Meta Loses Insurance for Defense in Major Social Media Addiction Litigation

A Delaware judge has ruled insurers do not have a duty to defend Meta Platforms in the thousands of lawsuits that allege its Facebook and Instagram platforms harm children.

Superior Court Judge Sheldon K. Rennie ruled Meta’s insurance companies are not obligated to provide its defense because the allegations against the company describe deliberate and intentional acts rather than accidents or occurrences that would trigger coverage under the commercial general liability policies.

The judge also found that Meta would not be prejudiced by a Delaware coverage ruling at this time.

Thousands of suits have been filed on behalf of children who used Meta’s platforms, as well as by more than a thousand school districts and 43 states. The lawsuits have been consolidated into two actions in California. Known as the Social Media Litigation, the complaints allege Meta intentionally designed addictive algorithms and features on Instagram and Facebook that allegedly cause young users to suffer mental health issues, including anxiety, depression, and eating disorders.

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Hartford, Chubb and more than 20 other insurers sought a declaration in Delaware, Meta’s state of incorporation, that they owe no duty to defend Meta in the Social Media Litigation.

In Meta’s view, the design choices it made constituted accidents and are thus covered by its insurance because it did not intend to cause the alleged resulting harm, such as addiction or depression.

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However, insurers successfully argued that the complaints do not need to allege Meta intended to cause harm, just that Meta intended to engage in certain conduct, and the conduct resulted in harm. Because the harm allegedly flowed directly from deliberate design choices, the insurers argue the “accident” requirement of the insurance policies is not met.

Meta asked that any ruling about insurance coverage be dismissed or delayed until after the litigation is completed. It maintained that California law dictates coverage litigation must be stayed pending resolution of the underlying action when the coverage litigation turns on facts to be litigated in the underlying action.

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The insurers said California law does not mandate a stay in this case because the court is not making factual determinations regarding Meta’s intent, causality, or knowledge.

Judge Rennie agreed with the insurers.

“The conduct alleged in the Social Media Litigation—even when viewed through the lens of negligence—describes deliberate acts rather than accidents under the policies. Because the court’s determination regarding Meta’s intent is based strictly on the face of the underlying complaints, it does not “overlap” with the factual truth of the allegations to be litigated in California,” the judge ruled.

The ruling applies only to the duty to defend, and not to indemnification, which could require discovery into the facts. Meta has 30 days to appeal the matter to the Delaware Supreme Court.

Meta, which tried but failed to have the coverage case heard in California, has not yet responded to the decision.

Insurance policyholder attorney Tae Andrews of the firm Calfee, Halter & Griswold LLP is disappointed but not surprised by the Delaware court ruling. “In short, this is nothing new but continues the Delaware state courts’ trend of hollowing out the duty-to-defend standard from what should be a broad standard into a much narrower and difficult one for policyholders,” Andrews, who was not involved the Meta case, told Insurance Journal.

Andrews pointed to a 2022 opinion in which the Delaware Supreme Court held that Chubb insurers had no duty to defend the Rite Aid pharmacy against suits brought by Ohio counties over the cost of responding to the opioid epidemic because the underlying actions only sought recovery of economic losses.

For insurers, the ruling could be a major victory setting a precedent that claims like those in the social media addiction litigation do not trigger defense or indemnity coverage under standard policies.

The court rejected Meta’s claim it would face potential prejudice in the underlying litigation if the ruling on defense coverage was not stayed. To the contrary, such a stay would prejudice the insurers, the court found.

“An insurer’s duty to defend must be assessed at the outset of a case. Just as the insured is entitled to a prompt defense if coverage is possible, an insurer is entitled to a prompt exit when there is no potential for coverage. Delaying this determination through a stay would force insurers to fund a defense they do not legally owe,” the opinion added.

“Insurers have accurately stated the analytical framework,” wrote Judge Rennie. “Under the relevant policies, the insurers’ duty to defend is triggered only by suits seeking damages caused by an ‘accident.’”

Under Section 230 of the Communications Decency Act, internet companies are largely shielded from liability for material their users post to their sites. As part of their argument, the plaintiffs maintain the 1996 law does not shield the firms from responsibility for their designs and algorithms.