green goblin

Keeping the Liability Goblins at Bay

There have been a few law suits recently that looked more like hoaxes or stories you’d read in the Onion than actual liability cases.

Disappearing act

One such story involved Snapchat. If you’re unfamiliar with the technology, it’s an instant messaging feature used mainly by the younger generations for instant – and supposedly ephemeral –communications (the messages and/or images sent were supposed to disappear automatically and forever after they are opened and viewed.)

Earlier this year, Snapchat settled with the FTC, admitting that their claims of disappearing images were false, and also admitting that they were collecting data on users including location and contacts information. Like unsettled spirits, it seems, data and images never really go away, instead they turn up at the most inopportune moments to haunt you.

It gives you wings – or $10

In another suit, Red Bull customer Benjamin Careathers sued the energy drink manufacturer for false claims. Though it was widely reported that Careathers sued over the fact that he didn’t sprout wings, as per Red Bull’s tagline, “it gives you wings”, Careathers suit was more focused on the drink’s claims as a provider of energy. “Red Bull defendants prey upon consumers by promising that, among other things, ‘Red Bull gives you wings’ by providing a mixture of ingredients that, when ingested significantly improve a consumer’s physical and mental performance,” notes the lawsuit.

Instead of battling the suit in courts, Red Bull offered a settlement of $10 cash or $15 in product to any U.S. consumer who had purchased Red Bull since 2002. Doubtless, the marketing-savvy company is hoping the settlement will have wings of its own and turn into yet another promotional opportunity for the drink.

False claims can hurt you

False claims, even when they’re tongue-in-cheek, can be devastating to a company. There are false claims from countless health products – think of vitamins and herbal supplements that make unbelievable claims about weight loss – and there always seems to be a suit about a car company exaggerating its miles per gallon, Hyundai being among the most recent.

In addition to big consumer cases, however, even smaller businesses need to worry about making false claims on contracts. From employment contracts to sales contracts, an exaggeration might encourage a candidate to say “yes” to a job offer, or push a sale through, but later you might find out where the thin line is between “exaggeration” and “false claim”.

False Claims Act – the Lincoln Law

False claims have been a serious crime in the U.S. ever since the government enacted the False Claims Act during the Civil War to establish clear liability for anyone who “knowingly submitted false claims to the government.” The Justice Department has published an excellent primer on the act, which is known affectionately as the Lincoln Law, or FCA. During the past few years, there has been a surge in the number of false claims filed. The Association of Corporate Counsel notes that FCA suits “used to be a risk mostly confined to the medical and procurement industries, now communication companies, commercial lenders, energy providers, international trade companies, and entities in a variety of other nontraditional industries are routinely FCA targets.” Any company doing business with the government needs to be aware of their liability risk, urges the association.

Staying away from false claims

There are a few things you can do to protect yourself against commercial or government false claims lawsuits. First, make sure you have marketing and legal professionals on your team who understand intellectual property laws, contract law, and possess a certain degree of professional common sense. You don’t want to wind up passing every single line through legal, but you do want to know that members of your team will make solid, informed decisions about what you say in public advertising and official documents.

Be sure you’ve got good research from reputable firms. There are plenty of research firms out there that will give you the answer you want – so make sure you hire researchers that will give you the right answers.

You can never be 100 percent sure that every claim you make – or every tagline your ad agency writes – will be foolproof. Be sure you’re covered. Work with your insurance agent to make sure you have coverage for false claims lawsuits, particularly if your company holds any government contracts. If you feel you might be susceptible to frivolous suits, contact us to find out how enterprise risk captive insurance could help round out your coverage scenario.