For example, in recent months social media has been used as a key form of communication in the Occupy Wall Street protests, as an enabler of the grassroots uprisings in the Middle East, and as a tool used by rioters to incite and coordinate civil disorder in the United Kingdom. Two U. K. men were actually jailed for four years each for inciting disorder via social networking sites. Just one disparaging tweet on a company’s product or service has the potential to trigger a viral reputation meltdown if a business does not provide an immediate and effective response.
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Social networking sites raise customer awareness on a global scale, in some cases even helping people to make a claim for a faulty product or for a personal injury. A recent Consumer Reports survey also found that social media use by households is exposing them to a range of risks, including virus thefts and identity theft. Meanwhile, there are growing concerns about social media and consumer privacy. U. S. representatives Edward Markey and Joe Barton, co-chairs of the Congressional Bi-Partisan Privacy Caucus, recently wrote to the Federal Trade Commission (FTC) asking it to look into the way Facebook tracks user activity.
And in a sign of the growing potential liability faced by social media and online companies, Facebook Inc. has reached a settlement with the Federal Trade Commission (FTC) over its privacy policies. 4 Among other things the settlement will require Facebook to obtain consent from users each time it retroactively changes its privacy policy and to establish and maintain a comprehensive privacy program designed to address privacy risks associated with its products and services.
Key social media liability and risk-related news stories from 2011 include New York State Senator Anthony Weiner’s resignation from Congress due to a sexting scandal that began when he accidentally posted a link to an inappropriate picture of himself on his public Twitter account, and singer Courtney Love’s settlement of a defamation lawsuit for $430,000 after being sued by her former designer for allegedly libelous statements posted by Love on her Twitter account.
Social media related risks such as cyber-bullying and textual harassment are also leading to growing exposures for school districts and educational institutions. There are many more examples like these, but what is clear is that the growing use of social media in everyday life is giving rise to a range of evolving liabilities. Industry experts say this is creating a whole new world of privacy, security, intellectual property, employment practices and other risks for businesses and individuals.
The proliferation of social media use comes amid growing concerns over cyber security. Businesses that store confidential customer and client information online are exposed to increasing liabilities and costs as a result of cyber attacks and data breaches. Indeed, total data breach costs have increased every year since 2006, according to the Ponemon Institute (see later section on cyber security).
Some 340 organizations across business, financial, educational, government and healthcare sectors, have publicly disclosed data breaches in 2011 as of November 1, according to the Identity Theft Resource Center. 6 This compares to 662 publicly disclosed data breaches during 2010. A massive data breach at Sony Corp’s online game networks in April 2011 resulted in the theft of more than 100 million online accounts, for example. Just months later in October 2011 Sony’s Playstation Network and other online entertainment services were hit in a second attack that compromised 93,000 user accounts.
Coming in the wake of the 2010 Wikileaks breaches of classified data, these high profile data breach incidents have served to increase both public and government scrutiny of cyber security practices. A hacker group known as Anonymous has also drawn the attention of the FBI and other federal investigators after much-hyped cyber threats, announced in video messages on YouTube or via Twitter, some of which appear to have crashed the websites of governments and financial institutions.
The Securities and Exchange Commission (SEC) recently issued guidance urging publicly traded companies to disclose significant instances of cyber risks and events. 7 Description of relevant insurance coverage was included in the SEC’s list of appropriate disclosures. Meanwhile, a number of federal legislative/regulatory proposals on cybersecurity, including data breach notification, are under consideration by Congress. At the state level, some 46 states also have breach notification laws in effect.
