Hot Prospects for Internet Liability Insurance

A recent study by ComScore Media Metrix reveals over 100 percent growth in social networking, blogging and local information type websites. Specifically, the top-ranked sites in the study are Blogger.com, Myspace.com, Wikipedia and Citysearch. If you have internet clients/prospects functioning in the social network, local search/info and blogging space, now may be the time to approach them with an internet liability insurance proposal. With the growth in this area, these types of sites are gaining a larger audience. This increased visibility is great for the sites’ business plans but can also lead to larger exposures, which means self-insuring may no longer be the best choice.

Coverage Considerations

Bulletin boards and forum type features are common on social networking sites and blogs. In addition, many local search/travel/points of interest sites feature opportunities for visitors to post their opinions and questions. All of this customer interactivity creates a heightened opportunity for defamation and privacy claims. For example, a post or comment in a forum may reveal private information of a third party, creating opportunity for an invasion of privacy claim. Or a third party may sue for defamation claiming a post was a malicious lie or was defamatory in another way. Since a defamation claim may take many forms, it’s important to secure adequate defamation protection. The federal Communications Decency Act can provide protection in some contexts. Even then, however, it may need to be raised as a defense in an expensive court case.

As we’ve previously discussed, disseminating content on the internet is publishing. So, the intellectual property risks associated with content definitely apply online. The Digital Millenium Copyright Act can provide relief in some but not all contexts; even then one may have to pay to litigate whether and how it applies. Further, as more visitors use the company’s website or read their corporate blog, the greater the possibility for a claim. This can include a trademark infringement claim made by another social networking site as far away as Australia or a copyright infringement suit brought by a competitor’s corporate blogger living just down the street.

In addition to the risks above, an internet liability policy can also provide much needed security insurance (very handy if the site accepts and stores the personal information of others) and, of course, errors and omissions protection. See our previous post on the 4 corners of tech/internet policies for more coverage considerations.

Quality Procedures

In addition to transferring risk via an insurance policy, these internet companies can also consider some of the following practices: develop user rules defining appropriate and inappropriate posting behavior; develop a privacy policy explaining how the private information of customers is collected and used; develop a Terms of Service and Terms of Use agreement identifying how the site offers (and doesn’t offer) its services and provides for their use; and state copyright ownership details, including an outlet for readers to report alleged infringements.

Everybody’s Buying It

CNet reports a renewed interest by corporate advertisers in placing internet ads. This increased online ad spending supports the trend of online growth, in not only the sectors highlighted above but all over the internet. The increased demand for Internet Liability insurance shouldn’t be far behind.