How can I safely provide a free online service?

Question

I am developing a website for secure sharing credentials. Similar to https://www.cloak.sh/ .

How can I protect myself and hopefully eliminate all my liability, while still providing a service "without warranty"?

No user data would be sold or anything like that. A truly free service as long as the costs are low. I would put all best efforts into make the most secure solution, etc. However, I can't discount the possibility of there being a bug, or getting hacked, or something that otherwise compromises the data users have uploaded.

My concern is I could see a scenario where an employee unbeknownst to their company shares sensitive information using my website. My website is then compromised, or the company find out some other way, and attempts to go after me for damages or something.

Basically, I want to run this website and provide this service as a free best-effort offering, without the possibility of it affecting my life negatively. Is this even possible? Is this a reasonable concern?

My only steps so far have been to register an LLC and all work would be done under the LLC to shield my personal life from any issues.

Answer 1

Insurance and diligence

While a well-written Terms of Service can mitigate your exposure, you cannot totally eliminate it because:

1. There are legal obligations that cannot be excluded by contract. For example, if your supply is covered by Australian Consumer Law (provided in Australia at a price less than AUD40,000 - free is less than AUD40,000) then you are liable for compensation for damage or loss and you are bound by non-excludable warranties.
2. Your contract cannot protect you against claims by third-parties. If your product causes harm to someone other than the person who agreed to your Terms of Service you might be liable and since they never agreed to your terms they are not bound by them.
3. Privacy law is usually non-excludable and varies enormously by jurisdiction.
4. You can always be sued. You might have no liability at all but going to court and proving that is expensive.

So, do your best and insure the rest.

Answer 2

How can I protect myself and hopefully eliminate all my liability, while still providing a service "without warranty"?

Is this even possible?

In most jurisdictions it is — provided that you write your Terms of Service wisely and specifically for every jurisdiction where you plan to offer it. Do not be surprised if in some jurisdictions it may not be quite possible.

If you are not sure you can write such terms yourself your only recourse is to hire lawyer(s) to do it for you.