As illustrated by the lawsuit Donald Trump recently filed against the Wall Street Journal’s parent company Dow Jones and its owner Rupert Murdoch, defamation lawsuits are all the rage these days. In the following guest post, Sarah Abrams, Head of Claims Baleen Specialty, a division of Bowhead Specialty, takes a look at the recent proliferation of defamation lawsuits and considers the D&O insurance ramifications. I would like to thank Sarah for allowing me to publish her article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Sarah’s article.
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While many states have continued the trend of increased protection for free speech with the adoption of robust anti-SLAPP statutes, headline-grabbing allegations and jury awards are driving an increase in defamation complaint filings in the United States. Lawsuits involving politicians, particularly those involving President Trump or his business, have skyrocketed, with defamation suits quadrupling since he began his political career in 2015. In addition, increased use of social media has caused post-based defamation lawsuit filings with combined jury awards of over $230 million.
Even streaming platforms have been a target of litigation, with more than 20 defamation suits filed in the US against Netflix and its production partners since 2019. The alleged facts in a defamation case can be salacious and prospective damages eye-popping and also may lead to increased exposure for D&O carriers. The following discusses recent high-profile defamation lawsuits, pleading requirements, anti-SLAAP legislation, and the potential D&O exposure stemming from such litigation.
One such recent case example involving prominent political figures involves California Governor Gavin Newsom, who recently filed a defamation lawsuit seeking $787 million over the reporting of a phone call with President Trump in early June. That is the exact amount of the settlement in the Dominion Voting defamation lawsuit filed over decried election fraud. President Trump publicly said that on June 10 that he and Governor Newsom spoke “a day ago” on the phone; however, the call was late June 6 California time, early June 7 for the President.
President Trump claimed that he called the California Governor to tell him, “[he’s] got to do a better job, he’s doing a bad job. Causing a lot of death and a lot of potential death.” The Governor disputed the timeline, as well as the retelling of the conversation, which was then amplified by the media outlet defendant. The Governor is alleging that allegedly false reports regarding the telephone conversation “have been amplified by far-right activists on social media, spreading the falsehood even farther” and presented “a false picture of the disagreement between Governor Newsom and President Trump.”
There have also been a couple of recent celebrity-rich defamation suits, both of which were dismissed. The first involved the lawsuit filed by Justin Baldoni against Blake Lively that came to an unceremonious end by way of dismissal by the Court in June. Justin Baldoni had sued Lively, her husband Ryan Reynolds, and other parties over the fallout from Lively’s claims that Baldoni sexually harassed her and orchestrated a smear campaign against her. Baldoni very publicly subpoenaed Taylor Swift to testify, which was later withdrawn.
Similarly, Shaw “Jay Z” Carter’s defamation and extortion suit against attorney Tony Buzbee over sexual abuse allegations connected to Sean “Diddy” Combs was dismissed in July. The Court found that public statements Buzbee made about the allegations, which were made before Jay-Z’s name publicly emerged in connection with the sexual abuse allegations against Combs, and Buzbee’s “liking” of a social media post, did not support Carter’s defamation claim. Even with the dismissal of both Baldoni and Jay Z’s Lawsuits, the reputational impact to the parties involved warrants consideration by D&O underwriters. Particularly, if a company has high-profile leadership.
Ahead of examining potential causes of action that may follow from defamation suits, the challenges facing plaintiffs filing such suits should be considered. As recognized by the Court hearing Jay Z’s case, “the California Legislature has authorized a special motion to strike in lawsuits that seek to ‘chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances’” (anti-SLAPP). The United States remains more protective of free speech than any other country in the world, making it relatively difficult to win a defamation case.
Defamation refers to a false statement presented as fact and made to a third party. The false statement must cause some type of actual damage. In a defamation lawsuit, a plaintiff has the burden of proving the elements of the offense. Most notably, courts have broadly interpreted the First Amendment to the US Constitution to require many defamation plaintiffs to prove, by clear and convincing evidence, that the publisher acted with “actual malice.” Similarly, if the defamed figure was a public figure (politician, celebrity, maybe a CEO), the plaintiff must prove actual malice in determining whether the statement was true or false.
Even with the higher burden to succeed, increasing anti-SLAPP legislation. First, it is important to understand what a SLAPP is. Strategic lawsuits against public participation (SLAPP) are civil complaints, frequently filed as defamation cases, that are brought not to win on legal merits but to drain resources from the defendant and suppress protected speech. Anti-SLAPP (Strategic Lawsuit Against Public Participation) statutes provide a legal mechanism, typically a “special motion to strike,” lawsuits brought “primarily to chill the valid exercise of constitutional rights of freedom of speech and petition for the redress of grievances.”
38 states plus the District of Columbia now have anti-SLAPP laws, raising the hurdle for a defamation complaint to survive. And yet, claims of defamation appear to be increasing. For D&O underwriters, it is important to understand that defamation is generally not covered by D&O insurance when filed by or against an insured party (e.g., a company or executive suing to protect their reputation). Many D&O policies also exclude coverage for intentional dishonest conduct, such as willful defamation. However, such exclusions typically require a final adjudication, so defense costs might still be advanced during litigation.
In addition, defamation counterclaims or cross-complaints may trigger D&O policy coverage. A helpful case example involved Tesla and former employee Martin Tripp. Tesla sued Tripp under federal and state trade secret laws, breach of contract, breach of loyalty, and computer crime statutes after Tripp disclosed internal data about Tesla’s Model 3 production to the press. Tripp countersued Tesla for defamation and false light based on emails, tweets, and public statements made by Tesla and its CEO, Elon Musk.
While there was no available coverage action involving the Tripp-Tesla case to review, readers of the D&O Diary can appreciate that such allegations against Musk may have triggered Side A coverage (with Musk having been named personally) or Side B coverage (if Tesla indemnified Musk). Tesla, similarly to Governor Newsom, Baldoni, and Jay Z, may have initiated its defamation lawsuit to protect its reputation. Public company boards can authorize such suits when they believe negative publicity is materially harming share price or brand value, whether or not the executive would be considered a “public figure.”
While D&O coverage does not cover affirmative lawsuits, exposure to company executives may trigger D&O policy protections. Thus, in the time of social media, D&O underwriters may want to follow the increasing trend in filing defamation lawsuits and appreciate the potential impact.
The views expressed in this article are exclusively those of the author, and all of the content in this article has been created solely in the author’s individual capacity. This article is not affiliated with her company, colleagues, or clients. The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter.