United States: Insurance Liability, Risks, And Options In Augmented Reality: Catch ‘Em All

The rising Pokémon Go sensation has dramatically increased the popularity of augmented reality games, but it has also brought with it increased risks and liabilities for both game users and developers alike. For those who don't know, Pokémon Go is a mobile app that, although released just last month, has already been downloaded over 75 million times, generated more than $75 million in revenue, and boasts daily usage statistics that have exceeded Snapchat, Twitter, Instagram, and Facebook. It's a location-based augmented reality game that allows users to partake in virtual scavenger hunts. Using the user's GPS and mobile camera, players are encouraged to explore their surroundings, seek out animated characters in real world places, and "catch 'em all." The characters are overlaid on the player's screen and displayed as if they exist in reality. Unfortunately, distracted players on the hunt can end up wandering (or driving) into places they shouldn't be, and becoming injured or injuring others as a result.

The number of Pokémon Go calamities increases daily, with incidents ranging from the mundane to the absurd and dangerous. In the few short weeks since its debut, users have experienced or caused numerous personal injuries, property damage, and car accidents. Some users have become stuck in trees and locked in cemeteries, while more serious incidents involve users straying onto train tracks, falling off cliffs, or entering restricted nuclear power facilities—all while on the hunt for Pokémon characters. Still others in pursuit of Pokémon have trespassed on private property, and some users have even been robbed after being targeted and led to specific locations using the app.

The question that lies ahead is whether and to what extent insurance coverage may be available to respond to the unfortunate and escalating losses we see from this augmented reality product, and others that are sure to follow. For those who use the app, or have been injured by those using it, several types of policies generally provide personal liability coverage, including your standard homeowner's insurance or renter's insurance policy, your auto insurance policy, and your uninsured motorist coverage (which in many states is mandatory). But coverage isn't just for the app user.

Aspiring app developers and companies that develop, manufacture, market, and distribute augmented reality apps or provide augmented reality services should not underestimate the value of appropriate insurance coverage. New companies focused on bringing their product to market in a competitive environment often overlook the value of insurance, in particular relatively new insurance products such as cybersecurity policies. Such coverages are particularly important when considering the fact that pop-up disclaimers and end-user license agreements that are common among mobile app developers don't always provide adequate protection, and don't necessarily apply to those injured by game players. In fact, a lawsuit has already been filed in Florida challenging the terms of Niantic's license agreement (the company that developed Pokémon Go). And even if a licensing agreement is upheld in court, an augmented reality company may incur substantial costs defending itself.

It is therefore important for these types of game developers and companies to have sufficient liability coverage, which might be available through commercial general liability policies and errors and omissions policies; however, the unique nature of many of these claims and corresponding losses might not fit squarely into the types of insurance policies we would typically turn to in these situations. Such policies should contain broad language that clearly cover bodily injury and property damage related to, among other things, the risks associated with augmented reality.

Companies that introduce augmented reality apps would also be wise to obtain additional coverage for cybersecurity due to the potential of such apps to collect vast troves of personal data and the prevalence of data breaches today. See Blank Rome IP attorney Gabriella E. Ziccarelli's article, The Price of Pokémon Go. As with most cases, whether coverage ultimately exists depends on the facts of the situation and the terms of your policy, so pay close attention and seek the assistance of qualified advisors when purchasing coverage to evaluate the risks, and help avoid potential gaps in coverage for augmented reality risks.

Whether Pokémon Go becomes a long-term success for Nintendo Co. remains to be seen. Nintendo stock soared earlier last month, only to plummet last week after realizations came to light that it didn't actually develop or publish the game (Niantic, Inc. did; Nintendo only has a percentage interest in the company that markets and licenses the Pokémon franchise to outside developers). Nevertheless, the game's status is at an all-time high and augmented reality games are likely to become more prevalent, thus increasing the need for sufficient coverage. As augmented reality continues to rise in popularity, it will becoming increasingly important for policyholders to know what insurance options are available to them, and developers of augmented reality products must be mindful of ensuring their business is adequately insured and protected.

Although it's too soon to know whether carriers will start to offer new coverages and/or apply exclusions specific to augmented reality, at least some specialty insurance options have already popped up. One company claims to offer "Pokedex Insurance" (which is limited to the cost of one's phone), while a Russian bank just announced that it will provide "free insurance" to its customers who play the game (up to $800). Whether or not these are mere marketing ploys looking to capitalize on the Pokémon frenzy remains to be seen. In any event, savvy policyholders, insurers, and brokers will no doubt have their eye on the augmented reality space as it continues to grow in popularity.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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