Evaluating Homeowners and Renters Insurance Policies

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).

Legal Claims Potentially Covered by Homeowners and Renters Insurance

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.

  • Bodily Injuries and Property Damage

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.

Business Pursuits Exclusion

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:

  • Chubb's coverage is the most favorable to the insured, as it does not exclude "incidental business at home" in which the insured has no employees and has gross revenues of $5,000 or less in any one year.

  • Erie's coverage is also somewhat favorable, covering "activities normally considered non-business" as well as all "occasional business activities." Whether blogging, for example, is "normally considered a non-business" activity is an open question.

  • Amica Mutual and Providence Mutual exclude virtually all liability "arising out of or in connection with a business" unless the participant is under 21 years old, self-employed, employs no other employees, and works either on a part-time or occasional basis. This exception to the exclusion primarily applies to jobs like baby-sitting and newspaper delivery.

  • OneBeacon's policy excludes coverage for all liability "arising out of or in connection with a business."

Increasing Your Insurance Coverage

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.

 

Last updated on February 24th, 2008

   
 
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