Media

The Media profession, which covers the area of marketing and communications used to be treated as miscellaneous business. Now, like the Information Technology sector, it has become an area of speciality for insurers and is a class on its own. The miscellaneous wordings that used to be offered by insurers were woefully inadequate.

Most PI policies require that a third party claim be made for a loss, which, for the media industry, would almost always be financial loss, arising as a result of the neglect, error or omission of the insured. In reality, media professionals will often be in a position to resolve any issues without their client needing to know there is a problem. Alternatively, they might waive an outstanding bill or issue credit notes so as to preserve commercial relations with their clients. The end result is no third party claim for damages and, therefore, under most wordings, no valid professional indemnity claim.

For this reason, it is essential that media clients are not treated as miscellaneous risks and that a suitable media wording is offered, which gives ‘first party’ cover and allows the problem to be put right without a claim being made by the client and also cover to allow the Insured to recover his fees from underwriters and not charge his client for work that has gone wrong. These types of cover require specialist claims attention. There are not many insurers who give the cover and some that do cannot give the claims service required as immediate decisions are required and there is often insufficient time to get the details in writing.

What do insurers look for?

Qualifications and experience - In common with its miscellaneous lineage media Insureds may not be qualified in the formal sense at all. Underwriter will most often want CVs of the principals of insured firms. Again, like miscellaneous clients, experience is also taken into account.

Type of activities - A media proposal form asks for a detailed split of business. As some activities are more hazardous than others, examples include:

Production of advertisements - Depends on the medium used for broadcasting the advert. Due to potential mass exposure and production costs, TV and commercial film work is deemed higher risk than radio and press, etc. Medium to high risk
Media planning and buying or 'media spend' – The planning of campaigns and the booking of space in the press, TV and radio. TV and commercial film exposure is higher than other forms of media. Normally, media companies have very good relationships with the media owners e.g. the TV companies, and can often resolve problems without having to claim at all Low risk
Design and production of printed literature and documents - the risk factor here will depend on the material being produced. Variable risk.
Direct marketing including mailshotting - There are many claims in this area although most tend to be relatively small in quantum i.e. £25-£50K. Some insurers have separate proposal forms for people in this area, which include questions relating to the procedures in place, the sizes of the mailings and the types of mailings. Medium risk.
Sales promotion – can be high risk when it goes wrong. Think of the Hoover debacle when holidays had to be provided for every Hoover purchased. Medium to high risk depending on activities.
Marketing including market research – regarded as a low risk activity.
Public relations – Again, regarded usually as low risk activity.
Publishers - Libel, infringement of copyright. Errors in publication (e.g. formula, design, etc.), withdrawal costs. Very much depends on content and circulation. An example of what is published will normally be required. Low to medium risk

Download Media brochure.

EXAMPLES OF CLAIMS

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Advertising - An advertisement featured a song which sounded as if it had been sung by someone with a stammer. The ad agency was warned by the IBA that the advertisement was bordering on being unacceptable. Once finalised, the IBA decided that not enough was done to adapt the song. The client refused to pay the agency. Cost to insurers: £140,000.

Media buying - Advertising space was supposed to have been booked in the national press for a series of adverts for the Easter sale of a chain of retail stores. The bookings were made for the wrong 4-week period i.e. 1 week before Easter and 3 weeks after. The firm refused to pay for the media spend and also claimed financial loss for the loss in revenue from the sale. Cost to insurers: £185,000.

Design of printed literature - A media company was producing a price listing for a chain of pubs in Scotland and England. The pricing for England should have been more expensive than for Scotland. The list had the Scottish prices for England and a claim was made for lost revenue. Cost to insurers: £45,000.

Direct mailing - Wrongly addressed mailings and incomplete mailing packs. Cost to insurers: £120,000.

Market research - A market researcher had their data encoded by a specialist firm who misinterpreted the instructions. The resulting report was not checked and the client made a claim for the delay and the cost of re-coding the data. Cost to insurers: £35,000.

Public relations - A PR firm involved in a campaign for a car manufacturer's new marketing strategy on their new special service contract. The product was badged with a name that was subsequently found to have been used before by another car company. A claim for breach of copyright was made and the strategy had to be withdrawn. Cost to insurers: £250,000.

What should you look for?

What does your client do? - The business description needs to be accurate, and, as the Media industry is truly worldwide in its nature, you must look out for potential US exposure. It is possible to arrange US cover but different terms will apply and the price will go up. The high hazard areas are primarily direct marketing and sales promotion risks and normally a different proposal form or at least an additional questionnaire will be required.

Sub-contractors - Most media firms will use sub-contractors and suppliers in order to fulfil their contracts. They normally contract as principals with their clients and, therefore, will be vulnerable even where the problem has been caused by an errant sub-contractor or supplier. It would be useful if indemnities are sought from such consultants and ideally that they have their own PI policies in force to deal with claims that the insurer wishes to subrogate.

Self employed consultants - Often, media firms will use self-employed freelancers who will, to all intents and purposes, be working for the insured as an employee. In such cases Media policies will normally deem such persons as employees and, therefore, waive subrogation rights.

Wordings
It is important that a proper media policy is used which includes 'first party' cover and cover for irretrievable fees. HCCI is always happy to provide specimen policies.

The usual cover

Usually the limit of indemnity will be 'any one claim' with legal costs in addition, often restricted to one extra limit for each claim's costs. The excess will not normally apply to insurers' costs and expenses. The normal heads of cover are:

Libel & slander (defamation)
Infringement of intellectual property rights (e.g. copyright)
Breach of confidentiality
Dishonesty of employees
Loss or damage to documents
Rectification (first party) cover
Irrecoverable fees (first party)
Product disparagement

The usual exclusions

Typically, media policies will exclude things that should have more specific insurance:

Employers liability
Bodily injury / property damage except where caused by a breach of professional duty
Property owners, etc.
Vehicles, etc
Products liability - but take care as some media businesses sell, repair or alter products and also have professional exposures

There are also 'boiler plate' exclusions:

Contractual liability - this is liability assumed under any express warranty, agreement, guarantee or the like, unless such liability would have attached anyway
Insolvency / bankruptcy of insured
Circumstances known at inception
Fines and penalties
Claims by financially associated parties - some insurers will cover these claims if they emanate from a third party
Radioactive contamination, etc.
War
Date recognition
Pollution

Then there are exclusions that are specific to the media industry:

The outcome or operation of any game, promotion, contest or lottery
Advertisements that result in any adverse change in a claimant's health, lifestyle or relationship with others
Mimicking, i.e. copying what is seen in an advert
Stunts
Statements that were known to be defamatory at time of publication.
Trading loss or loss of any client
Obscene, blasphemous or pornographic material

And finally...

Be aware of the wording. If your client is particularly exposed to bodily injury or environmental claims, check that these aren't excluded or restricted within either the basic wording or any applicable clauses (some insurers even draft restrictions to look like extensions!). If cover is restricted, is this the best that you can get? It might be, but ask - your client should understand the cover. HCCI will try to draw these things to your attention, with advice where appropriate.

As mentioned, the way in which 'first party' claims are handled is unusual. If you do have a client who has a problem then please get as much information as possible, which should include what went wrong, why, what the consequences could be, including a best guess on quantum and what the proposed resolution of the problem is. Then speak to HCCI for further advice and assistance.

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