Liability Risks for Mobile App Developers

Mobile apps are a huge part of our daily lives. From checking the weather and getting directions to banking, monitoring our health, playing games, and even dating, we use them for just about everything. So it should be no surprise that mobile apps have been one of the fastest-growing segments of the economy for the last several years - a trend that will likely continue. 

In fact, the average person has approximately 80 apps on their phone, and uses 40 of them at least once per month. Many of these apps are collecting personal data about us, and frequently sharing that data with third parties - whether for advertising purposes, or as part of the app’s functionality.

With more than 250 million smartphones in use in the U.S. alone, that is a lot of data being shared, which creates a lot of potential risk - both for users and app developers. Hackers might target apps that have security flaws to access that data, or the developer or a third party could share that information in a way that is unlawful.

 If this happens, the developer could be held liable. And with thousands, or even millions of users, data breaches, unauthorized sharing or uses of the data can quickly turn into an expensive class action lawsuit.

 To give you an idea, several major apps are currently being sued for unlawfully sharing data, including Facebook, The Weather Channel, and Pokemon Go. In the case of Pokemon Go, its parent company Niantic has proposed a settlement that will pay up to $8.1 million in attorney’s fees and expenses, plus $1,000 per individual, business or other entity whose data was shared without authorization. And that doesn’t include paying its own lawyers to handle the case.

 As you can see, the cost of unauthorized data sharing can be substantial. For a small or medium-sized app developer, it could easily be enough to bankrupt them. And that’s why it is so important to have clear, concrete privacy policies, as well as errors and omissions (E&O) insurance in case of unauthorized sharing. 

Liability Insurance Offers Protection for Mobile App Developers

 While smaller developers may not have as much exposure as larger ones, they can still be the target of class action lawsuits, which can have disastrous consequences. So, even for smaller developers, it makes sense to carry errors and omissions insurance that will cover them in case of a lawsuit.

 Of course, figuring out the amount of exposure a mobile app has, and creating a personalized insurance policy to meet the developer’s needs, isn’t always easy. There are many factors to consider, such as:

• Who is using the app
• What are they using it for (health and medical-related apps generally have a higher liability)
• What information is being collected
• How the information is being collected and stored
• Who the information is shared with and how it is used
• How clear the privacy policy is
• The app’s growth projections

In many cases, it is just as important to assess any third parties who are receiving the data as it is the app developer themselves. And, it is also important to make sure the developer is making users aware of changes to the data being collected and how it is being used, and getting clear consent from users to collect and share data.

With all the highly technical considerations that go into writing an E&O policy for a mobile app developer, it pays to work with an underwriter who has expertise in assessing privacy policies, data collection methods and other factors that could affect the liability exposure of a mobile app developer.

If you are a retail broker with mobile app, software and other related technology clients, locate a wholesale broker to offer your clients personalized E&O and liability insurance policies underwritten by Admiral Insurance Group.

Products and services are provided by one or more insurance company subsidiaries of W. R. Berkley Corporation. Not all products and services are available in every jurisdiction, and the precise coverage afforded by any insurer is subject to the actual terms and conditions of the policies as issued. Certain coverages may be provided through surplus lines insurance company subsidiaries of W. R. Berkley Corporation through licensed surplus lines brokers. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds.