Social network sites – new legal exposures?

Is the potential legal exposure of Social Network Sites (SNSs) a concern created by media, consultants, or lawyers or is it a more sustainable, technically-driven development which leads to new and unique legal exposures?

Possible legal issues

SNSs themselves do not create legal concerns. It is the social behavior on the SNSs that raises legal questions. Laws governing off-line conduct are equally applicable to on-line conduct, unless there are statutes and/or case law covering SNS-specific issues.

SNSs might raise legal issues which could lead to reputational risks and damage business relations such as: copyright infringement data protection, tort law, labor law, competition law, vicarious liability of the company (as an employer).

As SNSs have grown and have global reach international private law and international criminal law must be applied to determine the jurisdiction and applicable law for international cases.

Exposed lines of business

Outside of the potential loss exposures, there are many business opportunities with the development of SNSs for IT consultants, lawyers, and consultants.

The lines of business which are potentially exposed by SNSs are predominantly those classes covering financial losses:

  • Professional Indemnity/Errors & Omissions (PI/E&O)
  • Employment Practice Liability (EPL),
  • General Third Party Liability (GTPL)/Product Liability and
  • Directors’ and Officers’ Liability (D&O).

The (re)insurance view

From a (re)insurance view, these hazards are not anticipated to generate long tail exposures, thus PI/E&O and D&O risks are short tail exposures. In addition, under Commercial General Liability, only limited coverage is available, which reduces the potential exposure.

As of now, no claims have been reported to Swiss Re for advertising liability, defamation, or slander.

In-house SNS guidelines

Corporations and organisations are aware of SNSs’ potential risks and are actively adopting guidelines on how to use and behave on SNSs.

Use disclaimers

It is also a best practice among SNS providers to use very broad disclaimers. However, there is the possibility for increased claim frequency, since SNSs are growing in popularity.

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