Many traditional liability insurance policies have exclusions for cyber-related risks and stand-alone cyber insurance policies are the norm to cover cyber liabilities. Still, cyber insurance policies are not standardized to the same extent as traditional liability policies are, so businesses need to be aware of the key issues when obtaining cyber liability coverage.
Cyber liability is difficult to quantify. The liability risk depends on, among other things, the nature of the business operations, the company’s network security policies and infrastructure, and the types of data the company collects and stores. The key information needed to assess cyber liability risk is collected in the insurance application, which becomes part of the terms of coverage and false statements in the application could void the insurance. So, the first basic rule in cyber insurance is to pay careful attention to the information submitted in the application.
When issued, comprehensive cyber insurance policies cover first-party risks (i.e., damage and loss incurred directly by the insured) and some third-party risks (i.e., the insured causing potential liability to third parties). First-party coverage typically includes coverage for: (1) costs to respond to a cyber-incident including post-incident forensic investigation and data retrieval and restoration; (2) breach notification to comply with statutory and contractual obligations; (3) credit monitoring and identity theft protection services; and (4) reputation management through public relations and communications.
Third-party risks are liability that may arise from contractual obligations to indemnify or from litigation settlements or judgments from claims made by third parties due to the cyber breach. It is important to note that not all policies cover litigation costs. A cyber policy that covers litigation defense will mitigate the costs of defending what could be a large number of private actions stemming from a breach.
Many policies ex ..
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