Risk Insider: Kate Browne

The Cyber Smear: A Growing Global Issue

By: | April 2, 2018 • 2 min read
Kate Browne Esq., ARM is a Senior Claims Expert at Swiss Re Corporate Solutions. She has spent her entire career in the insurance industry, and speaks and writes extensively on the impact on the legal implications of drones, autonomous vehicles, the internet of things, and other emerging risks. Kate can be reached at [email protected]

Corporations and businesses, both big and small, are used to criticism. In fact, a clay tablet displayed at the British Museum may be the world’s first consumer complaint. The tablet contains excerpts of a letter from an ancient Babylonian who received the wrong grade of copper in 1750 B.C. In the 21st century, unlike ancient Babylon, a competitor, disgruntled employee, or unhappy customer can quickly and easily cause widespread damage to a company’s reputation through tweets, blogs, online reviews, and social media.

There is a difference between legitimate criticism and defamation. While the precise law varies by jurisdiction, defamation is generally understood to be any false statement of fact that injures a person’s status, good name, or reputation in the community. Spoken defamatory statements are known as “slander”, and written ones are referred to as “libel.” Modern law generally disregards the distinction between the two, and simply refers to all defamatory statements as “defamation.”

The internet has opened an almost infinite array of places for defamatory speech to occur, leading to phenomena knows as “cyber smearing”. Cyber smearing is the anonymous posting of disparaging, or even defamatory, rumors and statements about a company, their executives or even stock via the Internet.

Companies cannot stop cyber smearing but they can prepare for the inevitable by having damage control mechanisms in place. Prevention and preparation are, without a doubt, the key to combating cyber smears.

Over the last few years lawyers around the world have filed lawsuits alleging cyber defamation and cyber smearing, several of which have resulted in sizable verdicts. On January 31, 2018, the Ontario Court of Appeals upheld a $700,000 award which included punitive damages in a dispute between former business partners. According to the Court, the defamatory activities, which consisted of anonymous emails and posts on internet bulletin boards, were “unrelenting, insidious and reprehensible” and stretched out over a “lengthy period” (Rutman v. Rabinowitz, 2018 ONCA 80).

In April 2016, a Nevada federal court judge upheld a $38 million jury verdict in favor of a Los Angeles real estate investor against a pair of former tenants and their company. The court said the award was supported by evidence and wasn’t excessive as the former tenants had created websites calling the real estate investor “the next [Bernie] Madoff.”

In 2012, a trial judge in Tarrant County, Texas reversed the jury’s award of $13.7 million to a lawyer and his wife who were falsely accused of sexual perversion, molestation and drug dealing in more than 25,000 online postings.

In 2006, a jury in Florida, awarded a woman $11.3 million for defamatory online postings.

Civil and criminal cyber defamation cases have been filed in dozens of countries including Ireland, England, India and Malaysia.

The Internet changed the world by giving us the ability to instantly share information and ideas with a worldwide audience. As the United States Supreme Court has observed, with the Internet “. . . any person with a phone line can become a town crier with a voice that resonates farther than it could from any soapbox” (Reno v. A.C.L.U., 521 U.S. 844, 870, 1997). Companies cannot stop cyber smearing but they can prepare for the inevitable by having damage control mechanisms in place. Prevention and preparation are, without a doubt, the key to combating cyber smears.

More from Risk & Insurance

More from Risk & Insurance

2018 Most Dangerous Emerging Risks

Emerging Multipliers

It’s not that these risks are new; it’s that they’re coming at you at a volume and rate you never imagined before.
By: | April 9, 2018 • 3 min read

Underwriters have plenty to worry about, but there is one word that perhaps rattles them more than any other word. That word is aggregation.

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Aggregation, in the transferred or covered risk usage, represents the multiplying potential of a risk. For examples, we can look back to the asbestos claims that did so much damage to Lloyds’ of London names and syndicates in the mid-1990s.

More recently, underwriters expressed fears about the aggregation of risk from lawsuits by football players at various levels of the sport. Players, from Pee Wee on up to the NFL, claim to have suffered irreversible brain damage from hits to the head.

That risk scenario has yet to fully play out — it will be decades in doing so — but it is already producing claims in the billions.

This year’s edition of our national-award winning coverage of the Most Dangerous Emerging Risks focuses on risks that have always existed. The emergent — and more dangerous — piece to the puzzle is that these risks are now super-charged with risk multipliers.

Take reputational risk, for example. Businesses and individuals that were sharply managed have always protected their reputations fiercely. In days past, a lapse in ethics or morals could be extremely damaging to one’s reputation, but it might take days, weeks, even years of work by newspaper reporters, idle gossips or political enemies to dig it out and make it public.

Brand new technologies, brand new commercial covers. It all works well; until it doesn’t.

These days, the speed at which Internet connectedness and social media can spread information makes reputational risk an existential threat. Information that can stop a glittering career dead in its tracks can be shared by millions with a casual, thoughtless tap or swipe on their smartphones.

Aggregation of uninsured risk is another area of focus of our Most Dangerous Emerging Risks (MDER) coverage.

The beauty of the insurance model is that the business expands to cover personal and commercial risks as the world expands. The more cars on the planet, the more car insurance to sell.

The more people, the more life insurance. Brand new technologies, brand new commercial covers. It all works well; until it doesn’t.

As Risk & Insurance® associate editor Michelle Kerr and her sources point out, growing populations and rising property values, combined with an increase in high-severity catastrophes, threaten to push the insurance coverage gap to critical levels.

This aggregation of uninsured value got a recent proof in CAT-filled 2017. The global tally for natural disaster losses in 2017 was $330 billion; 60 percent of it was uninsured.

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This uninsured gap threatens to place unsustainable pressure on public resources and hamstring society’s ability to respond to natural disasters, which show no sign of slowing down or tempering.

A related threat, the combination of a failing infrastructure and increasing storm severity, marks our third MDER. This MDER looks at the largely uninsurable risk of business interruption that results not from damage to your property or your suppliers’ property, but to publicly maintained infrastructure that provides ingress and egress to your property. It’s a danger coming into shape more and more frequently.

As always, our goal in writing about these threats is not to engage in fear mongering. It’s to initiate and expand a dialogue that can hopefully result in better planning and mitigation, saving the lives and limbs of businesses here and around the world.

2018 Most Dangerous Emerging Risks

Critical Coverage Gap

Growing populations and rising property values, combined with an increase in high-severity catastrophes, are pushing the insurance protection gap to a critical level.

Climate Change as a Business Interruption Multiplier

Crumbling roads and bridges isolate companies and trigger business interruption losses.

 

Reputation’s Existential Threat

Social media — the very tool used to connect people in an instant — can threaten a business’s reputation just as quickly.

 

AI as a Risk Multiplier

AI has potential, but it comes with risks. Mitigating these risks helps insurers and insureds alike, enabling advances in almost every field.

 

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]