Trial by Media

”Trial by Media” describes the influence of the press on a person and/or company’s reputation by creating a perception of guilt or innocence before, or after, a verdict in a court of law.

Today’s society is influenced by social media. In that context, the insurance industry itself is susceptible to media and public scrutiny. In this article, we look at recent media publicity involving the industry and how the media may fail to convey the salient facts causing adverse coverage positions for policyholders.

Case Study One - current affairs program and social media involving insurance intermediary

The broadcast detailed the experiences of a couple (Policyholders) following the flooding of their storage unit in February 2020.

The Policyholders had arranged their insurance requirements through a storage company, who inturn engaged the intermediary. The intermediary had arranged cover for the facility and its’ customers to insure their goods whilst stored at the facility. When the Policyholder’s possessions were damaged whilst in storage, cover was declined due to a flood exclusion.

The intermediary had taken steps to formalise a coverage position to the policyholders who in-turn took exception to their claim being denied. As a result, a popular Current Affairs programme  arguably vilified both the intermediary and its Chairman due to the coverage being denied. The broadcaster is now being sued for damages as a result of alleged defamatory and inaccurate content.

The Statement of Claim brought by the Chairman (Applicant) against the Broadcaster’s presenter and journalists (Respondents), states that an email had been sent to the Broadcaster prior to the episode airing. That email explained:

  • that the Applicant was the broker, not the insurer (as was represented during the broadcast);

  • that the storage facility units subject to the claim were inundated due to the overflow of “anearby water course”; and

  • that the claims handlers, loss adjusters, and a hydrologist all confirmed that the loss was caused by flood: an event not covered by the policy. It is understood that the hydrologist’s report was provided to the Insured couple and had been shown to the Respondents.

It is alleged by the Applicant that despite possessing information to the contrary, the Respondents aired a series of statements by the insureds, which clearly suggested that the intermediary knew the damage was in fact caused by a storm and was itself dishonestly relying on the flood exclusion. Saliently, we understand that the Statement of Claim asserts that the Respondents knew that these statements were false and furthermore were in possession of expert evidence to the contrary.

The Statement of Claim also addresses the publishing of the material to the broadcaster’s Facebook page, which had about 2.3 million followers.

Case Study Two - current affairs program and social media involving global insurer

A story that aired in June 2020 poorly portrayed the image of a well-recognised and highly reputable insurer who had denied a claim to a Policyholder who was publicly recognised for his past heroics.

The Policyholder, who was hailed for his role in rescuing two trapped miners in 2006 , submitted a business interruption claim for his business, an outdoor recreation retailer. The claim was made for business interruption under an Industrial Special Risk (“ISR”) Policy. The loss claimed was for a downturn in business revenue that was resultant of devastating natural disasters in late 2019 and early 2020.

The broadcast focussed on the profile of the Policyholder, the devastating impact of the bushfires and the unwillingness of the insurer to resile from its position. The reporter focussed on the “business interruption” cover extended by the policy but made no mention that for that extension to operate, there must first be damage to “insured property”. Whilst some business interruption policies may not require “property damage”, this was nevertheless a key omission that ought to have been reported on factually, if nothing else to educate the wider public.

Following the broadcast, it appears that the risk of further media exposure and consequential adverse publicity caused the insurer to settle with the Policyholder. We are not apprised with the particulars as to whether cover was granted, or indeed should have been or if the payment was a ex-gratia commercial settlement.

Lessons learned

The risk of adverse publicity and scrutiny of claims decisions, and indeed escalating premiums in a “hard-market” increases significantly via social media.

As we noted previously in our article on “Current trends in claims management reflectingly poorly on industry: strategic denials” (located here), we are currently in a hardening market and as such there is no place for legitimate claims not being met by insurers. Insurers must ensure that claims decisions are thorough.

Otherwise, the media ought to report more factually on the issues at hand, particularly where legitimate coverage denials occur. As a whole, many industry stakeholders would feel that the positive role that the insurance industry has played is very much “underreported”.