Many insurers are now offering “cyber liability” or “cyber risk” policies designed to protect policyholders against electronic injuries that policyholders may either suffer themselves or cause to others. Most of these policies focus on protecting policyholders in the event of a data breach. According to a recent report, the finance and insurance industries experienced the largest percentage of data breaches followed closely by information technology, retail trade, manufacturing, public administration, transportation and warehousing as well as education, government, and healthcare. Virtually no company is immune from this type of risk.
It is worth looking at purchasing cyber liability coverage because insurers have argued that “traditional policies” do not protect against this type of harm. For example, insurers have argued that there is no advertising injury coverage where there is no “publication” of the data. Today, many policies also have language excluding from the definition of “property damage” loss of or damage to electronic information and/or data. Finally, policyholders should keep in mind that CGL policies do not cover the insured’s own first-party losses, while a cyber liability policy typically does provide this type of coverage.
Although more insurers are offering this type of coverage, there is no standard policy language. Accordingly, policyholders should look closely at their existing coverage to determine what types of events may be covered. Cyber liability policies can cover everything from liability for permitting access to identifying information of customers to transmitting a computer virus or malware to a third party customer to failing to notify a third party of their rights under the relevant regulations in the event of a security breach. As a result, all companies should be looking closely at what type of coverage they currently have for these types of risks and examining what types of coverage are available in the marketplace.