In the last decade we have heard of data breaches affecting all facets of society, from banks to retailers to the government, to the credit bureau. The list is shocking from the consumer’s end. Every American has likely been touched by one of the major breaches: Anthem, eBay, Equifax, Facebook, Home Depot, JP Morgan Chase, Marshalls, Sony’s PlayStation Network, Target, Uber or Yahoo.
We know the chaos that ensues for the folks whose information has been hacked. But, what about the company who held the clients’ information when it was stolen? What does the aftermath look like for them? Can insurance help?
Firstly, let’s see what cyber risk is. According to the Institute of Risk Management, it is defined as the risk of business disruption, financial loss or negatively impacting a business’s reputation due to the failure of its technology systems.
What is Cyber Liability Insurance?
Cyber insurance coverage mitigates recovery expenses after a data breach or cyber-attack. Cyber Liability can be added to a business policy or purchased as a standalone. It is typically made up of some or all of the following four:
- Errors and Omissions (E&O)
- Media Liability
- Network Security
4 Exposures and Their Insurance Defenses
Errors and Omissions Insurance is a standard part of many business insurance policies. This covers a company if a client files a claim against it for services rendered or failed to render. E&O was originally the go to insurance for tech companies to protect their interests. But, as we get farther into the technology age, this policy alone falls short of the necessary coverage.
Media Liability Insurance has become necessary for any business with an internet presence. With the digital age encouraging companies to have websites, social media and commercial advertising, the chance increases exponentially to infringe on copyrighted material or intellectual property. This policy may also cover litigation stemming from claimed libel or slander.
Network Security failures have the potential to take down an entire business. A failure of the security system can result in anything from a data breach to a virus that disables operations. So, if your company holds highly sensitive or proprietary information, the need for this type of policy becomes a lot more important.
Privacy Insurance is one of the hot topics right now with all of the recent data breaches. But, network security isn’t the only issue. Human error can come in to play if someone steals a smart device containing client information. Also, if the hard drive has not been wiped clean on a donated computer. And even, if an employee accidentally emails client info to the wrong email address.
What does Cyber Insurance Cover?
Cyber liability insurance will cover the legal fees after a data breach. And, it will also help with restoring your computer systems, recovering data, notifying the customers who may have been breached, then reestablishing their credit reports and personal identities. Extensive fees incurred for public relations, forensic investigation or regulatory penalties may result, depending on the scale of breach.
The terms of your policy may indicate that it only covers ‘first-party cyber liability’ or ‘third-party cyber liability’. First-party refers to the expenses you pay relating to investigating the breach, notifying customers, public relations, fraud monitoring or crisis management. In contrast, third-party refers to expenses relating to litigation resulting from a data breach or copyright infringement.
Who should have Cyber Liability Insurance?
Cyber risk doesn’t just affect large companies. In fact, over half of all cyber attacks happen to small to mid-sized businesses. There is an assumption that small business owners will not have invested as much money into their cyber exposure and, therefore, will be an easier target. This may be true in many cases. However, the costly aftermath of a cyber-attack could put a smaller company out of business. With that said, any company —small or large— that accepts credit cards, stores customer information or has an online presence, should have some form of protection. The amount of coverage a business needs will vary based on the level of risk and exposures it has.
Daigle & Travers is based in Darien, between Stamford, Norwalk, and New Canaan. We also serve Fairfield County, Greenwich, Weston, Westport, Wilton, Ridgefield, Redding, Easton, Fairfield, Southport, Trumbull and parts of Westchester County and Long Island.
Here at Daigle & Travers Insurance, we will provide you with the right coverage to make sure your investments are safe during a disaster. We will give you the information and options you need to make the best choice of insurance company and policy. Give us a call today at (203)-655-6974.