by
on September 05, 2023
The only way to protect the assets of your business is to carry adequate Commercial General Liability (CGL) Insurance. A CGL policy protects your business from damages caused by bodily injury or property damage for which your business is found to be legally liable. CGL is usually triggered first in the event of a loss, so many business owners don't feel an additional endorsement or stand-alone policy is necessary. A typical CGL policy contains three coverages:
If the threat exists that your company could be sued by a competitor for infringement of intellectual property theft, or you do not have the funds to cover legal fees associated with defending your patent or trademark, this coverage is vital. Defending infringement litigation can cost hundreds of thousands of dollars, not including the cost of damages and prejudgment interest.
In patent infringement cases, attorney’s fees can easily top $1 million. Budgeting and planning for the protection of intellectual property rights may not only save your company a significant amount of capital, it may also help keep your business viable when legal bills accumulate rapidly.
Any act by the insured that somehow violates or infringes on the rights of others (referred to in the policy as an offense) is the subject of personal and advertising injury liability coverage, although only those acts that are specifically listed in the policy are covered. The coverage under the “advertising injury” provision is limited to those injuries that are directly related to the advertisement. Therefore, the policy covers debts owed by the insured party due to claims filed against it.
Coverage B policyholders are sometimes covered in cases relating to trademark infringement; however, copyright claims are only successful when directly related to advertising, and patent claims are rarely covered under the “advertising injury” provision.
The cases that allow for coverage in a patent infringement suit are generally limited to instances in which a court finds contributory infringement or inducement to infringe through an advertising medium. Since the advertising injury provision in a standard CGL is limited, many businesses consider additional coverage to protect their intangible assets.
There are three important exclusions in the AI/PI coverage that outline the need for additional intangible asset coverage:
Advertising, broadcasting, publishing or telecasting
Designing or determining content of websites for others
An Internet search, access, content or service provider (ISP)
There will be a large coverage gap in a traditional CGL policy if you are a media company, technology company or any other company that does business predominantly on the Internet.
Because of the increase in the number of intangible assets companies possess, and the number of companies doing business on the Internet, new types of liability coverages have emerged to meet specific needs.
E&O insurance, also known as professional liability insurance (PLI), helps fill gaps in traditional CGL policies by protecting professional advice- and service-providing companies from having to bear the full cost of defending against a negligence claim that a service the company provided did not have the expected or promised results.
An E&O policy can cover intellectual property losses due to copyright infringement and plagiarism while also protecting a business against a data breach or identity theft. For example, if an IT specialist at a company makes a mistake with the company firewall and allows malware to spread through the company’s network, an E&O policy would help cover the losses from the exposure. An E&O policy can be customized with several other coverages, such as:
A D&O policy insures upper management against claims of securities fraud, breach of fiduciary and other types of liability. For example, shareholders of a company could sue a company’s directors and officers for not putting the proper measures in place to stop a data breach.
When purchasing CGL and cyber liability coverage, businesses have two primary policy types to choose from—claims made and occurrence. A claims made policy covers claims while the policy is in force, while an occurrence policy provides coverage for when the act occurred. Both types offer distinct advantages and disadvantages, so it is wise to do research to determine the best type of policy for your business.
At Defy Insurance, we know insuring against risk can be complicated. Contact us today. We can help you navigate the complex cyber liability insurance world and discuss the coverages you need to protect your business from cyber risks.
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