Cases make insurers take note of net risks

Cyber-liability insurance received a massive fillip this week after internet service provider Demon reached a £245,000 out-of-court settlement for libel – and it emerged that Ulster Unionist leader David Trimble is suing Amazon.co.uk.

Demon agreed a £245,000 out-of-court settlement with a liability claimant, physicist Dr Laurence Godfrey who claimed postings on its bulletin board were "squalid, obscene and defamatory".

Four days before the case was due to be heard at the High Court, Demon agreed to pay Godfrey £15,000 in damages as well as £230,000 in legal costs. The internet service provider's own costs are also likely to be substantial.

Trimble's case, meanwhile, centres on reviews of his book, Sean Philemy, which were posted on Amazon-hosted websites.

Internet libel expert, Keeble Hawson solicitor Jonathan Armstrong, said the two cases will result in a sea-change in the market, with insurers being more stringent about covering internet risks.

He said: "I think the insurers have got to look at imposing policy conditions to make sure internet companies use the right sort of software. You don't fit an ordinary fire alarm in an office, you get a security firm to do an analysis. The same goes for the internet."

Paul Dickson, proprietor of Watford-based Dickson insurance brokers, said the Demon settlement will encourage insurers to develop internet insurances. He said: "This is not going to have a damaging effect on the insurance market's ability to continue to devise cover for internet risks. On the contrary, it is going to encourage buyers but it won't put off insurers."

He also claimed that special circumstances surrounding the case – Godfrey asked Demon to remove the material – mean that a legal precedent for cyber-liability has not been set in stone. He said: "The fact that Demon failed to remove the material, in my opinion, played no small part in the award against them."