Electronic commerce and communication: a few insurance tips

Electronic commerce and communication: a few insurance tips

Business opportunities in the virtual world of electronic commerce continue to grow, but this technology comes with exposure to risks and possible losses. In today’s Internet economy, business owners who operate in cyberspace may be subject to risks that are not necessarily covered under their insurance policies.

The insurance industry is currently addressing liabilities associated with electronic commerce and communication by offering a mix of errors and omissions and commercial general liability policies. If you are operating in cyberspace, you may want to evaluate your own exposure to Internet liabilities in order to properly determine the extent of your insurance needs. Identified below are three main risks facing many of today’s Internet businesses:

Intellectual Property Risks. Currently, the Internet allows you to reproduce logos, trade names, and other copyrighted material through software and downloads. This technology could infringe upon the rights of other parties. Also, losses could arise if the enabling technology fails to perform as projected or guaranteed.

Media Liability Risks. As you surf the Internet to provide and promote your products and services, you may want to consider risks associated with the creation, manipulation, or dissemination of content found in cyberspace. Some issues to consider are copyright and trademark infringement claims resulting from the use of published material, defamation suits caused by the broadcasting of libel and slander throughout global chat rooms, and invasion of privacy claims stemming from tracking files that monitor user visits (i.e., "cookies").

Breaches of Security Risks. Information that is provided by you online could expose you to risk of loss if that information is stolen, damaged, or released without your authorization. Security breaches or loss of data could occur through error (e.g., system malfunction) or malicious intent (e.g., computer hackers).

What to Do?

As you conduct business using the Internet, your risks and your exposure to associated risks may undoubtedly change. Here are a few tips concerning insurance coverage for online activities that may help you navigate through the web of potential liabilities:

• Review your liability, property, and other insurance policies for coverage in those geographic locations where you intend to work. Generally, insurance policies limit coverage to specific geographic regions, so you may not be protected against claims instigated in other states and countries.
• Consider purchasing specialized insurance policies that are similar to those purchased by media and communications professionals. Generally, companies using the Internet to provide or promote products and services are subject to the same risks as companies in the media industry.
• Attempt to obtain business interruption insurance that is not specifically tied to a physical event or occurrence. For example, loss of Internet service that could prevent you from conducting business could result from system viruses and other technological breakdowns.
• Develop and maintain a formal, written business Internet and intranet policy, a policy for responding to and remedying complaints, and procedures for dealing with independent contractors and consultants. Be sure to train your employees accordingly.

As you conduct business in cyberspace, consider your company’s online liability risks and the insurance you may need to protect your interests. Our insurance professionals can assist you in obtaining the proper coverage before a virtual malfunction becomes a real world loss. 

 Risk Manager Online Vol. 14 No. 5 Copyright © 2006 Liberty Publishing, Inc.