Insurance Issues for the Growing Business

If you, like many of today’s growing business owners, plan on taking advantage of the Internet to develop e-commerce traffic for your business, there are important insurance issues that you should consider. Many business owners who make the transition to the online world do not realize that traditional insurance policies may not cover the most common risks associated with operating a business on the Internet.

Although each policy is different, the traditional Commercial General Liability policy can fall short of covering the following sources of Internet liability: 1) liability for business interruption; 2) liability for lost data; 3) liability for loss of economic value of data and/or breach of privacy; 4) liability for passing viruses and the like; 5) liability for infringing intellectual property; and 6) liability for non-physical torts, such as defamation.

The standard CGL policy typically covers only “physical” damage to a third parties “tangible” property. As a result, data losses and losses of the economic value of data are ordinarily not covered by such a policy. Data loss or business interruption can occur if your clients or customers are storing information on your website or your server, and your website or server slowed or crashed to the point it damages your client’s business. Your client or customer can also lose the economic value of their data in the event you inadvertently disclose their trade secret (the idea being that the data itself is not lost, but its value as a secret is).

One of the most common sources of website liability stems from the (often unintentional) infringement of someone else’s intellectual property. The surprising fact is that liability for the breach of someone else’s intellectual property is usually covered by standard CGL policies only to the extent that the infringement occurred because of “advertising” activities. This results in extremely limited coverage, which can be of little value, especially for websites where users are posting copyrighted images.

The Law Offices of Aaron J. Stewart understands the various, and sometimes unusual, sources of liability with running an online business. Our goal is not only to protect you and your business to the maximum extent provided by the law, but also to help you to identify any gaps in your insurance coverage. The insurance industry has taken strides to catch up with the changing e-commerce landscape, and there are policies and riders that can cover your unique business model. While we are by no stretch of the imagination insurance brokers, we can identify those risks that should be covered so that you can work with your insurance agents to ensure that you are protected.

For more information from the California State Bar, see the following:  You can also contact us at!