It's no secret that civil torts drain profits from small-business owners, drive up the cost of products and services, and burden the nation's judicial system. In 2010, tort costs soared to $264 billion – roughly $857 per person, according to the report "2011 Update on U.S. Tort Cost Trends" by risk management firm Towers Watson.
The bad news is that even a meritless lawsuit can hit your business in the pocketbook. For example, say a competitor sues your business for something you posted about it on Twitter. Even if the tweet doesn't amount to libel or false-light invasion of privacy, the tort can still rack up lawyers' fees and time away from your business. In fact, the National Federation of Independent Business reports that U.S. small-business owners pay an estimated $35.6 billion just to settle civil suits – and 95 percent of small-business owners settle out of court when faced with a claim. (Read more in NFIB.com's article, "How to Handle Frivolous Claims.")
Given the rise in social media libel, copyright infringement, and invasion of privacy cases over the past few years, it's worth learning more about frivolous litigation so you know what to expect.
Social Media Defamation or Grasping at Straws: The Example of the $50k Tweet
In the case Horizon Group v. Bonnen, Horizon Group Management, LLC filed a lawsuit against Amanda Bonnen, a 25-year-old renter in one of its buildings, for venting on her Twitter account about the conditions of her apartment.
According to the realty group, Bonnen damaged its professional reputation when she tweeted, "Who said sleeping in a moldy apartment was bad for you? Horizon realty thinks it's okay." Horizon sought $50,000 in damages.
Bonnen's attorneys successfully argued that her statement's literary and social context mattered in whether or not it should be considered factual. They noted that since Bonnen only speculates what Horizon thinks, her tweet should be viewed as a personal opinion rather than a statement of fact. Since she didn't mention where she lives or whether or not she actually lives in property managed by Horizon, the tweet lacked the factual content to effectively damage the landlord's reputation.
And the judge agreed, saying that the tweet was "really too vague" and "lacks any context" to meet the legal standards for libel. The case was dismissed.
Even if the claim never made it to trial, fighting a frivolous advertising injury lawsuit can still cost a considerable amount. To respond to a claim like the one Bonnen faced, your business would have to hire a lawyer and pay that lawyer to respond to the charges and make preparations for trial. For most small-business owners, those legal defense fees alone can be enough to strain an already stretched bank account.
What to Do When You're Sued for Social Media Advertising Injuries
There's no magical way to prevent your business from being sued for frivolous reasons. Sometimes people sue to send a message; other times, they’re trying to force your hand and make a quick buck. But if you respond to a claim with a strong counterclaim or defense, you increase your chances of having the meritless suit dropped.
Those who pursue unreasonable suits are typically fighting a war of attrition. The idea is to drag out the lawsuit long enough to make the situation financially burdensome enough that you'll be willing to settle just to end it.
When faced with a meritless claim (e.g., a complaint that you committed libel on Facebook even though what you wrote was factually true and didn't hurt the person's reputation), remember to…
- Answer the complaint swiftly. Your answer should outline all possible defenses and counterclaims.
- Be quick about handling all the proceedings to prevent the claim from dragging out longer than it has to.
- Ask your attorney about the possibility of bringing summary proceedings, which can speed up the process if your case requires prompt action and only involves a small number of clear-cut issues.
Before a lawsuit even becomes an issue, though, you'll want to arm yourself with the appropriate financial tools to pay for your legal defense costs and other expenses if the claim goes to trial or is settled out of court.
How General Liability Insurance / Advertising Injury Insurance Can Get You Through a Frivolous Claim
Small business insurance is designed to protect businesses like yours from common risks. And if your company actively participates in social networking sites and social media marketing, you could face claims over…
- Libel or slander (e.g., you write or say something that hurts someone's reputation).
- Copyright or brand infringement (e.g., you profit by using a company's trademarked name or slogan). (Read more about this in the post “Social Media and Business Risk: Slander, Libel, Invasion of Privacy, and Copyright Infringement.”)
- Invasion of privacy (e.g., you use someone's image to promote your products without their permission).
- Copying someone's advertising ideas (e.g., you recreate another company's advertisement).
Fortunately, General Liability Insurance can cover all these advertising injuries. If you're sued for using an unauthorized picture of Boo the Pomeranian to help sell your products, for example, your GL policy can help pay for legal defense fees, settlements or judgments, and other court-related expenses.
To learn more about how General Liability Insurance can safeguard your finances in a social media advertising injury lawsuit, read "How Commercial General Liability Insurance Can Protect You from an $82,630 Tweet" on our blog.