Highlights from the Legal Guide: Are Your Online Activities Covered by Insurance?

This is the fourth in a series of posts calling attention to some of the topics covered in the Citizen Media Legal Guide [1] we published in January. As we roll out new sections of the guide each month, we will highlight some of the more important topics in blog posts.

In the first three posts we discussed choosing a business form [2]for your online activities, the issues associated with selecting aplatform for online speech [3], and deciding whether and how to be anonymous [4] when publishing online. In this post we highlight the importance of insurance and help you evaluate whether your existing coverage is sufficient.

Even frivolous lawsuits dismissed at a relatively early stage of thelitigation can be expensive to defend, and the cost skyrockets thelonger the litigation continues, particularly if judgment is renderedagainst you. While most lawsuits never get to trial, if you lack themoney to carry out a vigorous defense, the only option available to you may be tosettle (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 youronline activities are covered by your existing homeowners or rentersinsurance. If your activities are not covered, it might be worthgetting media liability insurance [6], even if such policies initiallyappear to be prohibitively expensive. Alternatively, if your onlineactivities are part of an existing business, you may be able to addcoverage 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:

1. Carefully review your existing insurance policies to see if claims related to your online activities are covered (e.g., claims for libel, invasion of privacy, copyright infringement). Review the section on Homeowners and Renters Insurance Coverage [7] in this guide for help in making this determination.


2. If your current insurance policies don't cover you, consider switching to another carrier that will provide coverage. See the section on Evaluating Homeowners and Renters Insurance Policies [8] for guidance.


3. Consider whether your state's law excludes coverage for your specific activities. This is especially important if you make any money from your online activities. See the section on Insurance Exclusions for Business Pursuits [9] for information.


4. If your state excludes coverage for business pursuits and you make sufficient money from your site to be excluded, carefully weigh whether the income you receive is worth the loss in coverage.


5. Consider whether media liability insurance might be a better option (for many, it may be prohibitively expensive, but the coverage can be quite comprehensive). See the section on Media Liability Insurance [6] for help.

Homeowners and Renters Insurance Coverage [7]

If you have homeowners or renters insurance [10], your policy may cover some ofyour online activities. Most such policies cover damages and legal feesincurred in suits against the insured for "bodily injury," and "bodilyinjury" is often defined as including personal injury arising out of defamation or invasion of privacy.Obviously, you are only covered if your insurance contract containsthis or similar language and your first plan of action should be toread your policy, paying close attention both to the body of the policyand 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 damagesand legal defense costs, but not punitive damages (damages awardedabove and beyond the amount necessary to compensate the plaintiff forhis or her injury). This is important because plaintiffs often seekpunitive damages in defamation suits, and the fear of large punitivedamages might prove an insurmountable inducement to settle or removecontent. On the other hand, actual verdicts (as opposed to settlements)for plaintiffs are fairly rare in these types of suits and even rarerin the case of punitive damages.

Most homeowners policies exclude coverage for "business pursuits." How "business pursuits" is interpreted varies fromstate to state. (See the Insurance Exclusions for Business Pursuits [11] section of this guide for more information.) In most states, youractivities may be excluded from coverage if you earn advertisingincome from your site or blog or you collect money through other onlinemeans (say, through a PayPal "Donations Accepted" link on your site).If you are worried about losing coverage because you make a smallamount of money from your site or blog, you may want to considerforgoing 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 characterizingyour 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 [8] in this guide for a discussion of the terms and coverage of several large carriers.

Media Liability Insurance [6]

If your online activities are not covered under your currentinsurance policies, a growing number of companies are offering medialiability insurance. While these policies are expensive -- perhapsprohibitively so for a newly formed business -- they can also be quitecomprehensive. They typically cover costs to defend against suitsbrought for:

• libel, slander and defamation;
• invasion of privacy (a growing concern, as suits arising from newsgathering activities are not hampered by the First Amendment concerns that make libel and slander suits difficult to win);
• copyright infringement and other intellectual property-related suits; and
• damages resulting from errors, omissions, misstatements or misleading statements made by you.

Media liability policies typically have a minimum coverage of $1 million andcan run all the way up to $100 million for large publishers. Thepremiums may be as low as $1,500 a month, but typically begin at$2,500. Media liability insurance is a growing business with morecompanies underwriting policies every year, so it makes sense to shoparound. Some carriers that provide policies in this area include: American International Group [12], Chubb Group [13], Media/Professional Insurance [14], First Media Specialists [15], ACE USA [16],OneBeacon Insurance Group [17], and AXIS Capital U.S. Insurance [18]. 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:

• International Coverage: Increasingly, traditional and non-traditional journalists are finding themselves sued abroad in jurisdictions more favorable to plaintiffs than the United States. If you are likely to touch on foreign issues or discuss foreign citizens in any way, you might want to ensure that your policy covers you for suits brought overseas.

• Settlement: Many insurance policies include "hammer" clauses, which specify that the insurer, rather than you, gets to decide whether to accept a settlement (at the penalty of losing or drastically reducing coverage if you don't acquiesce). Because insurers are worried about their economic bottom line rather than your reputation (or good journalism, for that matter), you and your insurance company may not agree on when is a good time to settle a lawsuit. Insurance companies sometimes include clauses giving them a say in whether or not you will print a retraction (something that can limit liability or damages in many states -- please see the Overview of Retractions [19] section of this guide for more information).

• Punitive Damages: Some policies cover punitive damages and some do not. While actual awards of punitive damages against citizen journalists are likely to be relatively rare, this coverage may provide you with peace of mind and also enable you to fight rather than settle suits you believe are meritless.

• Coverage Period: Some policies cover you for any claim filed against you during the policy period; others, for any claim brought against you for an incident that occurred during the policy period. The latter gives you more insurance should you discontinue your site, terminate your policy, and subsequently find yourself embroiled in a lawsuit.

• Policy Limits: All policies will pay attorney's fees, but some deduct defense costs from policy limits and some do not. Because such fees can be significant, this may make a large difference in the actual coverage of your policy.

• Counsel: Some policies allow you to select your own lawyer, while others do not.

• Financial Security: It is important to make sure your policy is underwritten by a company that is financially secure.

• Lawyer's Opinion: Some insurers require that you hire a lawyer to assess your chances of being sued and write an opinion letter to the insurer before it will underwrite a policy. The costs of this can be quite substantial.