Newsrooms Are Playing Russian Roulette With Libel Insurance

And some thoughts on how they can stop

Welcome to Second Rough Draft, a newsletter about journalism in our time, how it (often its business) is evolving, and the challenges it faces.

A couple of weeks before the election, I wrote that I thought repressive changes in the constitutional law of libel under a potential second Trump Administration was one of the risks that has been overrated. I still think that, but this week I want to write about a risk that I think is significant and growing, even without intervention by the Supreme Court.

I’ve seen this for a few years now as I work with smaller newsrooms around the country, but in the wake of the election results, and the forces they may have unleashed, I think it’s worth calling out. The problem lies in libel insurance, and particularly in what I regard as an epidemic of inadequate coverage.

When most people think about libel insurance, if they think about it at all, they focus on the dollar limit amount of coverage, or perhaps the premium cost, or maybe even the deductible (which is referred to as the “retention.”) Those aspects of coverage matter, and they have all become problematic, but the challenges go beyond that, and I want to look closely at a number of them.

The law hasn’t changed, but the news business has

Before we do that, let’s ask why this is happening, particularly when the country’s libel laws remain the most protective of any major nation in the world, and have been left more or less unchanged for almost 40 years now.

What has changed is not the law governing the press, but the press itself, and especially its business conditions. Put most simply, as profits have evaporated and newsrooms have shrunk, the willingness of many publications—notably those controlled by hedge funds, which means most American newspapers-- to take risks have declined markedly. They have simply chosen to publish fewer risky stories, to back off more often in the face of threats from those whose wrongdoing they might have revealed, and therefore, in the end, to get sued not nearly as often (to “file claims” in insurance industry parlance).

At the higher end of the press, that is, in larger and more financially stable newsrooms, those willing to take legal risks are many fewer in number than they were even a decade ago. The result for the few that remain are much higher premiums and higher retentions. But that is not actually the acute societal problem, as the few remaining willing risk-takers can generally absorb this burden.

The Gecko, unfortunately, does not offer libel insurance.

The problem comes at the level of the many newer entrants who need coverage, and must enter the market as it now exists. Too many of them are flying blind, and making what could turn out to be serious mistakes.

Very few, in my experience, are making the mistake of foregoing coverage altogether. And relatively few are setting the coverage limits too low—particularly in light of the fact that they are not the sort of “deep pockets” that attract litigation because of the potential payday for plaintiffs. It’s true that a small handful of outlier verdicts and settlements have come in higher than ever before—think Gawker vs. Hulk Hogan/Peter Thiel, Dominion voting machines vs. Fox News and Alex Jones/Sandy Hook. But nonprofits pose much less attractive targets, as they have only their own (usually fairly meager) assets, and don’t expose shareholders to loss, as they lack shareholders.

Three problem areas

My concerns therefore largely lie beyond coverage limits, in three areas in particular: with retention (again, deductible) levels, “choice of counsel” (the ability to pick their own lawyers) and especially control of litigation (the ability to direct cases once they find themselves embroiled). Let’s look briefly at each:

• Retention-- It’s tempting, in order to lower the certain cost of libel coverage, to opt for a higher deductible. But if a small newsroom chooses a retention that it cannot afford to spend without drastically cutting back on its operations, it has set up a situation in which a single suit, even if ultimately meritless—and quite possibly based on a story that is entirely accurate— could be crippling. In such circumstances, the pressures to avoid publishing the story, or to walk away from it after publication even when it was correct, can be enormous. That’s the equivalent of loading a bullet in a game of Russian Roulette.

• Choice of counsel—Libel law has come a very long way from the common law (old and well-established case law) that prevailed until 60 years ago. It is now embodied in a complex set of precedents in the Supreme Court, federal courts of appeals and highest state courts. The upshot is that it is a very specialized field, one dominated at the national level by just a few law firms on the defense (publisher) side, and with a small number of seasoned plaintiffs’ lawyers as well. If your policy calls for your insurer to have a free hand in choosing your lawyer, they may well make that choice based on price rather than experience, which could leave your newsroom at a marked disadvantage. Having a policy that enables you some choice of counsel, or agreeing in advance on experienced representation, can make a big difference, avoiding a second bullet in the chamber.

• Control of the case—Most crucial, and often overlooked, is whether the insurance company retains the power to settle your case over your objection if doing so makes sense in dollar terms. If they have that latitude, they can choose, for instance, to pay to end a case to save on the costs of litigation even when the story in question was true. That will generally leave observers—including your readers—to conclude that you got the story wrong, with attendant costs to trust and reputation, as well as dealing a hard blow to newsroom morale, recruiting and perhaps retention (in the HR sense). It’s a third bullet, and one to be vigorously avoided.

What, then?

I don’t have a great or easy answer to all of this. In most cases, I sorrowfully recognize that I am calling on organizations already strapped to spend more on an expense that yields precisely zero additional reporting. But I think the alternatives are even worse, particularly if Trump’s ascendancy emboldens some opponents of the press, as I expect that it will, at least for a time.

Groups like the Reporter’s Committee for Freedom of the Press (a consulting client of mine) and Lawyers for Reporters can help, as can big firm pro bono representation, especially from experienced counsel. We need qualified lawyers at the nation’s leading firms to step up here. Perhaps there is some way for philanthropy to organize and help underwrite insurance on more favorable terms, particularly with respect to choice of counsel and control of litigation. But, failing or pending that, if you are running a smaller or struggling newsroom, or helping someone who is, thinking hard about libel insurance should be an urgent priority.