Advertising agencies design and execute various media campaigns to help clients differentiate their products or services from competitors and attract new customers. These agencies typically take on companies across industry lines as clients, namely retailers, restaurateurs, manufacturers and other service providers. Advertising agencies may specialize in creating certain types of media campaigns (e.g., digital, print, radio or television) or launch advertisements spanning several mediums. They hire a range of professionals (e.g., market researchers, copywriters, graphic designers, photographers, videographers, media specialists and account executives) to manage their operations and may perform their services from multiple locations, including their own office spaces, clients’ properties and industry events.
Common tasks among advertising agencies include identifying potential clients and contacting them to offer advertising services; sharing presentations to educate clients on the importance of advertising and outline service costs; brainstorming, designing and delivering media campaigns; giving clients guidance on ideal media sizing and formats; preparing campaign launch plans and associated contracts; and processing advertising-related correspondence and documentation.
Advertising agencies must consider several risks, including property concerns, staff-related issues and liability exposures. As such, it’s crucial that they secure proper insurance to protect their operations against possible losses. Keep reading for an outline of common exposures within the advertising industry and associated coverage considerations.
Common Exposures for Advertising Agencies
Here’s a breakdown of key exposures advertising agencies may face in their operations:
- Professional liability— Advertising professionals have a responsibility to act in the best interests of their clients and execute effective and honest media campaigns. If these professionals make mistakes that result in financial harm, advertising injuries (e.g., copyright infringement, invasion of privacy, libel, slander or defamation) or otherwise poor services for their clients—whether that entails creating false or misleading advertisements, neglecting to incorporate clients’ feedback when establishing media campaigns, or launching campaigns that breach state or federal advertising laws—advertising agencies could be sued and held liable for the damage caused to other parties.
- General liability— If any third parties (e.g., clients, vendors or passersby) experience injuries or damage within advertising agencies’ office spaces, these agencies could be held liable for the related losses. For example, a guest may sue an advertising agency if they slip and fall when visiting the agency’s office space.
- Employment practices liability (EPL)— Advertising agencies must provide their staff with a workplace free of discrimination and harassment. If these agencies contribute to a hostile work environment by participating in or permitting discrimination and harassment, failing to investigate workplace complaints or taking adverse employment actions (e.g., discipline, lack of promotion or unlawful termination) against staff, they could face costly legal action and potential regulatory penalties from federal and state employment agencies.
- Cyber— Many advertising agencies rely on digital systems and advanced software to schedule appointments, maintain open communication with clients, create online portals for client invoices and payments, and store sensitive documents and information. Additionally, agencies that specialize in digital advertisements may create and save both past and current media campaigns on online cloud platforms. Yet, amid growing digital threats, using such technology could make these agencies more vulnerable to data breaches, ransomware incidents and other cyberattacks. Following such incidents, advertising agencies could encounter prolonged service disruptions and incur costs related to notifying impacted individuals, recovering lost or damaged data and technology, handling associated legal ramifications and reputational losses, and implementing additional cybersecurity measures to prevent future incidents.
- Property— Although advertising agencies may perform their services across several locations, they tend to primarily operate out of owned or leased office spaces. These spaces are often equipped with a variety of office furniture, stationery, computers, design software, photocopiers, printers, phones, art supplies, media equipment (e.g., digital and film cameras, lenses, film developing materials, studio lighting, sound booths and set props) and sensitive documents. Unexpected events—including fires, inclement weather, theft and vandalism—may result in this property being damaged, stolen or destroyed, leaving advertising agencies with significant recovery expenses. These agencies may also experience business interruptions (e.g., canceled or delayed services and temporary closures) amid the recovery process, compounding related losses.
- Auto— Larger advertising agencies may have a fleet of company-owned vehicles that their staff can use to meet clients off-site and attend industry events, resulting in commercial auto exposures. Alternatively, smaller advertising agencies may have their staff utilize personal or rental vehicles for business purposes, creating hired and non-owned auto (HNOA) exposures. In both instances, it only takes a single accident on the road to cause major losses. Following collisions or other auto accidents involving their staff, advertising agencies could encounter serious expenses and liabilities from vehicle repairs and bodily injuries.
- Inland marine— When advertising professionals travel between locations to perform their services, they may carry valuable business property with them, mainly sensitive documents, laptops, design software, art supplies and media equipment. By doing so, these professionals could make such property vulnerable to inland marine risks. In particular, this property could get stolen or damaged by unanticipated events while in transit, potentially posing considerable recovery costs.
- Occupational safety— Common occupational ailments in the advertising sector include musculoskeletal disorders due to repetitive tasks, slips and falls stemming from hazardous walking surfaces, digital eye strain caused by frequent use of computers and other screen technology, struck-by injuries related to the operation of heavy media equipment, and bodily trauma resulting from vehicle-related accidents. If their staff get injured or become ill on the job, advertising agencies could incur sizeable workers’ compensation expenses and face possible OSHA penalties.
- Crime— Because advertising agencies often have access to large amounts of money and keep valuable documents and materials on-site, they may face elevated crime exposures, particularly theft and vandalism. These crimes could stem from both external and internal threats. For instance, perpetrators could be passersby engaging in a crime of opportunity, or they could be staff seeking to abuse agency resources for their own personal gain. In any case, these incidents could leave advertising agencies to recoup lost funds and missing or damaged materials.
Coverage Considerations for Advertising Agencies
To help address their exposures and stay protected amid potential losses, accounting firms should consider the following forms of coverage:
- Professional liability coverage—If a client alleges that an advertising agency’s staff provided negligent services, caused advertising injuries or made other professional mistakes, this coverage—also called errors and omissions insurance—can help pay the resulting expenses.
- General liability insurance—This coverage can assist if an advertising agency is held legally or financially liable for injuries, harm or damage to another party or their property.
- EPL coverage—An advertising agency could face legal action alleging workplace discrimination or harassment, wrongful termination or discipline, failure to employ or promote, or other unlawful employment practices. EPL coverage can reimburse the associated legal defense costs.
- Cyber liability insurance—Such coverage can compensate certain first- and third-party expenses that may result from an advertising agency experiencing a data breach, ransomware attack or other cyber incident.
- Commercial property coverage—This coverage can help pay the resulting repair or replacement costs if an advertising agency’s property—such as office space, furniture and equipment—gets damaged, stolen or destroyed due to a covered event.
- Business interruption insurance—If an advertising agency is forced to temporarily close its doors due to direct physical damage caused by a covered event, this coverage can compensate the agency’s typical operating costs (e.g., business income, commercial mortgage and tax payments, lease and loan expenses, and staff payroll) during the closure.
- Commercial auto coverage—Such coverage can reimburse costs resulting from an advertising agency’s staff getting involved in accidents on the road while operating company-owned vehicles.
- Workers’ compensation coverage—If an advertising agency’s staff get injured or become ill on the job, this coverage pays for their medical treatment and rehabilitation costs, as well as their lost wages.
- Commercial crime insurance—Also known as fidelity insurance, this coverage can help reimburse an advertising agency for losses caused by theft, staff dishonesty and other commercial crimes.
- Inland marine coverage—An advertising agency’s business property, specifically valuable documents, software, supplies and equipment, could become damaged due to a covered event while being transported or temporarily stored off-site. In these cases, this coverage can help pay the associated recovery costs.
- Umbrella and excess liability insurance—If an advertising agency’s claim costs exceed the limits for its primary liability policies, this coverage can increase those limits. Furthermore, umbrella policies can broaden existing policy coverage.
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