Norwich Union has become the first company to be prosecuted for using an Email system to disseminate libellous information about a competitor.
Last week the insurance company was ordered to pay damages totalling #450,000 after admitting its staff had used an internal Email system to spread rumours about Western Provident Association.
The rumours suggested Western Provident was in financial trouble, insolvent and was being investigated by the Department of Trade and Industry. They also suggested the company was not in a position to write any new insurance.
The rumours first emerged in the summer of 1995 and began circulating among brokers, clients and potential customers of Western Provident. According to a spokesman for Western Provident, Norwich Union staff were able to use this false information when soliciting new business, "with the result that they could be used to the detriment of Western Provident in order to obtain new business".
A statement read in court said: "Norwich Union now accepts that this was wrong, that there was no truth in any of the allegations and that Western Provident was not under investigation by the DTI. Its insolvency margins are and were very healthy, it was and remains well able to write new insurance and it was not in any financial difficulties."
The case is the first where a company has successfully sued another for so-called electronic libel. A spokesman for Norwich Union said: "Norwich Union deeply regret and sincerely apologise to Western Provident Association for the dissemination of the rumours."
Data stored on a private intranet system that is used to undermine the credibility of a rival is of course illegal. What is not clear is whether potentially libellous material that remains on a private system could be used as evidence if discovered.
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