Your network is your company’s life blood.  You want to be protected in the event your cybersecurity is breached; the attack on Target being a recent, well-publicized reminder to the threat of cyber attacks.  Some years ago, losses resulting from such events would have been covered under a standard commercial general liability policy.  But insurers have increasingly added exclusions to CGL policies to remove coverage for losses resulting from cyber events.  At the same time, insurers created cyberinsurance policies as a product designed to manage these types of risks.  But before you obtain a cyberinsurance policy, you need to know a few things about the coverage afforded under those policies.

What is a CyberInsurance Policy?  

Cyberinsurance policies are designed to protect your company from data breaches.  Cyber policies usually provide both first- and third-party coverage.  First-party coverage pays those costs your company directly absorbs in the event of a cyber attack.  Below is a small representative sample of first-party coverage typically provided by insurers in these cyber policies:

• Consultants hired to remedy the data breach.
• Public relation firms.
• The cost to your company of notifying your customers of the breach.
• Credit monitoring services for your customers after the breach.

Cyber policies also have a third-party component, which provides coverage for losses your company suffers due to the claims of others.  In the event your company gets sued because of a data breach, the cyber policy may kick in to provide coverage for the following items

• Defense fees and costs to defend the lawsuit.
• Indemnification for lawsuits for libel, slander, and defamation
• Fines and penalties your company is assessed because of the data breach, or for failure to disclose a breach to your customers

What should you look for in purchasing Cyberinsurance?

Like any insurance policy, you need to read the policy to understand its coverage.  However, it is important to note that these policies are relatively new, with a small body of law providing interpretation of their terms.  In that sense, understanding the coverage you want will be dictated by knowing some common areas of variance between the cyber policies:

• Some policies require that vendors or consultants hired to respond to a security breach be approved by the insurance company first.  You may not be able to select your team after a breach.  This is one area where the scope of coverage between carriers can vary significantly.
• Certain items you might anticipate being provided in the event of a breach may not be covered.  For example, call centers or the cost of restoring or recreating data.
• The temporal coverage for the profits your company loses because of the interruption of your network can vary.  This is not an inexpensive aspect of the coverage.  If your network goes down for days, it will likely have great economic consequences.

Cyber coverage may be appropriate for your company, but your coverage needs to be tailored to the risks you face because each company is unique.  Cyberinsurance policies are being offered by many carriers, but the products can vary wildly in price.