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In an age of multimedia communication complicated by Internet tell-all sites and data security threats, risk managers probably should view all the world as an audience and all businesses as merely media outlets.
While that allows nonmedia businesses to market themselves and their products more efficiently and effectively than ever, it also exposes them to risks that they may not realize are not insured, some insurance experts say.
But one media liability underwriter, Media/Professional Insurance Agency Inc., says a new coverage would help shield nonmedia companies from not only traditional media risks but also intellectual property infringement claims that their various so-called corporate expressions could inadvertently generate, as well as cyber risks.
Nonmedia companies have greatly expanded the kind of audiences they are trying to reach as well as the types of measures used to communicate with them, said Chad Milton, a senior vp and national practice leader for media liability and intellectual property with Marsh Inc. in Kansas City, Mo.
Beyond traditional print and broadcast advertising, nonmedia organizations as well as their industry associations have Web sites; produce ancillary videos, such as how-to pieces or conference presentations; publish newsletters; arrange product placements in movies and TV shows; and, in the case of universities, run radio stations.
How a company manages its advertising and intellectual property risks--whether through insurance or other risk mitigation efforts--can be a sensitive topic for some risk managers.
For example, one risk manager at a large corporation said she could not discuss the issue for fear that any information she revealed would be used against the company by plaintiffs' attorneys.
But Gary Kilburg, a former risk manager for Fortune 200 companies, said he and his peers managed their advertising, intellectual property and data security risks rather than counting on insurance to cover them.
That was essentially the case even with advertising injury claims to which a commercial general liability policy would respond, because deductibles or retentions usually would exceed most claims, said Mr. Kilburg, a senior vp and the chief risk officer for broker ABD Insurance & Financial Services Inc. in Seattle.
In addition to not being able to pierce the deductible or retention level consistently, risk managers have seen CGL insurers increasingly restrict that coverage in many areas and only marginally improve coverage in others, insurance experts said.
The advertising injury provision in traditional CGL policies has been expanded in recent years to cover claims arising from Internet-based advertising, said Richard S. Betterley, president of Betterley Risk Consultants Inc. of Sterling, Mass.
It even may cover a Power Point presentation if it was designed to attract customers or clients, said Joe Underwood, a senior consultant with Albert Risk Management Consultants in Needham, Mass.
But while claims of defamation and invasion of privacy would be covered if the alleged improper statements were published, coverage questions are arising on what "publication" means, Mr. Milton said.
In addition, if the publication involved in the incident is the policyholder's own enterprise, underwriters could consider that a traditional media business, for which coverage is excluded, he said.
Meanwhile, newer CGL policies cover copyright infringement claims arising only out of advertising, which the policies "narrowly" define as traditional advertising, Mr. Milton said. Claims arising from material on the policyholder's Web site are covered "only to the extent the Web site is considered advertising."
Additionally, trademark infringement claims and claims resulting from data security breaches are not covered, Mr. Milton said.
Policyholders also would not be protected if their Web domain name violated another company's trademark, Mr. Underwood said.
The advertising injury provision also would not respond to claims stemming from statements that a policyholder's employees made about a competitor in a chat room, Mr. Underwood said.
As with their advertising risks, many risk managers do not look to insurance to manage their intellectual property risks, because of the typically low limits that are available and the perceived small risk of such claims, Mr. Betterley said. In addition, patent infringement coverage is "really tough to get," he said.
And while data security coverage is available, the majority of risk managers prefer to manage the risk rather than purchase coverage, said Mr. Underwood.
Some media liability underwriters have expanded their market base by offering multimedia content coverage to nonmedia companies.
For example, Chubb Corp. offers an all-risk content policy that would respond to claims alleging not only defamation but also copyright infringement, invasion of privacy and any new type of claim "not seen before," said Ken Goldstein, worldwide media liability manager for Chubb Specialty Insurance in Simsbury, Conn.
Mr. Goldstein said that means Chubb's policy--unlike a typical CGL policy--would have responded to the kind of claim that Bank of America faced last fall because of an employee musical performance that was videotaped during a bank meeting. In the performance, a duo borrowed the tune and reworked the words from the song "One" by the Irish rock band U2. The performance was designed to celebrate the bank's recent acquisition of MBNA Corp. and ostensibly was intended only for internal use.
The video, however, did not remain internal for long.
Instead, it wound up on the Internet, including on YouTube.com, the popular Web site that hosts user-generated and professional videos, and music blog Stereogum.com.
As a result, Bank of America wound up with a cease-and-desist order from Universal Music Publishing Corp., which charged that the bank had violated the Los Angeles-based music catalog owner's copyright of the U2 song.
As of late February, the video still could be viewed on YouTube. Universal Music did not return phone calls, but a Bank of America spokeswoman said Universal Music had not taken any further action.
But other risks that could arise from corporate expressions are not covered by multimedia or CGL policies, according to Mr. Milton and Media/Pro executives.
Media/Pro's "Corporate Expressions" coverage would fill that gap, according to Vp Mike DiSilvestro.
The policy covers claims resulting from any form of advertising and spoken conversations, such as sales pitches; claims arising from security breaches of client and customer databases; and product-related intellectual property claims, including product designs as well as logo and trademark infringement claims.
The product design coverage is "what makes it unique," said Leib Dodell, president and chief executive officer of Media/Pro. "If you're a shoemaker and you advertise, a multimedia policy covers the content of the ad," he said. "If you're sued based on the design of the shoe, your multimedia policy won't cover that claim."
The coverage, unveiled in mid-February, provides $5 million of limits with a minimum deductible of $25,000. Media/Pro is the managing general underwriter for National Casualty Co., a nonadmitted unit of Scottsdale Insurance Co. of Scottsdale, Ariz.
Management vs. insurance
Although many risk managers have opted to manage their various corporate expression risks rather than finance them with insurance, "that doesn't mean an insurance policy wouldn't add value to certain firms" smaller than the Fortune 200, Mr. Kilburg said. "It boils down to understanding and managing the more critical risks of your business, and whether these types of risk qualify as such."
Indeed, Mr. Underwood said, a growing number of risk managers at companies with up to $100 million of revenue are beginning to look for data security coverage.
Demand for the corporate expression coverage from organizations "doing a lot of advertising and public outreach" could be "pretty strong" eventually, but not immediately, Mr. Milton said. "Some of them are waiting to have the coverage taken away from them," he said, referring to their media coverage in their CGL policies.