Cyber Liability Insurance
What is Cyber Liability Insurance?
Cyber-Liability – Just the word has a science-fiction sound and feel to it! Add the bitcoin ransom requests we hear about every day and I wonder if I have entered some sort of Twilight Zone. Be that as it may, the truth is every business, large, small and in-between, is subject to some sort of cyber liability claim.
If you use a computer to send, receive or store electronic data, your business is at risk. Tax records, company documents, customer information, etc., all such data can be lost, damaged or stolen. Most of us have our employees’ information stored: social security numbers, health records, maybe even credit card numbers. Regardless of how the information is lost, restoring it is likely to be both time consuming and difficult. Bad enough to think about losing our data, but that thought can quickly morph into a nightmare when we realize that a data breach can be the onset of third-party claims and/or lawsuits.
Deciding what to do about our cyber loss exposures is the question, not if we have any exposures.
Cyber liability insurance does not come in a uniform policy, but rather most companies have created their own specific set of coverages and endorsements. Some contracts include both first-party and third-party protection. Typically, contracts provide a range of coverages, some automatic and some by requested endorsement. So, the best for us to approach this discussion is via some policy term definitions.
Let's Take a Look at the Cyber Liability Policy Term Definitions:
Data Restoration: This is a primary protection area that you will want to discuss with your agent. What will your policy pay toward the cost to replace and/or restore electronic data. We are talking about data, programs, software, etc. damaged or destroyed by hacker or a virus or other named peril within the policy.
Cyber Extortion: That is big one that we are hearing about right now and we often think of the ‘big’ companies subject to this type of loss. Not so! I’ve known some small, one-person operations where their computer was hacked, commandeered and a $5,000 ransom required to release the data. According to ’60 Minutes – June 6 broadcast- it has become so widespread that the ‘bad guys’ can go on the web and rent the necessary apps to effect a data breach. Further to the ’60 Minutes’ piece, some -if not most of the hackers- use a standard ransom demand, but are willing to negotiate down to whatever the ‘kidnapped’ computer owner can pay. If there were any good news in that story, it was the nearly 100% of time, once the ransom is paid, the data is released. The majority of the cyber liability policies will cover any extortion payment made within the insurer’s consent plus related expenses – such as the cost of hiring an expert negotiator to negotiate with the extortionist.
Loss of Income and Extra Expenses: This definition can become very specific in some insurance contracts. It, of course, largely means what income you lost while attempting to restore your data system, as well what it cost to restore operations to normal. Some policies, have an itemized list of expenses they will consider; others require the back-up to verify the loss of income.
Crisis Management: Some amount of Crisis Management is pretty consistently included in most cyber liability products; however, the level of protection varies significantly among the conveyances. They can be broad enough to include the cost of hiring an attorney, a forensic accountant, a computer expert or even public relations expert to assist in assessing damages, sorting out what data was compromised, as well as mitigating the damage to the company’s reputation.
Notification Costs: Too often insureds don’t consider the cost of notifying the people whose information has been compromised. It sometimes comes as a surprise to the insured that most states have laws in place that require businesses to inform every individual who was likely injured by the data breach. Some insurer’s go so far as to provide for the cost of providing credit monitoring services for affected parties.
There are a few items typically found in the more complex policies particularly attractive to larger corporations: Network Security & Privacy Liability –to cover claims caused by negligent acts, errors or omissions. Electronic Media Liability – to cover lawsuits involving libel, slander, invasion of privacy, domain name infringement, etc. Regulatory Proceedings – to cover fines, penalties imposed on businesses by regulatory agency; typically would also include the cost of an attorney to respond to the regulatory authority.
Perhaps, what is equally important is what is not covered by the cyber liability contract: Bodily Injury; property damage, Intentional dishonest acts by the insured; war, terrorism, contractual liability, utility failure, cost restoring computer systems to a higher degree of functionality; acts committed prior to policy inception or retro-active date.
Does Your Business Need Coverage from a Cyber Attack?
BOTTOM LINE: Every business should review their exposure to cyber liability losses AND, if their insurance budget allows, purchase, at least, a minimum cyber liability package.
There are currently on the markets now $250,000 cyber liability packages, available to Texas Independent Auto Dealers at an annual cost o $300 when purchased in conjunction with a garage liability policy. These small basic contracts require very little application effort and are purchased with fully earned premiums. There are also contracts that provide broad coverages and can reach limits of $10,000,000 or more. Maybe it is time to discuss your options with your insurance agency.
Do not hesitate to contact me. I’m eager to receive your feedback, questions and comments. If you have specific subjects or insurance concerns you would like to see discussed here, please let me know. email@example.com or www.mulleninsurance.com.
If you’d like additional information on insurance for your business or you’d like to request a quote, please visit https://mulleinsurance.com/#Insurance-quote or give us a call at 972-681-6297.
MULLEN INSURANCE AGENCY, INC
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