Legal Update: Apologies and the risk of contravention of 'no admission' clause

Saying sorry - and what is more saying sorry in the right way - is an essential part of crisis management, as the recent Samsung and Talk Talk debacles have shown. The importance of saying sorry does not just apply to exploding phones and loss of customer data, but to the police, health authorities, care homes and to almost every aspect of corporate and social business.

Public relations consultants play a crucial part in managing reputations and salvaging crisis situations. However, it is not just a case of apologising in the right way. Where insurers are involved, the policyholder has to make sure that in managing the crisis on a PR front, it is not falling foul of the terms of its insurance.

Whether you are talking about mandatory or voluntary reporting to regulators or about making an apology for the sake of customer and investor relationships, there is a risk for any policyholder that it might be acting in contravention of a non-admission condition in the policy.

In my experience, policy conditions specifically relating to apologies are very rare and you are looking instead at general claims control conditions. In practice, claims control provisions are likely to forbid any ‘admission of liability' and there is a very fine line between saying sorry and admitting liability.

In these circumstances, policyholders need to work not just with their PR consultants but with their insurers to achieve a form of apology that does not involve an admission of liability. While this might sound straightforward on paper, in reality this can be very tricky to pull off successfully. Aggrieved customers typically see through a superficial apology. And the moment a more extensive apology is given, that risks being tantamount to an admission.

The first step is for the insured to try to secure their insurer's agreement to whatever is going to be sent out or to be broadcast. This is easier said than done and often in the heat of the moment, especially when confronted by a hostile interviewer on live media, the policyholder will find itself acting as a "prudent uninsured" (effectively acting without the sanction of insurers, which means in practice insurers may criticise what they do afterwards).

Some of these issues may be avoided where there is a crisis response package as part of the policy coverage, with insurers providing their own team of experts to help the insured when the crisis happens and to put a strategy together.

In addition to saying sorry, a wrong-doing entity may also be required to self-report to its regulator. Wordings will often prohibit the admission of liability "with respect to any claim". However, at the time of self-reporting, a claim may not yet exist and on this wording, self-reporting may not breach the non-admission obligation.

To give reassurance, some policies make it clear that self-reporting does not breach any non-admission clause. This is not necessarily the end of the story as the wording will often provide that "compliance with a legal obligation to report to the regulator" does not amount to an admission. This could lead to issues as it is not always clear if there is a legal obligation to notify or whistleblow in all applicable countries.

When apologies are handled badly, it can have a serious negative effect on an entity's reputation, goodwill and quite often, share price. On the other hand, an overly effusive apology could be deemed an admission of liability, which could also have a seriously negative effect on reputation, goodwill and share price.

As Sir Elton says, sorry is indeed the hardest word.