Advertisers and agencies must regularly audit their advertising and professional indemnity cover, and check out their claim handling procedures too.
Topic: Insurance
Who: Intellectual property/professional indemnity insurers and insured advertisers and marketing agencies
When: Now
Where: US and UK
What happened:
Ruthless it may sound, but claimants litigating over advertising claims or content may be keen to see if there are ways of framing their claim so that the defendant cannot claim on their insurance. In the US, there have been a number of cases in recent years where no monetary claim is made, only a claim for an injunction banning the offending advertisement. If this occurs and the insurance policy is worded so as to cover only "sums which the insurer shall become legally obliged to pay as damages", can the defending party claim on the policy at all? In some cases the insured has argued that the standard "sweep up" claim in proceedings for "further or other relief", a tactic deployed in the UK in the same way as in the US, is effectively a claim for damages, thus triggering the insurance cover. The US courts, however, have not been sympathetic to this reasoning.
Why this matters:
There are two fundamental aspects to effective risk management in any organisation involved in commercial communications. First and foremost there is ensuring that the cover described in your insurance policy is the cover you need. Here, these US cases underline the need to regularly audit policy wordings in the light of perceived risks and re-negotiate with brokers and insurers as necessary.
Secondly there is the need to get a grip on the handling of claims. The most comprehensive policy wording in the world can be rendered nugatory by a wrong move once a claim comes in. Late or inadequate claim reporting, making admissions or offers to the other side or instructing outside advisers without prior reference to insurers and telling the other side that the claim is insured are just some of the "don’ts." Another common blind spot for ad agencies is assuming that the policy will indemnify for all claim costs the agency agrees to eat, in order to preserve the client relationship. In many cases, the policy will make it quite clear that the extent of the insurer’s obligation under the policy is to indemnify the agency in respect of its legal obligations to the claimant, not what the agency may regard as its moral or commercial obligations to its client.
As soon as a claim is intimated, no matter how tempting it may be to file it and hope it goes away, insurers should immediately establish the handling ground rules and the people who must be involved. The right start should see to it that in the long run the time and cost involved in the process is minimised, as well as the damage to next year’s premium!
