Commercial Cyber Liability Insurance

Two Main Categories Of Cyber Liability Coverage

Cyber risks are generally divided into two main categories for insurance purposes:

First Party Coverage

• Cyber Incident Response Fund
• Cyber Incident Response Team
• Non-Panel Response Provider (Aggregate)
• Digital Data Recovery
• Network Extortion
• Business Income/Extra Expense (Extra Expenses include the cost to retain the services of a third party forensic accounting firm to determine the amount of BI loss)

Third Party Coverage

• Cyber, Privacy, and Network Security Liability
• Regulatory Proceedings
• Payment Card Loss

Scenarios Where Cyber Insurance Coverage Could Help

Manufacturing

The Facts: A contract manufacturer stores its customer’s designs on its network. The designs are used in the production of custom assemblies in accordance with customer specifications. The manufacturer’s network is infected with a virus which corrupts the customer’s design specifications, resulting in damage to information in the manufacturer’s care. The customer sues the manufacturer seeking recovery of late delivery penalties imposed by its downstream customer.

The Bottom Line: Defense costs totaled $500,000 and $250,000 for indemnity, customer damages.

Retail

The Facts: A hacker penetrates a retailer’s network security and steals credit card information from a database containing stored transaction data. The hacker uses the harvested information to make purchases and to fraudulently obtain loans in each cardholder’s name. Cardholders sue the retailer to recover their cost to repair credit and discharge fraudulent loans and seek damages for emotional distress. The banks who issued the cards compromised in the attack also sue the retailer to recover card re-issuance and cardholder notification costs.

The Bottom Line: Defense costs totaled $750,000 and $1.75M to repay banks and cardholders for the damages they incurred.

Construction

The Facts: A small construction firm maintains employee and 1099 contractor records on their network. The records contain private personally identifiable information for tax reporting, including social security numbers/tax payer IDs. The firm’s network security is breached. The attacker steals personal records. The firm must notify all affected individuals in writing. It also purchases one year’s worth of credit monitoring services on their behalf to detect unauthorized activity in their credit accounts. Later, the attacker sells the stolen information to an ID theft ring. The ID thieves age the information for a year (after credit monitoring stops). They then begin using it to fraudulently obtain credit in the name of the compromised individuals. The affected individuals sue the firm for breach of privacy and seek consequential damages.

The Bottom Line: Defense costs totaled $500,000, privacy expenses were $100,000 and customer damages were $900,000.

Technology

The Facts: A mid-sized technology company hosts web sites for retailers. Retailers rely on web site availability to generate e-commerce income. The technology company’s site is disrupted by a virus. Their customers’ ability to generate income is disrupted. Customers sue the company to recover lost income.

The Bottom Line: Defense costs totaled $100,000 and $500,000 for indemnity and customer damages.

Other Liability Insurance May Not Cover Cyber Risks

Commercial General Liability Insurance does not provide coverage against economic losses and professional services, which excludes most cyber risk damages. This type of policy is designed to cover physical damage to your computer (e.g., a lightning strike) as opposed to damage caused by a hacker or rogue employee. Commercial Property Insurance and Commercial Crime Policies may offer limited coverage, if any at all.

The bottom line is that traditional insurance products don’t address internet exposures; indeed, some carriers have begun to specifically exclude data- and technology-related risks from their policies. Brunswick Companies’ Risk Management professionals can help you determine what, if any, coverage your existing policies provide and offer additional coverages if not included.

The Advantage of Cyber Liability Insurance Through Brunswick Companies

Brunswick Companies offers Cyber Liability insurance policies from a range of top ranked carriers. With over 45 years of commercial insurance experience, we have the know-how and industry contacts to match your needs with the plan that best suits your risk management and financial goals.