Cyber Liability - What does it mean?

As you know over the past 10 years there has been a shift from "bricks and mortars" to "clicks and orders". Everyone (at least is seems that way) has access to the Internet and every company has a web presence.

As technology becomes increasingly important for successful business operations, the value of a strong Cyber Liability Insurance policy will only continue to grow. The continued rise in the amount of information stored and transferred electronically has resulted in a remarkable increase in the potential exposures facing businesses. In an age where a stolen laptop or hacked account can instantly compromise the personal data of thousands of customers, or an ill-advised post on a social media site can be read by hundreds in a matter of minutes, protecting yourself from cyber liability is just as important as some of the more traditional exposures businesses account for in their general commercial liability policies.

Unfortunately the common "general liability" policies do not account for cyber liabilities in a time when data theft is commonplace and there is an increasing number of intellectual property liability claims.

Cybersecurity attacks and incidents can vary widely, including theft of financial assets, intellectual property, and sensitive information belonging to clients and customers. Repercussions of these attacks and incidents can include remediation costs, disruption of operations, increased litigation, increased cyber protection costs, and reputational damage.
 
What are the economic threats that "your" company faces within the cyber world?:

Data breaches – Increased government regulations have placed more responsibility on companies to protect clients’ personal information. In the event of a breech, notification of the affected parties is now required by law. This will add to costs that will also include security fixes, identity theft protection for the affected and protection from possible legal action. While companies operating online are at a heightened risk, even companies that don’t transmit personal data over the Internet, but still store it in electronic form, could be susceptible to breaches through data lost to unauthorized employee access or hardware theft.

Claim Example: A hacker successfully obtains sensitive personal information from a company’s computer system. As a result, a number of customers bring a claim against
the company for allowing access to their personal information.

Intellectual property rights – Your company’s online presence, whether it be through a corporate website, blogs or social media, opens you up to some of the same exposures faced by publishers. This can include libel, copyright or trademark infringement and defamation, among other things.

Claim Example: A lawsuit is brought against a mutual fund manager by a competitor alleging that their online marketing content and product branding have been plagiarized and their trademarks infringed upon.

Damages to a third-party system – If an email sent from your server has a virus that crashes the system of a customer, or the software your company distributes fails, resulting in a loss for a third party, you could be held liable for the damages.

Claim Example: An employee of a company sends a "seasons greeting" email to a client, but the email had a virus implanted in the email. Once the client opens the email his or her entire company's network crashes resulting system failures, loss of income, and hardware replacement.

System Failure – A natural disaster, malicious activity or fire could all cause physical damages that could result in data or code loss. While the physical damages to your system hardware would be covered under you existing business liability policy, data or code loss due to the incident would not be.

Claim Example: A manufacturer experiences a small fire loss to its server room. The property policy responded to the physical loss of the servers, but there was unique software and code that was used during the manufacturing process. The loss of the software and code resulted in a stoppage of manufacturing for an extended amount of time.

Cyber Extortion – Hackers can hijack websites, networks and stored data, denying access to you or your customers. They often demand money to restore your systems to working order. This can cause a temporary loss of revenue plus generate costs associated with paying the hacker’s demands or rebuilding if damage is done.

Claim Example: An organized crime ring gains unauthorized access to a company's transactional system, obtaining customer account information and authorization codes. They demand funds to stop the release of the data.

Business Interruption – If your primary business operations require the use of computer systems, a disaster that cripples your ability to transmit data could cause you, or a third party that depends on your services, to lose potential revenue. From a server failure to a data breach, such an incident can affect your day to day operations. Time and resources that normally would have gone elsewhere will need to be directed towards the problem which could result in further losses. This is especially important as denial of service attacks by hackers have been on the rise. Such attacks block access to certain websites by ether rerouting traffic to a different site or overloading an organizations server.

Claim Example: A retail’s server is infected by a severe virus, and as a result their website is not available to customers for an extended period.

Why Cyber Liability Insurance?

A traditional business liability policy is extremely unlikely to protect against most cyber exposures. Standard commercial policies are written to insure against injury or physical loss and will do little, if anything, to shield you from electronic damages and the associated costs they may incur. Exposures are vast, ranging from the content you put on your website to stored customer data. Awareness of the potential cyber liabilities your company faces is essential to managing risk through proper coverage.

Cyber Liability Insurance is specifically designed to address the risks that come with using modern technology; risks that other types of business liability coverage simply won’t. The level of coverage your business needs is based on your individual operations and can vary depending on your range of exposure. It is important to work with a broker that can identify your areas of risk so a policy can be tailored to fit your unique situation.