Companies that make their living providing services on the web tend to buy E&O insurance, companies like ASPs and ISPs. But the conventional wisdom on companies that have websites but aren’t truly creatures of the web is that they haven’t been big buyers of internet E&O insurance for their websites. If true, that’s a curious state of affairs since a company with a website may take on many of the same risks as a media or publishing company, plus quite a few more.
Industry-wide light market penetration of website owners may be attributable to the fact websites are still relatively new to many companies, and they haven’t fully recognized the exposures a site creates or expands.
What are those exposures? They depend on what the company does with its site. Does it just contain information about the company; does it collect information from other sources and then disseminate the information to visitors or members; does it have chat rooms, areas where digital data can be downloaded or where comments can be posted on a bulletin board? Is the site transactional, supporting e-commerce?
The kinds and levels of exposures vary with the nature and sophistication of the website. But we can start with defamation and invasion of privacy. Most traditional media companies are keenly aware of these risks and train their staffs to deal with them. Some internet companies also have their staff and attorneys vet their sites to stay out of trouble. Others don’t.
Regardless of the level of care, a website owner is basically like a traditional a publisher, making content available to multiple people. If that content contains a false and damaging statement of fact about another, it may be actionable, the basis of a valid legal claim. The internet as the medium adds a couple of twists. It is viewable throughout the world. Depending on the company and its operations, a website may make the company vulnerable to a claim in a distant jurisdiction, with a different legal system. And once information is on the internet, curing the problem can be akin to stuffing the cat back in the bag. It isn’t like a newspaper or magazine, quickly thrown away with the injury limited to the scope of the first publication. It can take on a life of its own.
The site owner may have similar vulnerabilities to invasion of privacy claims.
There are the normal intellectual property risks associated with content. But again, the nature of the medium adds some twists. The URL, or website address, itself can generate a claim, as can the use of trademarks of others in the metatag, which can contain a somewhat hidden description or selection of keywords that may be used to enhance chances of being picked up and displayed by a search engine.
Specific internet activities can generate their own unique types of intellectual property claims – like search engines selling advertising that appears in search results on behalf of company B when a search is done using the trademark of company A (Click here to read our search engine entry). Popup advertisements that appear on behalf of company B when the internet user is viewing the website of company A have generated many lawsuits. And the ease of making perfect copies of information on the internet increases risks with copyright claims.
If confidential information of other persons or companies can be accessed through the internet, security and privacy risks are increased. If the web site provides services relied upon by third parties, loss of those services due to a security breach or denial of service attack can generate liability claims.
And there are the garden variety E&O exposures where the company makes mistakes in their services, particularly with interactive web sites, that cause a loss.
Another reason companies with a web presence may not buy insurance is a mistaken belief that their general liability policy’s advertising injury and personal injury coverage may meet their needs.It seems probably that the market penetration of internet E&O insurers will increase with time, as companies become more aware of the risks through news reports, their own bad experience or by other means. Development and then widespread use of insurance solutions tends to follow the creation of liability by business activity and court decisions.