Most cyber policies include more than one type of liability coverage. These coverages apply to damages or settlements that result from covered claims. They also cover the cost of defending you against such claims. Note that defense costs may reduce the available limit of insurance.
The first type of liability we will discuss in Part 2 of our miniseries will be First Party liability. This is the coverage that indemnifies or protects your business against unnecessary expenses you incur resulting from a data breach or cyber-attack.
What is Cyber Related (First Party) Insurance Coverage?
Cyber liability coverage policies typically include various property and crime coverages. They also cover certain costs, such as notification expenses. First-party coverages are often subject to a deductible or retention.
- Loss or Damage to Electronic Data
- Many policies cover losses caused by damage, theft, disruption, or corruption of your electronic data. They also cover damage or theft of data stored on your computer system that belongs to someone else. For a loss to be covered, it must result from a covered peril such as a hacker attack, a virus, or a denial of service attack. The policy generally covers the costs to restore or recover lost data. It may also cover the cost of outside experts or consultants you hire to preserve or reconstruct your data.
- Loss of Income or Extra Expenses
- Many policies cover income you lose and extra expenses you incur to avoid or minimize a shutdown of your business after your computer system fails due to a covered peril. The perils covered may be the same as those covered under Damage to Electronic Data. The loss of income and extra expense coverages afforded under a cyber liability policy differ from those provided under your commercial property insurance. Cyber policies cover income losses and extra expenses that result from an interruption of your computer system by a covered peril. Property policies cover income losses and extra expenses that result from an interruption in your business operations caused by physical damage to covered property, which often does not include electronic data.
- Cyber Extortion Losses
- Cyber Extortion coverage applies when a hacker or a cyber thief breaks into your computer system and threatens to commit a nefarious act. A hacker may threaten to damage your data, introduce a virus, or shut down your computer system unless you pay him or her a sum of money or ransom. The attacker may also subject your computer system to a denial of service attack or threaten to release confidential data unless you pay the sum demanded. Extortion coverage typically applies to expenses you incur (with the insurer's consent) to respond to an extortion demand, as well as the money you pay the extortionist.
- Notification Costs
- This may cover the cost of notifying parties affected by the data breach by government statutes or regulations. They may also include the cost of hiring an attorney to assess your firm's obligations under applicable laws and regulations. Some policies cover the cost of providing credit monitoring services for those affected by the breach. Some also cover the cost of setting up and operating a call center to assist those affected.
- Damage to Your Reputation
- A data breach can severely damage your firm's reputation. As a result, some policies cover the costs you incur for marketing and public relations related to damage control following a data breach. This coverage may be also be referred to as Crisis Management.
In our next series Part 3 – Examples of First Party Cyber Liability Losses we will discuss several scenarios that might lead to a loss for your business that could be prevented by purchasing cyber insurance.
We provide Cyber Liability Insurance for all types of firms in Newton, Needham, Wellesley, and all of Massachusetts. Contact Kovalev Insurance for cyber liability insurance and request a complimentary consultation to ensure your business is properly protected.
