The Web's untamed frontier of regulation has given rise to caution among Web site owners who want to cover themselves in case of an unforeseen lawsuit or loss of business.
"When a business, particularly a non-technology business, puts themselves online, they are now facing a series of business risks they've never faced before," says Jonathan Ezor, director of legal affairs at New York-based advertising agency Poppe Tyson.
Being on the Net is a liability
"Being on the Internet, particularly for small business, may be the single largest source of liability exposure because of the worldwide, broad-based nature of the network," Mr. Ezor says.
The rocky terrain starts when registering for a domain name, insurance analysts say.
Hundreds of lawsuits have been launched over domain name disputes, says Rick Wagner, VP of New York-based J&H Marsh & McLennan, an insurance broker.
In determining these cases, courts focus on trademark ownership.
Another fertile battleground for lawsuits, and therefore insurance, is copyright infringements. Dozens of lawsuits over Web advertising and content have been filed in the past few years, centering on piracy of text, graphics and photographs, as well as linking issues.
Slander and libel issues are also on the rise with the advent of chat rooms.
Legal experts say that if a chat room is monitored, the publisher becomes responsible for everything posted because he or she is essentially an editor.
But no legal answer yet exists if the chat room is not monitored. While general liability policies exist for business owners not in the publishing field, once they become ersatz publishers on the Web, their general liability policies often are no longer valid, insurance company representatives say.
So insurance companies have created policies to cover Web publishers on these issues.
"There are efforts being made to create new insurance policies for Web site owners and package it up with business interruption, liability for chat rooms, potential fraud issues. There are efforts in making this a combined product," Mr. Wagner says.
American International Group, an insurance company based in New York, has two policies targeted to companies with Web sites.
First, a professional liability policy is designed for companies that build Web pages for companies and also includes "errors and omissions" coverage, which covers mistakes made on content, for instance.
"I don't know of any perfect product out there [for Web site owners]," says Thomas Cornwell, VP of insurer Chubb & Son, Warren, N.J. "One of the most difficult issues is determining the intrinsic value of information. We as a company have not figured out a way to address it."
As an example, Mr. Cornwell explained that quantifying the value of a company's proprietary pricing list would be a difficult task for insurance purposes.
And if a competitor hacks into the company's database to steal the pricing list, it would be difficult to place a value on that loss for claim purposes, not to mention proving that the theft actually took place.
If goods and services are sold on the Web, another policy covers breaches of security for credit cards, for example.
In the realm of e-commerce, separate policies are being written to protect those selling goods on the Internet, particularly insuring against hackers who could gain entry to credit card databases.
To protect firms whose only avenue of transactions is the Web, there is business-interruption insurance in case Web technology fails and brings business to a halt.
"It's a very fluid area right now and it will be for another couple of years, I imagine [before case law is established]. It's impossible for the legal system to keep up with the evolution of the technology," Mr. Wagner says.