E-commerce can be a complicated interplay between a website and the users, especially from a legal perspective. In one high profile case, Melissa Earll, a hearing-impaired woman, sued eBay for not accommodating adequately for her disabilities, as outlined in the Americans with Disabilities Act (ADA). She argued that when she applied to sell goods on eBay, the registration process required her to answer an automated phonecall that gave out the registration access code - which she could not hear.

In her claim, she also argued that eBay operated as a storefront, and thus should be required to have accommodations for deaf customers, in accordance with the ADA. Representatives from eBay counter that their site is not a storefront, and thus ADA requirements do not apply. In a statement, eBay officials asserted that the internet is not a "place," but instead a "means of remote communication" - but this issue remains on shaky legal ground in a world where a huge majority of consumers buy online. The legal system continues to struggle with e-commerce, from taxation laws to seller agreements, and new legislation is constantly proposed to help address these issues.

Thirty years ago, e-commerce barely existed. Today, millions of businesses buy and sell products online. Businesses offering everything from wholesale clothing to auto parts find a way to sell products online. An e-commerce business faces different risks than a brick-and-mortar company and you need an insurance policy that’s designed to address those concerns.

E-Commerce Growth Facts

  • E-commerce sales are expected to grow by 10% over the next five years. 
  • In 2017, online spending could total $370 billion. 
  • In 2017, an estimated 10% of all retail sales will be conducted online. 
  • In Western Europe, online sales will total nearly $247 billion by 2017.
  • Western Europe experienced a 14.3% increase in online spending between 2012 and 2013.

E-commerce Insurance vs. Standard Business Insurance

For many small businesses, a standard business owner’s policy (BOP) will cover most risks. This policy combines property coverage with general liability. If someone slips and falls while shopping at a store, the liability portion will help pay for medical expenses. If a heavy wind storm breaks a few windows, the property damage will be covered by insurance. As an e-commerce business, you operate in a completely different realm, so while the standard BOP policy may cover a few risks, you need more comprehensive coverage.

An e-commerce business presents unique challenges that only e-commerce insurance can address. Two key areas that internet businesses should focus on include:

  • Data security: An online business likely keeps sensitive customer data and valuable business information on a secure database, but breaches are known to happen. Risk management is essential to preventing a breach, but are you prepared if information is exposed? You could be held liable for each customer’s information.
  • Business interruption: You likely rely on other third-party providers to assist you with functions like shipping or internet service. If they experience an issue that stops business on your end, a prolonged problem could lead to reduced profit. Business interruption insurance helps you recuperate any losses.

E-commerce Insurance Coverage

It's a good idea to speak to an independent agent about other forms of coverage which would be advantageous to your business:

  • Transportation coverage: If you sell a product, you must ship it to your customer, but do you have a way of ensuring it’s covered during transportation? If your product is involved in a car accident or stolen, it causes delays. This insurance can provide compensation to your business if you lose money due to a shipping error.
  • Contents coverage: If you manufacture your own product or have a warehouse, you likely need a comprehensive property coverage that also protects tools and machinery.
  • Workers compensation: Just because you operate online doesn’t mean you don’t need help. If an employee is injured while on the job, this coverage helps with medical expenses and possible lost income. Check your state laws. It may be required to operate.
  • Directors and officers insurance: Specifically made to deal with the liability of directors and officers of a business, this provides coverage if they make an operational mistake that causes a loss for your company.
  • Intellectual property insurance: If you work with intangible property like software, data, or even gaming operations, you could be sued for the rights. This insurance helps cover your legal defense. You should also let your independent agent know if you ship globally. Some insurance policies will have exclusions for goods shipped worldwide.

E-Commerce Liability Protection

Liability protection is always a must, but setting the right limits is the best way to get the most protection. A good place to start is analyzing your risk factors and business worth. If you’re a small business worth several million dollars, liability limits of $1 or 2 million may cover your needs. On the other hand, a large e-commerce business with multiple branches could need more protection.

One way to save money on your e-commerce insurance is by raising your deductibles. Examine how much of a loss you can afford to take out of pocket. Raising your deductible to even $10,000 could make a difference, but just make sure you can actually afford it.

If you're unsure about the liability risks your business faces, it's important to seek out professional help. An attorney can help you understand your legal responsibilities, patent law, and even the ADA and other items that you might be curious about from a protection standpoint. Of course, insurance agents are also familiar with liability and can help advise you when it comes to finding a policy that will cover your risks. Just be sure to find a reputable insurer who understands the business you run.