Are You Covered for Cyber Liability?

Humans have probably been devising new ways to swindle each other since the first cave dweller tricked a companion into giving up his share of a mammoth steak. In the digital age, the pace of innovation has exploded for those who specialize in fraud and theft just as it has for those interested in more legitimate business enterprises. The bottom line is that scammers are constantly finding new ways to worm their way into electronic storage to steal information and other resources they can exploit for profit, and you need to be prepared.

The thieves often go unpunished. And instead of blaming the criminals, the system puts legal liability for the losses on the businesses that were holding the information that was wrongfully taken. That information can be worth millions.

Just as companies take steps to insulate themselves from other forms of loss by buying insurance to protect them from property damage or liability while operating vehicles, businesses also need to ensure they have insurance that protects them from cyber liability. It can be challenging to determine what losses are covered under particular policies, and even more challenging to get insurers to cover the losses that they should under these policies. At Ver Ploeg & Marino, we’ve been fighting insurance companies on cyber liability issues since our founding in 1995, so we know how to succeed in getting insurance companies to live up to their obligations in this area.

Every insurance policy is different, and every business has unique needs, so we can’t offer advice about your need for cyber liability coverage in a blog. However, we can discuss some issues you need to be aware of and steps that can help provide the protection you need in this age of sophisticated cyber scams.

What is Cyber Liability?

It is hard to find a business in Florida that does not rely on information technology in some form. Companies communicate internally and externally via email. They provide information through their websites. They store data—including customer data—on electronic spreadsheets and in databases. 

Storing information online saves space and makes that information instantly accessible from anywhere. Communication and electronic provision of information give us quick answers and can speed sales. But the ease of access and increase in speed also increase exposure to risk. Specifically, all data in electronic format is at risk of theft, and the company can be held liable for how the stolen information is used.

If a system is hacked or data is lost or compromised in some other way, a business can be subjected to expenses such as:

• Liability for losses suffered by customers and others due to wrongfully appropriated information
• Costs to replace or repair computer systems
• Costs to notify those whose data was compromised, pay for credit monitoring, and engage in public relations to restore customer confidence
• Business losses due to system downtime
• Fines for problems such as failure to comply with the Florida Information Protection Act

In many cases, there is the potential for a class action lawsuit filed on behalf of customers for breach of privacy. Even if the losses suffered by individual customers seem small, when lawyers combine the losses into a class action suit, those lawyers stand to gain a big payday, so class action lawsuits are always a risk in this type of situation.

Is Cyber Liability Covered Under General Liability Insurance Policies?

If a business is led by a responsible individual or team, that business will have some form of commercial general liability insurance, often referred to as CGL. However, the coverage offered under those policies is often far more limited than policyholders realize.

CGL is marketed as comprehensive insurance for businesses, but it does not cover every type of risk business owners face. It is useful primarily in situations where a company is sued due to professional negligence or negligence that causes bodily injury or property damage. Over the years, courts have generally held that CGL policies provide little, if any, protection from claims resulting from data breaches. Some CGL policies specifically exclude cyber liability coverage. Others may provide protection, but with specific coverage limitations that can leave companies open to extensive losses. It is important to review the terms of a CGL policy carefully with an attorney experienced in coverage interpretation issues to determine the scope of any protection from cyber liability losses.

Cyber Liability Policies

Never ones to miss a chance to sell additional coverage, insurers now offer policies designed specifically to protect businesses from losses associated with cyber liability. Generally, these policies cover costs that result from cyber attacks and data breaches, as well as losses caused by events such as power surges. 

However, as with any type of insurance, it is essential to read the details of the policy to understand what is and what is not covered. In particular, it is critical to understand whether the policy covers third-party losses resulting from a data breach or whether coverage is limited to losses experienced by the policyholder.

Moreover, even when a business purchases coverage designed to protect it from particular losses, the insurance companies responsible for providing coverage will often deny responsibility and claim that a loss is not covered even when it clearly falls under the scope of the policy. That’s where we come in.

Insurance disputes and bad faith actions are, unfortunately, so common that we have devoted our entire practice to resolving these conflicts. Our thorough understanding of the insurance business has enabled us to succeed in protecting the rights of policyholders for decades.

When Your Insurer Refuses to Honor Their Obligations, Ver Ploeg & Marino Can Help

When an insurance company refuses to pay claims, engages in unnecessary delaying tactics, refuses to defend policyholders, or acts in bad faith, the team at Ver Ploeg & Marino fights effectively to get the insurer to act as they should. Sometimes, a letter or negotiation exchange will spur the insurance company to honor its obligations under a policy. Other times, we need to proceed with litigation to get the results our clients deserve. While we try to resolve disputes quickly out of court, we are always prepared to succeed in court if necessary.

If you’ve got an insurance concern, we invite you to schedule a consultation with our team to learn how we may be able to assist.

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