Liability Risks on Social Media

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min read
Updated: 08 March 2024
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Insuranceopedia Staff
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Key Takeaways

  • Misusing social media could qualify as libel and ruin your company’s reputation.

Social media is progressing at an alarmingly exponential rate. According to Statista, as of the second quarter of 2017, Facebook had 2 billion monthly active users, the microblogging service Twitter averaged 328 million monthly active users, and Instagram reported more than 800 million monthly active users worldwide.

While these all started as personal, user-focused platforms, businesses are jumping on the bandwagon, seeing social media as an efficient way to reach out to and communicate with consumers. But this added efficiency cuts both ways: building a social media presence puts you at risk of people’s unfiltered and publicly visible attacks on your business or products. These attacks can come from competitors, disgruntled employees, or even current employees who are oblivious to the damage they could be causing.

Freedom of speech is on full display with every post, tweet, and share. People take a risk with every character they use to express their point of view. And with so much social media activity out there, there is a constant risk that someone will post something they should have thought twice about.

There is, after all, a fine line between free speech and slander. That fine line is liability risk.

What Is Liability Risk?

Liability risk is the threat a company or an individual faces when they have to bear the consequences of damage due to:

  • The behavior of an employee, company, or third party (General Liability Risk)
  • A product sold causing injury to a consumer (Product Liability Risk)
  • A product or service not living up to the expectations of the consumer (Contractual Liability Risk)

This means that the company, its employees, and its contractors are responsible for the way the company runs, the goods and services it sells, and the safety of its customers when using those goods and services. If there is a breakdown in any one of these areas, the company opens itself up to lawsuits, and they will often have to pay hefty settlements in order to rectify the problem the breakdown caused. In addition, they have to win back their reputation and the customers they may have lost.

General liability covers the things employees say and do. It can involve their actions at work as well as their activities when they are off the clock. A seemingly innocent comment or photo on Facebook can have a negative impact on the company they work for. The company can be represented in a negative light due to their employees’ personal behavior, political beliefs, or release of internal corporate information.

When an individual, whether they are representing a company or not, makes a defamatory statement that is spoken, it is called slander. When a defamatory statement is made in written form, it is called libel. Since social media deals mainly with written communication it falls under the libel category. Every person who has a social media account, even a business account, takes on a liability risk when they choose to use their account inappropriately (find out whether liability insurance will cover you for accusations of libel).

How Is Social Media Misused?

With the popularity and ease of access to media outlets, people have grown accustomed to letting the world know every detail about what is going on in their lives.

If it were just photos of their children or the meal they’re about to eat, that woudln’t be so bad. But unfortunately, it has also become common to air grievances on the Internet. In most cases, people don’t consider the ramifications of what they’re writing before they click “send.” The problem is that once something is out there on social media, it can rarely be retracted. You can delete a post, but it’s likely already been seen – and maybe even shared! – by countless people. The damage has already been done. What remains are the consequences of what was said or done by the perpetrator.

Companies assume liability risks if an employee decides to relieve some aggression through one of their corporate social media accounts. Someone reading the employee’s rant could take it to represent the views and values of the company, which could mean losing customers.

Keep in mind that it doesn’t take much for a post to go viral. And it doesn’t even matter if the comments or the actions of the person are true – very few people do any fact checking before sharing something.

And it’s not just private individuals. Public figures, companies, and brands can all post something foolish to their social media accounts. Because they tend to have far wider reach, the snowball of shares will continue to roll downhill until the company has a serious issue on its hands and has lost a number of customers. It’s something Paula Deen, Chick-fil-A, or KitchenAid know all too well.

There is another liability risk to consider. Someone may intentionally want to do a business harm. This deliberate form of libel could come from an employee who is not happy with a management decision, a dissatisfied customer who finds fault with a product they purchased, or it could even come from a competitor in an effort to discredit a company and draw customers to their own business.

What Can You Do About This?

There is only so much that can be done after the fact. It takes more than just an apology to win customers back. Companies spend millions of dollars to repair their image and brand after an unfortunate libel incident occurs. Most businesses purchase liability risk insurance to protect themselves from the costs of litigation and help stay afloat when those lawsuits do arise (learn about the 4 Essential Types of Liability Insurance Every Business Should Have).

Having a liability policy will be the only answer in the long run. Someday, somewhere, there may come a time when the system breaks down: a disgruntled employee makes accusations, a fault in your product is discovered, or someone makes a false statement about your business. Those breakdowns will find their way to the public eye, and before you know it, the company will be on the receiving end of a lawsuit, or you might be forced to file one to clear up false allegations (see Insurance and Lawsuits: What Happens When You Are Sued to learn about the process).

A good proactive start is for a company to have a standard online activity policy when it comes to their employees and the internet. Education about libel and how it affects the company is imperative. Teach employees what risks they take when posting online about their job and their activities on the job. Inform employees of what can and cannot be said. Then monitor those employees to maintain compliance, and deal with the ones who violate the policy accordingly. Liability risk goes beyond any freedom of speech laws. This is because it is about protecting the company’s image from being tarnished unjustly.

It is also wise for a company to have a specific department in charge of any online activity, such as advertising. Make sure that no inside secrets are being shared, no outlandish claims for or against the goods and services are being made, and that there is no defamation of another company taking place.

The Best Step to Take

The best way to avoid any liability action is to refrain from any situation that could cause defamation. A company should: treat their employees well, make the best products, address complaints accordingly, and live up to each customer’s and employee’s expectations. This gives leaves open fewer opportunities for someone to use social media as a platform to defame a company; instead, it could be used to acknowledge and praise companies for the high standards they uphold and deliver.

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