Agents' Legal Issues provides a brief, general overview of a complex area of law, and neither the author nor Rough Notes intends it to be taken as legal advice for any specific legal problem. For a specific legal problem, consult legal counsel that understands the law of insurance and insurance agencies, and provide all the details.
When a group of agents gets together at a convention, or around a conference table for a meeting, the talk tends to be about the state of the business--either the competition, or people within an agency, or people who work for carriers, or people who are well known within the industry.
Nothing is more interesting than that bit of gossip about people you know. Perhaps Sam is rumored to be drinking a bit too much. Maybe Jim is thinking of jumping from one agency to another. Mary may be making a lot of money but neglecting the family. And Bob is said to be dipping into his premium fund trust account.
Once in a while, the rumors seem to be very calculated, as competitors pass around gossip designed to cause a given agent to lose business. In one case I know of personally, an agent who was getting toward age 65 was the subject of rumors that he was going to retire and leave town--presumably thus causing some insureds and prospects to think of choosing the agency across town for their insurance.
Agents need to be aware of possible libel or slander situations that may develop as a result of some such conversations.
Agents aren't the only ones concerned about libel and slander. Many famous people have been involved in libel suits. Some celebrated cases in the past have included Carol Burnett's suit against the National Enquirer, Jerry Falwell's suit against Hustler magazine, and General William Westmoreland's suit against CBS. Of those three famous cases, one plaintiff won a jury verdict which was later reduced; one plaintiff won damages for emotional distress before a jury but had the decision reversed by the Supreme Court; and one plaintiff settled in private with the defendant after 18 weeks of jury trial. Do you remember which was which?
Talk is cheap--except when it's libelous or slanderous. Then, talk can be quite expensive.
Lop off his ears!
In Europe and America several centuries ago, you didn't want to be accused of libel. It was punishable by jail time, and you might even get executed if you libeled someone sufficiently important. Back in the early 1700s, for example, a New York publisher was imprisoned for criticizing the governor of New York. Years before that, an offender had his ears lopped off!
Libel and slander cases eventually left the criminal courts and became the subject of lawsuits seeking damages. Most libel and slander cases today involve a trial by jury, and punitive damages are possible. Libel and slander are considered "torts," just as auto accidents are.
On occasion, you may see a claim of libel or slander added to a lawsuit that would seem to have nothing to do with libel or slander. One common area is employment practice lawsuits, where punitive damages are not allowed in connection with most basic allegations. So how does a lawyer bring in the possibility of punitive damages? He/she finds a reason to sue for libel or slander. That's often easier than you would think since rumors tend to abound when a person is fired or quits employment, and it is relatively common for the boss to say some things about the departed employee that may be somewhat beyond the strict truth. The same boss also may try to justify a questionable firing by putting comments in the employee's personnel file that aren't supported by the facts.
Libel and slander, by the way, technically both come under the heading of "defamation." Defamation is false or misleading injury to someone's reputation. Libel, in the old days, was strictly written defamation, while slander was spoken defamation. However, in these high-tech days, the two concepts have been mixed together. Someone who speaks on television, radio, or a cassette tape may well end up getting sued for libel because the defamation was recorded by one of those electronic means and thus is considered to have been "written" on one of those media.
Does it matter whether I tell the truth?
As a defense against libel in the old days, it didn't matter if you told the truth (and it continues to be that way in some repressive countries). It was still a crime if the statements were injurious to an important person's reputation. But nowadays in the United States, truth is a defense. Many people, however, think that defense is broader than it is.
It's certainly a defense if you say the exact truth about someone. But in so many cases, you aren't saying the whole truth, but rather a part of the truth. That can leave you open to charges that you put the person in a "false light," even if you didn't strictly lie. And "false light" lawsuits can lead to damages. It's just as bad if your facts aren't completely correct--if you said six things of which four are true, nevertheless, two of the statements are false, which leaves you open to a lawsuit.
In the Falwell case, above, which involved a parody, the Supreme Court ruled that Hustler's parody of Falwell could not be seen as describing actual facts and therefore could not be the basis for damages.
Authors have tried to circumvent the risk of being sued for libel in a variety of ways. One way is to publish a fictional account. However, if the fictional character is recognizable as being very much like a real person, then a libel case still can be brought. Another trick is to wait until a person has died before writing about the person. The theory is that the dead cannot be libeled, since they no longer will suffer from loss of reputation. Whether or not that works, a number of publishers have used the theory to come out with books about controversial figures shortly after their deaths.
Newspaper reporters have a special standard for libel and slander since they publish articles for a living. If they report on public officials, they generally cannot be sued unless they acted with "malice" in publishing a falsehood. If they report on public figures, such as famous entertainers or sports figures, they must usually make sure they aren't negligent--although the laws in this regard can differ from state to state.
For a famous entertainer, it's obvious that he/she is a public figure. But what about an insurance industry executive, or the head of the largest insurance agency in your town? Are they public figures? That's a matter for the courts to decide.
Product disparagement
If a person slanders a product, there is a separate kind of lawsuit called "product disparagement." You aren't supposed to say false things about a competitor's insurance policy any more than you are supposed to say false things about the insurance company executive whose company issued the insurance policy. Of course, if you lie about insurance coverages, there are specific insurance laws in many states that prohibit that on top of any libel or slander laws.
You may think that libel and slander suits are common. You certainly hear about the big ones, the ones that involve famous celebrities, since the press often covers those in great detail. However, there are actually fairly few libel and slander cases that get far in the courts. Sure, a lawyer may throw in a count for libel or slander. But the number of cases that actually are seriously brought primarily on the basis of libel or slander is not high. Whereas hundreds of thousands of business contract lawsuits are brought every year in America, the number of real libel and slander cases is only a few thousand. Libel and slander cases may lead to high verdicts, and they may be highly unpredictable in result, and they seem to be on the increase, but they have never been as numerous as contract disputes or auto accidents.
One reason is that you need to prove some sort of damage. Generally, the damage in a libel or slander case has to be tied to loss of reputation, and it helps a lot if the plaintiff can point to some direct monetary damage as a result of the libel. For most of us, if someone says something nasty and false about us, it isn't going to result in damages that we can point to. Luckily, most of us have reputations that aren't going to be much shaken by one person trying to spread false rumors.
But some people will indeed suffer. Some big libel cases in the 1990s have involved a lawyer accused by a newspaper of accepting bribes to fix court cases; a business person accused of making bribery payments to foreign officials, and a banker accused of inappropriate practices. Such businesspeople could, indeed, find clients or financing sources drying up from the accusations.
However, many of the big jury verdicts that you may have heard about get reduced or even overturned on appeal (for instance, Carol Burnett won a large verdict at the trial level, but the appellate court reduced the size of the verdict substantially). Sometimes juries have a tendency to feel emotional about libel and slander cases, while appellate courts may be less emotional and may look more closely at the elements of the law. One common ground for reversal is if the offending statement was simply an expression of opinion. A person has the right to express an opinion about another person as long as the opinion doesn't veer into saying false facts.
But be careful. You are entitled to speak your opinion about someone, but there is a fine line here. According to one expert, if you said, "My opinion is that Richard Nixon is a crook," that would have been open to a libel suit during his lifetime because the underlying statement is one that could be verified as to whether it was factual or not. On the other hand, if you say, "I believe Richard Nixon was not a good president," that is an opinion about which reasonable persons could differ.
Another defense that often works involves the breadth of distribution. It's hard to defame a person very much unless the statements were distributed. If you just call someone a nasty name to his/her face, how have you hurt that person's reputation? Sometimes, the issue of whether reputation was hurt revolves around whether the plaintiff can prove that many persons heard the slander and actually believed it.
In some cases, even a brutal libel isn't going to hurt them. For some actors, if the word is spread in gossip magazines that they are sleeping around, or have a drug problem, then regardless of its truth, there may be a three-million-dollar book deal in the offing! Everyone will want to read the book to see what the actor says in response. Rather than harming the actor, the libel may actually have helped make the person more famous.
Defamation cases tend to have very short statutes of limitation. In other words, in many states, you have to sue very quickly or you may lose your right to sue for defamation. The statute of limitation may be no longer than one year in some states. Why? Because memories fade quickly in such cases. If you are going to prove what was said, and to whom, and how much a reputation was besmirched, you'd better get out and do it quickly, and give quick notice so that the defendant can prepare a defense before everyone forgets it all.
The Internet gives the concept of defamation a whole new meaning. On the Web, you can defame people far more effectively than ever before. If you put a falsehood at a popular Web site, your false statement may receive millions of "hits." And what if you put something true on the Web, but the target then fixed the problem? You may be liable for defamation for keeping the statement on the Internet once it is no longer true.
Of course, defamation insurance exists. Commercial general liability policies have coverage for defamation--often as an optional coverage. Do you inquire of your insureds if they feel a need for defamation coverage?
Companies that publish newsletters, books, magazines, or other written materials may have a high need for insurance protection from defamation. "Publishers liability" insurance can protect such companies. Sometimes, the cost of such insurance can be fairly high, simply because the publication is aggressive in its articles. Even if everything the publication says is true, angry targets may sue. In fact, small publishers are sometimes deterred from publishing stories simply because they are afraid of the financial costs of defending them.
So what's the bottom line about sitting with your buddies and gossiping about other agents? It's not a good idea. Never say anything that you wouldn't be proud to have broadcast on the evening news. *
The author
Randall Kleinman, JD, CPCU, CLU, ARe, has been involved with the insurance industry since 1979 in a variety of capacities. He is currently vice president of online services and corporate counsel for an insurance-related technology company. He has written the "Agents' Legal Issues" column since 1994. He can be reached at oospensky@email.msn.com.