What is third-party cyber insurance coverage?
Third-party cyber liability coverage helps cover legal expenses if a client files a lawsuit against your company for failing to prevent a data breach or cyberattack on their business. This type of insurance is advisable for technology businesses that provide software recommendations to clients or bear responsibility for their network security.
This coverage can often be combined with your errors and omissions policy, forming what is referred to as technology errors and omissions insurance, or tech E&O.
Specifically, third-party cyber insurance can aid in covering:
Legal defense costs
If your business faces a lawsuit from a client asserting your failure to prevent a data breach at their business, cyber liability insurance may contribute to covering attorney’s fees and other legal costs associated with your defense in court.
Settlements
In the event of a lawsuit initiated by a client who experienced a data breach, you and the client may opt for an out-of-court settlement to address and rectify the damages they suffered.
Court-ordered judgments
If a client alleges that your company is responsible for a data breach at their business and takes legal action against you, you may be legally obligated to cover damages resulting from any judgments in the lawsuit.
What is not covered by cyber liability insurance?
It is advisable to carefully review your cyber liability insurance policy to be aware of exclusions. Some common scenarios not covered by cyber liability insurance include:
Business Interruption from External Systems
Your policy might exclude coverage for business interruption costs arising from a computer system failure owned by a third party, except for interruptions specifically covered by dependent system failure.
Criminal Proceedings
Claims presented in the form of criminal proceedings, including illegal actions, investigations, or grand jury proceedings, may not be covered by your policy.
Intentional Acts
Instances of fraud, criminal conduct, or knowingly wrongful acts committed by you or your employees may be excluded from coverage.
Prior Acts or Knowledge
Claims for incidents you were aware of before the commencement of your coverage might not be covered under the policy.
Subsidiaries Beyond Your Control
Incidents experienced by a subsidiary that lacks majority ownership or management control may fall outside your policy’s coverage.
Understanding these exclusions is crucial to ensure that you comprehensively understand the limitations of your cyber liability insurance coverage. Regularly reviewing and updating your policy can help you stay informed and adequately protected against potential cyber risks.
How to protect manufacturers from cyberattacks?
Dealing with data breaches is costly and can be a protracted process. According to a joint study conducted by IBM, the average time for resolution is approximately 241 days when a breach is internally discovered. If a hacker is responsible for the disclosure, the resolution period extends to 320 days. Interestingly, the study reveals that the affected organization’s staff identifies only one-third of breaches.
A cyber liability insurance policy proves invaluable in mitigating the financial impact and streamlining the resolution process. This coverage can assist in covering expenses related to:
Mandatory Notification of Affected Parties
Ensuring compliance with legal obligations by covering the costs associated with notifying parties affected by the breach.
Investigating and Fixing Security Flaws
Supporting the investigation and rectification of security vulnerabilities that led to the breach.
Several Years of Credit Monitoring Services for Affected Customers
Providing credit monitoring services for affected customers over an extended period to safeguard against potential identity theft.
Loss of Business Opportunities
Compensating for the loss of business opportunities that may arise due to the aftermath of the data breach.
Protect Your Business – Act Now!
Don’t wait for a cyber threat to strike. Take proactive steps today to secure your business against data breaches. Invest in cybersecurity measures that will safeguard your assets and fortify your business for the challenges of tomorrow.
Secure your business’ digital future – because prevention is your best defense against data breaches. Contact us now!
