Even frivolous lawsuits dismissed at a relatively early stage of the litigation can be expensive to defend, and the cost skyrockets the longer the litigation continues, particularly if judgment is rendered against you. While most lawsuits never get to trial, if you lack the money to carry out a vigorous defense, the only option available to you may be to settle (perhaps even to take down the allegedly offending content or even your entire site) regardless of the merits of your defense.
For these reasons, it is important to assess whether your online activities are covered by your existing homeowners or renters insurance. If your activities are not covered, it might be worth getting media liability insurance, even if such policies initially appear to be prohibitively expensive. Alternatively, if your online activities are part of an existing business, you may be able to add coverage to your business insurance policy through an add-on rider. Consult your insurance agent for costs and details.
Here are a list of steps to take when evaluating your insurance coverage needs:
If you have homeowners or renters insurance, your policy may cover some of your online activities. Most such policies cover damages and legal fees incurred in suits against the insured for "bodily injury," and "bodily injury" is often defined as including personal injury arising out of defamation or invasion of privacy. Obviously, you are only covered if your insurance contract contains this or similar language and your first plan of action should be to read your policy, paying close attention both to the body of the policy and any separate definition sections.
You should note, however, that your policy may not include coverage for copyright or other intellectual property claims, which do not typically fall within the standard definition of "bodily injury" or "personal injury" covered by most policies.
Homeowners and renters insurance policies generally cover both compensatory damages and legal defense costs, but not punitive damages (damages awarded above and beyond the amount necessary to compensate the plaintiff for his or her injury). This is important because plaintiffs often seek punitive damages in defamation suits, and the fear of large punitive damages might prove an insurmountable inducement to settle or remove content. On the other hand, actual verdicts (as opposed to settlements) for plaintiffs are fairly rare in these types of suits and even rarer in the case of punitive damages.
Possible Coverage Exclusions
Most homeowners policies exclude coverage for "business pursuits." How "business pursuits" is interpreted varies from state to state. (See the Insurance Exclusions for Business Pursuits section of this guide for more information.) In most states, your activities may be excluded from coverage if you earn advertising income from your site or blog or you collect money through other online means (say, through a PayPal "Donations Accepted" link on your site). If you are worried about losing coverage because you make a small amount of money from your site or blog, you may want to consider forgoing the advertising revenues and donations.
In a few states, you might still be covered even if you make money if your online activities are not your "primary" occupation. In other states, you will need to show that your online activities are no more than a "hobby," even if you made some money from it. Note, however, that there may be adverse tax consequences from characterizing your business as a "hobby." You should consult a tax adviser before characterizing for tax purposes any income you make from your online activities.
If your existing homeowners or renters insurance policy does not cover your online activities, you may want to consider switching carriers or purchasing additional coverage through an umbrella policy. See the section on Evaluating Homeowners and Renters Insurance Policies for a discussion of the terms and coverage of several large carriers.
If you are interested in further reading on this topic, Eugene Volokh published an excellent post on the Volokh Conspiracy.
Homeowners insurance policies (and renters insurance policies) typically provide some personal liability coverage that may cover claims brought against you arising from your online activities. As a general rule, however, the more you expose yourself to potential claims, the more you should consider coverage beyond your homeowners policy. This is especially true if your online activities even arguably constitute a business.
In general, homeowners insurance policies do not refer specifically to claims arising from online activities, but this does not rule out the possibility of coverage for such claims. When evaluating policies, you should pay particular attention to two factors: (1) the types of potential claims covered by the policy, and (2) the scope of the policy's business activity exclusion.
To help you consider these factors, we have reviewed five policies:
Want to help us create a more comprehensive review? We are hoping to collect homeowners and renters insurance policies from every carrier and every state. Please contact us if you would be willing to send us a copy of your policy (with any personal information redacted, of course).
In the course of your online activities, you may be sued for defamation, invasion of privacy, or intentional infliction of emotional distress. These claims may be covered by your insurance policy if it includes coverage for personal injury claims. Personal injury coverage is not dependent on physical injury, and commonly includes (among other things) claims for defamation (including libel and slander), "humiliation," and invasion of privacy. For more information about defamation, privacy, and intentional infliction of emotional distress claims, see the Risks Associated with Publication section of this guide.
Of the five policies we reviewed, only the Erie and Chubb policies cover personal injury claims. The Chubb policy also includes "shock", "mental anguish", and "mental injury" under its definition of personal injury.
You may also be sued for copyright or trademark infringement in the course of publishing your work online. These claims, as well as other Intellectual Property claims, do not appear to fall within most homeowners insurance policy definitions, and it is therefore unlikely that your homeowners insurance will cover you if you are sued for copyright or trademark infringement. For more information about copyright and trademark, see the Intellectual Property section of this guide.
None of the policies we reviewed provide coverage for injury that the insured "intends" or "expects." Additionally, none of the policies covers punitive damages. This may be particularly relevant to claims involving defamation, where plaintiffs generally seek punitive damages.
All five homeowners insurance policies we reviewed cover claims involving bodily injury as well as property damage.
In general, bodily injury is defined as "bodily harm," "sickness," or "disease." The Erie policy also includes "mental anguish" in its definition of bodily injury. Additionally, each policy states that coverage for bodily harm extends only to situations where the injury results from an "occurrence," which is defined as "an accident."
Given these constraints, if your policy is limited to coverage of bodily injury claims, you will likely not be covered for claims against you that arise from your online activities.
All five policies we reviewed exclude coverage for claims arising out of the insured's business activity. There are differences in the ways that state laws treat this exclusion, as well as important variations in the policies themselves. We discuss the different state approaches in the Insurance Exclusions for Business Pursuits section of this guide.
In order to understand the business activity exclusion in the five policies, we looked at: (1) its definition of "business" and (2) the scope of its exclusion.
1. Definition of "Business"
Although the Chubb policy states that it does not cover damages arising from the insured's "business pursuits" it does not define what a "business pursuit" is. The Erie policy defines "business" as "any full-time, part-time or occasional activity engaged in as a trade, profession or occupation." The Amica Mutual, OneBeacon, and Providence Mutual policies contain identical definitions: "A trade, profession or occupation engaged in on a full-time, part-time or occasional basis . . . or [a]ny other activity engaged in for money or other compensation."
The Amica Mutual, OneBeacon, and Providence Mutual policies further state that an "activity engaged in for money or other compensation" will not be characterized as business (and therefore will not be excluded from coverage) if:
(1) the insured received $2,000 or less in the year prior to the start of the policy, or (2) the insured engaged in a volunteer activity, and only received payment of expenses incurred in the performance of the volunteer work.2. The Scope of the Business Pursuits Exclusion
The five policies that we reviewed vary a great deal in how narrowly they apply the business pursuits exception:
If it seems likely that your online activities will fall under the business pursuits exclusion of your policy, you should consider purchasing Media Liability Insurance.
Otherwise, given the limitations of basic bodily injury coverage, if you engage in substantial online activity you should look for a policy that includes personal injury coverage. Such a policy will likely be more expensive, but the coverage for injuries like defamation may be well worth the additional cost should someone bring such a claim against you.
A more comprehensive alternative is to purchase an umbrella policy as recommended by the (not impartial) Insurance Information Institute, which states that such coverage typically begins in the range of $150-$300 annually. The primary effect of umbrella policies, which do cover personal as well as bodily injury, is to increase your coverage cap. Given the high cost of legal services, this may be worthwhile even if your policy already covers personal injury. Some umbrella policies also augment your coverage in other ways. The OneBeacon umbrella policy we reviewed, for example, eliminates the punitive damages exclusion; this might be crucial if you are sued for defamation, for which punitive damages are often sought.
Most homeowners insurance policies exclude coverage for liability relating to "business pursuits." Although the exact formulation varies by state, the courts generally define a "business pursuit" as a continual or recurrent activity carried out for financial gain. In most states, courts give a broad interpretation to "business pursuits," drawing in almost any activity that results in financial gain. In these states, if you devote a non-trivial amount of time to your online publishing activities and make any money from them -- for example, through advertisements or a tip jar -- then you probably are carrying on a "business pursuit," and your coverage could be lost. Conversely, if you don't make any money from your online publishing activities (or more precisely, if financial gain is not your motivation), then you probably are not engaging in a "business pursuit," and you won't lose coverage under your homeowners insurance. As Eugene Volokh notes, "if you're worried about the risk of libel lawsuits, you might want to consider staying entirely noncommercial." (emphasis in original).
In other states, the courts have interpreted "business pursuits" in a narrower fashion. There, you might be able to argue that your online publishing activities are not business pursuits so long as they are not your primary occupation or making a profit is not your primary motive. In these states, going commercial does not necessarily carry the same risk of losing coverage under your homeowners insurance.
Most homeowners policies do not have a separate provision stating what law will be used to interpret them, so courts ordinarily will apply the law of your place of residence.
Choose from the list below to view state-specific information on the "business pursuits" exclusion in the fifteen most populous U.S. states and the District of Columbia. Keep in mind that there is no case law directly addressing the definition of a "business pursuit" in the online publishing context, so there is substantial uncertainty surrounding this area of law.
California law defines a business pursuit "as a regular activity engaged in for the purpose of earning a profit." Smyth v. USAA Property and Casualty Insurance Co., 152 Cal. App. 3d 864, 869 (1984). CMLP has identified no California cases interpreting this test in the context of online publishing out of the home (or elsewhere). As a general matter, however, California cases have established that an activity need not be full-time or a primary (or even major) source of income in order to qualify as a business pursuit.
Therefore, if you live in California, you may be in danger of losing coverage for your online publishing activities if you make money from your website or blog, such as through advertisements or a tip jar, unless those activities are temporary or sporadic.
Note that specific language in a policy might lead a court to a result different from the overall state trend.
Florida law defines a business pursuit as "a continuous and comprehensive activity for financial gain." State Farm Fire & Cas. Co. v. Friend, 478 So.2d 1198, 1200 (Fla. App. 1985). CMLP has identified no Florida cases interpreting this test in the context of online publishing out of the home (or elsewhere). The Friend case (above) suggests that a short-term, part-time activity carried out for money may not be considered a business pursuit when the primary motive of the activity is not financial gain (in that case, the insured person was helping out a friend).
Therefore, if you live in Florida, you may have an argument that your online publishing activities are not a "business pursuit" if your primary motivation is not financial gain. This argument might be undercut, however, if your publishing is more than a part-time, short-term activity.
Note that specific language in a policy might lead a court to a result different from the overall state trend.
Georgia law defines a "business pursuit" as "a usual commercial or mercantile activity customarily engaged in as a means of livelihood and typically involving some independence of judgment and power of decision." Brown v. Peninsular Fire Ins. Co. 320 S.E.2d 208, 209 (Ga. App. 1984). CMLP has identified no Georgia cases interpreting this test in the context of online publishing out of the home (or elsewhere).
As a general matter, Georgia courts have excluded from the category of business pursuits activities that are not the insured's primary occupation, even if engaged in for profit. See for example Brown (above) and Southern Guaranty Insurance Co. v. Duncan, 206 S.E.2d 672 (Ga. App. 1974). Other courts have indicated that an activity will not be considered a business pursuit if the primary motivation is not financial gain. See for example Nationwide Mutual Fire Insurance Co. v. Collins, 222 S.E.2d 828 (Ga. App. 1975).
Therefore, if you live in Georgia, you have a good argument that your online publishing activities are not a business pursuit if you carry them out in your spare time or your primary motivation is not financial gain, even if you make money from those activities.
Note that specific language in a policy might lead a court to a result different from the overall state trend.
Illinois law defines a "business pursuit" as a "continuous or regular activity, done for the purpose of earning a profit." State Farm Fire & Casualty Company v. Moore, 430 N.E.2d 641 (Ill. App. 1981). CMLP has identified no Illinois cases interpreting this test in the context of online publishing out of the home (or elsewhere).
As a general matter, Illinois courts deem even part-time and supplemental activities done for profit to be business pursuits. On the other hand, Illinois courts have determined that profit-making activities that are temporary or sporadic, or that result in compensation only irregularly, are not business pursuits. See for example the Moore case above.
Therefore, if you live in Illinois, you may be in danger of losing coverage for your online publishing activities if you make money from your website or blog, such as through advertisements or a tip jar, unless those activities are temporary or sporadic.
Note that specific language in a policy might lead a court to a result different from the overall state trend.
Indiana law defines as business pursuit as "a continued or regular activity for the purpose of earning a livelihood." Mid-American Fire & Casualty Co. v. Shoneys, 843 N.E.2d 548 (Ind. App. 2006). CMLP has identified no Indiana cases interpreting this test in the context of online publishing out of the home (or elsewhere).
One Indiana court has held that the a for-profit activity is not a business pursuit if it does not occur continually or regularly, or if making a profit is not the primary motivation. See American Family Mutual Insurance Co. v. Bentley, 352 N.E.2d 860 (Ind. App. 1976). In that case, the insured rented storage space in his home to a third party for money, but there was no evidence that he did so regularly, or that profit was his primary motivation. In other cases, however, Indiana courts have held that an activity is a business pursuit even if the activity is not the insured's primary occupation. See for example the Shoneys case above.
Therefore, if you live in Indiana, you may be in danger of losing coverage for your online publishing activities if you make money from your website or blog, such as through advertisements or a tip jar, unless those activities are temporary or sporadic.
Note that specific language in a policy might lead a court to a result different from the overall state trend.
Massachusetts law defines "business pursuits" as incorporating "two significant elements: profit motive and continuity." Nationwide Mut. Ins. Co. v. Bent, 1999 WL 1203774 (Mass. Super. Nov. 9, 1999). CMLP has identified no Massachusetts cases interpreting this test in the context of online publishing out of the home (or elsewhere). One Massachusetts court has indicated in reasoning not essential to its judgment that the category of business pursuits embraces “[a]ny full or part time activity of any kind engaged in for economic gain." Metro. Prop. & Cas. Ins. v. Fitchburg, 793 N.E.2d 1252 (Mass. App. Ct. 2003).
Therefore, if you live in Massachusetts, you may be in danger of losing coverage for your online publishing activities if you make any money from your website or blog, such as through advertisements or a tip jar, unless those activities are temporary or sporadic. The law in Massachusetts is not clear on this point, however.
Note that specific language in a policy might lead a court to a result different from the overall state trend.
Michigan law defines "business pursuits" as follows:
To constitute a business pursuit, there must be two elements: first, continuity, and secondly, the profit motive; as to the first, there must be a customary engagement or a stated occupation; and, as to the latter, there must be shown to be such activity as a means of livelihood, gainful employment, means of earning a living, procuring subsistence or profit, commercial transactions or engagements.
Riverside Ins. Co. v. Kolonich, 329 N.W.2d 528, 530 (Mich. App. 1982). CMLP has identified no Indiana cases interpreting this test in the context of online publishing out of the home (or elsewhere).
As a general matter, Michigan law excludes from the category of business pursuits activities engaged in as a hobby, when financial gain is only a side consideration. For instance, in the Kolonich case (above), a Michigan appellate court reversed a lower court ruling because the insured person's activities -- teaching ceramic classes in her home, firing ceramics pieces, and selling the occasional piece -- could constitute a hobby rather than an enterprise conducted for profit.
Therefore, if you live in Michigan, you may have an argument that your online publishing activities are not a "business pursuit" if you carry them out as a hobby and your primary motivation is not financial gain, even if you make some money from those activities. Additionally, you might be able to argue that your publishing activities are not sufficiently continuous to constitute a business pursuit, if you engage in them sporadically and they are not part of your "customary engagement" or "stated occupation."
Note that specific language in a policy might lead a court to a result different from the overall state trend.
New Jersey law defines a "business pursuit" as an activity involving "continuity" or "customary engagement" and a "profit motive." Prudential Prop. & Cas. Ins. Co. v. Boylan, 704 A.2d 597, 602 (N.J. Super. 1998). CMLP has identified no New Jersey cases interpreting this test in the context of online publishing out of the home (or elsewhere).
As a general matter, however, the New Jersey courts include nearly all profit-making activities carried out on a regular basis in the category of business pursuits. The activity does not need to be the insured person's sole occupation or means of support, but it must be more than merely sporadic or occasional.
Therefore, if you live in New Jersey, you may be in danger of losing coverage for your online publishing activities if you make money from your website or blog, such as through advertisements or a tip jar, unless those activities are temporary or sporadic.
Note that specific language in a policy might lead a court to a result different from the overall state trend.
New York law defines a "business pursuit" as an activity regularly engaged in with a view toward earning a livelihood or making a profit. In other words, to constitute a business pursuit, there must be two elements: "first, continuity, and secondly, the profit motive." Showler v. Am. Mfrs. Mut. Ins. Co., 261 A.D.2d 896, 897 (N.Y App. Div. 1999). CMLP has identified no New York cases interpreting this test in the context of online publishing out of the home (or elsewhere).
As a general matter, however, the New York courts include nearly all profit-making activities carried out on a regular basis in the category of business pursuits. The activity does not need to be the insured's sole occupation or means of support, but it must be more than merely sporadic or occasional.
Therefore, if you live in New York, you may be in danger of losing coverage for your online publishing activities if you make money from your website or blog, such as through advertisements or a tip jar, unless those activities are temporary or sporadic.
Note that specific language in a policy might lead a court to a result different from the overall state trend.
North Carolina law defines the word "business" in "business pursuit" as "an individual's paramount means of earning a livelihood." North Carolina Farm Bureau Mut. Ins. Co. v Briley, 491 S.E.2d 656, 659 (N.C. App. 1997). CMLP has identified no New York cases interpreting this test in the context of online publishing out of the home (or elsewhere). As a general matter, however, North Carolina courts have declined to include part-time work under the exclusion, at least where the insured also had a separate full-time job.
Therefore, if you live in North Carolina, then you may have a good argument that your online publishing activities are not a business pursuit so long as they do not constitute your primary occupation or source of income.
Note that specific language in a policy might lead a court to a result different from the overall state trend.
Ohio law defines a business pursuit as work "engaged in regularly" which "produce[s] an income." Watkins v. Brown, 646 N.E.2d 485, 488 (Ohio App. 1994). CMLP has identified no Ohio cases interpreting this test in the context of online publishing out of the home (or elsewhere). As a general matter, however, Ohio courts have deemed activities to be business pursuits even when profit was not the primary motive and the amount of money earned was small.
Therefore, if you live in Ohio, you may be in danger of losing coverage for your online publishing activities if you make money from your website or blog, such as through advertisements or a tip jar, unless those activities are temporary or sporadic.
Note that specific language in a policy might lead a court to a result different from the overall state trend.
Therefore, if you live in Pennsylvania, then you may have an argument that your online publishing activities do not constitute a business pursuit if your primary motivation is not financial gain, even if you make some money from those activities.
Note that specific language in a policy might lead a court to a result different from the overall state trend.
Texas law defines a "business pursuit" as incorporating two elements: "(1) continuity or regularity of the activity, and (2) a profit motive, usually as a means of livelihood, gainful employment, earning a living, procuring subsistence or financial gain, a commercial transaction or engagement." Allstate Ins. Co. v. Hallman, 159 S.W.3d 640, 644 (Tex. 2005). CMLP has identified no Texas cases interpreting this test in the context of online publishing out of the home (or elsewhere).
As a general matter, however, Texas courts recognize that "hobbies" are distinct from business pursuits. One court has defined a hobby as "a specialized pursuit, such as stamp collecting, painting, or gardening, that is outside of a person's regular occupation, usually done in a non-professional way as a means of relaxation during leisure time." United Servs. Auto. Assoc. v. Pennington, 810 S.W.2d 777, 779 (Tex. App. 1991). In that case, the insured, a car salesman, bought a horse in order to experiment with new race training methods. The court held that the jury was entitled to view this as a hobby and not a business pursuit, even though the insured admitted that he would have liked to turn the activity into a business in the future.
Therefore, if you live in Texas, you have a good argument that your online publishing activities are not a business pursuit, so long as you can characterize them as a hobby. It will help if your primary motivation for publishing online is not financial gain, and you have other employment.
Note that specific language in a policy might lead a court to a result different from the overall state trend.
CMLP has identified no District of Columbia cases interpreting the "business pursuits" exclusion. If you know of a case on this topic, please contact us.
Virginia law defines a "business pursuit" as follows:
To constitute a business pursuit, there must be two elements: first, continuity, and, secondly, the profit motive; as to the first, there must be a customary engagement or a stated occupation; and, as to the latter, there must be shown to be such activity as a means of livelihood, gainful employment, means of earning a living, procuring subsistence or profit, commercial transactions or engagements.
Virginia Mut. Ins. Co. v. Hagy, 352 S.E.2d 316, 318 (Va. 1987). CMLP has identified no Virginia cases interpreting this test in the context of online publishing out of the home (or elsewhere).
As a general matter, the Virginia Supreme Court has given a rather broad interpretation to the category of business pursuits. In Hagy (above), the court ruled that an insured person who performed childcare in her home was engaged in a business pursuit as a matter of law, even though she testified that, after experiencing a downturn in her business, her motivation for doing so was "love for the child rather than the prospect of financial gain." The court noted that the childcare operation bore all the outward signs of a business for profit and found that even a small amount of income was sufficient to provide evidence of a "profit motive."
Therefore, if you live in Virginia, you may be in danger of losing coverage for your online publishing activities if you make money from your website or blog, such as through advertisements or a tip jar, unless those activities are temporary or sporadic.
Note that specific language in a policy might lead a court to a result different from the overall state trend.
Washington law defines a "business pursuit" as an activity that is (1) conducted on a regular and continuous basis; and (2) profit-motivated. Stuart v. Am. States Ins. Co., 953 P.2d 462, 465 (Wa. 1998). CMLP has identified no Washington cases interpreting this test in the context of online publishing out of the home (or elsewhere).
As a general matter, however, Washington courts give this test a broad interpretation. In order to be deemed a business pursuit, an activity does not need to be one's sole source of income and does not need to be full-time, nor does the activity need to be motivated solely by profit. "Some" profit motivation is sufficient to make an activity a business pursuit, so long as it is conducted on a regular and continuous basis. See, e.g., Stoughton v. Mutual of Enumclaw, 810 P.2d 80 (Wash. App. 1991).
Therefore, if you live in Washington, you may be in danger of losing coverage for your online publishing activities if you intend to make a profit from your website or blog, such as through advertisements or a tip jar, unless your activities are temporary or sporadic.
Note that specific language in a policy might lead a court to a result different from the overall trend.
If your online activities are not covered under your current insurance policies, a growing number of companies are offering media liability insurance. While these policies are expensive -- perhaps prohibitively so for a newly formed business -- they can also be quite comprehensive. They typically cover costs to defend against suits brought for:
Media liability policies typically have a minimum coverage of $1 million and can run all the way up to $100 million for large publishers. The premiums may be as low as $1,500 a month, but typically begin at $2,500. Media liability insurance is a growing business with more companies underwriting policies every year, so it makes sense to shop around. Some carriers that provide policies in this area include: American International Group, Chubb Group, Media/Professional Insurance, First Media Specialists, ACE USA,OneBeacon Insurance Group, and AXIS Capital U.S. Insurance. Keep in mind that you will likely have to go through a licensed agent or broker to secure coverage from these companies.
There are several things to consider when shopping for a media liability policy: