Understanding Cyber Liability (Part 2)

Once you’ve identified your client’s different vulnerabilities to cyber-related threats, you can begin the process of selecting policies to help mitigate their cyber risks. In the second part of this series, we will go over the different coverage options for cyber liability insurance.

What Does Cyber Liability Cover?

Cyber liability covers a variety of first party expenses, as well as some third-party liability. The types of losses and extra expenses covered by cyber liability are often excluded under basic commercial property and liability policies. Coverage varies depending on the insurance company, but typical first-party coverage includes:

  • Loss of Business Income and/or Extra Expense Coverage: Covers income lost and expenses incurred due to any amount of a shutdown of computer systems as a result of a hacker attack, virus or other insured cyber-related peril.
  • Loss of Data: Covers the cost of restoring or recreating data that was damaged or lost following a virus, hacker attack or other named cyber-related peril.
  • Associated Costs: Some policies may cover associated costs such as the cost of notifying affected parties, providing credit protection services and even the cost of setting up and operating a call center. Other costs such as crisis management costs (hiring public relations, legal consultants and computer forensics consultants) may be included as well.
  • Cyber Extortion: Covers costs associated with a cyber extortion threat, including ransomware.

Third-party liability coverage typically acts as a type of E&O coverage specifically for cyber threats, and is applied to damages claimed against a company resulting from alleged errors or omissions made when creating, sending, receiving or storing electronic data. In some cases they may sold be sold as separate policies.

  • Network security liability covers lawsuits against a company due to a data breach where client, customer or employee information is compromised or in the event others are unable to access their data on said business’s computer system. Typically applies to events such as a denial of service attack, a virus, malware or unauthorized use/access of the system by an outside party.
  • Network privacy liability is similar to the above coverage, but typically covers allegations that the company failed to protect sensitive data such as social security numbers, credit card numbers or bank account information belonging to employees, clients, partners or customers that was stored in the company’s computer systems.
  • Electronic media liability covers lawsuits against a company for libel, slander, defamation, copyright infringement, invasion of privacy or domain name infringement. These acts typically result from the publication of online information, in the form of articles, online ads, social media posts or other online media.

As businesses continue to rely on more advanced technologies, cyber threats will increase too. It’s important for insurance agents to be aware of the wide variety of cyber risks against businesses as well as the coverage solutions to help mitigate them.

About American Team Managers Insurance Services

Founded in 1998 by Chris C. Michaels, American Team Managers Insurance Services (ATM) has provided wholesale and MGA services to more than 5,000 independent insurance agents throughout the United States. Our goal is to establish close, long-term relationships with our agency partners and insurance carriers and provide competitive products for the Exclusive and Non-Exclusive markets that we serve. For more information on our products and services, give us a call at (714) 414-1200 to speak to a representative.

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