Do ecommerce businesses need public liability insurance?*

While an ecommerce business does not face the same risks as a bricks and mortar store, there is still the potential for customers to sue you for negligence if they suffer injury or losses when dealing with your business. The types of risks that ecommerce sites face fall into three main categories: cyber liability, product liability, breaches of privacy and professional liability:

• Cyber Liability – Ecommerce sites are attractive targets for malicious hackers that want to steal credit card details or other sensitive information about your clients. If your site suffers a data breach in which this information is stolen, you could face claims for any damages suffered by the victims. Another cyber risk that ecommerce sites face is a Distributed Denial of Service (DDoS) attack in which your store is flooded with traffic and cannot operate. Aside from the loss of revenue this could cause, your customers may also argue they suffered losses since they were relying on access to your products or services. You could also be sued for damages if a data breach originating from your site is then used to cause damage to third-party computers, networks or data.
• Product Liability – You could be liable for a damages claim if the products you sell on your ecommerce store are defective and cause injury or other damages to your customer. These are some of the most common liability claims that are made against ecommerce stores by customers. While these types of claims may be borne by the manufacturer, your ecommerce site has a duty of care to ensure that it is not selling defective or dangerous products and may face legal action. Also if your manufacturer is located overseas, or go out of business , any claims for product  liability are  your responsibility.
• Professional Liability – Your ecommerce site must have terms and conditions information that sets out the contract between you and the buyer when providing goods or services to them. If you breach these conditions, by not delivering the products or services that you promised, your customer could sue you for any losses that they suffer as a result.
• Breaches of Privacy – As part of its operation, your ecommerce businesses will gather personal information about your clients, customers and visitors. If you do not clearly state what personal information you record and how you use it you run the risk of infringing a person’s right to privacy. Because the internet is global you could run the risk of impinging these rights in another country (such as the European GDPR regulations) even when you comply with the rules in your own country. You could even risk having to pay significant fines or penalties for visitors to your store that did not make a purchase.

Having suitable liability and cyber insurance in place can protect your ecommerce business against legal action from customers and other third parties that claim to have suffered injury, property or other damage as a result of your business activities. This insurance can pay your legal costs in defending yourself against these claims as well as covering any compensation costs that are ordered against you by a court if you are found liable.  Cyber coverage may also be able to include negotiating with hackers on your behalf, payment of demands from hackers and fines.