Insurer pays cost of e-mail rumours

The dangers of circulating unsubstantiated rumour via e-mail were starkly demonstrated yesterday after the Norwich Union insurance giant was forced to pay out pounds 450,000 in libel damages and costs.

The out-of-court settlement, thought to be unprecedented, in favour of the private medical insurers Western Provident Association could have implications for companies who are careless about the kind of information transmitted on their internal e-mail systems about competitors, clients, advisers or other commercial contacts.

There has already been an out-of-court settlement in an e-mail case involving private individuals which has served to spotlight the risks of disseminating defamatory personal information, which would include some forms of office gossip, through the electronic medium.

While it is the same law of libel that applies to e-mails as to paper messages - essentially, publication of defamatory material to another person without the plaintiff having to prove he suffered damage - the ease of e-mail communications and their sheer multiplicity can significantly magnify the libel risk. Once untrue or unprovable rumours on an organisation's internal e-mail spill out to or are accessed by the outside world, the potential damages will be that much greater.

Western Provident had brought proceedings against Norwich Union Healthcare, part of the Norwich Union Life Insurance Company, after rumours began circulating in insurance circles in 1995.

David Engel, solicitor for Western Provident, told Mr Justice Popplewell at the High Court that the claims - that the company was insolvent, being investigated by the Department of Trade and Industry and unable to write new business - were disseminated by some Norwich Union staff via its internal e-mail system. Norwich Union now accepted there was no truth in any of the allegations.

David Sherborne, counsel for Norwich Union, said it regretted and apologised for the dissemination of the rumours. The company had made every effort to ensure that such "unacceptable practices" did not occur again and had undertaken not to repeat the allegations.

Julian Stainton, WPA's chief executive, said: "People regard electronic mail as a transient medium in that the message disappears into the ether. The reality is that everything you type and send is recorded almost for all time and is available to be reassembled at a later date by the written or spoken word."

This novel libel risk is likely to give much food for thought in the business community. In an increasingly global economy, libel payouts through careless electronic communication could be payable in a number of different jurisdictions, depending on a country's laws.

Organisations might have sound reasons, for example, for issuing warnings or instructions to staff about undertaking certain types of transaction or doing business with certain organisations. But if these can be construed as libellous, the cash register will start ringing.

The moral of the tale appears to be that in the electronic age much more care will have to be taken - in businesses and homes - than in the days of the old-fashioned office memo or poison-pen letter.