Today’s B2B marketing agencies are more creative than ever. But from a legal standpoint, it’s easy for them to run into trouble. Here, an agency made several errors when delivering social media campaigns for a client, leading the client to demand significant compensation.
As the agency had purchased CFC’s media policy the month prior, they had the legal support and in-house expertise from CFC to navigate what turned out to be a tricky litigation process—and achieve a successful outcome.
The claim
An established marketing agency with $61.9 million revenue was hired by a client to provide media planning and buying services. The client gave clear requirements of the target audience, messaging to follow and a budget of $10.6 million to execute the work.
During the campaign, the client noticed the agency had made several targeting errors, and asked for the mistakes to be fixed. The agency explained it had taken the client’s media planning over from a previous agency. Since it was overstretched dealing with two intensive accounts at the time this new work was onboarded, the agency had gone ahead with parameters set by the previous marketing agency, instead of incorporating newer requirements requested by the client. The agency recognized its error and wanted to continue working with the client. However, disagreements soon surfaced over the extent of the monetary loss caused by the errors.
The day after raising the complaint, the client demanded $540,000 in compensation for lost advertisement and fees. The agency conducted its own analysis and found the monetary loss amounted to just $375,000.
The outcome
A month before the dispute, the marketing agency had purchased CFC’s media policy. This meant the agency could benefit from professional indemnity cover, and could access legal support and in-house expertise from CFC throughout the entire process of the claim.
The legal support mediated negotiations between the two parties, finding an agreement for the agency to owe compensation of $450,000, a figure significantly less than that initially touted by the client. Expert advice meant the process moved swiftly, going from notification to settlement in just three months. CFC took care of the financial compensation, which empowered the agency to continue business without being impacted by its mistake.
In this type of case, the money owed can often reach dizzying sums. For smaller businesses in particular, taking out a policy can negate the risk of bankruptcy, enabling them to continue business as usual. CFC is well versed in handling such cases, and is here to provide the professional and specialized support needed to alleviate both financial and legal pressures
If you have any questions regarding media and entertainment insurance for small business sellers, get in touch at media@cfc.com.
*The companies and circumstances in this case study are fictional, but the scenarios are realistic and reasonable based on our experience.
