We all love to focus on the extravagant lives of celebrities, but how about the mundane aspects of their lives, like insurance? It might surprise you that many well-known people have used their homeowners insurance policies to provide coverage for defamation claims. With the rising use of social media, and the attendant risk of defamation claims, people should understand what coverage is offered by their homeowners insurance policies.
What is Defamation?
Depending on the jurisdiction, defamation usually is a false statement made to a third-party that results in some harm to the reputation of another in the community—whether intentionally or negligently communicated to the third-party. Defamation may be spoken (slander) or written (libel). Under the First Amendment, a public figure may not recover damages for defamation “unless clear and convincing evidence proves that a false and defamatory statement was published with ‘actual malice’—that is, with knowledge that [the statement] was false or with reckless disregard of whether it was false or not.” See N.Y. Times Co. v. Sullivan, 376 U.S. 254, 280 (1964).
Social media is ubiquitous. When there is no face-to-face communication, it is easy to fire off a tweet or TikTok rant in the heat of the moment. That tweet or rant may end up subjecting you to a defamation claim if it contains a false statement. While opinions are not defamatory, statements dressed up as opinions may be actionable. For example, “My neighbor is not very neighborly” is an opinion while “It is my opinion that my neighbor broke into my car” is an assertion of fact dressed up as an opinion.
How Is Online Defamation Covered by a Homeowners Insurance Policy?
Despite the title, a homeowners insurance policy is not necessarily limited to claims arising with respect to the home. The basic coverages in a homeowners policy are well known—property damage and personal liability. Property damage concerns damage to the property’s exterior and interior and to personal assets and belongings. Personal liability coverage may pay for a claim asserted by a person who is injured or whose property is damaged. All of this is subject to the policy’s exclusions and conditions. What many people may not know is that coverage provided by their homeowners policy may also include so-called “personal injury” coverage.
Personal liability coverage and personal injury coverage are not interchangeable. While both apply to claims by third parties, each coverage applies to completely different scenarios. Personal liability coverage generally applies when a person has been injured or property has been damaged. By contrast, personal injury coverage concerns, among other things, defamation and the related torts of libel and slander.
So yes, it’s true that a homeowners policy may provide coverage for defamation. And well-known people have been using homeowners policies for that coverage for years.
The most well-known recent example is Amber Heard. In the summer of 2022, the public was captivated by the Johnny Depp and Amber Heard defamation trial. Behind the scenes, Amber Heard turned to her homeowners insurers to provide coverage for her defense costs and the judgment against her. Bill Cosby also looked to his homeowners insurance policies to defray his legal costs in the defamation lawsuits asserted by the women who said he sexually assaulted and then defamed them. Other notable individuals who used personal injury coverage to defend against defamation lawsuits include Roger Clemens, O.J. Simpson, and former president Bill Clinton.
Both Heard and Cosby engaged in litigation with their insurers about whether their policies provided coverage for the defamation claims asserted against them. Neither insurer challenged that personal injury coverage applied to defamation claims. Rather, both sought declarations from a court that they did not need to provide coverage for the defamation claims because there was something else that excused the insurer from covering the claims. In Heard’s case, a provision in the California Insurance Code did not permit an insurer to pay for an insured’s “willful” conduct. The insurer is claiming that Heard acted “willfully” because the jury found that she acted with actual malice when she defamed Depp. Heard’s litigation with this insurer remains pending. In Cosby’s case, the insurer claimed that a “sexual misconduct” exclusion applied. In 2014 and 2015, nine women who accused Cosby of sexual assault filed three lawsuits against Cosby claiming that he defamed them when he denied their accusations. His insurer contended that the defamation claims arose out of Cosby’s alleged sexual assaults. As a result, the insurer sought a declaration that it did not have to defend him or pay any judgment entered against him if a jury found that he had defamed the women. The court concluded that, while it was premature to decide if the insurer had to pay for any damages that may be awarded, it did owe Cosby a defense, and therefore had to pay his attorneys’ fees, at least provisionally.
Does the Coverage Apply to All Defamatory Statements?
Personal injury coverage is not a free pass to defame people online (or offline). Many policies include an exclusion for intentional acts. This exclusion eliminates coverage for losses you intentionally cause. There also may be other exclusions that would eliminate coverage for defamatory statements. However, even if these exclusions ultimately relieve an insurer from paying an adverse judgment or funding a settlement of a defamation claim, the insurer still may be obligated to pay the costs of defending against the defamation claim, which can be considerable. This is because the insurer’s duty to defend is broader than its duty to indemnify, and the duty to defend continues until the insurer can definitively establish that there is no coverage for the claims.
The duty to defend is broader because if there is a reasonable potential for coverage under the policy (with the insured getting the benefit of the doubt), then there is a duty to defend the claim. This is decided at the beginning of the lawsuit and generally is based only on the allegations in the plaintiff’s complaint. By contrast, the duty to indemnify (or pay up to the limits of the policy) depends on the insured demonstrating that the claim actually is covered by the policy. This happens at the end of the lawsuit and is based on all information developed in the case. If there is a duty to indemnify, then the insurer must pay the claim either by funding a settlement or paying the judgment against the insured.
In the context of defamation and the intentional acts exclusion, even though defamation commonly is thought of as an intentional tort, most jurisdictions recognize that it is possible for a person to defame another person negligently. This means that an insurer must defend until it can definitively establish that the defamation was intentional. In most jurisdictions, the insurer does not have the right to recover the defense costs that it paid to defend the claims that ended up not being covered.
Why Does This Matter?
According to Pew Research Center’s April 7, 2021 Fact Sheet, 72% of all Americans use some type of social media, with Facebook and YouTube being the most widely used platforms. Social media has the power to turn anyone into a published author with potentially enormous reach. Social media makes it easy for people to broadcast anything and everything that happens in their lives. People can publish comments, criticisms, thoughts, and opinions about anything, including other people. The posts are made in real time and often without the benefit of reflection. If people are angry with an employer, neighbor, coach, or teacher, they can post about it immediately. The lack of face-to-face interaction may embolden people, making it easier to say things they might otherwise not say. All of this creates an enhanced risk of defamation claims, and of course the widespread reach of social media enhances the potential for damages.
Homeowners who may not have considered that their homeowners policies could provide coverage for defamation claims should look at their policies to determine whether the coverage is included. As the use of social media rises, so does the risk of defamation claims. As a result, personal injury coverage may become one of the most important coverages in a homeowners policy.
