Answers to Common Cyber Liability and Professional Liability Questions

Cyber liability insurance is a type of commercial insurance that offers protection to businesses  from the losses resulting from a data breach, including litigation from upset vendors or clients for exposing data to outside threats.

These losses can be categorized as first-party damages and third-party damages. 

First-party coverage refers to direct costs for responding to a privacy breach or security failure. Examples include: legal representation, PCI compliance and industry or governmental fines, investigation efforts, and restoration costs). 

Third-party coverage refers to when people sue or make claims against you, or regulators demand information from you. Examples include termination of client contracts, payments for the loss of personally identifiable information (PII), and maintaining operations following the breach.

There are also non-material damages that can result from insufficient cyber threat mitigation, such as the long-lasting effects of a tarnished brand reputation and the loss of trust from key clients and vendors.

Any business that stores sensitive data — such as financial records, medical records or legal documentation — should have cyber liability insurance.

Although it is common to believe that only large corporations are targeted by hackers, SMBs are the most vulnerable type of business when it comes to cyber security threats. This is primarily due to a comparative lack of audits and security protocols compared to larger firms.

It’s important to understand your organization’s vulnerabilities and how your technology and investments are currently managed. To discuss your risks and potential mitigation strategies, reach out to Rob Ferrini to review your options today.

Most businesses are not legally obligated to have cyber liability insurance. However, due to gaps in coverage under commercial general liability coverage (CGL), many companies are beginning to require cyber insurance in contractual agreements.

The question is not if you will be targeted by a cyber attack, but when will you be targeted.

With cyber liability insurance, you receive vetted support from a trusted team of cyber sleuths. When your company is targeted, you can identify the risk faster, learn what happened, and take measures to minimize damage and losses — saving your firm from financial and reputational harm.

Cyber liability insurance should always be customized based on the unique needs and size of every client — don’t trust anyone who tells you differently.

From a liability standpoint, consider these two examples:

ABC Corporation has business ties and stores valuable information for America’s top five banks. In the event of a lawsuit, damages could easily exceed $500 million.

ACME Inc. is a small financial investing startup with $2 million in assets under management for 12 affluent individual investors.

ABC Corporation carries much higher liability and therefore would require a different level of coverage to ACME Inc.