Post, like, share...lawsuit?
Is your general liability policy ready for social media?
By Vince Gaffigan EVP, Director of Risk Consulting vgaffigan@lockton.com
One viral post on social can make a company’s day. Or it can just as easily ruin its year.
As more businesses ride the social media wave, they’re also surfing straight into a legal tsunami. From defamation to copyright infringement and influencer misbehavior, the potential risks are vast — and potentially costly. Many businesses and risk management professionals believe general liability insurance will provide adequate coverage…but the reality is often far different.
Opportunities & challenges
Social media has transformed how businesses engage with consumers, creating new avenues for marketing and communication. Large numbers of Americans across all demographic groups use various social media platforms, from YouTube and TikTok to Instagram and Twitter, according to recent Pew Research Center data. And major platforms pick up new users every day, including many who rely on social media for news and information.
Chief among these transformations has been the emergence of social media influencers — individuals who promote and advertise various brands to their online followers. While influencers may sometimes seem to have over-the-top personalities, their effectiveness in capturing attention and driving trends is undeniable. Their unique ability to personally connect with audiences makes them powerful marketing agents across generations.
But as social media evolves, the legal liability landscape for companies, influencers, and insurers has become increasingly fraught. Social media increases the risks of libel, slander, and infringement of copyrights, trademarks, trade dress and/or privacy. Seemingly innocuous content — from short comments to longer blog posts and photos and videos — can quickly go viral and spread globally, causing significant damage.
This evolution highlights the concept of “social media liability,” along with the often misunderstood “personal and advertising injury” coverage under general liability (GL) policies. Recent case law reveals the perils of potential gaps in coverage, underscoring the need to take a carefully tailored approach to address social media risks. Failure to do so could lead to unpleasant surprises following a loss.
Immunity from legal liability
Social media platforms enable users to create, share, and interact with content, fostering conversation, opinions, and online communities. Social media companies are broadly protected from liability related to this content by Section 230 of the Communications Decency Act of 1996.
At its core, Section 230(c)(1) provides immunity from liability for providers and users of an "interactive computer service" who publish information provided by third-party users. The law states that “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”
The law was intended to protect early internet companies by enabling them to grow without fear of litigation. Social media sites are seen as a platform for communication rather than true creators of content. As such, liability is shifted to those who create and post content.
But while Section 230 immunizes online platforms from legal liability for posts, comments, and other messages, it does not free them from liability for content that violates federal criminal law or intellectual property rights.
The issue of immunity for social media platforms has become politically charged. Critics argue that Section 230 allows platforms to avoid accountability for harmful content. Calls for reform are intensifying, with states such as Texas and Florida introducing their own laws. This has led to a regulatory patchwork that will become an even bigger compliance challenge in 2025.
Despite Section 230 providing a degree of immunity for platforms, the rapid spread of user-generated content highlights the potential risks that companies may face from social media marketing. It also underscores the need for tailored and specific policy language that aligns with digital exposures.
The role of influencers
Influencers and brand ambassadors play a central role in social media and marketing by developing content, building an audience, and shaping opinions and trends. They typically have large, engaged followings and directly influence buying decisions and attitudes. Influencer marketing works because people trust recommendations from someone they “know,” whether it’s a friend, neighbor, family member, or celebrity.
Social media influencers can amplify the impact of marketing efforts in various ways, including:
- Credibility & trust Influencers are trusted figures, and their followers see them as credible sources of recommendations. When an influencer endorses a product, it often comes across as a genuine suggestion rather than a traditional advertisement.
- Expanded reach & brand awareness Influencers are experts at target marketing and have built audiences interested in specific topics. Collaborating with an influencer allows a company to reach the right audience more efficiently. By leveraging an influencer's established audience, companies can connect to audiences that might not be within reach through traditional marketing efforts.
- Improved engagement & authentic content Influencer content tends to generate higher engagement due to a personal connection with followers — leading to more likes, comments, shares, and conversations about the product. Influencers' strong bond with their audience helps them communicate a brand's story effectively.
- Cost-efficiency Influencer marketing can be more cost-efficient than traditional advertising. Rather than spending large amounts on TV ads or print campaigns, brands can work with influencers who have niche audiences for a fraction of the cost. They can choose influencers who cater to particular demographics or interests, allowing them to more effectively reach desired audiences. Some influencers also have an audience concentrated in specific geographic regions, which helps businesses seeking to drive growth in a particular area.
- Loyalty Long-term collaboration with influencers helps brands establish brand loyalty within those influencers’ audiences. Followers who see influencers consistently promoting certain brands develop a high level of trust and confidence. Influencers can also drive increased traffic to the brand through links and discounts.
All of this is upending traditional marketing and advertising. More than 85% of major and midsized brands budgeted for some form of influencer marketing in 2024, according to a recent report from the Influencer Marketing Hub. According to the same report, the influencer marketing industry was expected to grow to more than $24 billion by the end of 2024.
DEFAMATION
Defamation is one of the most common claims related to social media. Defamation can occur purposefully or unintentionally and is categorized as either libel (written statements) or slander (spoken statements).
Social media platforms enable users to post opinions and commentary, but there is a fine line between opinion and fact. In 2023, Tesla sued a popular car reviewer in China for defamation, alleging that the reviewer spread false information about its inspection processes. Earlier, in 2019, Elon Musk — Tesla founder and chairman of X, formerly known as Twitter, which was acquired in 2022 — was personally sued for defamation after calling a British cave explorer a “pedo guy” on X.
In another notable case, Dominion Voting Systems sued Fox News and several network program hosts and guests for claiming its voting systems were rigged in the 2020 presidential election. All of these statements were widely quoted through various social media channels. Dominion settled with Fox for more than $750 million, with Fox acknowledging that the court had ruled that certain statements it made about Dominion were false.
While state defamation laws vary, a business that files a defamation lawsuit against an influencer generally must prove that the statement:
- Was false.
- Identified the business.
- Was published to a third party.
- Caused actual harm, such as a loss of customers or revenue.
Cases can arise from online platforms where statements are fixed and disseminated, including sites such as YouTube or TikTok. For example, Rapper Cardi B won over $4 million in a landmark libel lawsuit against Kebe Studios and YouTuber Tasha K for making false claims about her sexual health, drug use, marriage, and child. The Grammy Award-winning artist filed the lawsuit after Kebe refused to remove more than 40 videos that had attracted millions of views to a monetized channel. The court rejected the defense that Tasha K was not a journalist and that her primary objective was to go viral, entertain her viewers, and increase traffic.
INTELLECTUAL PROPERTY VIOLATIONS
Intellectual property, according to the World Intellectual Property Organization, “refers to creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names, and images used in commerce.” Social media platforms enable access to endless displays of content (including those from other social media platforms), leading to the widespread assumption that this content is in the public domain and therefore “free.”
Intellectual property infringement is another area where social media liability claims are on the rise. Influencers often use copyrighted music, images, or logos in their posts without obtaining proper licenses, leading to legal disputes.
In 2021, Sony Music Entertainment sued Ofra Cosmetics, alleging that it used unlicensed music from Sony artists in numerous influencer-created videos on Instagram and other social media platforms. In 2024, Sony also sued hotel chain Marriott for using hundreds of its songs in advertisements posted by its influencer partners on Facebook and other social media platforms without permission. The case recently settled; under U.S., copyright law, Marriott’s potential exposure could have been as much as $140 million.
Likewise, an influencer’s name, aesthetics, and content may also be considered a “brand” protected under trademark law since it distinguishes his or her advertising services from those of other influencers. In a recent lawsuit, Sydney Nicole Gifford accused fellow influencer Alyssa Sheil of copying her distinct neutral-toned aesthetic on social media. The outcome of this case could set a precedent for the entire influencer industry.
FALSE ADVERTISING & ENDORSEMENTS
The Federal Trade Commission (FTC) enforces laws that prevent unfair, deceptive, and fraudulent business practices. These laws reflect the basic truth-in-advertising principle that endorsements must reflect the endorser’s honest opinion and not be misleading. The FTC recently warned businesses that paying people — such as social media influencers — to endorse a service or product without disclosing the paid relationship is a deceptive advertising practice subject to serious civil fines.
And it’s not just companies that can be held liable for FTC violations. A social media influencer can also be held personally liable for violations of relevant state and federal laws.
Influencers and the brands they promote are often targets of lawsuits alleging false or misleading representations. In a high-profile case, Kim Kardashian paid $1.26 million in penalties to the Securities and Exchange Commission (SEC) to settle charges that she promoted cryptocurrency on social media without disclosing her financial compensation for the endorsement.
Similarly, the FTC took action against TEAMI LLC for its claims that its teas could cause rapid weight loss, fight cancer, and unclog arteries. TEAMI advertised primarily through a massive social media campaign but failed to disclose that its influencers had been paid.
As the FTC intensifies its oversight of social media advertising, more lawsuits related to influencer endorsements are expected. Brands can be held liable if influencers fail to disclose paid partnerships, emphasizing the need for businesses to understand their insurance coverage in these areas.
DATA BREACHES / CYBERATTACKS
Consumers engaging with businesses and influencers on social media are more vulnerable to data compromises and cyberattacks. The disclosure of protected personal, health, and financial information, credentials, IP addresses, and social media profiles on these platforms carries greater risk.
Threat actors can exploit social media users in many ways, including via phishing scams, fake giveaways, impersonation tactics, and malicious links shared in comments or direct messages. This is particularly prevalent when influencers — or malicious actors posing as influencers — run promotions or giveaways, encouraging high engagement with potentially deceptive content.
Unlike established companies, influencers typically do not have robust cybersecurity and privacy protection protocols. Losses of this nature can have severe financial impacts and cause significant damage to reputations and sales for both influencers and the companies and brands they represent.
Coverage under GL policies
Against this backdrop of litigation, businesses (and influencers) often look to their GL policies for defense and indemnification. Coverage B, which protects against personal and advertising injury, is especially important. This coverage protects insureds against liability from certain offenses such as libel, slander, and copyright infringement.
Coverage B, however, has significant limitations, especially in the context of social media. As a result, coverage may flow from a patchwork of policies including GL, intellectual property, cyber liability, media liability, and reputational risk. In some instances, coverage may be limited or even nonexistent.
Limits of personal & advertising injury
Under a standard ISO GL form, wording for Coverage B reads:
We will pay those sums that the insured becomes legally obligated to pay as damages because of ‘personal and advertising injury’ to which this insurance applies. We will have the right and duty to defend any ‘suit’ seeking those damages...This insurance applies to ‘personal and advertising injury’ caused by an offense arising out of your business but only if the offense was committed in the ‘coverage territory’ during the policy period.
For a claim to be covered under this wording, the following criteria must be met:
- The act must arise out of the business operations of the insured.
- The act must occur during the policy period.
- The act must fall within the specific definitions of a personal and advertising injury offense.
“Personal and advertising injury” is defined as “injury, including consequential ‘bodily injury,’” arising out of one or more of the following offenses:
- False arrest, detention or imprisonment.
- Wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord, or lessor.
- Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.
- Oral or written publication, in any manner, of material that violates a person’s right of privacy.
- Use of another’s advertising idea in your “advertisement.”
- Infringing upon another’s copyright, trade dress or slogan in your “advertisement.”
- Libel, slander, or defamation: Oral or written statements that damage the reputation of a person.
Note that the term “social media liability” does not appear anywhere in ISO form. Thus, it must flow from one of the offenses outlined above.
Unlike Coverage A, which concerns bodily injury and property damage caused by accidents, Coverage B primarily deals with intentional acts, though the outcome of those acts may be unintended. This distinction is particularly important for businesses navigating the legal landscape of social media marketing.
Other Coverage B exclusions
Key limitations under Coverage B include:
- Knowing violation of rights exclusion: This exclusion precludes coverage if the insured knowingly violates another party’s rights. For example, if a company or influencer intentionally posts defamatory content, the insurer may deny coverage under this exclusion.
- Material published with knowledge of falsity exclusion: This exclusion denies coverage for claims involving the publication of false material with knowledge of its falsity. This is particularly relevant in cases of false advertising, where influencers or companies knowingly misrepresent products.
- Quality or performance of goods — failure to conform to standards: This exclusion denies coverage for claims that a product or service was not “as advertised.” Claims about a product’s effectiveness or efficacy that were exaggerated by an influencer are generally not covered.
Additional limits of GL policies
- Data, privacy, & electronic communication exclusions: In addition to the exclusions mentioned above, businesses must also contend with data liability and privacy-related exclusions in their GL policies. As companies collect and use personal information, insurers are responding by excluding coverage for data breaches, privacy violations, and electronic communication risks. These exclusions are often tied to regulations like the California Consumer Privacy Act (CCPA), which has heightened the financial stakes for businesses that mishandle customer data.
- Electronic data exclusion: This exclusion precludes coverage for damages arising from the loss, corruption, or inability to access electronic data. This can be particularly relevant for social media claims involving data breaches or cyberattacks.
- Intellectual property exclusion: GL policies exclude most types of intellectual property claims, including copyright, trademark, or patent infringement. This can impact social media claims where content posted online infringes on someone else’s intellectual property rights.
- Unauthorized use of another’s name or product exclusion: This exclusion eliminates coverage for claims arising from the unauthorized use of another person’s name, likeness, or product in advertising. This is particularly relevant for social media influencers and businesses using endorsements.
- Electronic chatroom or bulletin board exclusion: This exclusion avoids coverage for personal or advertising injury arising from content posted on electronic chatrooms or bulletin boards that the insured hosts, owns, or controls. Although chatrooms may not be as popular as they once were, this exclusion may apply to social media platforms managed by an insured.
Recognizing the serious potential of social media losses, insurers have become more aggressive about defending their rights when claims are filed. For example, coverage only applies to sums that “the insured” becomes legally obligated to pay “as damages.”
Whether an influencer is considered an insured depends on the policy definitions and facts. It is also clear that the insured must be legally obligated to pay (voluntary payments don’t count), and “damages” must be paid. Simply paying back money or being fined by the FTC likely won’t be considered “damages.” Nor will an administrative hearing by the FTC be considered a “suit.”
As mentioned above, two of the covered offenses under personal and advertising injury include:
- Use of another’s advertising idea in your “advertisement.”
- Infringing upon another’s copyright, trade dress or slogan in your ‘advertisement.
“Advertisement,” as typically defined in such policies, includes “notices that are published … on the Internet … about [the policyholder’s] goods, products, or services … for the purpose of attracting customers or supporters.” These provisions appear to cover claims against the policyholder for IP violations resulting from internet posts, even if the corporation is not the party publishing the posts.
Although social media advertisements could be included in these terms, insurers have plenty of leeway for interpretation. For example, insurers could argue that certain content doesn’t directly promote goods, services or a business. They could also take the position that a social media post is more of an opinion or personal communication rather than an explicit promotion of a product or service. Additionally, some insurers have argued that certain published content isn’t under the control of an insured business and, therefore, does not constitute an “advertisement” made by the insured.
10 best practices
As social media continues to evolve, the potential for increased complexity around losses and coverage grows. Here are some best practices to mitigate these risks:
1. Ensure clear contractual terms.
When working with influencers, brands should require written contracts that carefully spell out insurance and indemnification requirements. This helps clarify coverage expectations and protects the brand from any claims arising from influencers’ activities.
2. Understand the breadth of advertising and marketing activities.
This includes the use of influencers, sponsored content, and user-generated content. Ensure all activities are compliant with relevant laws and regulations.
3. Establish clear social media policies.
Develop guidelines for both employees and influencers that cover acceptable behavior, disclosure of paid promotions, and the proper use of intellectual property. Strictly enforce adherence to these guidelines to maintain consistency.
4. Legal review of marketing strategies.
To avoid legal pitfalls, make sure legal counsel reviews all social media marketing strategies to ensure compliance with advertising, privacy, and intellectual property laws.
5. Regularly review GL policies.
Ensure your GL policies provide the broadest possible coverage for social media risks. Consider amending existing policy wording to close potential gaps. Coverage B is an often misunderstood and frequently litigated part of the GL policy, so be sure your insurance broker reviews the language and that it dovetails with other policies.
6. Consider IP, media, and cyber coverage and ensure these are coordinated with your other coverages.
Depending on the nature of the business, additional covers should be reviewed and considered to provide an organization with added insurance protections:
- Intellectual property insurance can specifically cover claims of infringement of copyrights, trademarks, patents, and trade secrets.
- Media liability insurance can protect against claims arising from the publication or broadcast of media content and can potentially extend to allegations of defamation, invasion of privacy, and copyright infringement.
- Cyber insurance can, among other things, provide coverage for claims alleging data breaches, cyberattacks, or other security incidents.
7. Provide regular training.
Educate employees and influencers on social media risks, FTC disclosure requirements, and copyright laws. Regular training helps reduce liability and ensures everyone is aware of the latest regulations and best practices.
8. Monitor social media and influencers.
Use tools for social listening and reputation management to detect harmful content or IP infringement. This proactive approach helps catch potential risks before they escalate.
9. Develop rapid response protocols.
Prepare for potential allegations or losses by having pre-established arrangements with public relations and crisis management firms. Quick and effective responses are critical for brand protection.
10. Respond quickly to potential claims.
In the event of a lawsuit or claim, it is critical to notify the insurer promptly and seek legal counsel. Delayed reporting can lead to denial of coverage, especially in the case of personal and advertising injury claims.
Protecting your organization
As social media becomes an increasingly powerful tool for businesses, the associated legal risks are also growing. Companies that rely on influencers and social media marketing must understand the potential exposures, including defamation, intellectual property violations, and false advertising claims.
While Coverage B under GL policies offers protection for certain offenses, the rise of social media exclusions and data liability limitations has left businesses vulnerable. By implementing best practices, companies can better navigate the complexities of social media and protect themselves from potential risks.
Contributors
Maryam Rad Director of Business Operations, Cyber & Technology mrad@lockton.com
Chuck Jainchill U.S. Cyber & Technology Product Leader cjainchill@lockton.com
Social media risks
Despite the obvious benefits, the rise of social media has led to a significant increase in claims against businesses and influencers. These claims often allege defamation, libel, intellectual property infringement, and false advertising, which can complicate organizations’ risks and insurance coverage. Brands can also find themselves directly associated with individual influencers who engage in problematic behavior or are misaligned with company values, leading to public backlash and reputational harm.
Being accustomed to creative freedom, influencers might also post false or unsupported claims. They may also inadvertently infringe on intellectual property rights or defame people or products in seeking to capture their followers’ attention. All of this can lead to lawsuits and result in negative consequences for the companies that hired them.
Most social media and influencer litigation has centered around the following: