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Making the case for Internet liability coverage

There has been very little in the history of the world that has revolutionized society so greatly and as quickly as the Internet. The Internet has allowed anyone and everyone with access to a computer to obtain information from anywhere in the world. The Internet has allowed everyone to create their own content and have it accessible everywhere. In a perfect world, there would be no limitations. Doctors, scientists, researchers and philosophers from any country have the ability to converse with colleagues on the other side of the world.

However, doctors and scientist striving to better the world are not the only ones with access. There are plenty of people on the Internet with malicious intent. Everyone has heard stories of hackers gaining access to different Web sites and obtaining private information, and holding companies hostage with their abilities. Identity theft, cyber extortion, viruses, worms — these are all concepts that were inconceivable a few generations ago.

The Internet has also created a whole new venue for companies and individuals to make careless, but costly mistakes. Some mistakes made over the Internet, such as advertising injury, have usually been covered under an insured’s commercial general liability policy. Other business losses, such as stolen equipment or property, are usually covered under their commercial property policy or under the CGL for property in the insured’s care, custody and control. However, many general liability insurance policies exclude a company’s actions on the Internet.

What is Internet liability?
Internet liability insurance covers very specific wrongful acts as defined by the policy forms. Here are some examples of such coverages:

• Infringement or unauthorized use of any advertising material, copyright, slogan, trademark, etc., through the Internet.
• Failure to protect private or confidential information of others from unauthorized access on or through the Internet.
• Making known to any person or organization material that violates a person or organization’s right to privacy or publicity right.
• Plagiarism or unauthorized use of a literary or artistic format, character or performance through the Internet.
• Failure to prevent the transmission of a computer virus to authorized users of a Web site or any private communication networks such as customers, suppliers or supporters, on or through the Internet.

Take a second to digest that last bullet point. As protection software advances, as viruses advance, there may be an instance when a company, maybe your insured, could get sued for not properly updating its virus protection, thus causing everyone that legitimately uses the site to download a computer virus. Is there anyway you can be 100 percent sure that a hacker will not install a virus on your insured’s Web site?

Viruses are not even the biggest threat that hackers pose to your client’s network. Data breaches hit mainstream news all the time, including recent breaches from the Veterans Administration and TJX. Think about all of the smaller companies whose systems may be hacked into. Identity theft is big money. Everyday that Microsoft, Cisco and Apple develop new ways to block hackers, criminals overseas and in the United States find ways to break those codes.

Who needs Internet liability?
So which clients need to be presented with Internet liability? Any client that uses the Internet could benefit from the intellectual property protections and virus security, but the real need is for the clients that conduct transactions over the Internet.

When recommending this relatively new insurance product, agents must make sure certain things are in order. Make sure that the territory definition is global. If it is not, what will protect an insured from someone in India or China accessing its Web site and bringing suit against the insured in the United States.

Also, make sure that the company providing the insured’s Internet liability insurance is adequate. How long has it been providing technology insurance? How long has it been in business? What is its A.M. Best rating? Is it an admitted carrier? These are all key questions to consider when purchasing Internet liability insurance.

Also, carefully review the insurance company’s policy form as many differ from each other. Many companies will combine Internet with errors and omission coverage. Agents need to have a good understanding of what is and is not covered by each form.

The Internet is not made from brick and mortar. Criminals know that, many insurance companies know that, and agents need to understand that. Agents should always read the policy forms, and make sure they are aware of any added endorsements.

There are plenty of great companies that are actively seeking to write these Internet liability policies, and there are plenty of businesses out there that need to purchase it.

Andrew L. Cohn is the founder of ALC Risk Solutions, an independent agency in Miami, Fla. Cohn specializes in writing technology and marine insurance.