Protecting Your Company From
Internet and Computer Liabilities

The explosion of cyberspace, computer technology and electronic commerce has created a world of new and uncertain potential liabilities. These new sources of liability may threaten not just "high-tech" businesses but any company with a presence on the Internet. Companies should look to insurance to offset liabilities or loss which may arise from the use of technology for their operations in cyberspace. This article gives an overview of insurance coverages available for some of the common risks that companies may face on the information superhighway and offers recommendation for managing risks raised by use of technology in the Internet.

Because technology makes products, services and information widely accessible at lower costs than other comparable mediums, use of technology may dramatically increase the risk of loss and liability. First, larger audiences mean potential greater claims. Second, increased dependency on automation increases the risk of severe claims. Third, Internet technology may lead to novel issues involving intellectual property, jurisdiction, choice of law, and the global reach of the Internet.

Putting into effect a company policy defining permitted and prohibited uses of e-mail and the Internet, by itself, may help companies limit their liability. Such policies typically permit reasonable access to the Internet, but bar inappropriate uses of the Internet. However, companies also need to assess their needs for insurance protection to help limit the threat posed by these exposures.

While the commercial and personal uses of the Internet and encryption technology are expanding at a tremendous pace, understanding of the risks and legal implications for many Internet activities lags far behind. One thing corporations can do, however, when potential liabilities or losses arise, is immediately consider any possible source of insurance coverage. Companies pay substantial premiums to have insurance coverage protection. Accordingly, businesses should make use of these assets when faced with liabilities stemming from activities in cyberspace.

Corporations with a significant presence on the Internet may also wish to start thinking about additional insurance which specifically covers their cyberspace activities. Because risks abound on the Internet and no encryption or other technology can be guaranteed to be foolproof, corporations should try to insure that they will be protected before a claim is made.

Provided as an educational service by John Raymond Dunham, III, Esq..

This publication is intended to serve you. If you would like certain topics covered, or have any questions or comments, you are invited to contact Mr. Dunham at: 941.951.1800, Ext. 250, Facsimile: 941.366.1603, E-Mail:, Web site: or write him at LUTZ, BOBO, TELFAIR, DUNHAM & GABEL, Two North Tamiami Trail, SARASOTA, FLORIDA 34236.

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered and report on issues and developments in the law. It is not intended as legal advice, and should not be relied upon without consulting an attorney.