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Political fervor heightens risks for consultants

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Political consultants and organizations involved with campaigns and voting are facing rising liability risks as elections become more contentious in an increasingly polarized political landscape. 

The more litigious environment has been spurred in part by the rise in organizations advocating for political causes and by the spread of false information on social media, experts say.

Campaigns or committees are proliferating, with organizations seeming to exist for a huge number of political sectors and topics, said Lisa Rodriguez, Seattle-based senior vice president, executive liability broker, at Brown & Riding Insurance Services Inc.

“There are so many things going on right now in the world. There are advocacy groups that are for just about everything,” Ms. Rodriguez said.

Underwriters tend to treat political organizations as higher risk than other nonprofits such as a Rotary Club or foundation because the losses and payouts can be higher due to the sensitive nature of the risk, she said. “It’s always been a tougher class,” she said.

The market has evolved, said Holden McKinney, Fort Washington, Pennsylvania-based assistant vice president, professional lines, at Amwins Group Inc.

“I remember the first few political action committees I worked on being placed with a nonprofit D&O market for $2,500. Those days are long gone,” Mr. McKinney said.

Typically, premiums even for local political action committees are well over $25,000 for a $1 million limit, he said.

Misinformation around elections can threaten the electoral process and make it harder for people to exercise their right to vote, which can give rise to legal and reputational risks for political consultants, said Joshua Tucker, New York-based senior adviser and fellow at Kroll Institute, a think tank. Mr. Tucker is also professor of politics and co-director of the Center for Social Media and Politics at New York University.

“There’s a legal risk if your campaign activity crosses the line into illegal attempts to suppress people’s right to vote,” Mr. Tucker said.

Consultants face a difficult trade-off, because on the one hand they are paid to get their candidates to win, but on the other hand surveys suggest that a broad percentage of Americans support democracy and electoral integrity, he said. 

“There is a danger of being associated with candidates who themselves are associated with casting aspersions on the way in which democracy works in the U.S.,” he said.

Defamation lawsuits associated with elections are growing even though for public figures it is much harder to prove that a statement about them is defamatory, said Caleb P. Burns, a partner at law at Wiley Rein LLP in Washington.

Litigation involving alleged defamation of public figures has largely been unsuccessful until the past few years because the threshold for a claim is higher and there has to be some allowance for public discussion, he said.

“The litigious nature of former President Donald Trump as well as a number of other political figures has something to do with this. Courts have become more sympathetic to these claims, and the environment has gotten more friendly for these types of lawsuits,” Mr. Burns said.

Last year, Mr. Trump filed a $475 million defamation suit against CNN.

Political campaigns and committees should consider a range of coverages such as directors and officers liability, employment practices liability, errors and omissions, cyber and crime insurance, sources say.

Media liability and personal injury risk in general are important considerations for political organizations, Mr. McKinney said.

“Politicians and political action committees obviously say a lot of things, run a lot of ads, make a lot of statements. And then the political research organizations also put out studies and data to support what they’re advocating for,” he said. 

Cyber risks are also growing. Cyberattacks on the Democratic National Committee in 2015 and 2016 led to a breach that cybersecurity experts and the U.S. government later traced to Russia.

“Anyone running a high-profile campaign will be a target. You have donor information that might be shared with you,” including a large amount of personally identifiable information that could present an opportunity to a bad actor, Mr. McKinney said. 

Professional liability risks can arise if the service or advice given to others leads to a financial loss for the organization or client, Ms. Rodriguez said. 

Many political organizations also raise funds for a particular campaign or cause and if an issue arises with how those finances are handled it can lead to a D&O claim for alleged mismanagement of those funds or for not following the entity’s bylaws or mission, she said.

A donor may assume their donation will be put toward a particular cause, but if the donation is put toward something else, they could sue for mismanagement, she said.

For businesses that handle funds, crime insurance provides coverage for losses due to embezzlement and fraud, she said.