The following is Part II in our two-part series on the intersection between social media advertising and the lesser known portion of commercial general liability (“CGL”) policies—the elusive “Coverage B.” In Part I, we examined the prevalence of social media and social media advertising in today’s society. We also provided a brief overview of the Coverage B provisions that are likely to be implicated by social media advertising. In Part II, we discuss these Coverage B issues in greater detail.
Potential Coverage B Issues Implicated by Social Media Advertising
1. What Constitutes Advertising?
A threshold issue that could arise in cases involving social media advertising is whether the use of social media qualifies as “advertising” under the policy. In the typical insurance policy, “Advertising Injury or Damage” is defined as including a covered offense stemming from the insured’s “advertising” efforts. However, the term “advertising” is often left undefined.
Social media advertising raises some unique questions, particularly with respect to whether specific content constitutes “advertising.” On the one hand, banner ads (i.e., those typically found on the top or sides of a website) are akin to traditional forms of print advertising; therefore, it is difficult to imagine that such content would not qualify as “advertising” for Coverage B purposes. On the other hand, social media offers access to less formal means of advertising. For instance, a business could open a Twitter or Facebook account in order to promote itself through individual postings. Although the use of these social media platforms as a promotional tool would appear to constitute “advertising,” judges unfamiliar with social media platforms, or at least more familiar with traditional forms of advertising, might disagree.
This issue has not yet been addressed in the Coverage B context. However, one court recently concluded that a business’s Facebook posts did not constitute advertising under the Lanham Act. In Buckeye International v. Schmidt Custom Floors, 2018 WL 1960115 (W.D. Wis. Apr. 26, 2018), a federal judge held that Facebook posts made by one business criticizing another business did not constitute advertising under the Lanham Act because they were “individualized person-to-person communication[s].” This ruling fails to appreciate that a business’s posts to social media accounts, particularly where the business makes those posts public without limitation, are not “individualized person-to-person communications” because they are often intended to reach large audiences or the public-at-large. However, judges examining similar issues in a Coverage B dispute could reach similar conclusions. Thus, educating courts about the basics of social media platforms, including how they operate and the purposes for which businesses use them, is critical in any litigation involving these technologies.
Anyone who has ever viewed a Twitter feed has surely noticed the presence of hashtags within individual Tweets. Hashtags were originally intended as a tool to categorically arrange materials so that other users could easily search for a topic. However, their use has quickly expanded to other social media platforms. Today, they are often used to express humor or as a method for brand recognition. Indeed, certain courts to-date have found that hashtags are entitled to trademark or copyright protections, despite that they were originally intended to assist with online search capabilities. The Wall Street Journal has reported that companies are increasingly filing trademark applications for hashtags related to their companies and products.
The increased protections offered for hashtags has potential Coverage B implications. In Part I, we discussed the fact that included among the covered offenses that constitute “personal and advertising injuries” are: (1) the use of another’s advertising idea in your “advertisement”; and (2) infringing upon another’s copyright, trade dress, or slogan in your “advertisement.” Thus, social media advertisements employing hashtags could trigger intellectual property litigation. And, the related defense costs and/or indemnity arising out of such litigation would potentially be covered by standard Coverage B protections.
3. Risks Associated With Social Media Influencers
In Part I of our series, we discussed how companies were employing brand advocacy through paid social media influencers (individuals with a significant following on social media who post content about products and services in exchange for compensation (e.g., money or free products)). Although a company’s use of social media influencers does not create any unique Coverage B issues, the use of such influencers as part of a marketing campaign is not without risks. Social medial influencers are certainly not professional advertisers—recent studies show they are not only not aware of the rules and regulations concerning their paid posts, but may actually be consciously ignorant of those rules and regulations. Therefore, in order to minimize liability, companies seeking to utilize influencers must be dogged in (1) educating their influencers, and (2) monitoring their influencers’ content. This is especially true given the above-referenced statistics showing social media influencers are often ignorant of advertising norms—an influencer left to his or her own devices is an influencer who could cause headaches for an insured. However, even companies that educate influencers about advertising norms must trust these people to actually follow the rules. By utilizing influencers, companies give up certain elements of control over the advertising that they would maintain under traditional advertising campaigns and increase the chances that an influencer could engage in acts that constitute covered offenses for Coverage B purposes.
As highlighted throughout this two-part series, the use of social media advertising raises interesting and unique issues, as well as possible liabilities to companies. Along with these possible liabilities comes the potential for insurance coverage under policies offering coverage for “personal and advertising injuries.” While it remains to be seen how courts will address these issues, companies should be mindful of the potential for insurance coverage.
 See https://www.wsj.com/articles/companies-increasingly-trademark-hashtags-1459333936
 See Jim Tobin, Ignorance, Apathy or Greed? Why Most Influencers Still Don’t Comply with FTC Guidelines, Forbes (Apr. 27, 2018 8:00 AM) https://www.forbes.com/sites/forbesagencycouncil/2018/04/27/ignorance-apathy-or-greed-why-most-influencers-still-dont-comply-with-ftc-guidelines/#3e467407e9db; Steven P. Mandell et al., Recent Developments in Media, Privacy, Defamation, and Advertising Law, 52 Tort Trial & Ins. Prac. L.J. 531, 560 (2017).