The Florida Bar

Florida Bar Journal

Crisis Communications and Image Restoration — There’s Insurance for That?

Business Law

Imagine the following scenario. You represent a small to medium-sized business or organization as their primary counsel. Your client calls you with an urgent matter that truly qualifies as a crisis such as 1) a retail client has a significant data breach; 2) a non-profit organization has an employee charged with assault on a minor; 3) a driver for a well-known local company is involved in a deadly DUI in a work truck; or 4) a real estate client holding company has a serious fire with injuries and even death in one of its apartment buildings.

Beyond their immediate impact on the injured, these and many other incidents can cause significant harm to your client’s business or organization. If not addressed immediately with accurate, timely, and appropriate messaging, episodes like these can escalate into catastrophes causing long-term damage to the client’s reputation in the community or their market. As counsel we assist navigating them through the legal ramifications of these events, but, a great value added proposition would be to advise them on potential relief from their insurance policies as well.

Insurance Coverage

A source of significant help may be located within your client’s already existing insurance policies, including their commercial general liability (CGL) policy, their separate cyber/data breach policy if not included in their CGL policy, and possibly other policies they may have such as property coverage depending on the nature of the incident. This coverage may reduce or eliminate the potential for lingering harm to the client.[1]

Some CGL polices provide additional coverage known variously as “crisis management enhancement endorsement,” “emergency response expenses endorsement,” or “public relations endorsement” to address an immediate crisis. Some policies also offer longer-term “image restoration and counseling” coverage to help restore “the named insured’s reputation and consumer confidence through image consulting.” Each is discussed below.

Crisis Management/Emergency Response/Public Relations Enhancements

For crisis communications, a representative CGL policy may provide the carrier “will reimburse you for ‘crisis management emergency response expenses’ incurred because of an ‘incident’ giving rise to a ‘crisis’ to which this insurance applies. The amount of such reimbursement is limited as described in [the policy].” Further language states “‘crisis management emergency response expenses’ mean those expenses incurred for services provided by a ‘crisis management firm.’…‘Crisis management firm’ means any service provider you hire that is acceptable to us. Our consent will not be unreasonably withheld.” For instance, suppose there is a data breach and the client is required to give formal notice to all of its customers who may be effected, a crisis management endorsement may help with the messaging and cover the cost of that notice.

Image Restoration Enhancement

Concerning image restoration, a typical policy may provide to “reimburse the insured for expenses incurred for image restoration and counseling arising out of ‘improper acts’ by any natural person.” Note that this coverage does not cover a company’s loss of profits due to a crisis, but instead helps cover the expenses associated with repairing the damage to reputation through strategies focusing on public communications and outreach.[2] While many companies offer both types of these coverages, there does not appear to be standardization of the insuring language that is common in certain policies. As with all insurance matters, the meaning of every defined term is critical.

Ascertaining Coverage and Preparatory Steps

There are two ways to find out about this coverage, what it covers, what it excludes, and what the policy limits are. The first is proactive review of your client’s insurance policies as part of an annual (or if necessary more often) business-client check-up. The second and more likely way for smaller clients is for the client to notify you that they’ve just received an evidence preservation letter setting forth a potential claim, or worse, there’s a news van parked across the street shooting B-roll video of your client’s building! Naturally, finding out the first way is much better. However, this coverage can be vital and extremely useful even if found at the last minute or after the fact.

Ideally, counsel would find the provision as part of an annual insurance review with the client. With this information in hand, counsel is able to help the client locate and vet a suitable crisis communications firm before there is a crisis. This is akin to having any other professional such as an attorney or CPA on retainer to be called upon if necessary. Note that the best choice for a crisis communications firm may not be the client’s regular public relations firm. Further note that insurance will not cover the cost of identifying a crisis communications firm before there is an actual crisis.

When a firm is selected before a crisis, the client and firm can prepare a communications “map” to be used when necessary. The map will identify ahead of time the person who will be authorized to speak for the organization in a crisis. The map will also define what to say, what not to say, and how to say it. The map may even have sample generic scripts that can apply to any crisis in the first few days while the specific facts are being learned. More importantly, establishing this relationship ahead of time will allow the crisis communications firm to learn about the client and their business to better prepare for an emergency with crisis-specific responses should the need arise.

Illustrative Example

A more common scenario involves learning about this coverage after a claim arises. This author first learned of this coverage about 10 years ago. The coverage provisions were found around page 80 or so of a 100-page CGL policy and endorsements. It was found while responding to an evidence-preservation-and-insurance-information demand letter from a personal injury firm.[3] Initially, the client’s policy was being reviewed to determine whether, when, and how to notify the insurer of this potential claim and to demand defense and indemnity. Given the nature of the threatened claim, injury defense counsel was appointed immediately.

In our first discussion with appointed counsel and having found the coverage, we asked for a recommendation for a crisis communications firm. Counsel provided us with a referral to a national firm that they had worked with in the past and that specialized in the particular type of potential claim being faced.[4] By the end of that day, the crisis communications firm was hired at insurance company expense. They began the immediate communications mapping process that would go on to serve the client well.[5]

Fortunately for the client, the alleged wrongdoer was a long-ago employee and the claim did not arise from the client’s business or his past employment there. However, the client’s name was being identified by injury counsel as a former employer of the alleged wrongdoer. There were two media interviews with the client’s leader who was also their dedicated spokesperson.

As it turned out, neither interview resulted in further print or broadcast pieces regarding our client. However, the communications map and practice with the crisis communications team gave the spokesperson the confidence to calmly, accurately, and appropriately respond to reporter questions. Although this particular “crisis” is long past, the maps developed at the time can still provide a valuable initial framework for the client should there be a crisis in the future.

Take Aways

Well-executed communications can provide significant immediate benefit to a client that finds itself in a crisis. When necessary, image restoration coverage involves a longer-term time frame to help the client recover from a reputational crisis through messaging and other means. Insurance coverage may be available to help clients with the expenses of either or both of these harms. If not already included, it may be possible for this coverage to be added for little or no additional premium. The best guidance is to research and plan before a crisis as opposed to responding to one with no gameplan. Careful reading of the applicable policies ahead of a crisis can help the client prepare for it and reduce the potential harm that could follow. Even without advance research ahead of a crisis, knowledge that such coverage might exist in the client’s insurance policies and attention to their terms can still provide a significant benefit to the client.

1 For the purposes of this article, we limit the discussion to CGL policies, recognizing that the coverages may be located in the client’s other policies. This is in part because CGL policies are the first and foremost line of defense in most cases.

[2] Insurance that reimburses damages to sales or similar losses related to a crisis are generally referred to as “reputational risk” insurance. These types of policies are underwritten to a specific client’s needs. Due to their expense, these policies are generally only available to the largest businesses and are beyond the scope of this article.

[3] “Disclosure of certain information required.” Fla. Stat. §627.4137 (2022). This is the letter injury lawyers send to potential Florida defendants to discover their potential insurance policies and coverage limits.

[4] There are many crisis communications firms. Some are generalists and others have developed specialty areas of practice based on the nature of the crisis, including mass shootings, sexual abuse, and the like.

[5] The crisis communications firm was directly hired by appointed defense counsel to preserve privilege. This particular firm had leadership on call 24/7/365 and they started immediately on addressing the claims raised in the evidence preservation letter and formulating appropriate and accurate responses.

Russell A. Sibley, Jr.Russell A. Sibley, Jr., is a sole practitioner who provides legal representation to businesses and charitable organizations in and around Tampa.

This column is submitted on behalf of the Business Law Section, Mark Stein, chair, and Daniel Etlinger, editor.

Business Law