Hey, Let's Be Careful Out There!

One might think that maintaining a weblog is not a risky proposition. Speaking as a lawyer, I have to offer a lawyerly, "That depends."

There are weblogs that focus on hotly debated issues of public policy. It is not beyond the realm of possibility that a by-product of these debates might be a lawsuit for defamation. By way of example, Richard Perle is apparently bringing a lawsuit against Seymour Hirsh for a story authored by Hirsh that appeared in The New Yorker. The lawsuit is being brought in England, which is extraordinarily liberal in allowing recoveries for alleged defamation.

One can easily foresee the possibility of a similar lawsuit growing out of a weblog posting. In that regard, it is notable that the law is unclear as to where such a lawsuit can be brought. There is a case in Australia that holds that jurisdiction over a claim for an alleged defamatory statement can be exercised in that country over Dow Jones & Company, located in New York, for publishing Barron's Online. The theory is that the publication of the defamatory statement took place in Australia when Australian web surfers clicked on the site. Although I've heard that Australia's a nice country, I wouldn't want to defend a lawsuit there.

While The New Yorker has deep pockets and, most likely, an insurance policy that provides coverage for defamation claims, I doubt that many bloggers carry insurance policies that are specifically designed to provide such coverage. Let me suggest, however, that bloggers may, in fact, have such coverage in many cases.

Many, if not all, homeowner policies include within the definition of "personal injury," an injury caused by defamatory comments. Umbrella policies generally mirror that coverage. At the least, weblog authors should make certain that their homeowner's policies provide coverage. Additionally, since umbrella coverage is relatively cheap, they should consider acquiring an umbrella policy with significantly higher limits.

However, be aware that such policies generally contain exclusions for business activities. Thus, if a weblog is designed for what might arguably be considered to be a business purpose (such as a weblog by an attorney offering legal commentary), make certain that your business policy provides such coverage and has sufficient limits of coverage.

This brings me to the case of Applied Signal & Image Technology, Inc. v. Harleysville Mutual Insurance Co., decided last week by Judge Blake of the United States District Court for the District of Maryland. Under the facts of that case, Applied Signal was sued for, among other things, allegedly placing the plaintiff in a "false light." Harleysville agreed to defend the case under a reservation of rights. That is, it agreed to underwrite the costs of defense, but reserved the question of whether it had an obligation to contribute to any settlement or judgment obtained by the plaintiff.

At the end of the day, Harleysville contributed $25,000.00 toward a settlement of the case. It balked, however, at reimbursing Applied Signal for the total defense costs of $88,000.00, arguing that these costs should have been apportioned between those allocable to the covered claim and those allocable to claims that were outside of the policy's coverage.

Harleysville lost. The Court held that the policy provision that required Harleysville to "defend any 'suit' seeking . . . damages [covered by the policy]" was a covenant that was independent of its obligation to indemnify Applied Signal from any loss. The Court pointed out that Maryland requires an insurer to defend when there is a "potentiality that the claim could be covered by the policy" (emphasis by the Court). Furthermore, the Court awarded Applied Signal the reasonable attorneys' fees and costs it incurred in having to bring the action to force Harleysville to reimburse it for the attorneys' fees incurred in the defamation action.

The Moral: An ounce of insurance protection is worth a pound of litigation cure.