More of Bob Roth's Interview
Q.
Aren't internet businesses in general off limits for most insurance companies?
A.
Yes, they truly are. Number one, most of them do not understand it. Number two, it's completely different than anything that's been around prior, and most insurance companies
are slow to adapt to very new operations... they need to wait and see what kind of data they can get on the risk, and see whether they even consider it insurable. For the
most part, yes. You are talking companies that just plain do not want any part of it. I mean, you're never going to see the Travelers or Equitable or Aetna or any of these
time-honored, very conservative companies insuring an adult site. It's just not going to happen.
Q.
There are just too many exposures that exist that are unknown. Insurance companies like knowns, not unknowns. That's where I could see the biggest issue being -- when you go to an
underwriter and say, "Well this guy's got a thousand different sites, and a thousand different niches." That's got to be a real tricky thing to be talking to a traditional underwriter about.
A.
Yes it is. The marketing, especially on the adult side, but to a little lesser degree on the mainstream side of the net, is a continual process and it's much more difficult
than marketing any other type of risk right now. Believe me, it's probably easier right now to place the liability on a dynamite manufacturer than it is to place the liability
on an adult webmaster. But luckily I've been doing this long enough that I've got contacts in place, and for many, many years I've been in the high risk end of the insurance
business anyway, so a lot of people who I've known for many years are making the step over -- with a little kick in the butt from me sometimes, but we're there, we've got these
things in place, and we're ready to go for my customers.
Q.
What insurance products or policies do you offer that would benefit a webmaster?
A.
Okay, let's start out with the multimedia liability policy dovetailed with the general liability policy. That's the one that's going to give you the basic liability coverage
that you need. If you have employees, you're also going to need an employment practices liability policy. That's going to give you harassment coverage of all types, sexual
harassment or any other type... discrimination of all types, whether it be because of age, sex, whatever... and this applies to your liability to your own employees.
You must then endorse this to have third party coverage... what they call a third party endorsement... so that if you have people on your staff, and someone calls in and says, "Go
take a look at this" and shows them something that they consider way, way past their norm, and sue you as the employer for exposing him to that. You'd better have that in place
if you have employees. In all states you have to have workers' compensation. Hopefully, some of these people have it now. If not, they'd better get it. That needs to be there.
Things of this sort.
Look at my page that has the outline of needs... you can go through it at your leisure. You do not want to ever discount commercial property. In addition to the normal things like
a building if you own one, but think about your content, your computers, and everything else -- there are huge amounts of property out there right now that are underinsured
or just plain not insured at all. Think of servers. Think of the hundreds of millions of dollars invested in servers that are located around the country. Some of these big
webmasters -- these big pay sites -- have very smartly co-located servers that are spread around the country, if not around the world, so that if one section goes down, they've
got some backup. But they've got lots and lots of dollar value out there. They've got a bigger dollar value out there in what their liability is to their customers if the thing
goes down and they're off the air. This is called time element coverage, or business interruption. The guy who owns the server or the hosting service is going to lose income.
In addition to that, his customer... and once again you've got to endorse for his customer -- the third party here -- is going to lose income as well, because if his site isn't
getting hosted, nothing's flowing -- everything has come to a stop. So we have vast, vast needs for a large amount of business interruption insurance out there, and that is a
property coverage, not a liability coverage.
Here is where you can protect people against hackers. You can protect them against hacker attacks that come in and corrupt their property, their files, what's on their computers.
You can also protect against denial of service, which once again would be about the same thing. If they hack and knock the computers down electronically, we can cover it the
same way as if the building burned down, and you lost your income stream due to a fire. I can now protect you if that happens because of a hacker or, as happened to some firms
a few months ago and I think Ebay was one of them, thousands if not millions of hackers trying to come in at one time. That can be covered.
Make sure once again when you're looking at property insurance that you have a real good, frank heart-to-heart discussion with the agent and broker on this so that you know what
you need. If you're down for a long time, you obviously want to cover your employees' salaries so that they're still there when you get back online, and you have the third
party coverage that you need. This is really a major item -- this is what puts a firm back in business, because there's no sense in buying a guy a whole bunch of new servers
if he doesn't have any customers anymore. Then he's starting over from scratch, and he doesn't need all that new hardware you just bought him.
Q.
The comment here in the room is that that's not professional liability. Is there any professional liability type of coverage at all?
A. Right. Professional liability would apply to someone who is a programmer, or what you do -- scripting. You have a liability if that thing doesn't work when you're done -- that
is a professional liability/malpractice/E & O type of exposure. That is in a completely different type of liability policy, and yes, it can be purchased. It is out there --
it can be found -- and it can be bought.
Q.
Webmasters are going to have a different type of exposure, I think that's the point.
A.
Yes, webmasters are normally not programming for others. People who are programming for others need professional liability, because professional liability is sort of like a
design error type of thing. You go in and contract with somebody, and you say, "At the end of six months you pay me 2.5 million dollars and this is going to do this..." but
it doesn't -- that's a professional liability exposure.
Q.
And I suppose if you didn't finish it, then we're getting into a bonding issue if you don't finish the job.
A.
Yes, if you don't finish the job, you can get into financial guarantees and penalty clauses in contracts that would be enforced and perhaps backed up by a bond. Obviously all
of these things come into play and they're all covered by policies designed to cover each of those specific areas of responsibility that you enter into.
License # 0655631
Rothco Consulting is responsible for the design, programming,
and maintenance of this site.
© 2000 Rothco Consulting
