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I run an internet business as a sole proprietership and I post photos on my site from visitors who submit them. i'm afraid someone may sue me one day for copyright infringement.
Does anyone know if Liability insurance can protect me in this case?
DMCA laws should protect you given the consdition that you follow them properly. I would recommend you to do lot of reading at DMCA and other website about copyright law and have a separate email address just for receiving possible complains from anyone claiming copyright. Under DMCA's Safe Harbor law (http://digital-law-online.info/lpdi1.0/treatise33.html), normally as a service provider you cannot be held liable if you follow the guidelines.
Here are few URL's that might be helpful. (may times it can be boring to read law, but here are few quick links, but still if you got time, then I recommend to do detail reading.)
[digital-law-online.info...] (Simple & Easy to understand language)
And last but not least, If you have even little doubt, make sure that you have your business as LLC.
Hope this helps.