The media and PI insurance

Advertising agencies, publishers, broadcasters, multimedia companies, public relations firms, sales promotion companies, direct marketing agencies and indeed any organisation operating in the broad worlds of media and marketing fall into the 'media' sector for professional indemnity insurance.

These areas of business used to be treated in PI terms as another 'miscellaneous' business. PI policies require that a third party claim be made for a loss, which, for the media industry would almost always be financial loss, arising as a result of the neglect, error or omission of the insured.

However in reality, media professionals will normally be in a position to fix the problem before it ever becomes apparent to their client. Alternatively, they might waive an outstanding bill or issue credit notes so as to preserve commercial relations with their clients. The end result is no third party claim for damages and therefore, under most policy wordings, no valid professional indemnity claim.

For this reason, it is essential that a suitable media wording is used and that the correct advice is sought when purchasing cover, which is when a specialist PI consultancy can be of significant benefit. Cover should provide rectification and irrecoverable fees cover. These heads of cover are often referred to as 'first party' cover and require specialist claims attention.

How do insurers rate a risk and what do they look for?

Due to the nature of the sector, the principals may not be qualified in the formal sense, so sight of a CV is a normal requirement unless the business has been trading for a while.

A media proposal form asks for a detailed split of business. Some activities are more hazardous than others. Here are some examples:

Production of advertisements
The key factor here is often the medium used for broadcasting the advert. Due to potential mass exposure and production costs, TV and commercial film work is deemed higher risk than radio and press, etc.

Example: An advert involved a song which sounded like it was sung by someone with a stammer. The advertising agency was warned by the IBA that it was close to the mark. Once finalised, the IBA decided that not enough had been done to adapt the song. The client refused to pay the agency. Cost to insurers: £140,000.

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Media planning and buying or 'media spend'
This is generally considered low risk. Again, TV and commercial film exposure is higher than that achieved through other forms of media. Normally, media companies have very good relationships with the media owners e.g. the TV companies, and can often resolve problems without having to claim at all.

Example: Advertising space was supposed to have been booked in the national press for a series of adverts for the Easter sale of a chain of retail stores. The bookings were made for the wrong four week period i.e. one week before Easter and three weeks after. The firm refused to pay for the media spend and also claimed financial loss for the loss in revenue from the sale. Cost to insurers: £185,000.

Design and production of printed literature and documents
This area is viewed as medium hazard. There are far more claims in this area but they tend to be of low quantum. Insurers look for a good sign-off procedure.

Example: A media company was producing a price listing for a chain of pubs in Scotland and England. The pricing for England should have been more expensive than for Scotland. The list had the Scottish prices for England and a claim was made for lost revenue. Cost to insurers: £45,000.

Direct marketing including mailshots
High risk. There are many claims in this area although most tend to be relatively small in quantum i.e. £25-£50K. Insurers have separate proposal forms for people in this area, which include questions relating to the procedures in place, the sizes of the mailings and the types of mailings. It is as well to expect higher excesses and premiums in this area.

Example: A business produced wrongly addressed mailings and incomplete mailing packs. Cost to insurers: £120,000.

Sales promotion
High risk. A separate proposal form may well be required here and higher minimum excesses and premiums apply. Quantum can be well into six figures.

Example: The well known Hoover holiday offer.

Marketing including market research
This is generally viewed as low risk

Example: A market researcher had data encoded by a specialist firm who misinterpreted the instructions. The resulting report was not checked and the client made a claim for the delay and the cost of re-coding the data. Cost to insurers: £35,000.

Public relations
Normally low risk.

Example: A PR firm was involved in a campaign for a car manufacturer's new marketing strategy in respect of its new special service contract. The product was badged with a name that was subsequently found to have been used before by another car company. A claim for breach of copyright was made and the strategy had to be withdrawn. Cost to insurers: £250,000.

Publishers
Moderate risk. It very much depends on content and circulation. An example of what is published will normally be required.

Examples: Libel, infringement of copyright. Errors in publication - e.g. formula, design, etc., withdrawal costs.

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What should you look for in professional indemnity insurance?

Make sure you get the cover you need. Provide insurers with a description of your business making sure it is accurate. The media industry is truly worldwide in its nature, and you should recognise that if you have any US exposure, it is generally excluded, and while it is possible to arrange US cover, different terms will apply.

The high hazard areas are primarily direct marketing and sales promotion risks, and normally a different proposal form or at least an additional questionnaire will be required. For this reason, it is worth disclosing this at the point of enquiry.
Many media firms use sub-contractors and suppliers in order to fulfil their contracts. They normally contract as principals with their clients and therefore, will be in the firing line even where the problem has been caused by an errant sub-contractor or supplier. It could be useful to seek indemnities from such consultants and ideally, they should have their own PI policies in force to deal with claims that the insurer wishes to subrogate.

Often media firms will use self-employed suppliers who will, to all intents and purposes, be working for the insured business as an employee. In such cases media policies will normally deem such persons as employees and therefore waive subrogation rights.

Policy wordings

Wordings can differ from insurer to insurer if you are exposed to, say, bodily injury or environmental claims. Check that these aren't excluded or restricted within either the basic wording or any applicable clauses. If cover is restricted, shop around to find a wording appropriate to your business profile.

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The usual cover

The normal heads of cover are:

• Libel & slander (defamation)
• Breach of intellectual property rights (e.g. copyright)
• Breach of confidentiality
• Dishonesty of employees
• Loss or damage to documents
• Rectification (first party) cover
• Irrecoverable fees (first party)
• Product disparagement

The usual exclusions

Typically, media policies will exclude things that should have more specific insurance:

• Employers liability
• Bodily injury/property damage except where caused by a breach of professional duty
• Property owners, etc.
• Vehicles, etc.
• Products liability - but take care as some media businesses sell, repair or alter products and also have professional exposures. There are also 'boiler plate' exclusions:
• Contractual liability - this is liability assumed under any express warranty, agreement, guarantee or the like unless such liability would have attached anyway
• Insolvency/bankruptcy of insured
• Circumstances known at inception
• Fines and penalties
• Claims by financially associated parties - some insurers will cover these claims if they emanate from a third party
• Radioactive contamination, etc.
• War
• Date recognition
• Pollution

There are exclusions that are specific to the media industry:

• The outcome or operation of any game, promotion, contest or lottery
• Advertisements, etc. that result in any adverse change in a claimants health, lifestyle or relationship with others
• Mimicking, i.e. someone copying what is seen in an advert
• Stunts
• Statements that were known to be defamatory at time of publication.
• Trading loss or loss of any client
• Obscene, blasphemous or pornographic material

Presenting your proposal for insurance

The presentation of your business to insurers is very important both in respect of the facts i.e. the things for which cover is required, and the way in which you do your business, both of which influence an insurer's perception of your business and the risk it poses to them.

We would always recommend that in addition to the proposal form you are asked to complete, you provide supporting documents with your proposal such as:

• A CV showing the principals qualifications and experience in the areas of business to be covered
• Any Terms of Business or terms of engagement you use
• A copy of your corporate brochure
• Details of your website
• An insurance history listing all material changes to your business since you first had professional indemnity insurance. For example, mention any previous businesses for which you require cover. It is possible you may be asked for a claims history from the previous business or a copy of its last completed proposal form.

Don't forget to include the names of any businesses with which you have merged, or any that you have acquired, as these will need historic cover. Likewise you may have ceased to offer certain services for which cover is still required.

Keep a written record of all requests for cover to be extended and any historic or material changes to your business. This information can be updated each year and provided as an addendum to the proposal. Any certification the business may have i.e. accreditation by a governing or standards council, is also well worth disclosing.

Keep your presentation neat and tidy. Bear in mind that an untidy presentation may be construed as an untidy business. Allow yourself time to complete the presentation and remember that a hard copy always look better that a faxed one sent in at the last minute.

The Professional Indemnity Insurance market is relatively small so at the point of renewal, concentrate on asking only one or two specialist brokers to quote. Bombarding the market with requests can result in your proposal being locked out of some markets.

Renewal is an ideal time to review your insurance requirements. As your business grows and your contract values increase, it is wise to consider what could go wrong and how much it may cost to settle a claim - and also cover the attendant legal costs. Some policy wordings provide a limit of indemnity with legal costs in addition to the limit. Others provide limits of indemnity which include the legal cost. However, the cost of litigation is high and can eat into the limit of indemnity provided if costs are inclusive.

Many professionals are obliged to carry PI by their professional bodies. Many of these bodies not only have specific requirements in respect of policy wording but also on the limits a professional must carry and the excesses they are allowed. Renewal is an opportune time to check your cover both in respect of your own requirements and those of your professional bodies.

Associated links

• Marketing Week
  The UK's leading source of news and information for marketing, advertising and media professionals.

• Campaign
  The UK's top-selling advertising magazine covering all aspects of media, marketing and advertising.

• Direct Marketing Association
  The Direct Marketing Association (The DMA) is the oldest and largest trade association for users and suppliers in the direct, database and interactive marketing fields.

• British Web Design and Marketing Association
  The Association seeks to improve e-business standards through sharing knowledge, understanding and proliferation of best practice.

• The Chartered Institute of Marketing (CIM)
  At CIM, our mission is to deliver unique, professional world-class support for marketing professionals.

• Market Research Society
  The Market Research Society is the world's largest professional body for individuals employed in market research or with an interest in it.

• The Institute of Public Relations (IPR)
  The IPR is the UK’s leading public relations industry professional body. Founded in February 1948, it today has over 7000 members.

• The Institute of Direct Marketing
  Founded in 1987 the IDM is the world's first professional body, created solely for individual direct marketing practitioners.

• Advertising Association
  The Advertising Association is a federation of 24 trade bodies representing the advertising and promotional marketing industries including advertisers, agencies, media and support services.