Media Expansion : Opening the Door to Liability

Liability risk within the traditional print and broadcasting media sectors may be well understood and increasingly well managed by the media industry as it develops, but the “Big Bang” of information technology development since the late 1990s has created new and ambiguous litigation exposures.

In today’s technology age, virtually anyone with a cell phone that boasts built-in camera and Internet connectivity features is a potential media reporter. The ever-expanding innovation of new wireless, multi-media devices such as iPods, PSPs and cell phones — enabling users to download data/images from the Internet and upload to another Web site in a matter of seconds — illustrates the evolving liability exposures facing all enterprises hosting an online presence.

As a result, the dramatic growth and need for Internet interaction by traditional media producers and nearly every other commercial enterprise has greatly broadened potential errors and omissions (E&O) litigation exposures.

This danger has been amplified by recent online site trends allowing for direct posting of commentary by customers and the public as a whole. This includes everything from product reviews on a retailer’s Web site through to personal derogatory opinions expressed against an individual or organization. These types of posts create a potential defamation exposure for the Web site host. You can add to this complexity the growing popularity of “blogs,” which are personal, editorialized-type commentaries hosted on Web sites. Overall, the online move toward interactive exchange between Web site hosts and their audiences has vastly expanded the possible media liability exposure for both traditional and nontraditional information content distributors.

The potential media liability exposure is not only restricted to the owners of Web sites or platform hosts: it includes third-party content managers or providers such as advertising and news agencies. The precise nature of media liability lawsuits can be difficult to predict; the issue of legal jurisdiction further compounds this ambiguity. The Internet is global and the exchange and hosting of information does not adhere to geographic or political borders.

MEDIA LIABILITY COVERAGE

E&O media liability exposures currently recognized by the courts include (among others):

• defamation;

• invasion of privacy;

• plagiarism;

• misappropriation; and

• copyright and trademark infringement.

The legal profession would suggest this is probably just the “tip of the iceberg” in terms of future liability charges. Even if an enterprise is innocent of the allegations made in a libel lawsuit, it could still possibly incur expenses running into millions of dollars in defence and “economic settlement” costs.

Perhaps the most alarming aspect of the sudden advancement in media technology — and the associated increase in liability exposure — is that few enterprises or content providers appear to be aware that their general liability insurance policies are unlikely to provide coverage in such circumstances.

In situations in which general liability policies do provide such coverage, it is usually very limited; personal injury coverage is typically on a named-policy basis. Not many insurers have been keen to dip their toes into the murky waters of media liability and have therefore sought to limit their exposure. Media liability coverage is therefore a speciality line and a limited number of carriers offering such cover internationally.

BROKER PERSPECTIVE

One advantage of the Internet is that it provides companies and content providers with a larger and broader audience than traditional media channels such as print, radio and television, observes Alan Hollingsworth, partner and practice leader of entertainment and media at HKMB Hub International. “The surge in online media continues to raise the bar from a competitive standpoint, and what we as brokers are seeing among our clients is increased focus on creativity,” he notes. “The downside, unfortunately, is that this creativity push, combined with a larger audience, widens the potential liability exposures facing a client.”

Hollingsworth says few Internet Web site hosts and third-party content providers appear aware of the possible media liability to which they may be exposed. However, after 10 minutes of discussion on the subject, most clients’ eyes are left wide open with realization. “The [role] of the broker is to find out exactly what the potential exposures of an enterprise might be, from hosting events and entertainment activities to Web site involvement. Media liability is an evolving exposure.”

Although market awareness of media liability exposures is limited thus far, “Web site hosts are definitely increasing pressure on third-party content providers to have media liability coverage before awarding contracts,” Hollingsworth says. This move began in the United States, but is starting to become a more common practice in Canada. “We expect such contract requirements will increase in coming years.”

The lower level of awareness of media liability exposure in Canada has much to do with the fact that the country appears to be less litigious, Hollingsworth notes. Litigation related to the media is still very much in the infancy stage. “However, it is definitely becoming more of an issue,” he adds.

Furthermore, “a Web site host or content provider based in Canada might feel more comfortable in a less litigious environment, but unlike most other forms of media, the Internet is open to a worldwide audience, so there’s worldwide exposure to media liability,” Hollingsworth adds.

UNITED STATES v. CANADA

“In the United States, several legislative protections limit the exposure of Web site owners, hosts and third-party platform providers or managers against media liability that simply do not exist in kind in Canada,” says Ken Goldstein, assistant vice president and worldwide media liability manager at Chubb & Son, a division of Federal Insurance Company. These include:

• Communications Decency Act (CDA), which addresses whether bloggers are shielded from liability resulting from information that third parties post. Liability is determined on the basis of whether or not a blogger engages in an acceptable amount and type of editing that does not cross the threshold of becoming an “information content provider.”

In essence, under the CDA, Web site owners or platform providers are generally protected if they allow the public to post material but do not engage in any form of editing. In such instances, the liability would fall on the member of the public or the third-party posting the defamatory content. However, in situations in which the Web site owner or platform provider monitors and edits content that is ultimately deemed to be defamatory, then the Web site or content provider is responsible for those edits.

• The Digital Millennium Copyright Act (DMCA) limits the liability of online providers in terms of copyright infringement by their users. This “safe harbour” applies if the Web site or platform provider did not knowingly post the infringing material and also acts expeditiously to remove the material after having been given appropriate notice. A current case before the courts, Viacom v.

YouTube and Google, will determine whether or not the latter two organizations knew users were posting material that infringed Viacom’s copyright.

The U. S. legal system also places the burden in defamation cases on the “injured party” to prove a “false statement of fact.” In cases involving public officials and figures (such as actors), the party presenting a defamation lawsuit has to prove actual malice on the part of the media (i. e. that the media acted with knowledge of falsity or with reckless disregard of truth). Neither of these higher standards exists in Canada, Goldstein ob serves.

“The lack of legislative protection in terms of media liability is a real problem in Canada,” comments Lorne Honickman, a partner at Toronto-based legal firm McCague, Peacock, Borlack, McInnis & Lloyd. The blog feature of Web sites is currently shrouded in the most legal ambiguity. In general, however, nobody in Canada is protected against copyright infringement if they have been given notice of the infraction.

“The issue of ‘hyper-linking’ is another contentious area of Internet media liability that has yet to find legal direction in Canada,” Honickman notes. “There are a lot of lawsuits out there at the moment. And the world of the Internet is evolving day by day.”

Honickman notes that although most corporate Web sites have some form of content disclaimer, such disclaimers become ineffective once an injured party gives notice and immediate action is not taken to remove the material.

A COMPLEX FUTURE

The Internet is without borders. It is under no specific jurisdiction. Audiences are worldwide, and Canada simply does not afford the legislative protection against media liability that the United States and most European countries do. Web site disclaimers do not offer a “get out of jail free card.”You simply cannot reliably disclaim yourself from negligence.

Media liability exposure is not new, but the forms of exposure are becoming more dynamic as technology advances. Almost every enterprise engaged in Web site activity faces potential exposure and should look to assess their increasing risks and secure appropriate liability coverage.