Data Loss: A Business Nightmare

Many companies find that business stops when the computers go down. What happens when your data is lost or corrupted? Can insurance help get you back in business?

As computers, network systems and the Internet have become integral to business, the insurance industry has responded by excluding coverage for certain risks from standard policies, and then developing endorsements and separate policies to cover various threats to software, data and networks. This complicated, ever-changing picture makes it important to review your operations and your insurance annually to make sure your business is adequately protected.

Coverage for networks and data is sometimes called cyber insurance. It covers two broad areas: your own data and the data of customers, partners and clients that you interact with. In insurance terms — first-party and third-party coverages.

Protecting Your Data

Most property policies have coverage limits for computer hardware and exclude software and data. Insurance companies offer optional endorsements that increase hardware limits and add coverage — usually with small sub-limits for:

• Loss of software, programming and data caused by viruses.
  
  
• Loss of income and extra expenses due to damaged hardware or software caused by viruses.
  
  
• Loss of income due to viral attacks that overload computers and prevent normal business traffic.
  
  
• Electronic fraud — reimbursement for money stolen through the computer.
  

It is important to work with your IT executives to identify your company’s specific cyber risks. The next step is to analyze your current insurance program to understand which risks are covered and which may need additional protection. We are here to help.

Data Back-Up

Can you place a price tag on your data? Perhaps it’s priceless! After a major data loss, insurance may not be able to prevent you from losing customers and perhaps your good reputation. Insurance should not be your first line of defense. It is crucial to have an IT security program that backs up your data and protects your business.

Here are some basic requirements of an ongoing security plan:

• Off-site data back-up.
  
  
• Fire walls, anti-spam and anti-virus software.
  
  
• Controlled access to data through user-permissions and separation of duties.
  
  
• Documentation of each user’s access to applications and files.
  
  
• Restricted access to data from outside the company’s computer network.
  
  
• Encrypted proprietary and personal data.
  
  
• Controlled access to the physical building and hard-copy files.

Third-Party Data

If you are an electrical contractor who causes an electrical surge that wipes out your customer’s data, your general liability (GL) policy should cover their data loss. However, if you inadvertently transmit a virus to your customer, your GL policy will not cover the loss. Your errors and omissions policy will probably not cover it either, unless it includes specific cyber liability language.

Cyber liability is a big issue in the insurance industry. As the Internet becomes a more important business channel, including social media and cloud computing (storing and using data on a vendor’s Web site), companies need to review their liability insurance. For instance, any company that has a Web site or uses social media is, in fact, a publisher that may need the protection of a media liability policy.

Insurance companies are responding by developing new coverages and redefining existing ones. Here are some key coverages.

• Privacy Liability: Covers losses from failing to protect personal information (i.e., Social Security numbers) and corporate information, as well as costs to repair identity theft and to respond to regulatory agencies.
  
  
• Network Security Liability: Covers losses due to a failure in network security such as unauthorized access, virus transmission or destruction of software and data. May also cover business interruption for third parties impacted by the network security failure.
  
  
• Internet Media Liability: Covers the company’s Web content for infringement, defamation, plagiarism or negligence. May also include coverage for transmission of viruses to your Web visitors.

Cyber liability can be bought as a freestanding policy or as part of a professional liability policy. To learn more, please give us a call. 

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In this issue:

This Just In...

Professional Liability Versus Errors & Omissions

Data Loss: A Business Nightmare

Umbrellas and Follow Form Coverage

Winter Prep Check-up

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