Homeowners and Renters Insurance Coverage

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.


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