted by hackers, including email addresses, passwords and credit card information, according to experts.
Outside of motion picture studios, which carry an increased risk from copyright infringement, it would be difficult to justify a client purchasing media coverage above $50 million to $100 million as most judgments would not reach that level, with the notable exception of the Gawker jury award, Mr. Finz said.
The Gawker case has not altered pricing or demand, but it may have triggered requests for additional information from underwriters about how content is cleared and how media organizations evaluate the reliability of their sources and corroborate the information they receive, he said.
But the heightened exposure for media companies due to the political rhetoric could eventually effect pricing, Ms. Groeber said.
“I do think the political environment, as well as the evolution of cyber risk that we’re experiencing right now, as well as some open cases that may impact case law going forward and uncertainty around how that might change, will impact rates over the next six to 18 months,” she said. “Those companies that have experienced a really favorable rate environment should potentially consider budgeting for increases.”
Media companies typically win libel cases either on summary judgment or appeal because of existing legal protections, but they still face claims that are costly to defend, according to insurers. More than 90% of OneBeacon’s costs in its media segment are for defending their media insureds from these lawsuits, Ms. Caron said.
“We do look at the legal issues in every jurisdiction, but from an underwriting perspective, it’s almost not the main issue for us because we’re still going to have to incur the legal costs,” said Angela Weaver, London-based media liability underwriter/ media specialist for Beazley P.L.C.
Media organizations can rely on the First Amendment protections for newsgathering, but engaging in illegal activities such as fraud, misrepresentation, criminal trespass or gaining access under false pretenses will work against them, Ms. Caron said.
“If a regular person can’t do it, then journalists should not be doing it either,” she said.
Media companies should also use good sourcing and documentation in their stories and in some cases have them vetted by attorneys, according to experts.
“My view remains that the best legal strategy is still good journalism,” said Mr. Williams of Haynes and Boone. “If the story is right and well-researched and well-prepared, you’re usually going to be okay as a legal issue as well. That’s been the advice for a long, long time, but I still think it’s the best. What has changed is the demands of the business, the pressure to get things out more quickly. As with any other endeavor, that can sometimes lead to mistakes. But I don’t think it changes the fundamentals.”
However, media companies cannot shy away from their watchdog role for fear of litigation, experts say.
“People are very worried about Mr. Trump and some of his comments and dislike of the media,” Mr. Brenner said. “The sky isn’t falling. Nothing whatsoever has changed the fact that political speech is certainly a matter of public concern. I’m not seeing this huge risk to the First Amendment at this point. I’m personally much more concerned about media defendants getting too scared and self-censoring.”