In mid-August, Progressive Insurance ended up in the Twitter (News - Alert) hot seat over its refusal to pay an uninsured motorist claim for a Maryland girl killed in an auto accident. In fact, the girl’s brother, comedian Matt Fisher, claimed in a Tumblr post that Progressive actually paid for the defense of the at-fault driver when the Fisher family sued the driver for negligence.

Some of the facts of the case are in dispute. However, Progressive mounted a disastrous cut-and-paste social media response to the tragedy. With icon Flo’s smiling face next to its Twitter feed, the company repeatedly tweeted a canned message: “This is a tragic case, and our sympathies go out to Mr. Fisher and his family for the pain they’ve (cont).”

In the wake of the incident, 9,000 people posted about Progressive on Twitter. Of those, 3,900 reported negative feelings about the company. Also, 1,100 indicated that they were Progressive customers who had decided to switch insurers.

The problem, says social media strategist Sally Falkow, is that Progressive failed to conduct a social media audit. When Fisher published his Tumblr post, he set of a firestorm of tweets and retweets, one by Gawker (News - Alert).com, which has over 200,000 Twitter followers. Fisher himself has 2,500 Twitter followers.

“If Progressive had done a social audit and they knew the online profiles of their policy holders, in particular the people who have claims with them, I venture to suggest that they’d have done the right thing without going to court,” Falkow wrote. “They’ve had to settle anyway, due to the firestorm of opinion. And now they have a PR flap and reputation damage attached.”

One way to contain damage is to launch a private social network that includes customers, partners, employees and personal contacts. A private network can help companies to learn who their biggest influencers are. Also, customers have a venue where they can launch complaints before the stories go viral on Twitter.

In 2013, cloud CRM provider Salesforce.com plans to launch a private social network creation service for its customers called Salesforce Communities. Also, Cisco (News - Alert) has refashioned its Quad enterprise social network to create a service called Cisco WebEx Social.

Regardless of what service they use, companies have to avoid generating automated, robotic responses to real people. Otherwise, they could find themselves in the middle of a public relations catastrophe.

Want to learn more about the latest in communications and technology? Then be sure to attend ITEXPO West 2012, taking place Oct. 2-5, in Austin, TX.  Stay in touch with everything happening at ITEXPO (News - Alert). Follow us on Twitter.