Tech companies in the UK are urged to reconsider their insurance portfolio in light of the controversial Richard O’Dwyer case. Mr O’Dwyer, who funded his university education by setting up a website with links to films and TV programmes, is facing possible jail after a judge last week ruled that he can be extradited to the United States to stand trail for copyright infringement.

Even if he is successful in his fight to avoid prosecution, he now faces substantial, unrecoverable legal costs. The case highlights the need for IT specialists to review the nature of their cover in response to the changing legal landscape.

The case is interesting for UK based web developers, IT consultants and businesses that specialise in the tech industry because it highlights the exposure that these businesses have to actions from around the world, even if the business is very small or does not trade outside of the UK.

The nature of the business means that every web site has the potential to reach and breach the laws of countries around the globe. The result is the potential for legal action against both the business and the directors.

Whatever the rights and wrongs of the situation, Mr O’Dwyer has had to face the onerous financial cost of defending himself against the extradition and the cost of appeal. These costs will be irrecoverable even if when the case is eventually heard, he is found to have done nothing wrong.

In the event that he is found guilty then not only will he face up to five years in a US jail, he may also have to pay damages for infringement of copyright.

The case highlights how owners of web sites with open forum discussion groups or income generating possibilities, regardless of their size, should consider carefully how to protect against cost of defending such an action.

There are two relevant types of insurance cover which are essential – Professional Indemnity (PII) and Directors and Officers (D&O) cover. PII for tech professions will provide cover for defending claims for inadvertent copyright infringement and will also cover the cost of damages which arise from such actions.

The cover will be subject to a pre agreed limit and an excess, however if you buy a good quality insurance policy then the defence costs will normally be covered without excess or limit. Any cover also needs to be worldwide (including USA and Canada) for it to provide adequate protection.

Professional indemnity cover will not provide insurance to pay for the cost of defending the extradition hearings or appeals, however a good quality D&O policy will provide this cover. Although D&O is normally bought by Limited Companies or Clubs, Societies or Associations, it can be adapted to suit sole traders to provide protection against the risks faced by individuals.