It is a useful clause in a professional indemnity insurance, which offers coverage against defamation cases filed against the policyholder. Libel and Slander include those defamatory statements or materials which can have the negative impact on the reputation of a person in the eyes of the other. Here the statement may be made either in written (libel) and orally (slander).
A professional indemnity insurance offers cover for actions brought against the policyholder for libel and slander. The insurance company pays the cost and expenses in respect of such libel and slander.
A libel act can be committed through any of the visible means, including print (magazines, newspapers), sculptures and films. Slander is a defamation which is done through spoken words.
As verbal communication can reach to many people through modern media, defamation committed via words spoken over radio, television or the internet can be considered under slander. When it is difficult to know under which category defamation falls, the court decision will be final.
Often professional indemnity insurance policies offer certain extensions to cover unintended acts of libel and slander.
The cover is provided for a libel and slander in a professional indemnity insurance, provided=
- The libel or slander is committed by the policyholder while discharging the professional duties
- There is no intention of the policyholder to publish the libel or slander with express nastiness
In order to seek coverage for libel and slander under professional indemnity insurance, it is necessary to fulfill the below conditions=
The act must have been committed during the policy tenure
- The policyholder shall take all the precautionary measures in order to avoid libel and slander
- Take advice from an experienced lawyer who has expertise in this field, whenever required
- The act must have been committed by the insured
- The policyholder can save himself by proving that the statement made by him was true and was made with the permission of the other person
Case: 1
Shilpa Rao writes a popular blog about events in her community. Her writing has attracted a good number of followers, which has now increased to more than Rs 20,000.
Last year, she wrote a blog post about Rajan Sinha, who was earlier working as an accountant in her son’s school. She wrote that Rajan embezzled money and successfully got his crime covered as well.
However, her allegations were false. Nevertheless, Rajan was fired from his job of an accountant at a bank due to this negative publicity.
Rajan sued Shilpa and filed a defamation case. To prove his case, Rajan showed that:
- Shilpa’s statement about him was false
- Shilpa’s false statements injured him both emotionally & financially, and he also lost his job due to this
- Shilpa’s false statement was communicated to many people (Shilpa’s blog followers)
In this case, Rajan won his suit against Shilpa, who was asked to pay Rs 50 lakh as compensation to him. Luckily, Shilpa had a professional indemnity insurance policy, and she reached out to the insurer for the claim settlement.
The insurer reviewed the situation and found that Shlipa had committed a libel act, i.e., she made written defamatory statements. As the case fell under the purview of professional indemnity insurance, the insurer agreed to settle the claim.
Case: 2
Working as a creative head in T.S Creatives, Suraj Rai enjoyed a long line of clients, which were widespread in different parts of the country. A few months ago, Suraj came to know that M.J Engineering was looking to avail the services of a creative head for one of its projects.
Suraj Rai himself went to M.J Engineering to present the proposal. While talking to the head of M.J Engineering, Suraj made derogatory comments about N.J Fine Works which was also trying for this project.
When N.J Fine Work sent its representative to M.J Engineering, the latter refused its proposal and cited the comments made by Suraj Rai as the reason for the refusal.
The comments made by Suraj were false and were made with the sole purpose of grabbing the contract. N.J Fine Work filed a case again Suraj for the defamation.
It was found in the court that Suraj unintentionally remarked N.J Fine Work, however, it caused heavy damages to its reputation, and therefore, it was entitled to get compensation.
As T.S Creatives had bought a professional indemnity insurance for its creative head, Suraj, the company approached the insurer to settle the claim.
In this case, as the defamation was oral, the professional indemnity insurance considered it as a slander act and after carefully reviewing the current scenario, agreed to pay compensation to N.J Fine Work along with legal charges incurred by Suraj in defending himself in the court.
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