THE TWO-HUNDRED BILLION DOLLAR TWEET

On April 24, 2013, the Associated Press Twitter feed was hacked and reported that two explosions had occurred at the White House, injuring President Obama.  Trading bots reacted within seconds triggering a selloff that caused the Dow Jones Industrial Average, the S&P 500 and the NASDAQ to immediately drop 1%. This 72 character message wiped out over $200 Billion in investor value in moments. AP quickly issued a redaction and five minutes later the financial markets had regained all of their lost ground.

 Does your company’s social media policy include administrator security and crisis management procedures? As a publicly traded company, what are the implications of messages posted by hackers that disparage your competitors or release erroneous financial information?

Advertising Injury and Media Liability

A General Liability policy typically includes coverage for libel, slander, disparagement and related torts arising from the advertising of your products or services. Coverage may protect you from libelous messages, but we recommend you review your policy carefully. Coverage can vary depending on your industry, and some carriers exclude online activities and advertising.  If your company purchases media liability coverage, make sure that it extends to your online activities and accounts, and check to see if it excludes liability or harm caused by a third-party relying on your content.

Cyber Insurance

Cyber Insurance generally responds to first and third-party loss resulting from a security breach or a release of private information. Your actual coverage may vary depending on the needs of your business, but confirm that your policy will respond to any forensic or investigative costs you incur as a result of a hack, any lost revenue your company would sustain from suspending operations, and any public relations expenses you incur. If the hack releases or redirects your followers to private information taken from your network, your policy should also include coverage for customer notification, credit monitoring, and regulatory fines or penalties.

D&O Insurance

A drop in stock price over a social media hacking event could spur shareholder lawsuits seeking compensation for losses. Your directors & officers liability policy may provide some protection.  Check to see if it has exclusions for personal injury, libel, or slander as these could limit coverage for some situations. Confirm that the policy provides severability for the Insureds so that the actions of a disgruntled employee, director or officer do not preclude coverage for all Insureds. Any fraud exclusion contained in the policy should apply only once there is a ‘final adjudication’ establishing that such fraud occurred, so that the mere allegation of fraud doesn’t eliminate coverage.

 For a deeper review of the social media risks that your company faces and how insurance can help protect your company, contact Cliff Rudolph, our Technology Practice Leader.

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