Rolling Stone Defamation Case Highlights Insurance Need

As the Rolling Stone defamation case moves into the damages phase today, media businesses everywhere—and their insurers—will be watching closely.

A federal jury on Friday found that Rolling Stone magazine, its parent company Wenner Media and Sabrina Rubin Erdely, the author of a discredited 2014 article about an alleged gang rape at the University of Virginia, were liable for defaming Nicole Eramo, a former associate dean of students at the school.

According to this Wall Street Journal report, Ms. Eramo is seeking $7.5 million but the award could potentially go higher.

Rolling Stone also faces a defamation suit brought by the UVA chapter of the fraternity Phi Kappa Psi, the focus of the 2014 article. That case is seeking $25 million.

The verdict against Rolling Stone is the second large media liability claim this year.

In June, a jury awarded $140 million in damages to the former professional wrestler known as Hulk Hogan in an invasion-of-privacy case against Gawker Media Group over the publication of a sex tape.

Gawker settled the lawsuit just last week agreeing to pay the wrestling star, whose actual name is Terry Bollea, $31 million. Gawker was forced into bankruptcy and sold to Univision in August.

The cases have prompted legal experts to express concerns over the increasing frequency with which complaints about journalism are being settled in the “unpredictable and expensive sphere of the courts”, according to this New York Times article.

From the insurance perspective, the cases underscore how important it is for online and traditional publishers, broadcasters and other media-related firms to purchase media liability insurance.

This specialist type of errors and omissions (E&O) insurance protects creators of content against liability claims resulting from a range of exposures, including, but not limited to, defamation, invasion of privacy, infringement of copyright, and plagiarism.

While there is a fair amount of media liability insurance sold (an estimated $300 million to $500 million in the United States, and $50 million elsewhere (mostly in the United Kingdom)), according to this 2016 survey by Betterley Risk Consultants, further growth is predicted:

“We suspect that much of the media market is untapped risk, self-assumed by large organizations that can afford to self-insure, or ignored by small organizations that don’t think they are exposed.”

In the case of Rolling Stone, its parent company Wenner Media, is reported to have an undisclosed amount of media liability insurance to cover any damages related to the trial.

Still, at least one analyst cited in this report by the Wall Street Journal, says that if costs related to this lawsuit and other pending lawsuits exceed $50 million, Wenner Media may not be able to fund it with existing resources.

Check out I.I.I. resources on E&O insurance for small businesses here.

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